Santa Rosa managers lay out $20M structural shortfall, seek $13M in cuts and options to avert insolvency

City staff on Tuesday presented a detailed budget study session to the Santa Rosa City Council, saying the general fund faces a structural deficit of about $19.9 million for fiscal year 2025–26 that grows in subsequent years unless the city takes substantial action. Finance staff said a major driver is weaker-than-expected sales-tax revenue and sharply higher CalPERS pension costs.

The finance director and chief financial officer walked council through: updated sales tax forecasts; an operating reserve analysis showing reserves would be exhausted within a few years at current spending levels; and a menu of reductions totaling about $13.1 million the city could adopt now to reduce the near-term gap. That package would lower the immediate deficit to roughly $6.7 million, staff said, but additional steps would still be required in later years.

Staff emphasized the drivers. The city’s sales-tax forecast was revised downward after consultant reviews and the end of pandemic-era growth; sales-tax budget for FY2025–26 was reduced by roughly $5 million. At the same time, rising employer pension payments to CalPERS accounted for much of the long-term growth in the deficit. CFO Alan Alton and Budget Manager Veronica Connor said current projections reflect proposed 4% and then 3% labor cost-of-living adjustments and other agreed labor costs.

To reduce the deficit, staff proposed a combination of actions across administrative departments and public safety. Administrative and operational reductions—vacant-position eliminations, outsourcing some finance tasks, shifting some planning…