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Sunnyvale leaders review $717.7 million recommended budget, flag pension liability and reserve changes
Summary
City staff presented a recommended FY 2026-27 budget of roughly $717.7 million in total expenditures and asked council for direction on a set of budget supplements. Finance staff said the plan draws $69.4 million from reserves and relies on a multi‑decade strategy to pay down a large CalPERS liability.
City officials and staff opened a special Sunnyvale City Council budget workshop on May 19 to review a recommended fiscal year 2026-27 spending plan that finance staff said would require drawing on reserves to address ongoing liabilities, principally pensions.
City Manager Tim Kirby framed the workshop as a chance for council to provide final policy direction on an operations-focused budget, noting the city's long-run practice of balancing one-year budgets while using a 20-year plan to manage liabilities. Finance Director Matt Pollan said the recommended plan shows $650 million in revenues, a $425 million operating budget, roughly $213 million for capital, and a total enterprise and other funds projection that results in $717.7 million in expenditures across all funds. Pollan told council the plan anticipates a $69.4 million draw on reserves in 2026-27 and described the planned use of a pension trust to smooth CalPERS payments.
The pension issue loomed largest in council questions. Pollan said Sunnyvale's total pension liability is driven by CalPERS' actuarial assumptions and investment returns; the city is currently projecting an amortization schedule that uses the pension trust and planned reserve draws to pay down the unfunded accrued liability over the next two decades. Pollan added that strong CalPERS returns in the most recent reporting period reduced the near-term amortization burden, but cautioned that returns and policy changes at CalPERS are important variables in future years.
Council members pressed staff on the budget stabilization fund (BSF) trajectory, which is currently above the 15% policy threshold in the first two years of the plan but declines to a lower mid-plan point. Staff responded that the 20-year plan is designed to show the trade-offs of using reserves now to maintain services, and that adjustments can be made in future years if economic conditions change.
Beyond long-term liabilities, staff previewed several operating changes in the recommended budget. City Manager Kirby said the plan emphasizes right-sizing operations and includes funding to stabilize micro transit once grant support ends, additional positions for public outreach and public safety, and a 20-year set-aside for unhoused services. Pollan and department directors also briefed council on departmental budgets and large ongoing projects, including parks improvements, a multi-year sidewalk program, and clean-water and utility initiatives.
The council did not adopt the budget at the workshop; staff said a public hearing on the fee schedule and budget is scheduled for June 2, with adoption expected on June 16. Councilors directed staff to follow up on several detailed items raised during the workshop, including clarifications of reserve and pension schedule slides and additional data on service-level tradeoffs.
What happens next: staff will post the budget materials and hold a public hearing on June 2. Council plans to consider adoption of the budget and related fee schedule at its June 16 meeting.
