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Finance and Management Services <br />www.santa-ana.org/finance <br />Item # 21 <br />City of Santa Ana <br />20 Civic Center Plaza, Santa Ana, CA 92701 <br /> Staff Report <br />April 7, 2026 <br />TOPIC: Early Direction for the Fiscal Year 2026-27 Budget <br />AGENDA TITLE <br />Early Direction for the Fiscal Year 2026-27 Budget <br />RECOMMENDED ACTION <br />Provide direction to staff for the preparation of the proposed FY 2026–27 budget. <br />GOVERNMENT CODE §84308 APPLIES: No <br />EXECUTIVE SUMMARY <br />The City’s General Fund is estimated to face a structural deficit of approximately $19 <br />million before adjustments in FY 2026-27, driven by rising personnel costs, pension <br />obligations, contractual commitments, and continued expenditure growth outpacing <br />trends in recurring revenue. While the City remains financially stable in the current fiscal <br />year, corrective action will be necessary to maintain long-term fiscal sustainability. <br />As part of the FY 2026-27 budget development process, City Management is actively <br />working with department directors to evaluate operations and identify opportunities to <br />eliminate duplicative, outdated, or inefficient service delivery models. This review includes <br />an assessment of discretionary programs, ongoing General Fund subsidies, internal <br />service structures, and cost recovery practices to ensure that resources are aligned with <br />core priorities. <br />Staff is presenting this Early Direction report to provide the City Council with an <br />opportunity to review potential strategies, including expenditure reductions and revenue <br />enhancements, prior to development of the Proposed Budget. The objective is to ensure <br />recurring expenditures are supported by recurring revenues while maintaining essential <br />services and protecting the City’s long-term financial position. <br />DISCUSSION <br />This Early Direction agenda item marks the start of the City Council’s deliberations for the <br />upcoming FY 2026–27 budget. The report has two purposes: to provide information <br />relevant to the FY 2026–27 budget and future fiscal years, and to request direction from