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Fort Smith officials see roughly $10 million shortfall in preliminary FY26 general fund review
Summary
CFO Andy Richards told the Fort Smith Board of Directors a preliminary FY26 budget shows about a $10 million deficit and a projected 12% fund balance; officials discussed options including cuts, a 10% hiring/holdback and moving River Valley 911 costs to a separate fund.
CFO Andy Richards told the Fort Smith Board of Directors during a special study session that the city’s preliminary fiscal year 2026 general-fund request shows roughly a $10,000,000 shortfall and a projected fund balance of about $7,700,000 (12%).
Richards said the city has been refining department submissions and that the FY25 amended deficit had already been trimmed from about $19.4 million to $17.5 million. He said the FY26 preliminary request still includes all department capital and personnel asks and has not yet been fully reconciled with administration reviews.
The shortfall was partly driven by a newly recorded $1,300,000 transfer related to creation of a separate River Valley Communication Center fund; Richards said the center’s personnel and offsetting revenues were moved out of the general fund into a new fund for 2026, but the city will still need to support part of the center’s costs. Richards said the general-fund capital requests in the current submissions total about $3,700,000.
Board members and staff discussed tools to narrow the gap: a 10% hiring hold and vacancy management, further departmental cuts and targeted capital deferrals. Richards presented a scenario using three‑year average departmental shares that would, if fully realized, yield a contingency reserve of about 33.4% at the end of 2026; he said cutting about $3,500,000 from the $10,100,000 preliminary deficit would move the reserve toward the board’s 25% target and reduce the FY26 shortfall to about $6.6 million.
Directors emphasized the difference between the numbers shown tonight — described as the unrefined department “asks” — and a proposed budget the administration will produce after additional reviews. Several members asked administration to return options that would close specified gaps rather than present unprioritized program-level lists.
Context and next steps: Richards said revenue projections are conservative (sales tax held flat; a 10% property-tax increase was applied for revaluation effects). He noted FY23 was a high-water mark for some revenues, interest income has moderated, and certain one-time items in FY24 (for example, an airport payment) affect year-to-year comparisons. The board scheduled additional study work on key funds and departments and asked staff to return with refined projections, vacancy implications and capital prioritization.
