Item 21 - Early Direction for the Fiscal Year 2026-27 Budget

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Early Direction for the Fiscal Year 2026-27 Budget April 7, 2026 Page 7 5 6 9 0 High-Priority One-Time Projects $2.0 million Remainder available for direction during May budget workshops $3.0 million Total One-Time Money Recommendations $11.6 million To address unforeseen needs and emerging priorities of aging infrastructure, staff recommends setting aside $2.0 million for high-priority projects that may arise throughout the fiscal year. This may include critical repairs and improvements to City-owned facilities, such as the Bowers Museum, Eddie West Field Stadium, the Santa Ana Jail, community centers, and fire stations. Of this amount, staff recommends allocating $1.0 million to the Public Works Agency to support facility-related needs and $1.0 million to the Non-Departmental budget to provide the City Council with flexibility to address time-sensitive priorities that may arise during the fiscal year. Workers’ Compensation Fund As previously reported in the August 5, 2025 staff report on the Citywide Insurance Program, actuarial valuations show that the Workers’ Compensation Fund reserves remain below the City’s target reserve level of 80% of actuarially determined liabilities. As of June 30, 2026, the actuarial present value of Workers’ Compensation liabilities is approximately $44.8 million. The City’s target reserve level is approximately $35.8 million, while the projected ending fund balance of $19.8 million reflects a reserve shortfall of approximately $16.0 million relative to the City’s policy target. In addition, as discussed in the March 3, 2026, Mid-Year Budget Report, the Fund continues to face elevated claim-related costs, including wage continuation, medical treatment, and legal expenses. Estimated benefit payments for the current fiscal year total approximately $9.7 million, yet only $5.9 was originally budgeted. To help replenish fund reserves and support long-term stability, staff recommends a one- time General Fund transfer of $2.5 million to the Workers’ Compensation Fund. This transfer would improve the Fund’s reserve position while Human Resources continues implementing operational improvements to manage claims activity and reduce future costs. Human Resources, in coordination with the City’s third-party claims administrator AdminSure, City departments, and the City Attorney’s Office, continues to focus on claim- reduction strategies, training initiatives, and enhanced oversight of treatment and return- to-work practices. These efforts are expected to mitigate long-term cost escalation and improve the Workers’ Compensation Fund’s overall financial position. General Liability Fund As previously reported in the August 5, 2025, staff report regarding the Citywide Insurance Program, actuarial valuations indicate that General Liability Fund reserves