Item 25 - Public Hearing - Fiscal Year 2025-26 City Budget

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Labor costs for FY25-26 are estimated to be $281.50 million, representing just over one-third of the total Citywide budget. These increases are primarily driven by mandatory employee pension contributions, negotiated salary increases, and the addition of staff to deliver quality service to the municipality. Over the past five years, labor costs have grown at an average annual rate of 4.24%. The decrease in labor costs between FY21-22 and FY22-23 is somewhat misleading, as it reflects the City Council’s approved plan to set aside the savings derived from the refinancing of pension debt for future pension cost increases. The projected increase in salary costs from FY23-24 to FY24-25 is largely due to negotiated salary adjustments approved by the City Council following the adoption of the FY23-24 budget. As with most full-service governmental entities, salaries represent the largest share of the budget, especially within the General Fund. Given their significance, it is considered best practice not to budget for full (100%) position occupancy, recognizing that not all positions will be filled at all times. Budgeting under full staffing assumptions often results in excess budget capacity, limiting the flexibility to reallocate resources to higher-priority needs. To address this, the City accounts for typical vacancy periods by assuming a three-month recruitment and hiring window. As a result, newly adopted positions are budgeted at nine months of salary costs in the first year. 93