Here we are again. Another year, another Davis budget cycle, and another staff report warning that the city’s finances are unsustainable.
The structural imbalance continues, and unless there is major intervention, Davis will spend more than it takes in for at least the next decade. According to city projections, we won’t see balanced books until 2035.
None of this is new.
The City of Davis has been grappling with the same budgetary challenges for nearly 15 years: rising pension costs, deferred maintenance, and an overall structural gap between what the city spends and what it brings in.
While we have time and time again raised the alarm, it seems at each turn city officials acknowledged the issues, adjusted around the margins, and then postponed the structural changes needed to fix them.
Now we’re being told that city spending will continue to exceed revenues until mid-next decade. That is not a fiscal plan. That is an admission of long-term failure.
Despite the passage of Measure Q last November, despite new revenues and economic growth in recent years, the fundamental problem remains: Davis is spending too much and bringing in too little in terms of retail and economic development.
This year’s proposed biennial budget forecasts $96.9 million in General Fund spending for FY26 and $98.2 million for FY27. There are no cuts to core services, but there’s also no viable path to sustainability. Interim City Manager Kelly Stachowicz and Finance Director Elena Adair acknowledge the imbalance but offer only a vague promise to restructure the budget in the future.
Meanwhile, staff and consultants from Baker Tilly warn that Davis will need to find up to $3 million in ongoing savings or new revenue by FY27 to begin reversing course. In other words, the hard decisions are being deferred—again. City staff have recommended that the FY26 budget be approved as is, while “a deeper restructuring effort” be launched next year.
We’ve heard this before.
We also know what’s driving the cost increases. Pension obligations, workers’ compensation premiums, and deferred maintenance are major culprits. Police and fire budgets are rising—police alone will increase from $26.6 million in FY25 to nearly $30 million in FY27—due largely to pension and benefit increases, fleet replacements, and long-needed staffing increases. The urban forestry program has nearly doubled in cost in just four years. Social services are expanding as pandemic-era grants expire and the General Fund absorbs the full costs of homeless services like the Respite Center.
These are important services. But without long-term planning or serious discussion about trade-offs, they become unaffordable liabilities.
Even worse, the city is forging ahead with new staff positions—such as a downtown police officer, an aquatics maintenance technician, and two limited-term accountants—while simultaneously warning about a fiscal cliff. The city could defer or eliminate some of these hires, but it hasn’t. Staff are also reviewing long-vacant positions in social services and community development, but, again, no firm decisions have been made.
To make matters worse, the city may choose to delay contributions to its vehicle and IT replacement funds to free up $2.9 million in FY26. That’s a one-time trick that only kicks the can further down the road and risks even greater costs in future years when vehicles or systems inevitably fail. We’ve seen how this plays out: delays in infrastructure and capital improvements only drive up long-term expenses.
The same principle applies to the city’s roads and bike paths. The budget proposes $8.5 million per year for pavement maintenance—when staff and outside experts have said we need $14 million annually just to hold the line.
City Council members have explicitly asked to frontload road repair funding. Instead, we’re backloading it, gambling with the condition of our infrastructure. As roads deteriorate, the cost of fixing them multiplies. The city’s backlog of maintenance will only grow, pushing us further into a financial hole.
And let’s not forget the voters. Measure Q was passed in part because residents were promised that the city would finally fix its streets and bike paths.
If that money isn’t used as promised—if the city continues to delay key investments—why should anyone trust a future tax measure?
Meanwhile, as Musser and Carson noted in their blistering op-ed, the city is poised to approve what they called a “very rich and unwise” labor contract with the Davis City Employees Association. The deal guarantees minimum 2% cost-of-living adjustments even in years where inflation is flat and revenues are falling. It also includes $1,000 lump-sum payments and automatic raises that will drive up pension liabilities. Similar provisions are expected to follow for high-level city executives.
These are the kinds of decisions that have driven the city’s long-term liabilities for decades—and we’re doubling down.
As Musser and Carson argued, the Council should be freezing pay, not increasing it. There’s nothing in state law that requires the Council to offer raises the city cannot afford. Davis residents are being asked to accept the notion that the city must pay “the average” of surrounding jurisdictions in salary, rather than the more conservative approach of years past where we aimed to stay slightly below the regional average. That one shift—combined with generous new contracts—has added millions to the city’s future pension and retiree health obligations.
And still, the budget lacks any meaningful roadmap for how we’ll restore our General Fund reserve to 15 percent. It’s a vague aspiration, not a plan.
Finally, we should ask why a long-term financial forecast is missing from the current staff report. We’ve been told it’s “coming soon,” but a budget this large—with over $246 million in citywide expenditures in FY26 alone—should be driven by forward-looking projections. The absence of this information during a critical budget cycle is a red flag. It suggests that long-term sustainability is being treated as an afterthought, not as the central issue.
If this were a one-time problem, we could give Council and staff the benefit of the doubt. But we’ve seen this pattern for more than a decade.
The good news is the budget avoids cuts in core services. But that may be a temporary reprieve. As noted, staff warned that, without intervention, Davis would continue spending more than it brings in until at least 2035—when revenues are finally expected to outpace expenditures.
Right now we don’t have a sustainable model, in part because the city has to rely on new taxes to address ongoing cost increases. The city has needed economic development in addition to stricter budget management for over a decade—but that means hard choices that the city administration and council seem unwilling to make.
David Greenwald said … “ Now we’re being told that city spending will continue to exceed revenues until mid-next decade. That is not a fiscal plan. That is an admission of long-term failure.”
Admitting they are powerless is the first step toward recovery. When the opposition to the Sales Tax increase came together, many of the opposition felt creating a financial crisis was the only way to get the City’s attention, as well as get them to be honest with the taxpayers, residents, businesses, and voters. It appears from this staff report that the attention of the City has been achieved. But that is only a start. As the 12 Steps illustrate there is more to do if a relapse is to be avoided. I have excerpted the pertinent steps and pasted them below.
1. We admitted we were powerless — that our lives had become unmanageable.
4. Make a searching and fearless moral inventory of ourselves.
5. Admitted to ourselves, and to other human beings the exact nature of our wrongs.
6. Were entirely ready to address all these defects.
7. Humbly asked Him to remove our shortcomings.
10. Continue to take personal inventory and when we are wrong promptly admitted it.
I attended the budget presentation last week and I can say that the variables in forecasting are more extreme this year due to uncertainties about federal monies and risk of recession. For those who like graphics, here is the presentation by Bob Leland’s firm from the May 27 council meeting:
https://documents.cityofdavis.org/Media/Default/Documents/PDF/CityCouncil/CouncilMeetings/Agendas/2025/2025-05-27/01-Davis-Model-Forecast-Summary-Slides.pdf
Thank you for that Don. It is some of the honesty that is at the heart of Step 4 of the 12 Steps.
However, there is nothing in that presentation about the City’s unfunded liabilities.