Fresno is once again facing a substantial budget deficit despite an increase in revenues.
City officials revealed during last week’s city council meeting that the deficit is projected to be at least $23.3 million, with the potential to be far greater.
Flashback: Fresno has had to grapple with budget deficits over the last few years ranging in the tens of millions of dollars.
Two years ago the city used one-time COVID-19 pandemic relief funding – in the form of American Rescue Plan Act dollars – to help balance a $47 million deficit.
Last year, with pandemic relief funding no longer available, the city balanced a $50 million deficit with 5% department cuts and an attrition rate of 6.18%.
Driving the news: The city is staring down a $23.3 million deficit even though general fund revenues are projected to come in around $6 million more than expected.
Fresno Mayor Jerry Dyer noted during the council meeting that sales and property tax revenues are coming in strong. Sales tax is now expected to come in at nearly $4 million higher than expected, while property tax is only $100,000 off of projections. Business licenses are coming in around $800,000 higher, and franchise fees are over $1 million better than projected.
Despite the strong revenue numbers, Dyer said expenditures are simply outpacing revenues
What we’re watching: Dyer said he would not be surprised if the deficit grew to around $35 million when the city holds its budget hearings in June.
The Dyer administration is asking departments to cut their budgets by another 5% for Fiscal Year 2027 and maintain a 6.18% attrition rate. Dyer said the city may have to increase the attrition rate in order to balance the budget.
What they’re saying: City Manager Georgeanne White noted that this is the third consecutive year that the administration has asked departments to plan for cuts.
“The low-hanging fruit is gone,” White said. “So frankly I have to say, not looking forward to the type of cuts that are going to be coming from departments, because they don’t have a lot of options left, and I think it’s going to be a very difficult process.”
Cannabis on track: Fresno has struggled to accurately project what the cannabis sales tax would be since the first dispensaries opened in 2022.
It appears that the city finally has an accurate read on cannabis revenues.
The city projected $5.4 million for its cannabis tax in Fiscal Year 2024, yet it only took in $2.4 million. Despite being far off, the city projected $7.1 million in cannabis revenue in Fiscal Year 2025. That was off yet again, with the actual total coming in under $3 million.
The city tempered its expectations for the Fiscal Year 2026 budget, projecting $3.4 million in cannabis tax revenue. The mid-year budget review expects the cannabis tax revenue to come in close to $3.3 million.