For the first time in two decades, San Diego officials say the city is projected to have a balanced budget for the next fiscal year without using one-time fixes.
“This result did not happen on its own,” Mayor Todd Gloria said during a press conference. “It reflects difficult decisions, permanent reforms and sustained discipline. And over the last several years, my administration has confronted the city's structural budget deficit head-on.”
The city’s latest five-year financial forecast (released Friday afternoon) projects a $5 million surplus for fiscal year 2028, meaning the city is expected to bring in more money than it costs to provide services at existing levels. That’s after previous outlooks projected a $136 million deficit in fiscal year 2025, $258 million deficit in ‘26 and $88 million deficit in ‘27.
To close the deficit for the coming fiscal year, the city’s bringing in $80 million in trash collection fees and more than $60 million in increased hotel fees and funds from a national opioid settlement. Officials also recently made $180 million in cuts to library and recreation center services.
“You've seen service-level reductions that none of us are happy about, but I don't think anyone would be happy either about service-level enhancements that just turn out to get cut the next fiscal year,” Gloria said.
The city also projects the next fiscal year’s pension payout to total $25 million less than expected, due in part to strong investment returns. That’s the city’s second largest ongoing expense after salaries.
Still, officials stressed the city needs to remain disciplined moving forward.
The five-year outlook projects a $5 million deficit in fiscal year 2029, which balloons to $36 million three years later. Those costs mostly cover financing of planned infrastructure projects, according to the city.
Chief Operating Officer Bethany Bezak says that projection still leaves out the vast majority of the city’s massive infrastructure backlog.
"With a nearly $8 billion need to repair city infrastructure, there's no belt-tightening that we can use to close the gap — and we need a sustainable dedicated source of funding,” she said.
The five-year projections are based on this year’s spending, so next year’s financial situation could shift depending on the new budget the mayor and city council ultimately adopt next June.
San Diego Taxpayers Association CEO Mark Kersey is glad the city finally solved its structural deficit, but cautions that unforeseen events could put it back into the red.
The city’s projected to have about $207 million in reserves for fiscal year 2028 — far below what’s required by its own policies.
Kersey said that could be an issue if, for example, a downturn with the stock market put the city’s pension program on shakier ground. Or if this season’s “Super El Niño” inundates San Diego with heavy rain and flooding. Forecasters say it could end up being the strongest on record.
“The reserves are a literal rainy day fund, right? And if you believe the weather forecast, we're about to have a lot of those rainy days and they're about to be pretty severe,” he said.
In 2024, a massive storm flooded San Diego, displacing more than 1,200 households and causing more than $31 million in damage to public infrastructure, inewsource reported. This year, the city approved a $6.3 million settlement to insurance companies tied to the 2024 flooding.
“The problem is that when you're doing repairs on an emergency basis, they become quite a bit more expensive than if you're just doing them planned out months or years in advance. And that's what we saw back in 2024,” Kersey said. “To say nothing of the litigation that they had to settle… because of these faulty storm drains and channels.”
In a statement, a spokesperson for the mayor’s office said the financial forecast is a “starting point” for the next budget cycle.
