Palo Alto council adopts FY2026 budget, restores uncertainty reserve and funds single-role ambulance pilot

The Palo Alto City Council on June 16 adopted the fiscal year 2026 budget ordinance after a lengthy review that included the new AB 2561 workforce vacancy hearing and a separate review of nonprofit funding. The adopted budget restores a short-term uncertainty reserve, continues the city’s multi-year capital investment plan, and authorizes new staff positions tied to public-safety improvements.

Why it matters: The budget sets operating and capital priorities for the coming year, adds staff for a single-role ambulance pilot in Fire, and includes placeholders and a timeline for staff to identify $6 million in savings as the council requested. It also reaffirmed the city’s table of organization and municipal fee schedule.

Key actions and numbers - Budget adoption: Council adopted the FY2026 operating and capital budgets, the table of organization and updated municipal fees, and accepted the FY2026–2030 Capital Improvement Plan (CIP). The full citywide operating budget totals roughly $1.0 billion; the capital program is about $313 million for FY2026 and a five-year CIP totaling about $1.1 billion. - Reserves and fund balance: Staff restored the uncertainty reserve to $6 million and projected a budget stabilization reserve (BSR) of about $54 million (≈17.6% of FY2026 expenses). The BSR target referenced in staff materials is 18.5%. - Balancing work: Finance committee directed staff to implement $6 million in one-time balancing actions and identify at least $2 million in ongoing savings; a return to finance committee and council on detailed options is scheduled for August and September. - Staffing and programs: The adopted budget adds 18 FTE citywide (11 in the general fund). Notably, the budget includes funding to implement a single-role ambulance pilot in Fire (six new positions and five hourly paramedics for backfill) with a target activation in April 2026. The council also authorized staff to pursue filling a vacant Safe Routes to School planner FTE and to seek measure funding to support that position. - Municipal fees: The council adopted annual fee updates and authorized a rental registry fee program with limited exemptions and use of Measure K to support those exemptions.

Workforce and AB 2561 hearing City Human Resources and the unions presented required information under AB 2561 about vacancy rates and recruitment. The city reported a citywide vacancy rate of about 11%, improved from a pandemic-era peak, with concentrated vacancy challenges in utilities, public works, planning and inspections. SEIU — which represents frontline workers citywide — urged faster hiring for positions that have been open long and flagged burnout in key public works and utilities roles. Council directed staff to continue recruitment while budget follow-ups are completed in August.

Nonprofit funding (see separate coverage) As part of the FY2026 adoption, the council approved Policy & Services Committee recommendations for a nonprofit awards pilot (phase 1) and made on-the-fly adjustments to restore several organizations (Magical Bridge, UNAF, Neighbors Abroad and Environmental Volunteers) using the council contingency to cover a shortfall. The awards, their adjustments and related directions are captured in the budget motion and are summarized in the nonprofit article.

Next steps and reporting Staff will return in August with specific proposals to realize the $6 million of FY26 balancing savings and continue work on FY27 planning. The city will also bring the Palo Alto 1‑Water plan to the SCAP committee in September for detailed policy review and expects to complete a comprehensive cost-of-service study for utilities by late 2025.

Ending note Council members emphasized the uncertain federal/state fiscal outlook, the importance of protecting reserve levels, and the need for continued community engagement as staff returns with detailed, implementable savings recommendations.