Budget Outlook and Forecast

The Fiscal Reality Facing Vacaville

The City prepares multi-year financial forecasts to evaluate long-term sustainability. However, like many municipalities, the City faces a structural gap between ongoing revenues and the increasing cost of delivering these services. Recent staff analysis of the City’s five-year forecast shows an annual gap approaching $9 million even after cost-saving efforts. Review the latest staff report and City Council presentation.

Forecast Summary

These five-year projections are based on current revenue trends, expenditure assumptions, labor costs, inflation factors, and other known financial obligations. Because forecasts rely on assumptions about economic conditions and future costs, they are updated regularly to reflect new information.

Even with current cost-saving measures in place, the projected gap between ongoing revenues and expenditures is approximately $9 million. If those cost-saving measures were discontinued, the projected shortfall would increase to approximately $13 million. The City’s General Fund reserve is projected to be 27% at the end of the current fiscal year, equivalent to roughly a three-month operating reserve. Under current forecast scenarios, General Fund reserves are projected to decline below the City’s adopted reserve policy target in future fiscal years if structural gaps persist.

(millions of $) FY 25 FY 26 FY 27 FY 28 FY 29 FY 30
Reserve($) $49 $41 $29 $18 $9 $4
Reserve(%) 33% 27% 18% 11% 5% 2%

 

This imbalance is driven by well-known pressures: rising costs in public safety and emergency services, inflation in equipment and materials, and increasing service demands. These trends are not unique to Vacaville. Across California, cities are grappling with the same arithmetic; expenses are rising faster than traditional revenue sources.

To help stabilize finances, the City Council has directed staff to conduct voter research and begin public education regarding a possible local one-cent sales tax measure on the November 2026 ballot.

A structural budget deficit occurs when ongoing expenditures exceed ongoing revenues. Unlike a temporary shortfall caused by a single event, a structural deficit reflects a recurring imbalance between the cost of providing services and the revenue available to fund them.

This type of imbalance may persist even during periods of economic stability. If not addressed, a structural deficit can reduce reserves over time and require adjustments to spending, revenues, and/or service levels.