As $10 million deficit looms in 2025, Fresno’s early budget talks focus on ‘tightening of belts’

CORRECTION: An earlier version of this story incorrectly reported the city’s projected expenses. The story has been corrected to report that city expenses are expected to climb by about $21 million which will be offset by an estimated $24 million in carryover revenue.

Fresno budget staff predict the city will carry over just $626,900 in revenue in the next fiscal year, and early projections put the city in a $10 million deficit in 2025. 

City Manager Georgeanne White told the Fresno City Council last week that city budget staffers were still crunching numbers to determine exactly how to increase carryover this year so there can be a cushion for the 2025 fiscal year. She said she’d be back next month with more on the city’s expenses.

White said that means going to each city department director to figure out if they have unused funds to add to the city’s carryover revenue. City officials have so far blamed increased expenses on greater employee costs, as the city has expanded several departments since 2021. 

“It’s a tightening of belts as opposed to harsh cuts,” White told Fresnoland.

The prospect of entering the next fiscal year in July without significant carryover funds is a growing concern at Fresno City Hall. For example, last fiscal year, the city carried over about $48.8 million in revenue. Carryover funds in 2022 were about $45.5 million and in 2021, about 25.4 million. 

For the 2024 fiscal year, the city’s carryover revenue is approximately $51 million, about $24 million greater than initial projections, offsetting its associated $21 million in additional expenses. 

The city has come to depend on allocating carryover funds, on top of it providing a cushion in the event of a fiscal year deficit. Current budget projections show the city carrying over just $626,900 for the next fiscal year, and early estimates put the city in a $10 million deficit in 2025.  

White said she will be sitting down with budget staff and the directors of each city department to go through line item expenses and determine how to salvage unused funds. 

“Having been through the recession where we had to rapidly cut millions of dollars that affected services to residents and employees’ livelihoods, I would never want to overreact but I don’t want to underreact,” White told Fresnoland. “There needs to be a happy medium.”

During the mid-year budget review presentation at the Feb. 22 city council meeting, budget staff spent most of the time talking about a sales tax revenue shortfall. 

They predicted last summer the sales tax revenue would be about $154 million, but projections this month anticipate falling short by about $5.1 million. 

“This is sobering,” Councilmember Mike Karbassi said at the Feb. 22 city council meeting. “We’re a lot better off than the state right now, but at the same time, this isn’t great news.”

Budget staff anticipate $179.8 million in property tax revenue, $5.7 million more than initial projections, which appears to offset the sales tax revenue shortfall. Additionally, latest estimates show the city’s total revenue exceeds projections.

“While property tax is helping to cover the shortfall in sales tax, our expenses are up,” White said at the Feb. 22 city council meeting. “Employee services are our largest line item in the city, so we’re going to go through every (department) budget to see what we can do.”

During Mayor Jerry Dyer’s tenure, most city departments have expanded by hiring for new positions. 

The Planning and Development Department, along with police and fire, were the three general fund departments with the largest budget expansions since Dyer took office in January 2021. 

“The city has been hiring additional staff since 2021,” White said. “Additional staff means additional cost.”

Planning and Development’s 2024 budget was $232 million, $150 million more than it was in 2021. Both the police and fire departments’ budgets have expanded by about $50 million since 2021, with the police budget at $261.9 million and the fire budget at $127.6 million this year.