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Santa Barbara finance staff report $8.7M FY2026 shortfall and pitch mix of spending cuts and new revenue options
Summary
City finance staff told the Finance Committee the general fund faces a structural deficit of about $8.7 million for FY2026, warned reserves could be exhausted by FY2028, and proposed a package of spending controls, position reclassifications, and revenue options (including a transfer tax tier, TOT increase and cannabis tax adjustments). The committee voted unanimously to forward staff recommendations to council.
Finance Director Keith Dimartini told the City of Santa Barbara Finance Committee on Feb. 24 that the city is projecting a structural general-fund deficit of about $8,700,000 for fiscal year 2026 and warned that, if unchecked, reserves could be fully depleted by the end of fiscal 2028.
"We do have a structural budget deficit,” Dimartini said, adding that wage and benefit growth, rising insurance costs and ongoing capital and maintenance needs are outpacing revenue growth. The staff presentation asked the committee to receive the interim financial statements through December 2025, accept the six-month actuals report and adopt proposed appropriation and position-salary adjustments included in the committee packet.
Controller Natalie Liccoli reviewed departmental midyear results, reporting total general-fund expenditures of $118,500,000 (about 39.9% of the revised budget) and noting several…
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