(SACRAMENTO, CA) —The city of Sacramento is staring down a projected $66.2 million budget deficit as it begins crafting the fiscal year 2026–27 budget, according to a presentation to the city council on Feb. 10. City officials emphasize that the shortfall is not tied to an economic downturn but stems from a structural imbalance—ongoing expenses outpacing revenue growth. Expanded services, rising pension and insurance costs, inflation, and new labor agreements have all contributed to the gap. Voter-approved measures have also redirected General Fund dollars, further straining resources.
“This budget moment requires us to make hard choices, but also smart ones,” said City Manager Maraskeshia Smith, in a city news release. “We cannot cut our way out of a structural deficit. Our focus must be on stabilizing the budget while growing Sacramento’s economy, improving efficiency, and ensuring we deliver the services residents expect.”
Mayor Kevin McCarty noted that the city has already redirected $7.7 million in current-year savings to ease the impact. “We still have a significant deficit, and over the next three months, we’ll target strategic reductions that minimize impacts on core services like public safety and parks,” McCarty said, in the news release. “Moving forward, we can’t just slash budgets; we need to invest in policies and tools to grow our economy.”
Last year, Sacramento closed a $62 million gap without major service cuts or layoffs by relying on one-time funds, savings, fee increases, and program adjustments. Those measures provided temporary relief but did not resolve the underlying imbalance.
The city is currently negotiating with most labor units, and any increases beyond current proposals could deepen the deficit.
What’s Next in the Budget Process?
Residents will have multiple opportunities to weigh in:
*March: Departments present proposed budget-balancing strategies
*April: Release of the proposed fiscal year 2026–27 budget
*May: Public hearings and City Council discussions
*June: Final budget adoption
Community members are encouraged to attend meetings, submit e-comments, and share priorities with the mayor or their city council representative. More details, including meeting dates and engagement opportunities, are available on the city’s budget website.
OpGov.ai will continue to report on this issue.
Picture of City Hall from News Release. Submit Sacramento County tips and story ideas to Sarah Denos at sarahkdenos@gmail.com.
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