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County projects $10–$18 million general-fund gap; CAO urges program-by-program review
Summary
County Administrative Officer Matt Pontus and budget staff told the Board of Supervisors that the FY 2025–26 general-fund forecast shows a central gap estimate of $13.9 million (range $10–$18M), driven by constrained revenue growth, unitary tax declines tied to Diablo Canyon and rising insurance and pension costs. Staff proposed program reviews and a mix of short- and long-term reductions.
The San Luis Obispo County administrative team told supervisors on Tuesday that the county faces a significant budget shortfall in fiscal year 2025–26 and must begin program-level reviews to avoid drawing deeper on reserves.
County Administrative Officer Matt Pontus said the county’s reserves have already been strained by roughly $30 million in storm-related emergency expenses and that the forecast shows a midpoint shortfall of $13.9 million, with a conservative sensitivity range between $10 million and $18 million. "We cannot continue to operate with short-term strategies without a thorough reevaluation and right-sizing of our program spending," Pontus said.
Lisa Howe, division manager in the CAO’s office, outlined assumptions behind the one-year forecast, noting constrained discretionary revenue growth and several expenditure pressures: a projected decline in unitary property tax receipts linked to Diablo Canyon (staff estimated unitary tax revenue dropping from historical totals around $21 million down to roughly $8.7 million in 2025–26 across the region), higher liability and workers’ compensation rates, and $1.5 million in anticipated enterprise software licensing costs. Howe said the forecast assumes status-quo programs and shows nondepartmental (discretionary) revenue growing about 2.8% for 2025–26.
Assistant CAO Rebecca Campbell presented multi-year scenarios showing how additional positions, a recession-like slowdown in property-tax growth, or negotiated salary increases could widen the multi-year gap. Under a scenario that includes an average of 22 new general-fund positions per year, staff estimated the gap could grow to roughly $17.6 million. A three-year, CPI-level salary increase scenario would drive still larger deficits.
Campaigns to identify balancing options are already underway. Pontus said departments are completing program-activity inventories and that staff will return with more detailed program-by-program analyses this winter; supervisors asked for a reserves memo in January and clearer estimates of staff resources needed to implement reductions or restructurings. "These program sheets are due back to my office in the next couple weeks, and we'll be looking at them between now and January," Pontus said.
Public commenters urged transparency and departmental workshops; Mike Brown of CoLab suggested rotating departmental deep dives. In response to supervisor questions, staff pledged to show how limited-term positions and grant-funded roles were tracked and to identify which positions were intended to end with grant funding.
The CAO’s office recommended a mix of short-term and structural (long-term) budget balancing strategies and said staff will present options aligned with board priorities during the upcoming budget cycle. The county’s formal budget hearings will follow the usual calendar, with recommended budgets introduced in May and hearings in June.
What’s next: staff will return with program-level analyses and a reserves review ahead of the budget-development deadlines, enabling the board to consider targeted reductions, revenue options or both before May.
