Santa Barbara council adopts two-year financial plan, approves FY2026 budget after split votes

The Santa Barbara City Council on June 17 adopted a two-year financial plan for fiscal years 2026 and 2027 and approved the operating and capital budget for fiscal year 2026 after several contested votes and extended council deliberations.

Budget staff presented a package that includes adoption of the two-year plan, the single-year FY2026 budget, an appropriation (Gann) limit resolution, fee and penalty schedules, updates to the city—s classification and salary schedule, continuation of multi-year capital appropriations, and authorization for the public works director to execute water purchase agreements. Natalia Glusack, the city—s budget manager, told council, “We are looking at a recommended use of reserves in 2026 of $1,600,000,” and said that meeting the city—s 25% reserve policy would require an additional $4.4 million, pushing a combined shortfall to roughly $6 million in 2026 and a projected $8.4 million deficit in 2027.

Why this matters: the adopted budget uses limited reserves to fund community priorities – including a council-approved transfer to a local housing trust fund – while staff warned ongoing labor negotiations and future cost pressures could increase the projected deficits. Finance Director Keith DeMartini noted assumptions in the adopted plan include a 5% salary increase in 2026 and 4% in 2027; he told council that agreements above those assumptions would worsen the gap.

Council action and debate Councilmember Mike Jordan moved adoption of recommendation A, the two-year financial plan as presented, with Councilmember Harmon seconding. Jordan—s motion passed 4–3; the clerk announced "Motion passes 4 3 with Rouse Friedman as your dissenting." During debate Jordan sought to split the funding action for a $2.0 million annual transfer to the newly proposed local housing trust fund into separate, later motions so colleagues could vote on the core budget without that appropriation. After discussion and a short procedural pause those separate motions were withdrawn and the council moved forward with the staff-recommended package.

Other votes on packaged items included: - Recommendation B (adopt FY2026 budget and related single-year resolutions): approved by a 4–3 vote as announced by the clerk. (Mover/second recorded in the transcript.) - Recommendation C (establish FY2026 appropriation limit and related matters): approved 5–2 as announced by the clerk. - Recommendation D (amendments to the fees schedule, including downtown parking rules): approved unanimously after council directed a minor change to strike the phrase "once per calendar day per vehicle" from a parking-subsidy line. - Remaining budget housekeeping items (positions/salaries, continuation of multi-year appropriations, authorization for water purchase agreements) were approved in subsequent motions; the transcript records these items moving forward after discussion and with roll-call votes.

Council members who spoke during deliberations raised concerns about the size of the multi-year reserve draw and the timing of collective bargaining agreements. Councilmember Freeman said the current deficit assumptions could increase once labor settlements are reached. Councilmember Sneddon asked staff to ensure a clear plan for replenishing reserves and reminded council that the earlier vote to use reserves to fund the housing trust fund included direction to return with a replenishment plan.

Public comment and outreach No public speakers were recorded on the budget item during the meeting. Staff noted the city will continue quarterly monitoring and return with a midcycle update for FY2027.

What happens next Staff will finalize budget implementation and continue quarterly monitoring; council directed staff to return with follow-up items and updates as needed. If labor settlements exceed the budget—s salary assumptions staff said it would report adjustments to council for consideration.

Ending note Council members split on policy priorities and fiscal prudence but moved the city—s spending plan forward before the July 1 deadline for adopting the FY2026 budget.