Santa Barbara city leaders are moving closer to adopting a budget for the upcoming fiscal year. But, council members say difficult financial decisions are ahead as the city works to address projected budget shortfalls and a projected $1.1 million decline in budget reserves.
During a budget workshop Tuesday, the Santa Barbara City Council reviewed the proposed fiscal year 2027 budget, discussed employee compensation and staffing levels, and directed staff to continue identifying cost-saving measures.
City staff project the budget will expire next year with a small operating surplus. However, council members raised concerns that the city's reserve funds are still expected to decline.
According to city finance officials, reserve levels are projected to fall from about $27.9 million at the end of fiscal year 2026 to approximately $26.8 million at the end of fiscal year 2027—a decrease of roughly $1.1 million.
Mayor Pro Tempore Kristen Sneddon questioned whether the city can consider the budget balanced if reserve levels continue to shrink.
"If we don't project or anticipate or plan for how to make up that $1 million today and or when it comes back for our approval, I'm having a hard time considering it a balanced budget," Sneddon said during the workshop.
City Administrator Kelly McAdoo said the city cannot avoid making changes as it works to stabilize its finances.
“We can't choose not to do something," McAdoo said. "We're all facing added workloads as positions are not filled or held vacant. But there's a balance to be struck."
Among Tuesday’s changes, council members voted to delay hiring for a City Administrator position and advanced discussions on employee pay and staffing.
The council also directed staff to continue evaluating a list with several potential cost-saving measures. Those efforts include reviewing opportunities to consolidate boards and commissions, delay or reduce capital projects, hold some positions vacant through attrition, and identify additional revenue sources.
The council is expected to take a final vote on the fiscal year 2027 budget at its meeting on Tuesday, June 30.
