Fullerton leaders have heard warnings for years about the poor state of their city budget.
In June 2024, top city staffers at a city council meeting warned elected officials – most of whom still sit on the city council today – of the city’s structural budget deficit and the devastating impacts it would have on the city’s reserves in the following years if they weren’t addressed.
“Expenditures are outpacing revenues,” one staff member told officials two years ago – at the June 4, 2024 meeting.
“The use of excess reserves in fiscal year 24-25 provides city manager, working collectively with the city council, time to create strategies to address the city’s fiscal situation.”
At the meeting, then-Mayor Nick Dunlap, Councilmembers Ahmad Zahra, Shana Charles and Fred Jung all voted to adopt the budget using their reserves to help make ends meet.
Councilwoman Jamie Valencia was not on the city council at the time.
Recently, some city council members said they didn’t know just how bad the budget was, claiming staff misrepresented their reserves. Meanwhile, others said they knew they were headed towards a cliff years ago.
“It is sooner than anticipated by about a year, but we knew five years ago we would be in this budget situation now,” Jung said in a Monday interview. “We absolutely knew.”
It comes after a heated public debate last month when staff told council members the city budget is set to be almost out of money by the end of next year without some major changes.
[Read: How Cooked is Fullerton’s Budget?]
Given the pressing nature of the fiscal crisis facing the city budget, Mayor Jung and other city executives are facing questions on who knew what when, with Councilman Zahra questioning why no one ever took action if the budget was so bad, pointing to Jung’s own statements praising the city’s financial position.
“How can he say we all knew it was not balanced when he was claiming that it was?” Zahra asked in a Monday interview.
What Happened to the Money?
A large pothole on Washington Avenue in Fullerton on Saturday, Sept. 17, 2022. Credit: Zia Bella Blair
By the end of June, city staff are projecting they’ll have roughly $26 million in reserves.
However, around $10 million of that is already allocated to be spent on other projects or for other funds.
That leaves just $16 million that city leaders can use to balance the budget as their staff warn them they’re facing a $13.7 million shortfall.
Unless the city cuts out that shortfall by slashing spending, that would take the reserve to around 2% of the city’s budget by June 2027 – the city’s policies require them to maintain a 10% reserve.
“If no adjustments were made, reserve levels would decline to approximately 2% by the end of fiscal year 26-27 which is well below the city’s reserve policy,” said Steven Avalos, The Interim Director of Administrative Services at the March 17 city council meeting.
City council members also ran through $10 million of unassigned reserves in recent years.
Around $4.4 million was used to help patch the city budget, $2.7 million was allocated for specific purposes like fixing roads and capital projects and another $2.9 million was rerouted to the city’s successor agency after staff realized it was improperly marked as a reserve.
While state law requires cities adopt balanced budgets, municipalities like Fullerton often do that by moving money over from reserves and other areas to make up for the spending deficit.
City Leaders Point Fingers
People walk by Fullerton City Hall on Tuesday, April 11, 2023. Credit: JACK SUNDBLAD, Voice of OC
Now, Jung and Dunlap are saying city leaders knew for years about the problems, with Jung calling Zahra’s “grandstanding” at council meetings counterproductive.
“The gumption that he has to somehow make this about him, I just find appalling,” Jung said.
Dunlap said the city’s finances have “been no surprise” and said Zahra “doesn’t understand how finances work.”
“This whole notion that somehow people weren’t aware is nonsense,” Dunlap said. “Unless they’re completely turning a blind eye to the info I don’t understand how someone could not be aware.”
But Zahra questioned how he was supposed to know about the budget problems when Jung was campaigning for county supervisor on the pledge he fixed the budget, noting that he thought the budget was balanced for years.
“When it’s something that’s presented as balanced, there’s a level of trust you have to put in,” Zahra said. “He (Fred) claims he balanced the budget. If your house is made of glass, you shouldn’t be throwing stones at other people.”
Jung was recently ordered by a judge to remove his claims on the ballot that he’d “turned around a $9 million deficit into a balanced budget.”
Jung called Zahra’s comments “childish,” and said that his claims about the budget were just for that one year.
“The budget was balanced for that year. The budget’s not balanced in perpetuity,” Jung said. “But we knew there was a fiscal perfect storm coming five years ago.”
Councilwoman Shana Charles said staff didn’t make clear the accounting error until March.
“From my recollection. I don’t recall staff telling me about it in stark terms. I do remember them saying that we’re working on the budget. The budget is going to be tighter than we expected,” she said in a Monday phone interview.
“But I really didn’t get it laid out for me until the day before the March 17 meeting.”
Charles said in her first year on the city council staff did warn elected officials they were headed towards a deficit situation and the reserves would be run through by the 2027-28 fiscal year.
“Now, we’re looking at that our reserves are going to be depleted by the end of 2026-27 next year. It’s staring us in the face,” she said.
“We need to definitely do a thorough review of what went wrong and find that out and do better in the future on that but at the same time, we just have to grapple with the reality that we find ourselves in, which is that our reserves are lower than we thought by quite a bit. Our deficit is bigger than we thought.”
Councilwoman Jamie Valencia did not respond to a request for comment Monday.
Ignoring Financial Alarms?
A train passes by Downtown Fullerton on Oct. 5. 2025. Credit: ERIKA TAYLOR, Voice of OC
Deputy City Manager Daisy Perez said staff informed council members about the $2.9 million accounting error and the rest of the reserves months ago in a February 12 memo she forwarded to Voice of OC.
