Palo Alto finance committee forwards $6.2 million in FY26 budget reductions to council after debate over museum staffing and capital deferrals

The Palo Alto Finance Committee voted unanimously on Aug. 19 to forward to the full City Council a package of fiscal year 2026 budget amendments that would reduce city appropriations by approximately $6,200,000, a recommendation city staff said represents roughly 2% of the General Fund.

"We are presenting to you the recommendation to the City Council to approve fiscal 26 budget amendments and also that would entail reducing appropriations or cutting the budget by approximately $6,200,000," said Lauren Lydie, the city's chief financial officer, during the committee meeting.

The committee's action sends the proposal to the Sept. 8 council meeting with specific follow-up requests for staff. Committee members asked for department-level details on which proposed position reductions are currently vacant and for how long, a five‑year headcount comparison by department (with asterisks noting interdepartment transfers and major reclassifications), and a clearer revenue analysis for the Junior Museum and Zoo (JMC) guest‑services position targeted for defunding.

Why it matters: City staff said the reductions are intended to shore up reserves and narrow a projected multi‑year budget gap. The package proposed $3.4 million in ongoing savings (projected to continue through FY27 and FY28) and $2.8 million in one‑time reductions. About half of the $6.2 million package involves changes to capital project timing or scopes.

What was proposed: CFO Lydie described a mix of personnel and general‑expense reductions across departments and a set of capital project deferrals or downsizing. Department examples in the proposal included defunding a vacant revenue collections manager in Administrative Services; modest general‑expense trims for the City Attorney, City Auditor and City Clerk; defunding two of three previously budgeted fire trainee positions; and shifting funding sources for several transportation and planning positions.

Capital adjustments included reduced FY26 appropriations or schedule changes for several parks and facilities projects, including a smaller ADA appropriation (reduced to $450,000 for FY26), deferral of full athletic‑court resurfacing in favor of phased patching and overlays, a two‑year delay for the Wherry Park playground, and a one‑year postponement of three restroom replacements at Foothill Nature Preserve. Staff described capital recommendations as contingent on permit, bid and construction variables.

Notable numbers and program details captured in the meeting: - Total proposed reduction: ~$6,200,000; about $3,400,000 ongoing and ~$2,800,000 one‑time. (Lauren Lydie) - Proposed one‑time saving from shifting a planned FY26 hybrid/electric fire engine to a diesel model: $460,000; staff later said the diesel engine price cited was $1,126,000. (Budget presentation and Public Works) - Community Services Department reductions totaled about $332,000; the JMC access coordinator position accounted for $42,000 of that amount. (Amanda Dunlop, Community Services)

Public comment and debate: Five speakers representing the Friends of the Palo Alto Junior Museum and Zoo urged the committee to retain a full‑time JMC program assistant (guest services) position, arguing it generates revenue through rentals and events. "This position is essential...the JMC can actually bring in more money," said Lauren A., identified as president of the Friends of the Palo Alto Junior Museum and Zoo. Jill Hartnett, a member of the group's development committee, said the role is needed to plan after‑hours events and expand earned revenue without raising admission prices.

City staff and several council members flagged the JMC position as a priority to revisit before council action. Amanda Dunlop, assistant director for Community Services, said staff are developing a transition plan that would, if the cut is approved, share duties between an existing Lucy Stern position and other staff and that recent process improvements (including online birthday‑party reservations) have already increased revenues. Staff reported current ticket and membership revenue gains following price changes and software upgrades.

Other committee concerns and directions to staff: Committee members pressed planning staff about two planner positions proposed for reduction (one ongoing, one one‑time) and raised risks to project timelines, including housing‑element work. Members asked for more detail on consultant on‑call spending and for a scheduled Sept. 15 study session to outline tighter controls and expected savings from consultant reductions.

Levee/parks and permitting: Committee members expressed concern about proposed deferrals to Baylands levee repairs and asked staff to advance permitting work. As a compromise, staff offered to return to council with the option to appropriate a modest FY26 amount for permitting (committee asked staff to consider $50,000) rather than fully deferring the project.

Outcome and next steps: The committee voted unanimously to forward the FY26 amendment package to council with the staff follow‑up items described above. The committee asked staff to provide: (1) a department‑by‑department list showing which proposed headcount reductions are vacant and vacancy durations; (2) a five‑year comparison of filled positions by department (with notes on transfers/reclassifications); (3) a revenue‑impact analysis and conservative, middle and optimistic projections for the JMC revenue strategy tied to staffing levels; (4) clarification on consultant‑spending reduction expectations (to be discussed at a Sept. 15 study session); and (5) consideration of appropriating a modest permitting amount for the Baylands levee repair rather than fully deferring the funds.

"We ask that you contemplate these recommendations and could advance it to the council for their consideration and approval on September 8," Lydie told the committee during her presentation.

The council will receive the committee's recommendation and the additional information requested when the item appears on the Sept. 8 agenda.