BERKELEY — Berkeley councilmembers adopted a balanced budget last week, plugging a $21 million hole with temporary measures. However, a $20 million structural deficit means future hard decisions will still need to be made.
Berkeley city staff project spending about $819 million during fiscal year 2025-26, $311 million of which will come from the general fund. Most general fund dollars go toward staffing with nearly half covering police and fire department expenditures.
Staff’s balanced budget proposal, presented during a June 24 meeting, called for using one-time measures to cover a $21 million budget deficit. Those measures include a hiring freeze on 42 positions, funding about 12 positions from alternative sources, drawing money from a workers compensation fund, a pension trust fund and a fund for IT services, and redirecting tax revenue for preserving affordable housing to offset general fund and Marina Fund expenditures.
While doable in the short term, interim Budget Manager Shana Amenaghawon told the City Council similar measures can not be taken in the future to offset a structural budget shortfall of $20 million. Revenue has not kept up with expenditures and funding instability at the federal and state level presents more uncertainty, she said.
“Federal and state funding are at jeopardy right now and we’re trying to brace ourselves for that, but it’s a true environmental situation that we have to be cognizant of because we are funded heavily by local, state and federal funds,” Amenaghawon said.
Supportive of staff’s overall budget proposal, much of the council’s discussion was spent on debating how to spend $865,776 on special programs. One was championed by Mayor Adena Ishii and the other by Councilmember Rashi Kesarwani.
Underpinning much of Kesarwani’s budget considerations are funding cuts and priority adjustments at the federal level. A $1 million federal grant meant to help plant trees in West Berkeley was already stripped away, Kesarwani noted. Berkeley is also a sanctuary city for immigrants, a target of the Trump administration who sees similar policies as efforts to thwart mass deportation plans.
“We don’t know what other sorts of federal revenue losses we may face moving forward, so I think we need to be as fiscally restrained as we can be,” Kesarwani said.
Ishii acknowledged the challenging decisions facing a city with aging infrastructure and slow-growing revenue. Her proposal was about responsibly trying to treat city employees with respect and covering important community initiatives, she said.
Nearing the end of debate, both proposals nearly mirrored each other.
They agreed funding should go to a speed hump on Martin Luther King Jr. Way and Russell Street, deck replacement at the F and G docks in the marina, Youthworks, a career readiness program, to cover entrance fees for a year at the Adventure Playground, hiring a social worker for the Homelessness Response team, funding the deportation defense fund, supporting the Elmwood Festival, and covering the Marina Fund deficit.
The last question setting the proposals apart was whether to allocate $1.1 million or $2.5 million of Measure U1 money to the city’s Small Sites program, which helps preserve existing low-income housing. Measure U1 is a 2016 measure that raised the business tax on residential rental units to help increase affordable housing and prevent displacement.
Kesarwani said the $1.1 million allocation would bring the fund to $2.5 million overall, covering immediate program costs while preserving more Measure U1 funding for other affordable housing initiatives. Ishii countered that the council had already said they would contribute the full $2.5 million, bringing the Small Sites fund up to $3.9 million. Without doing so, Ishii worried other projects in the Small Sites pipeline would be in jeopardy.
In a split vote, the council voted 5-3 in favor of Kesarwani’s proposal. Ishii and councilmembers Cecilia Lunaparra and Shoshana O’Keefe voted no and Councilmember Igor Tregub abstained.
“We’ve worked really hard to make a compromise here and it’s disappointing to me that this is where we’re at,” Ishii said.
Councilmembers said both proposals were thoughtful but ultimately agreed additional funding could be allocated to the Small Sites program later to bring the fund up to promised levels.
As for the future of the city’s financial footing, Councilmember Brent Blackaby said growing the city’s revenue stream, not cuts, is what’s needed.
“Long term, having to do this year after year after year is also not what any of us want to be doing,” Blackaby said. “We have to grow our way out of the problem. We can’t cut our way out of the problem.”
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