National City council adopts FY25-26 budget, projects $9.3M shortfall and taps reserves

The National City council on Tuesday adopted the fiscal year 2025–26 budget after a multi-hour review that left members and speakers sharply divided over the city's fiscal outlook.

Finance staff presented a budget that projects $73.7 million in general fund revenue and $82.9 million in general fund expenditures, yielding a projected deficit near $9.3 million. The adopted plan uses roughly $8.3 million from the city's unassigned fund balance and $1 million from the economic contingency reserve to bridge the gap and fund a proposed $1 million economic development 'revitalization' project.

Why it matters: Council members and many public speakers warned that the adopted approach relies on one-time reserve draws rather than recurring revenue and that the city's CalPERS unfunded liability contributions are slated to rise over coming years. Finance staff highlighted an anticipated $3 million CalPERS payment in FY25-26 and noted sales-tax and franchise-fee projections had improved slightly since earlier drafts, providing limited offsetting revenue.

Council discussion and dissent: Several public speakers urged deeper cuts and more transparency; others, including the mayor and supporters, argued the budget allows targeted investments to stimulate local economic activity and that the reserve position (total reserves across accounts remain substantial) permits limited one-time uses to fund revitalization efforts. Council voted to adopt the FY25-26 operating and capital budget.

Next steps: Council and staff signaled the budget will be a living document. Labor negotiations—several contracts are due this summer—were not incorporated into the adopted numbers and could require mid-year revisions. Staff will return with mid‑year updates and any adjustments needed once negotiated labor costs are known.