To review a copy of the memo, click here.
“Council members had been notified of the $2.9 (million) in February so I was surprised that some recognized that for the first time, when they had been notified a month prior in detail about that finding,” Perez said in a Monday phone interview.
Perez said staff was ready to discuss the issue at the Feb. 17 city council meeting but elected leaders didn’t pull it off the consent calendar portion of the meeting – a set of items typically voted on as a block without discussion.
“We were surprised that they did not pull it,” she said, adding the city manager put up a subsequent discussion in March to be transparent with officials on the city’s financial position.
“We were surprised that some of them were acting surprised because they were not told the night before or that day, they were told at least a month before,” Perez said.
Fullerton city staff also say they publicly warned city council members years ago of a structural budget deficit and the impacts it will have on their reserves, if it was left unchecked, and elected leaders didn’t do much to quell it.
Perez said officials didn’t flinch at the thought of using almost the entirety of their $10 million in unassigned reserves back then to cover what was initially projected to be a $9.4 million deficit a couple of years ago.
“My biggest thing is the lack of reaction from Council or the just overall acceptance of adopting a $9.4 million deficit in the first place. There was not a lot of resistance at that point to bring down the deficit any further and the council was pretty accepting of going over budget,” she said.
Perez added that even with knowledge of the deficit, officials didn’t try winding it down.
“Everybody knew that we had a deficit budget,” Perez said. “They were fine with it. They didn’t ask for any further cuts. They were perfectly fine using the unassigned (dollars) so we had $10 million and they were fine using $9.4 million of that for the deficit.”
In the end, the deficit for the 2024-25 fiscal year turned out to be $5.7 million after property tax revenue came in higher than officials anticipated, according to Perez.
Councilwoman Charles said it was unclear how bad of a position they were in because the staff kept talking about having about $30 million in reserves last year.
However, $10 million of that had already been allocated to be spent on other projects.
“They kept mentioning this $30 million number and that $30 million number was inflated and so that is not how large our reserves are, essentially, so it seems to me like it was being double counted,” Charles said.
Years of Budget Deficit Warnings
A view of part of the SOCO District in Downtown Fullerton on Oct. 5, 2025. Credit: ERIKA TAYLOR, Voice of OC
In June 2024, former Councilman Bruce Whitaker was the lone dissenting vote against adopting the budget.
Whitaker, at the time, said officials should look at ways to narrow the budget gap before voting on the spending plan.
“One time monies that are being used this year to narrow the gap – It’s going to be a band aid, but next year, we won’t have those one time monies, and the gap will widen just on the natural next year so it is a pretty disturbing outlook,” he said.
Perez said efforts to get a tax measure on the ballot in the aftermath of that debate failed to get a majority support from elected leaders despite their fiscal projections.
Charles said since then they froze some vacant positions, formed a fiscal ad hoc committee who are looking at tax measures and tried to get more grants to offset costs.
Fullerton’s Bleak Financial Future
A view of Downtown Fullerton on Oct. 5, 2025. Credit: ERIKA TAYLOR, Voice of OC
City leaders have been struggling to balance Fullerton’s finances for years, with a failed sales tax measure in 2020 and questions over how to rebalance the city’s spending.
But things seemed to improve on the city’s budget disclosures after they received millions of dollars from the federal CARES Act, which sent money to cities across the county that were impacted by closures during the COVID-19 pandemic.
However, that money didn’t fix the city’s structural imbalance of funds, a bind Jung said city leaders are stuck in as residents oppose cutting any services but also shoot down any proposed sales tax increases.
“The only way to have mitigated any of this is to have cut in a massive way, cut services. But the fact is citizens didn’t want that,” Jung said. “We tried that in 2021, and they didn’t like it. They resoundingly said we don’t want services cut.”
After that, city council members signed off on a raise for firefighters, hired more of them and brought their ambulance services in house, which ran up costs on the already taxed budget according to Jung.
Now, he’s calling on council members to put another sales tax in front of voters, this time aiming the tax dollars at fixing the city’s roads.
“Is it the solution? Probably not. But it is a solution,” Jung said. “At some point, you require a hard look, and we’re going to take that this year. It’ll be a fairly extensive and robust process, with a lot of public engagement throughout.”
Perez also acknowledged in an open letter that even if the city gets a sales tax passed this year, it won’t start bringing them any money until 2027, which means something has to change now.
Zahra questioned why Jung and other city council members didn’t fix the budget over the past few years if they knew it was broken, highlighting he’d been on the outside of major votes for years.
“Right now we know that the budget is not balanced, it never was, and the reserves were being inflated to just show that we have a good financial standing,” Zahra said. “If he (Fred) knew this was not balanced, why didn’t he do something about it?”
Jung said the blame for the city’s current budget falls on the shoulder of every council member.
“I’m equally to blame, I never said I wasn’t,” Jung said. “We own this. We own our decisions.”
Charles said Jung has insisted on setting the council agenda for years.
“It is interesting how he is, for the first time since I’ve been on council, trying to lock arms with the rest of us and act like we are all in this together, when that has not been the case,” she said.
“It sounds like he’s trying to spread the blame,” Charles continued. “I’d rather focus, though, on what we can do to make things better in the future.”
Noah Biesiada is a Voice of OC reporter. Contact him at nbiesiada@voiceofoc.org.
Hosam Elattar is a Voice of OC reporter. Contact him at helattar@voiceofoc.org.
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