Council hears FY 2025–26 budget workshop; staff warns of structural deficit and pushes for grant pursuit

City staff presented a detailed overview of the proposed fiscal year 2025–26 major fund budget during the June 10 council meeting. The presentation covered the general fund and major enterprise funds and highlighted a structurally‑balanced picture that will require council attention if current trends continue.

Key figures and trends - Staff projected the general fund beginning reserves (July 2025) and estimated an ending reserve of roughly $7.5 million but noted an ongoing structural deficit of about $2.2 million for the coming year. Staff repeated earlier warnings about rising CalPERS liabilities and said the city will pay roughly $881,000 this year toward CalPERS unfunded liabilities, with nearly half coming from the general fund. - The budget assumes modest increases in sales and property tax revenue (3–5% range) but also anticipates higher insurance and workers’ compensation costs (about a 21% increase for some coverages). The presentation showed that law enforcement accounts for the largest single share of general fund expenditures (about 43%).

Subsidies and new obligations - Staff proposed new general fund subsidies that would increase the general fund’s load: Sierra House ($366,000) and the local redevelopment authority for the Riverbank Industrial Complex ($232,000). Councilmembers asked staff to explore using Program‑Level Housing Allocation (PLHA) funds to help mitigate the Sierra House subsidy; staff said that would require a plan amendment and a public hearing.

Staffing and capital - The proposed budget includes a classification and compensation study, a new human resources technician, a community development specialist promotion and the possibility of creating an in‑house engineering group to replace some contracted engineering work. Staff said some deferred positions (deputy city clerk, public information officer, recreation coordinator) were not included because of space and funding constraints. Council expressed interest in evaluating the public information role via an RFP and/or temporary contract while the compensation study is completed. - Capital requests included a shared backhoe (sewer/water), SCADA radio upgrades and several maintenance and ADA improvement placeholders. A $304,340 playground replacement request for Wharton Park was noted but deferred due to funding constraints.

Council direction and next steps - Councilmembers asked staff to examine multiple options: accelerate funding for the PERS trust (Section 115) beyond the proposed $750,000 set‑aside; explore the potential to move engineering in‑house with a cost/benefit analysis; and examine potential savings from contracts such as landscape and park services. Several councilmembers asked staff to explore utility assistance options and to examine the feasibility of ending or restructuring the Opportunity Stanislaus (LRA) contract in light of declining outside funding. - On the PLHA funds, councilmembers asked staff to prepare a plan amendment and public hearing to consider reallocating some PLHA funds for Sierra House; staff said a public hearing is required and that it will schedule the matter for July if council wants to proceed.

Why this matters The proposed budget shows constrained fiscal flexibility amid rising pension, insurance and contract costs. Council members emphasized the need to pursue all available grant funding, to evaluate service delivery models (in‑house vs. contract) and to protect vulnerable residents from utility cost increases.