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Mesa staff present budget approach; council questions 2% reduction target and multi-year reserves
Summary
City management presented the FY2026 proposed budget and a plan that includes an across-the-board 2% reduction target to help address a multi-year forecast shortfall; councilmembers asked for clarification about reserve levels, timing and whether larger reductions should be considered.
City management presented the proposed FY2026 budget framework at the April 17 study session and outlined a multi-year financial forecast intended to preserve fund-balance reserves while absorbing rising costs.
Staff described a planning exercise intended to reduce ongoing budget pressure in later forecast years: departments were asked to identify approximately 2% reductions to their base budgets as part of balancing the long-range forecast. Finance staff said the 2% target was selected to start addressing a projected shortfall in year four and to give departments time to find reductions without layoffs; staff said in aggregate the process produced about $11 million of net improvements versus the original $9.2 million target.
Councilmembers sought clarity on how the city uses fund balance and how bond-authorized capital projects relate to annual budgets. Staff explained that large capital projects are often multi-year and may be funded from prior-year collections held in reserves; when projects are carried over the one-year budged sources-and-uses statement can look like a deficit even when the funds are available in reserves.
Council members also debated whether a larger reduction target should be directed by the council now or whether staff'led, department-level adjustments with mid-course corrections are the best path. Several members praised staff's approach to avoid layoffs and to phase adjustments, while others pressed for more transparency on long-range assumptions and for staff to provide a clearer rationale for the 2% starting point.
Staff said they will return with follow-up materials requested by council, including reconciled project allocation lists for bonds and further detail about forecast assumptions and reserve policy projections.
