San Diego city departments asked to cut spending anticipating $171M deficit
SAN DIEGO — San Diego’s chief operating officer has ordered all departments to reduce their expenditures by 2% heading into the upcoming fiscal year as officials contend with a $171.9 million budget deficit projected for 2025 in the city’s five-year financial outlook.
Chief Operating Officer Eric Dargan instructed department directors and deputy chief operating officers to suspend all non-essential spending in the current fiscal year, which runs from July 2023 to June 2024, and find areas to trim estimated expenditures for 2025 in a Dec. 4 memo that was recently made public.
“Although $56.5 million in excess equity is projected to be available at year-end to help address the shortfall in Fiscal Year 2025, other mitigation actions are required to address the significant structural budget deficits that are anticipated,” Dargan wrote.
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The memo echoes concerns about structural deficits in the city’s budget that were noted in a Dec. 5 report from San Diego’s Independent Budget Analyst on the five-year budget outlook, which spans the 2025 to 2029 fiscal years.
“While the City’s annual budgets over the past three years were balanced, they were not structurally balanced,” the IBA report read, adding that this balancing relied significantly on one-time allocations of federal dollars from COVID-era programs — funds that will be exhausted by the end of the current fiscal year.
The report added that dips in consumer spending amid high inflation — notably at the end of the 2023 fiscal year in June of last year — also contributed to declines in San Diego’s revenue, as sales and property taxes are among the city’s largest localized funding sources.
For instance, a projected budget shortfall in fiscal year 2024 of $106.8 million was balanced with $72.2 million from the city’s excess equity, or unassigned funds, and $73 million in one-time revenues, including $52.1 million from the federal American Rescue Plan Act.
Moving forward, the IBA estimates that deficits could exceed $200 million each fiscal year through 2029 to maintain current services if spending continues to outpace revenue and the budget’s structure remains reliant on on-time funds to balance shortfalls.
” … it should be clear that the City will have to seek a major source of new revenue in the immediate future, or plan for significant cuts and restructures that will result in lower service-levels and fewer City run programs, beginning as early as FY 2025,” the IBA report continued.
Heading into fiscal year 2025, public safety departments are likely to see the most funding reductions under the chief operating officer’s request to cut each department’s expenditures by 2%, according to a document attached to the memo.
San Diego Fire-Rescue was asked to reduce spending about $8.1 million from their $351.8 million budget. Meanwhile, the San Diego Police Department was asked to trim $12.5 million from their $623 million budget.
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Other notable reductions include: $2 million from Transportation; $880,000 from Homeless Strategies and Solutions; $1.7 million from the city attorney’s office; $2 million from Environmental Services; $3.6 million from Parks and Recreation; and $1.5 million from the city’s library network.
It is important to note that the budget for the 2025 fiscal year has not been finalized by the city.
According to the chief operating officer’s office, the departments are currently in the midst of preparing “Executive Budget Review Presentations” to lay out their spending and revenue before the final budget is set. A proposed budget is set to be released by Mayor Todd Gloria in April 12.
FOX 5 has reached out to the city for additional comment and is awaiting response.
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