Gilbert leaders warn of widening budget gap as state, federal changes threaten revenues
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Summary
Town staff told council a series of outside changes — including phased flat-tax implementation, possible elimination of the food tax and uncertainty around federal grants — have created a budget shortfall that will force trade-offs in next year’s fiscal plan.
Town Manager Patrick briefed the council on a tightening fiscal outlook and a set of outside forces that together are creating a multi‑million‑dollar shortfall for fiscal year 2026. Patrick said the town was already planning one‑on‑one briefings in mid‑April on the FY26 budget but warned council that “we’ve got a budget deficit…primarily the loss of the residential rental revenue stream as well as the second phase of the flat tax implementation,” which staff estimated would reduce general fund revenue by roughly $14,000,000.
Patrick and Finance staff also flagged two other risks: uncertainty over federal funds and the potential elimination of the state food tax. “We’ve got about…$37,000,000 of federal funding” that is not yet certain, Patrick said, and he described a proposed elimination of the food tax in the state legislature as a separate threat of “about a $17‑ to $18,000,000 hit to our general government funds.”
Kelly, the town finance presenter, put the town’s revenue mix in blunt terms: Gilbert relies heavily on sales tax and state shared revenues. Kelly said sales tax and state shared income together make up the majority of general‑fund revenues and noted the town is more exposed to volatility than peers because of that mix. She also outlined that the town has plan alternatives under consideration, including paying off debt early and decisions about the secondary property tax levy that council later discussed.
Council members asked detailed questions about options and timelines and expressed concern about service impacts if revenues decline. Councilmember Koprowski emphasized the need to preserve reserves and continuity, while others urged staff to present concrete mitigation options ahead of final budget decisions. Staff said more detailed budget materials and one‑on‑one briefings will precede the formal budget schedule.
Why it matters: Gilbert funds most general services — police, fire, streets and planning — from the general fund. A sustained loss of the revenue streams described by staff would require cuts, new local revenues or continued use of reserves to maintain current service levels.
