Santa Maria City Council passes 2024-26 budget, with general fund deficit

Facing the looming challenges of filling a deficit, the Santa Maria City Council voted 3-2 (with Councilmembers Gloria Soto and Carlos Escobedo dissenting) to pass its 2024-26 biennial budget. 

click to enlarge Santa Maria City Council passes 2024-26 budget, with general fund deficit
File photo by Caleb Wiseblood
BUDGET WOES: Despite concerns about filling an almost $20 million deficit for the next two fiscal years, the Santa Maria City Council passed its 2024-26 biennial budget in order to comply with state law that requires local jurisdictions to adopt a budget by June 30.

The total budget for fiscal year 2024-25 is almost $364 million and $347 million in the 2025-26 fiscal year, Deputy City Treasurer Xenia Bradford told the City Council during the June 18 meeting. 

“The city is experiencing a systematic problem with the budget deficit within the general fund, including Measure U. They are not meeting their expenditures,” Bradford said. “We went from $80 million in allocations to proposed $139.8 million. Positions have grown over the years, 2024-25 incorporates 680 full-time positions and no change for 2025-26.” 

While general fund revenues are projected to continue growing at a steady pace, there’s a $21.3 million shortfall in 2024-25 and $20.2 million in 2025-26, according to the staff report. In order to fill the deficit, staff proposed pulling $21.3 million from reserves in order to balance the 2024-25 budget; however, that would mean there’d be no undesignated funds left to fill the 2025-26 gap, she said. 

Moving forward, city departments must evaluate how they can ensure full cost recovery, and the city must look at alternative funding sources to account for the city’s future growth, Bradford said. 

Councilmember Escobedo said that he wanted to see departments to look internally for cuts rather than bringing additional taxes to the ballot. 

“Raising taxes, that shouldn’t be the first option. I think our community is struggling so much, and I’ve seen other governments—local, state, federal—[when] there’s trouble they like to raise taxes to the people,” Councilmember Escobedo said during the meeting. “At this point with the economy … I think we need to look inwards and game plan before even touching the reserve for something like this.”  

Interim City Manager Alex Posada told Escobedo that the city has to use the reserves in order to have a balanced budget that meets state standards. He added that the city won’t be spending the money in the reserves on July 1, the state just needs to see that Santa Maria has a financial plan to cover costs. 

“Certainly I think our priority—as people responsible for the expenditures in the city—[is] to try to pull together as much reductions as we can,” Posada said. “We’ve been down this road before where we’ve had to make some hard decisions. We will bring you a plan with ideas down the road and what they mean financially.” 

Councilmember Soto wanted to “caution folks” when looking at cost reductions because the budget’s largest allocation goes toward salaries and benefits. 

“The last thing I would want us to do is jeopardize any positions. When I hear us give that directive or ask staff for cost-saving measures, we need to be specific as to what, to make sure we protect and ensure job security as best we can to employees,” Soto said. 

She advised that the city should look at some of its capital projects that could be delayed for cushion and wiggle room and search for other revenue sources to close the budget gap. 

“The last thing we should do, in my opinion, is tackle it through a scarcity mindset, and [we should] think about some of the ways we can generate revenue for the city so we can compensate employees and ensure that we put our money where our mouth is,” Soto said. “Your budget is your moral compass; it shows an organization’s priorities, and I’d like to show that our priority lies in our employees.” 

The Firefighters Union Local 2020 has been coming to City Council meetings for the last six months—including the June 18 meeting—advocating for wages to be raised to the market average, Soto said, adding that she would like to see if there’s any way the city can shift funds for capital projects for improved salaries. 

Posada noted that while all capital projects are urgent, he said that city staff can evaluate if any can be delayed and will come back to the City Council to reallocate funding toward salaries. 

Mayor Alice Patino said that the city has always prioritized protecting its employees over the years, but the funding isn’t there in Measure U or the general fund for salaries. She added that the city’s emergency reserve fund, the Local Economic Augmentation Fund (LEAF), is almost tapped out after this budget cycle, with $2.2 million after the 2024-25 fiscal year. 

“There was a comment that we use scare tactics—look at our LEAF funds. We are down to practically nothing,” Patino said. “Those aren’t scare tactics. We used those funds so that we kept our employees employed.”

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