Sacramento, California – Officials in Sacramento have started working on the city’s budget for the fiscal year 2026–27, projected to be $66.2 million short. The City Council was told about this imbalance on February 10. Leaders made it clear that the problem isn’t an economic slump, but rather a long-term mismatch between the city’s spending and the money it takes in each year.
City Manager Maraskeshia Smith said that this is a time when officials need to make tough but carefully considered choices. She said that cutting programs won’t fix a structural imbalance that has built up over time. Instead, the city wants to keep its finances stable while simultaneously boosting the local economy, making things run more smoothly, and keeping the public services that residents depend on.
The deficit has grown because of a number of factors. Expenditures have gone up because of additional efforts to help the homeless and provide shelter, new labor agreements, inflation, and higher expenditures for pensions and insurance. At the same time, several initiatives that voters passed have moved money from the General Fund, and the city’s long-term obligations have not kept up with revenue growth.
Mayor Kevin McCarty noted that the city has already moved $7.7 million in savings from this year to help with the immediate problem, but there is still a big gap. In the next few months, officials plan to make targeted adjustments to safeguard important services like parks and public safety. They also want to find policies that help the economy thrive instead of just making cuts.
Sacramento fixed a different $62 million deficit last year by leveraging one-time revenue sources, savings from the end of the year, fee reductions, and program changes. Those efforts made things temporarily stable, but they didn’t fix the underlying imbalance. Depending on the final agreements, ongoing labor talks could change the scenario even more.
Budget talks will go on until the spring. In March, departments will present their plans, in April a balanced budget will be suggested, in May public hearings will be held, and in June the budget will be approved. City leaders want residents to come to meetings, leave comments, and discuss their priorities as decisions are made.
More information about the budget process, meeting dates and opportunities for public engagement is available on the City’s budget website.