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City presents FY 2025–26 proposed budget showing $3.5M shortfall; council continues public hearing
Summary
Finance staff on June 10 presented a proposed fiscal year 2025–26 operating and capital budget that shows $120 million in revenues against $123.5 million in expenditures, leaving a $3.5 million projected shortfall. The council opened the public hearing and voted to continue it to a later meeting to allow more public review.
The city manager and finance staff presented the fiscal year 2025–26 proposed operating and capital budgets to the Folsom City Council on June 10 and asked the council to keep the public hearing open to allow more time for review and comment.
Key facts: the city manager and Finance Director Stacy Timani said the proposed budget projects roughly $120 million in total general fund revenues and $123.5 million in proposed expenditures, producing a $3.5 million shortfall for ongoing operations. The proposal relies in part on one-time use of the city's unassigned fund balance (emergency reserve), which the staff estimated would reduce the reserve to approximately 15% of expenditures by the end of the fiscal year—below the council's formal policy range of 17%–20%.
Why it matters: continuing deficits could force program cuts, service reductions or the exploration of new revenue sources. Staff noted that major cost drivers include increased salary, benefit and insurance costs (including CalPERS contributions) and operations "true ups" that bring ongoing budgets in line with current spending.
Presentation highlights Finance Director Stacy Timani told the council the proposed budget includes $5.5 million of increased salary and insurance costs (MOUs, step increases, benefit costs and CalPERS contributions) plus roughly $3.0 million of operations "true ups" to better reflect recurring costs in departments such as parks and recreation, fire and police. The package includes moving capital outlays into separate capital funds and using fund transfers to finance those projects rather than keeping capital inside departmental operating budgets.
Timani also described a five-year forecast showing growing gaps if no policy changes are made. Using current revenue and expenditure growth assumptions, staff projected a cumulative shortfall of about $24 million over five years and an unassigned fund balance that could fall near zero by fiscal year 2029–30 without changes.
Council discussion and next steps Councilmembers asked for more information about fund restrictions, the composition of transfers to capital funds and the urgency of capital replacements. Staff identified several capital priorities funded from separate capital funds (library roof and HVAC, vehicle and equipment replacement funds for police and fire, and ongoing enterprise fund projects for water and wastewater) and said they would provide additional detail where money is restricted by law or by developer impact fee rules.
City Manager remarks and staff process The city manager framed the proposed document as a starting point for a community-driven process: staff requested guidance on whether to pursue additional cost reductions, identify potential new revenue options, or continue current services while bringing options to council and the public in the coming months. He noted the council will have further opportunities in September–October and in a midyear review to refine spending decisions and consider structural changes.
Formal action The council opened the public hearing on Resolution No. 11401 (the FY 2025–26 operating and capital budgets) and then voted to continue the public hearing to allow the public additional time to review the revised budget and for staff to incorporate supplemental materials. The motion to continue the hearing carried unanimously (Raffel, Rohrbach, Kozlowski, Leary and Aquino voting yes).
What to expect: staff said they will post updated budget slides and revised summary pages online, provide further documentation about restricted vs. unrestricted fund balances, and return to council June 24 for continued budget hearings. The budget must be adopted by June 30; staff advised that if the council does not adopt a final budget by that date the city manager's proposed budget becomes effective by operation of law.
Ending Staff emphasized that long-term pressures—rising pension contributions, growing service costs and flat sales tax trends—require council and community engagement on funding choices. The council set a schedule of follow-up briefings and public outreach to refine options before final adoption.
