San Diego's chronic budget deficits are expected to continue years into the future, and cuts to services in 2026 will be unavoidable, finance officials told the City Council this week.
Financial data from July through September led the city's Department of Finance to project a deficit this fiscal year of $22.9 million. The department's First Quarter Budget Monitoring Report projects the police department will exceed its overtime budget by $3 million, while the fire-rescue department is on track to overspend on overtime by $4.6 million.
Hotel tax revenues are also trending below budget projections by $2.9 million, which officials believe may be connected to a drop in international tourism. And the City Council's delays to the start of parking fees in Balboa Park are expected to result in $8.8 million less revenue than assumed in the budget.
Independent Budget Analyst Charles Modica told the council Monday there are no quick fixes to the deficit, and that cuts to services in 2026 will be unavoidable.
"The city's constituents may ultimately be better served by providing fewer services well than more services poorly," Modica said at the council's meeting on Dec. 15. "As it is today, the city's existing resources are insufficient to allow it to provide the services that it currently does, and we belierecreationthat should be acknowledged."
The mayor and council have already cut funding for libraries, rec centers, arts and culture grants and more — all in an attempt to close a deficit of more than $300 million in the current fiscal year, which began July 1. The deficit has been years, even decades in the making, as the city grapples with aging infrastructure and the same inflation that's hit San Diego households.
Yet even the lean budget that was adopted in June was based on shaky revenue projections, according to San Diego's Office of the Independent Budget Analyst.
Looking years into the future, the deficits are expected to get worse. The city's Five-Year Financial Outlook projects shortfalls of $88.8 million in fiscal year 2027 and $106.9 million in fiscal year 2028.
One of the main reasons for the growing deficits is new infrastructure projects that come with ongoing staffing needs. Over the next five years, the city is planning to deliver 20 new or expanded parks, which require maintenance workers. The city is also expanding or replacing libraries in City Heights, Ocean Beach and Oak Park, and it's planning to build new fire stations in Black Mountain Ranch and Otay Mesa.
"When we deliver new projects to meet that need, it comes at an additional cost because there's an operational component to that," said City Council President Joe LaCava.
National politics are also impacting city finances. San Diego County health officials expect the One Big Beautiful Bill Act, passed by congressional Republicans and signed by President Donald Trump, will impact 327,000 people in the county who rely on Medi-Cal with new work requirements that take effect in 2027.
"The federal government is now going to be cutting people off from health insurance," said Councilmember Marni Von Wilpert. "And then we cannot bill them when we provide ambulance transport through 911. So our (emergency medical services) funds after 2027 may not be where it is today."
