Folsom staff present FY 2025'26 budget with $3.5 million shortfall; council continues public hearing

Folsom city staff on Tuesday presented the proposed fiscal year 2025-26 operating and capital budget and outlined a $3.5 million operating gap that would reduce the city's unassigned fund balance below the council's 17%-20% policy range if the gap is used. Council opened a public hearing on the budget but continued the item to allow public review and additional staff follow-up.

Stacy Timani, the city's chief financial officer, said the proposed budget projects total general fund revenues of about $120 million and proposed appropriations totaling about $123.5 million. "Total expenses at the $123.5 million that just had to be added into the budget right off the top," Timani said, noting roughly $5.5 million in personnel and insurance increases and $3 million in "true ups" to operating accounts based on actual spending trends. The shortfall, she said, would require use of about $3.5 million from the unassigned fund balance, reducing the reserve to an estimated 15% of expenditures by year-end.

Timani and City Manager Bridal (as recorded in the meeting) described the budget process and next steps: the council will hold additional review and public hearings; staff proposed returning on June 24 and planned a later September/October review and a midyear review in February or March. The presentation warned that without cuts or new revenue, projected shortfalls could grow over the next five years and deplete the reserve.

Key figures cited by staff: total proposed citywide budget of about $274 million across funds; general fund proposed appropriations of $123.5 million; an estimated $3.5 million draw on reserves in 2025-26 leaving the unassigned fund balance near 15% of expenditures; projected longer-term CalPERS contribution increases totaling roughly $4.6 million over several years per CalPERS outlook data.

Councilmembers and the city manager framed the shortfall as a decision point for the community. City Manager Bridal said the next months will involve public outreach and a menu of options for reducing costs or identifying new revenue, including discussions about service-level reductions and the possibility of a revenue measure in the future.

After public comment and council discussion, the council voted unanimously to continue the budget public hearing so the revised budget document could be posted and members of the public given additional time to review. The continuation was scheduled and the council directed staff to return at a subsequent meeting for adoption procedures. A roll-call on the continuation recorded "Yes" votes from Raffel, Rohrbach, Kozlowski, Leary and Mayor Aquino.

Why it matters: the budget funds police, fire, public works, parks and recreation, utilities and capital projects. Staff said the city must either reduce future operating costs, pursue new revenue, or use reserves with the knowledge that reserves could be exhausted in the medium term if structural gaps remain.