Fresno County projects $15.4 million shortfall next year, sets conservative budget schedule

Fresno County officials told the Board of Supervisors on March 11 that slower growth in property and sales tax revenues and rising costs — including salary and benefits, IHSS, and insurance rates — create a projected $15.4 million shortfall for fiscal year 2025–26.

The County Administrative Office presented the midyear budget status and proposed schedule for the recommended budget. The report projects departments will spend about 91 percent of budgeted appropriations this fiscal year; revenues recognized to date are roughly 28 percent of budget. "Most general fund departments have indicated that they will be at or below their budgeted net county costs with the exception of the sheriff's office," Budget Director Paige Benavides said, citing higher overtime and extra-help costs.

Why it matters: The county depends heavily on two revenue streams that are weakening: property tax in lieu of vehicle license fees (about 80 percent of discretionary revenues) and the local Bradley-Burns sales tax. The administration recommended a conservative 2 percent property-tax growth assumption for next year, which would add about $16 million compared with this year's budget, but estimated cost increases (salaries, IHSS, risk rates, IT/property system replacement and others) could outpace that, producing the midrange $15.4 million deficit.

Details: Chief Administrative Officer Paul Nerland and Benavides laid out major cost pressures: an estimated $12.7 million for salary and benefits increases, $8.2 million for IHSS, $7 million for Medi-Cal (county share), $4 million for higher liability insurance, and $5 million for planned systems replacement. The board heard that sales tax receipts for the first two quarters of fiscal 2024–25 were down about 4.4 percent year-over-year and projected to remain flat into 2025–26. Prop 172 (public-safety sales tax) receipts were also lower year-over-year.

Board action and schedule: The board accepted the CAO's recommended timetable. The preliminary recommended budget will be brought to the board June 24 for adoption of appropriations for July–September; final budget hearings are scheduled for the week of Sept. 15, 2025. Nerland and Benavides said that adopting a June preliminary budget allows staff to incorporate later state and federal budget developments into the final September adoption.

Federal and state risks: Officials emphasized federal uncertainty tied to proposed Medicaid (Medi‑Cal) modifications and the federal budget resolution process. Nerland said Fresno County budgets roughly $800 million in federal funds and that any federal changes to Medicaid could shift costs to the county. "Anything like that could put more pressure on discretionary dollars if there are mandated services that the county must now cover," Nerland said.

Local revenue risk flagged: The board received public comment from Mike Gibson, representing the Central California New Car Dealers Association, who warned that a pending California Air Resources Board (CARB) rule and recent federal actions could force manufacturers to send a far higher percentage of electric vehicles to California inventories. He said a sharp drop in in-state vehicle sales would reduce both sales tax and vehicle license-fee (VLF) replacement revenues that the county counts on.

Next steps: The board directed staff to proceed with the recommended schedule and additionally directed the CAO to meet with local auto dealers and to send a letter to state leaders asking for delay or reconsideration of CARB implementation, citing potential near-term revenue impacts.

Ending: Officials said they will pursue a mix of short-term mitigation (use of budget mitigation reserve), hiring controls, departmental scenario planning, and potential service reductions if necessary, but they emphasized the board will revisit priorities during the formal budget hearings this summer and fall.