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Budget advisers warn personnel costs — 63% of general fund — will shape FY2027
Summary
Staff told the Budget Advisory Board that payroll and benefits drive roughly 63.2% of the general fund and that bargaining agreements and rising pension and health costs will constrain short-term flexibility for FY2027 planning.
Staff told the Budget Advisory Board that payroll and benefits account for the bulk of the general fund and will be the principal driver of next year’s budget.
Laura Reese, director of office management and budget, said the city’s personnel costs “drive 63.2% of the general fund” and noted 139 net new positions over the past decade, with 70 added in police and 58 in fire to serve population growth. She added that most general-fund employees are covered by collective bargaining agreements that limit management’s ability to change wages without negotiations: “the team’s contract and the federation contracts both are recently approved. They continue through September 30 of 2028,” Reese said.
That combination — large personnel share, bargaining-covered positions and rising pension and health costs — means the board and staff must apply assumptions to model FY2027. Reese said staff used FY2026 as a baseline and incorporated several assumptions into payroll projections: a cost-of-living adjustment and a merit framework for various employee groups. For management and confidential employees the proposal assumes a 3.5% COLA and up to 3% merit increases based on performance; IAFF and FOP assumptions include step/merit progressions and additional COLA/market adjustments. On pensions, staff explained they budget by position using the actuarially required contribution; new employees generally enter the state FRS plan, which staff noted has a legislated contribution rate (FRS contribution cited at about 13.59% for FY27).
Board members pressed for more granular dollar-based trends and for clearer presentation of where leverage exists. A member asked staff to provide the ten-year history of personnel cost growth broken out in dollars (not just FTE counts or percentages) and to disaggregate high-level management compensation versus entry-level staffing. Reese and other budget staff agreed to provide those dollar figures for follow-up meetings.
The board recorded two formal motions tied to meeting business during the session: a motion to permit Melinda Faler to participate remotely (moved by Oliver; seconded by Jason) and a motion to accept the March 18 minutes (moved by Jason; seconded by Max). Both motions passed unanimously.
Next steps: staff will supply the requested dollar-based personnel trend charts and follow up on specific pension and bond maturity questions raised during the session (staff noted the special-obligation bond repayment schedule will be shared). The board flagged personnel cost modeling as the single highest near-term uncertainty for the FY2027 budget.
