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 staff to special-revenue funds, and cutting contracts—totaled just over $5 million and would eliminate about 14 FTEs if adopted. Staff also proposed evaluating two general-fund contracts in Housing & Community Services (legal-aid funding and immigration legal services) for possible reduction or elimination.

Public-safety proposals presented included the police department’s recommended reductions of about $2.5 million (eliminating roughly 12 FTEs in an initial proposal, with deeper reductions required to reach 8% savings) and multiple options from the fire department, including brownouts (temporary station closures while keeping staff on payroll) and blackouts (permanent decommissioning and layoffs). Staff said a fire truck company blackout plus other fire reductions would be among the options needed to approach an 8% public-safety target.

Staff also identified mandatory furloughs as a potential measure. Using a model comparable to prior recession-era furloughs, an 80-hour mandatory furlough across general-fund employees could save about $1.4 million per year (a pay reduction of roughly 3.85% for those affected). Staff characterized furloughs as temporary measures best used alongside structural changes.

Housing and homeless services were a central focus. Staff told council that ARPA funds that had been underwriting some homeless programs were fully expended, leaving the general fund to backfill costs. Direct operating costs for homeless services in FY2025–26 total roughly $5.9 million; staff said the total community cost including indirect public-safety responses could be higher (staff estimated $8–10 million when indirect costs are considered). Safe parking costs are roughly $1.0 million per year, with only $500,000 identified for FY2025–26 at the time of the presentation.

Council members repeatedly pressed staff on regional funding, calling on Sonoma County to deliver more support (Measure O/Measure H-type funding) because the city bears a disproportionate share of services and encampment responses. Housing and Community Services Director Megan Basinger and police and fire chiefs briefed council on how city programs, outreach and enforcement interact and warned that cuts to homelessness programs would increase pressure on police and fire response and on downtown services.

Staff presented sensitivity and reserve analyses showing that, after the proposed $13.1 million cuts, the city would still face long-term deficits driven largely by pension payments. City leaders and staff described the proposed package as a way to buy time for reorganization, further efficiencies and continued negotiations with labor and regional partners; they said deeper steps or additional revenue would still be needed to close the long-term gap.

Council gave staff direction—in a 5–1 straw poll—to continue to pursue the package of reductions, engage labor on potential impacts, and return in May with more detailed materials as part of the FY2026 budget study sequence. Staff also said they would form a short-term “budget deficit advisory committee” with councilmembers, staff and community members to provide additional public engagement.

What’s next: staff will return with department-level detail for items to be included in the May study session and the June budget adoption timeline. Staff also said they will report on any county or regional funding changes that affect homeless-services costs.

Quotes (selected and attributed to speakers who appeared in the transcript): “We are unsustainable at this level of reserve in the immediate future,” Deputy Finance Director Scott Wagner said as staff described the reserve outlook. “If we were to move forward with this all, it would bring our deficit down to 6.7 million,” Budget Manager Veronica Connor said when summarizing the package of departmental reductions. Fire management and unions urged caution: Steven Del Porto, director of Santa Rosa Firefighters, told council that “browning out or blacking out a station has drastic impacts on the community.”

Ending: Council members expressed deep reluctance about cuts to public-safety staffing and widespread concern about the county’s share of homelessness funding. Staff and council agreed to pursue the initial reduction package while continuing to seek regional partners and evaluate other budget tools (pension bonds, operational reorganizations, and additional revenue options). The council directed staff to continue negotiations with labor and to return with refined, department-level proposals in May and a proposed adopted budget in June.

(For the record: staff repeatedly emphasized that the numbers presented are staff proposals and forecasts; no final policy decisions were adopted at the study session beyond direction to continue work and consult labor.)