Item 30 - Fiscal Year 2026-27 Budget Work Study Session

Home Browse Search

Fiscal Year 2026-27 Budget Work Study Session May 5, 2026 Page 2 faces significant liability for safety issues and litigation. It is through this lens that we must take steps to close an updated $13 million gap to rebalance the budget. Updated General Fund Outlook Since the Early Direction discussion, revenue assumptions have been updated and expenditure estimates refined. As a result, the previously estimated General Fund deficit for FY 2026-27 has been reduced from approximately $19 million to approximately $13 million. A summary of the key changes is provided below. Description Impact on Deficit Initial Estimated Deficit ($19 million) Net Revenue Adjustments (increase of approximately $0.95 million from CPI-based and other updates, partially offset by a $1.2 million reduction in sales tax based on the latest consultant ($0.25 million) update Net Expenditure Adjustments (OC Streetcar timing adjustment— $0.5M vs. $2.OM; contracts held flat despite typical escalation; equipment replacement funding not included; partially offset by a $5.75 million higher required employee pension contribution than previously assumed Revised Estimated Deficit $13 million Potential balancing options are summarized in Exhibit 3 and some are discussed further throughout this report. If these options are implemented, the remaining shortfall would be reduced to approximately $4.7 million. The $4.7 million estimate assumes adoption of the options presented. To the extent that any of these strategies are not supported or are modified, the remaining deficit would increase accordingly. As such, the $13 million represents the current deficit, while the $4.7 million reflects the estimated remaining deficit after incorporating the proposed adjustments discussed below. Staff is seeking City Council direction on how to address the remaining estimated $4.7 million shortfall. This includes feedback on the proposed balancing options presented in Exhibit 3, as well as guidance on prioritization using the categories discussed during Early Direction and summarized again in Exhibit 4. As part of this process, staff recommends further review of discretionary or "nice-to-have" items to determine whether these should be reduced or maintained. Staff will incorporate City Council feedback into the Proposed Budget for consideration at the upcoming budget workshops. As Santa Ana employs various methods to close a budget gap, other state and local governments are struggling to balance their budgets. For its FY25-26 budget, the City of Los Angeles negotiated five unpaid furlough days with the LA City Coalition of Unions and Engineers and Architects Association, and the Los Angeles Police Protective League