Beaumont officials warn reserves are shrinking; staff point to transfers and personnel costs

The City of Beaumont’s finance team told the City Council at a June budget workshop that the city’s general fund balance has declined sharply since FY22 and could fall below its reserve policy unless the council approves spending reductions or other fixes.

City Manager Mr. Boone opened the session and said the city’s fund balance dropped from $53.5 million in FY22 to a projected $35.2 million at the end of FY26, a reduction of roughly $18.3 million, or about 34 percent. He said staff will likely propose reducing the city’s minimum general fund reserve and emphasized the need to curb spending rather than increase it.

Budget manager Amy Schmidt told the council the city’s personnel costs account for roughly 71–72 percent of general fund spending and that limited flexibility to reduce those costs is driving the structural gap. "We remain confident that through this planning and responsible financial management, the city will achieve a balanced budget," Schmidt said, while noting the figures are projections based on current assumptions.

Staff presented a five-year trend analysis showing projections under current assumptions: an estimated FY26 ending fund balance near the city’s adopted 20 percent minimum, a FY27 projection with revenues around $173 million and expenditures about $183 million (yielding a projected FY27 fund balance near 14 percent), and an FY28 projection that could reduce the fund balance toward the single digits if current trends continue.

Schmidt walked the council through a scenario that would impose a civilian hiring freeze (excluding police and fire), which staff estimated would save about $3.7 million and would raise a projected FY27 fund balance to roughly 16 percent in the model — still below the city’s 20 percent policy.

Council members pressed staff on a change in the city’s adopted deficit figure. Council members recalled an adopted FY26 budget deficit of $4.5 million; staff said the current projection is about $6.2 million. Schmidt attributed the increase primarily to additional general fund transfers out totaling $3.2 million that were not previously budgeted: $1.5 million to shore up the employee benefits fund, which had entered a negative balance after higher-than-expected health claims, and $1.7 million to shore up the transit fund, which ran a negative balance when expenses outpaced grant revenues.

Mayor Pro Tem Turner asked for a numerical breakout of the transfers, and Schmidt identified the $1.7 million transit increase and $1.5 million employee-benefits increase. Staff said they would provide more detailed slides or follow up if the printed materials did not fully answer the council’s questions.

Staff also noted the impact of known contractual wage steps that will affect future years: the presentation assumed approximately an 11 percent adjustment for fire and a 4 percent adjustment for police in upcoming years, which are factored into the FY28 projection. Staff discussed vacancies and timing (for example, rookie firefighter salaries and certification timing) that affect how quickly the city realizes payroll credits and associated costs.

The council scheduled an additional budget workshop on July 15 for updated numbers and further discussion. Staff emphasized that, unless revenue growth accelerates or the council accepts cuts or policy changes, each increase in spending will require corresponding cuts elsewhere or additional draws on the fund balance.