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Santa Rosa subcommittee told long-range forecast shows structural deficit; reserves at risk by 2028
Summary
Staff briefed the Long-Term Financial Policy Subcommittee on the results of recent budget reductions, a multi-year structural deficit, a projected reserve shortfall (staff said the general fund could be insolvent in 2028 if no actions are taken), and next steps including program-based budgeting pilots and revenue options.
City staff told the Santa Rosa City Long-Term Financial Policy Subcommittee that, despite substantial cuts implemented over the last year, the city faces a multiyear structural deficit and that reserves could be exhausted if current projections hold.
"We made $15,200,000 worth of cuts," Scott, staff member, told the subcommittee while reviewing last year's midyear and adoption reductions. Scott said the city is transitioning from a midyear-focused budget process to a year-round approach and plans a program-based budgeting pilot to produce more operational-level cost information.
Scott said the city's long-range financial forecast shows a worsening deficit into fiscal year 2026-27 and warned that, under the assumptions in the presentation, the general fund would be insolvent in 2028. "If we were to do nothing and the projections all played out the way that they did, the note here is that this general fund would be insolvent in 2028," he said.
Staff highlighted that CalPERS pension contribution increases are a major driver of future deficits and that contributions rise notably in 2026-27 before easing in later years. The presentation also noted the city must maintain council-mandated reserve policy and avoid measures that would put reserves below policy in the short term.
Committee members pressed staff for more operational detail about what program- or service-level cuts would mean. Member Caroline, committee member, urged focusing on "target services" rather than across-the-board percentage cuts and asked for clearer rankings of core versus noncore services. Several members urged staff to present more comparisons with similar cities and to provide concrete service-level impacts and trade-offs.
Staff said it will return with more detailed forecasts in October (an initial reserves number will be available then) and is already piloting program-based budgeting work intended to deliver more granular cost information for departments. Scott said staff will also brief the subcommittee on revenue levers and will research potential revenue options before public outreach. Committee members suggested considering a mix of small fee increases, parcel taxes, or other revenue measures in addition to pursuing efficiencies.
No formal votes were taken. The subcommittee set a future meeting to continue the discussion and asked staff to furnish operational-level analyses and proposals for revenue options and program-targeting frameworks.
