Palo Alto council and finance committee sketch $6M buffer, ambulance changes and nonprofit funding as budget work continues

City finance staff and the Finance Committee presented a reworked draft of Palo Alto's proposed fiscal 2026 operating and capital budgets Wednesday, advising the full City Council to use about half of the $12 million uncertainty reserve originally planned and to return with specific savings to preserve a $6 million buffer.

Lauren Lai, chief financial officer, told the council the budget transmitted May 5 reflects a multi-year forecast and that the Finance Committee recommended reducing the 2026 draw on the uncertainty reserve to $6 million, finding roughly $5.9 million of adjustments to avoid spending the full reserve in 2026. The committee also recommended deferring or reprioritizing capital projects in 5% increments (about $1.5 million per 5%) and asked staff to identify one-time and ongoing savings that would be adopted as a placeholder in the June budget with a final allocation to follow this summer.

The Finance Committee's approach is a hybrid: identify near-term savings to reduce reliance on the reserve, and keep a portion of the reserve available for 2027. Lai said staff will return to the committee on May 20 with candidate reductions and to the council in June 16's adoption packet with a placeholder for the remaining amount; the committee expects to finalize recommendations later in the summer.

Why it matters

City leaders said keeping a larger uncertainty reserve gives the city more runway through an uncertain economic outlook while leaving options to preserve services. The work also affects the capital…