New taxes? Spending cuts? Fresno leaders face tough decisions to fill $20M budget hole

Following consecutive years with more than 70 homicides in the city, Fresno’s public officials expanded the police and fire departments and signed off on big labor contracts for officers and firefighters. 

So far under Mayor Jerry Dyer — the city’s longtime former police chief — Fresno’s police budget grew by $74 million and the fire department’s budget grew by $52 million.

Those public safety expansions were partly funded by one-time pandemic relief funds from the federal government, with no clear plan in place for covering those costs in the future.

Now, facing a projected budget deficit of at least $20 million, Fresno leaders find themselves at a public safety crossroads over how to sustain the police and fire expansions they greenlit a few years ago. Over the last three weeks, Dyer has discussed with each councilmember ways to cut costs and increase revenue.

One potential strategy could be raising taxes on Fresno residents.

“We’re in preliminary discussions — is it feasible for us, as Clovis did, to pursue some sort of either general tax or a public safety tax in the future?” Dyer told Fresnoland. “When I say the future, it wouldn’t be until probably 2026.”

Dyer emphasized that conversations so far have been preliminary, and his administration is exploring options right now — not making final decisions. He also said he couldn’t speak to cost-cutting efforts, and whether that could include pay cuts or layoffs. 

Besides raising taxes, he said another way to increase revenue would be to collect more funds from Airbnb and VRBO, as well as Uber and Lyft. However, those other options would pale in comparison to the revenue from either a general sales tax or a public safety tax.

“I think it's absolutely true that any type of a general tax or public safety tax would yield far more money than what we're attempting to do with some of these other revenue enhancers,” Dyer said. “However, it's still important for us to explore those in advance of us pursuing any type of a public tax.”

Dyer insisted he would first exhaust all other options to cut costs and increase revenue before asking Fresno residents for more money through a local tax measure. His administration would also have to poll residents to gauge public support for a tax, Dyer said. 

“I would not pursue any type of tax unless I felt 100% confident that we had done everything possible as a city to cut any type of governmental waste or services that we could eliminate — that people of Fresno can live with,” Dyer said.

At the same time, city leaders also need to figure out how to pay for road maintenance and construction in the coming years, with lingering questions over whether the city will once again get behind efforts asking voters to renew Measure C, Fresno County’s long-standing sales tax that funds transportation projects.

Voters rejected a Measure C renewal in 2022 and efforts are already underway to get it back on the ballot in 2026 — the same year and possibly the same ballot that city leaders have eyed for a potential public safety tax.

Officials use short-term funds to enter long-term obligations

Last week, the Fresno City Council had a sobering midyear budget review, in which city staff said they anticipate their current $20 million city deficit projection to only grow in the coming months. 

City Manager Georgeanne White said she is instituting a hiring slowdown, just shy of a hiring freeze. 

“We are only authorizing positions that are absolutely essential — must have, not want,” White told Fresnoland during a brief interview after the Feb. 13 City Council meeting.

White also said the city’s use of temporary federal funds increased the city’s financial obligations, and officials need to find a way to cover those costs moving forward. 

“I would say that making ongoing expenditure decisions based on short term revenues is always a risky bet,” White told Fresnoland. “I try not to look in the rearview mirror. I'm not going to say that employees didn't deserve the raises — because they did.” 

White specifically referred to pay increases awarded through labor contracts for police officers and firefighters. 

“But now we deal with the consequences for every action,” White said.

Of the total $170 million in ARPA funds that Fresno received from the federal government, city officials allocated more than a third — about $50.9 million — for city employee payroll costs. Doing so kept the city from going into a deficit last year. 

That included putting $17.5 million in pandemic relief funds toward firefighter salaries. Since the beginning of the pandemic, the city also put about $25.3 million in ARPA funds toward police payroll costs. 

White added that she anticipated today’s financial woes during last year’s budget process.

How sales tax and cannabis tax factor into the city’s deficit

Besides multimillion-dollar obligations that city officials need to pay for, the city is also grappling with sales tax revenue falling short of projections. 

Fresno’s current fiscal year budget is built off a projection that the city would make $147.7 million in sales tax revenue for the current fiscal year, which ends June 30. City staff projections from this month predict the city pulling in $4.5 million less. 

“It is the current economic conditions that are driving that reduction in our sales tax,” said Henry Fierro, Fresno’s budget director, during last week’s midyear budget review.

Another contributor to the city’s financial woes is its cannabis tax. The subject has been a tough one for city officials since they began greenlighting cannabis businesses to open up shop within city limits. 

Unlike sales tax or property tax, the city’s budget staff do not have any historical data or trends to base their cannabis tax revenue projections off of. White, Fresno’s city manager, said city staff based their predictions off of annual sales projections from cannabis businesses — but minus 25%, just to be safe. 

But even then, the city’s projections have been way off.

Last summer, city staff predicted $7.1 million in cannabis tax revenue this fiscal year. Now they project less than half as much — about $3.1 million. 

One silver lining was the city’s property tax projections. City staff anticipate bringing in about $190 million, about $532,000 little higher than last summer’s projection.

Richardson calls on council colleagues to ‘lead from the front’

During last week’s midyear budget review, Fresno City Council President Mike Karbassi said he didn’t want to bring up raising taxes on Fresno residents.

Not only was Karbassi the only councilmember to broach the subject at last week’s City Council meeting, he also went out of his way to avoid using the word “tax,” instead describing it as a “revenue enhancer.”

“I'm not suggesting that we ever burden folks, and it's something that folks have to decide if they want to support,” Karbassi went on to say last week. “But the reality is I personally don't want to cut services.”

On the other hand, Councilmember Nick Richardson — the only other North Fresno councilmember besides Karbassi — directly addressed city department heads gathered inside council chambers last Thursday. He said Fresno’s councilmembers should be leading by example during tough financial times.

“We understand what you’re going through, we understand what your departments are going through, we understand the needs of the people in this city,” Richardson said. “It’s up to us as elected leaders to lead from the front.”

Richardson has already put money where his mouth is — specifically his paycheck. Last week, he announced that he’ll be diverting $10,000 from his own paycheck to cover PARCS swimming lessons for kids in the summer.