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Santa Rosa staff warn of $17.5 million shortfall, outline two-year strategy to avoid abrupt cuts
Summary
City finance staff told the City Council the base budget for FY 2026–27 shows a $17.5 million structural deficit tied to expiring grants, rising personnel costs and public‑safety overtime. Staff proposed using reserves, leasing apparatus and targeted department reductions, and will return with detailed proposals May 5–6.
The Santa Rosa City Council heard on April 21 that the city’s preliminary base budget for fiscal year 2026–27 includes a projected $17.5 million general‑fund deficit, driven largely by expiring grant funding, growing personnel costs and higher public‑safety overtime.
Chief Financial Officer Scott Wagner and Budget Manager Veronica Conner presented the forecast, saying the shortfall is “structural in its nature” and will cause reserve drawdowns without corrective steps. “If we were to take no corrective actions and adopt a 17 and 1/2 million dollar deficit, we would again expect the structural aspect of our deficit to cause growing deficits in the future years,” Wagner said.
Why it matters: the gap reflects a combination of one‑time grant money ending (notably a federal SAFER fire grant and ARPA‑funded programs supported in part by county Measure O), a projected salary and benefit increase (including an anticipated 4% cost‑of‑living adjustment for most bargaining units) and persistent overtime in police and fire. Veronica Conner told council staff projects a general‑fund revenue base of roughly $223 million versus $233.5 million in budgeted expenditures for the coming year.
What staff proposed: city finance outlined a two‑year, multi‑pronged approach intended to avoid a single, abrupt set of cuts. Key elements include:
- Using $8.4 million of reserves in year one to keep the adopted deficit at current levels and buy time for planning; - Pursuing lease financing for major apparatus purchases (targeting apparatus over $250,000) to better align payments with useful life and capture near‑term savings; - Pursuing pension cost‑management strategies (discussed separately at length) to lower future CalPERS payments; and - Directing departments to identify 1% and 3% targeted reductions (a department reduction “North Star” of about $4.3 million), with vacancy management prioritized so reductions would, when possible, affect vacant positions first.
Council reaction and next steps: Councilmembers pressed staff for more granular impact analyses and urged clarity on what the city’s “core services” would be before deep cuts occur. Wagner and Conner said proposed reductions will not be presented tonight; they will bring department‑level proposals and staff from affected departments to study sessions on May 5–6 and publish a full draft budget on June 2 ahead of adoption on June 16.
Public safety costs and overtime: presenters highlighted that police and fire together comprise roughly 65% of the general fund and that overtime and grant expirations are large drivers of the deficit. Wagner said the base budget includes a correction to better align overtime budgets with recent actuals, and previewed presentations by Chiefs Creegan and Westrope at the May study sessions to explain overtime trends.
What council asked for: members asked for clearer visualizations of the scale of the cuts by department, more detail about sales‑tax assumptions and the long‑term implications of using reserves. Staff committed to greater transparency and to returning with department heads for the May sessions.
The council did not take a final vote on reductions; it directed staff to return with the May 5–6 detailed study session materials.
