Fiscal year 2025 budget review - february 2026
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Fiscal Year 2025 Budget Review
Released: February 2026 Download the Full Report here In December 2024, the Department of Finance projected that the city's fiscal year 2025 budget would end with a deficit. Although projections anticipated that both revenues and expenses would outpace the budget, expenses were projected to be higher than revenues. This audit evaluates the reasons for the projected overspend and the effectiveness of controls that Finance put into place to help mitigate the risk of future overruns. |
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We found:
- Although the city's revenues were greater than the initial adopted budget in fiscal year 2025, expenses outpaced revenues. This led to a $16 million year-end deficit (based on unaudited figures as of October 2025), primarily due to overspending on personnel and associated benefits.
- The city partially closed the gap by moving revenues to the general fund from reserves and other sources, and reclassifying personnel expenses to other funds. Personnel expenses were $103 million higher than budgeted, partly because at the end of the previous year (fiscal year 2024), the city increased headcount by 417 positions that it may not have budgeted for in 2025.
- Also, Finance did not budget funds for vacant positions, many of which the city later filled. The city also overspent on contracted and purchased services by $32 million and on supplies by $18 million. Finance began introducing new budgetary controls in January 2025, including reinstating the Vacancy Review Board to review and approve all potential hires.
- In fiscal year 2026, Finance generally prohibited departments from spending more than 50% of their budgets before mid-year. Finance recommends whether to hire or promote employees as part of the Vacancy Review Board process, but the board makes the final decision and can choose to approve personnel actions that Finance does not recommend.
- Also, City Council passed legislation requesting Finance and Human Resources to provide monthly financial and personnel updates, but the July through September reports did not provide all the requested information that would be critical for transparency and decision-making. The November quarterly report provided backdated information, but information delays can negatively impact decision-making. The new controls could help reduce potential overruns but would be unlikely to decrease current personnel obligations. The city was projecting a nearly $5 million general fund deficit at the end of the first quarter of the fiscal year; personnel expenses are projected to be two percent higher than the initial adopted budget.