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Finance presents FY 2026 budget preview as general fund drops by $9.4 million vs. prior year
Summary
Finance and administration outlined a conservative FY2026 budget plan showing a projected $5.7 million shortfall that staff addressed through cuts, equipment delays and attrition targets; the citywide budget proposed is roughly $311 million with capital projects reduced to $77.2 million.
Scott Rathbone, the city’s finance director, and City Manager Jeff Jurgens presented a first look at the proposed fiscal year 2026 budget to the Bloomington City Council on Feb. 17, detailing a combination of revenue shortfalls and expense increases that produced a preliminary $5.7 million deficit before departmental adjustments.
"We said we need to be extremely conservative," Rathbone said, summarizing the multi-month budget work. After department reviews and proposed adjustments, the presentation showed a citywide proposed budget of about $311 million — down roughly $21 million from the prior year — and a general fund proposal about $9.4 million lower than the previous year.
Rathbone identified several drivers of the gap: reduced state-distributed replacement tax (PPRT) receipts that fell from $6.4 million in 2023 to a proposed $2.6 million, an estimated $750,000 impact from the grocery-tax elimination, lower-than-expected investment income and higher pension and contract costs. Rathbone said staff initially projected a $3.75 million shortfall in November, which grew to $5.7 million after deeper review.
To close the gap staff proposed a mix of operational cuts, delaying equipment purchases and targeted workforce reductions. The package included roughly $2.5 million in department cuts, $3.9 million in delayed equipment, and FTE reductions that staff estimate will net $700,000 (about $600,000 of that recognized in FY 2026 due to phased timing). The budget as presented includes a vacancy/attrition savings goal of $1.1 million baked into FY 2026.
Rathbone showed capital projects at $77.22 million (down about $11.3 million) with notable push-outs in sewer and storm projects and an $8 million target for asphalt and concrete work funded primarily by motor fuel tax and a portion of home-rule sales tax. He said planned water-fund borrowing will support a stepped-up water capital program; the water fund is projected to increase by about $6.3 million due in part to planned meter replacements and other projects.
Key figures and policy points from the presentation:
- Citywide proposed budget: approximately $311 million (down ~ $21 million year over year). - General fund proposed: approximately $134 million (down ~$9.4 million year over year). - Projected reserve balance (end of FY 2025): about $37.5 million; staff is not budgeting use of reserves in FY 2026 at this time and is showing a modest surplus cushion of roughly $665,000. - Replacement tax (PPRT) budgeted at $2.6 million versus a recent high of $6.4 million in 2023. - Vacancy/attrition savings goal: $1.1 million recognized for FY 2026; council-level target of roughly 12 FTE reductions over time (staff expects roughly half of that to be realized in FY 2026, ~ $600,000).
Council members asked for detail on the attrition targets and departmental impacts. Council Member Ward pressed for specifics and said he wanted to be taken seriously as council reviews body‑shop calculations of cuts: "I don't mean to be cranky about this, but I just wanna be taken seriously here," Ward said, and asked staff to provide lists of positions targeted for attrition before a final budget decision. Scott and the city manager said they will provide additional breakdowns to council members.
Rathbone also described timing: staff will present a proposed budget March 10, hold a public hearing March 24, and return for final adoption on April 14. He advised that FY 2026 should provide greater visibility on state-distributed revenues and that staff may recommend adding equipment or projects back to the plan if revenue outlook improves.
Why it matters: The general fund supports core services including public safety (roughly 52% of general-fund spending). The combination of flat or reduced tax receipts and rising costs for pensions, insurance and contractual services required staff to identify reductions and timing changes to balance the budget while avoiding immediate service reductions.
Next steps: Staff will provide council with a line-item capital review (department heads will present project-level details next Monday), return attrition/FTE target lists and continue to monitor state revenue signals ahead of the March–April budget schedule.
