Palo Alto council trims FY26 budget by $6.2 million; retains some community positions after amendment

The Palo Alto City Council voted unanimously to adopt fiscal-year 2026 budget amendments that reduce the general fund appropriation by approximately $6.2 million and defer selected capital projects, while restoring several community-facing positions after council amendments.

The package, proposed by staff and reviewed by the Finance Committee, aims to preserve reserves and reduce an ongoing structural gap: staff presented $6.2 million in reductions, split roughly $3.4 million in ongoing savings and $2.8 million in one-time savings. The council’s final motion included two amendments to restore a partial JMC access coordinator and retain a reserve police position, and directed the Parks & Recreation Commission to review a Foothills Nature Preserve capital project before midyear.

Why it matters: The changes reduce near-term spending and help maintain reserve balances, but officials and council members warned the city still faces a projected budget shortfall in FY27 and must monitor revenues and consultant spending closely.

What the council approved

- General fund reductions: Staff recommended and council approved about $6,200,000 in total general-fund savings for FY26. Staff described these as roughly $3,400,000 ongoing and $2,800,000 one-time savings. Many of the reductions were achieved by freezing vacant positions and reducing contract or operating expense lines.

- Capital deferrals and reassignments: Council deferred or delayed several capital projects to even out cash flow and preserve a CIP fund balance. Notable items discussed included the Baylands levee repairs (staff suggested retaining $50,000 for permitting to keep the project moving), athletic-court resurfacing delays, park playground deferrals and a recommendation to use Measure B (VTA local streets and roads funds) for the Churchill Avenue bike/ped improvements rather than city general fund dollars.

- Restores and amendments after council debate: During the meeting councilmembers proposed and adopted amendments that restored the following positions/items: - A part-time reserve police officer (0.12 FTE) — council accepted staff’s note that this position’s presence can reduce overtime costs for certain events. - The JMC (community recreation) program assistant functions: council approved an approach that shares an existing Lucy Stern program assistant to support the JMC and retained the outreach access coordinator as a 0.48 FTE (to improve access for underserved communities). - Direction to retain $50,000 in FY26 for permitting work on the Baylands (Bailen/Levee repair) so early planning/permitting can continue.

Staff rationale and debate

Lauren Lai, Chief Financial Officer, told the council the package was designed to protect core services while preserving reserves: “It was very important for us to continue…