A Balancing Act: City of Santa Barbara Begins Budget Season

Santa Barbara’s budget planning season is underway. On Tuesday, April 21, the City Council received an overview of the 2027 fiscal year operating budget. Structured to reduce the projected deficit, originally estimated at $14 million, the budget is now projected a more palatable target of $3.4 million.

City Finance Director Keith DeMartini and Budget Manager Natalija Glusac said the plan was to avoid major cuts, instead, relying on revenue increases and expenditure savings — totaling about $3.6 million — and another $1.5 million saved by delaying the hiring of vacant positions. Further savings would come from reallocating $2 million each from the fleet replacement and streets maintenance funds, $1 million originally intended for the city’s housing fund, and a little more than $1 million in other recommended options.

All told, the city budget would come in “technically balanced,” DeMartini said, with a surplus of about $200,000. But the city would have to factor in a required $3.6 million contribution to the reserve fund — necessary to keep the fund at viable levels — bringing the final deficit to $3.4 million.

The city has operated with a deficit ever since 2023, partly due to the disparity between incoming revenues and ever-increasing expenditures. This year, general fund revenues were slightly higher (the city projects $257.2 million in revenues compared to $256.9 million in expenditures), though DeMartini warned that the disparity is expected to grow in future years, with a potential deficit of more than $9 million in 2028.

City councilmembers did not discuss details or individual budget line items, as there will be multiple dedicated budget hearings over the next two months.

Councilmember Kristen Sneddon gave finance staff credit for managing to bring in a more balanced budget without major program cuts, though she expressed hesitation about deferring money intended for the city’s housing trust fund.

“It’s incredible what you’ve done, getting this to balance from the $14 million,” Sneddon said.

Councilmember Eric Friedman asked councilmembers to keep the city’s reserves in mind when heading into budget deliberations. The city has about $28 million in reserve funds, maintaining a base level of cash, but has effectively depleted its contingency reserves. “We are in our emergency reserves essentially today,” Friedman said.

The City Council unanimously approved the timeline of budget hearings, which will continue with a Finance Committee review on May 12, followed by City Council budget hearings for individual departments on May 12 and May 19. A final city council budget hearing will be scheduled for June 9, allowing the city to meet the target adoption date by June 16.

The entire budget book and associated documents are available online to the public through the city’s website.