Ceres staff outline FY2026 budget showing $2 million general-fund gap; adoption set for June 23

Ceres finance director Shannon Essen presented a proposed FY2026 budget on June 2 that projects citywide revenues of about $87.2 million against expenditures of roughly $96.1 million, with the general fund showing a $2 million structural gap.

"The general fund revenues are projected at $27.5 million while expenditures total $29.5 million, resulting in a $2 million deficit," Essen said, adding that the proposed budget relies in part on one-time capital spending funded from enterprise and special revenue balances. Staff projected an unaudited FY24 fund balance of $6.5 million that is expected to fall to about $4.88 million by the end of FY26, or roughly 16.3% of expenditures — below some professional reserve targets.

City Manager Doug Dunford and finance staff told the council the shortfall is not sustainable long term and reflected broader pressures: rising pension contributions, an anticipated increase in insurance costs, and the end of one-time federal ARPA funding used in prior years. "We are in the last year of our five-year contract with the city of Modesto for some services," Dunford said, noting staff are pursuing fee studies and a water and sewer rate study to shore up utility funds.

Staff detailed priorities and constraints: no new full-time positions were proposed for FY26; 14 existing authorized positions remain unfunded; fleet replacement is unfunded; and the first year of a five-year capital improvement plan is included. The budget document presented itemized fund types and department-level proposals, with public safety accounting for the largest share of general fund spending.

The presentation included department-level changes and cost drivers: personnel costs remain the largest general fund component, and the city has restructured community facilities district accounting to separate CFD funds for legal compliance.

Council members and staff used the workshop to flag areas for further analysis before adoption. Among the follow-ups staff committed to return with cost estimates were possible reallocation of council benefits toward public-safety training, a review of contract-service line items, options for addressing unfunded positions, and impacts of shifting certain program funds. Dunford said staff will bring a revised package and specific fiscal impacts to the council for the June 23 adoption meeting.

No formal votes were taken at the workshop; the meeting will return June 23 for final budget action.