El Cerrito’s 2025–26 Budget Study: Key Highlights & Risks

On April 15, 2025, the El Cerrito City Council held a budget study session to review the preliminary Fiscal Year (FY) 2025–2026 budget. Budget Manager Claire Coleman presented the budget remotely via teleconference. Unfortunately, significant audio issues marred her presentation, making it difficult for the Council and the public to follow along clearly. Despite these technical challenges, the session revealed critical information about the City’s financial plan for the coming year. This report summarizes the key points from the study session, including new expenditures, impacts on reserves, risk considerations, and Councilmember concerns, and analyzes what they mean for El Cerrito’s fiscal health.

All financial data and statements are sourced from official reports or credible public analyses of City finances.

Budget manager Claire Coleman delivered her budget presentation remotely while the Finance Director sat at the dais. Due to technical audio problems, many details were intricate to discern in real-time. Nonetheless, it was understood that Coleman outlined the FY 2025–26 budget as “balanced” – meaning planned expenditures do not exceed projected revenues – but only through a series of adjustments. These adjustments included both ongoing cost increases and one-time spending proposals. Coleman noted that other reductions would offset some rising costs, though the specifics of those offsets remained vague during the presentation. The lack of clarity, compounded by the audio issues, left councilmembers and observers with unresolved questions about the exact trade-offs being made to balance the budget.

Key New Expenditures and Salary Increases

A few significant cost increases in the upcoming budget were highlighted:

• Salary Increases: Approximately $256,000 in salary and benefit increases for existing staff, including raises for certain positions (notably the City Manager)​. These appear to be ongoing costs reflecting updated labor agreements or adjustments for the new fiscal year.
• New Fire Inspector Position: Around $117,000 is allocated to hire a new Fire Inspector for the Fire Department. This adds a recurring expense aimed at improving fire inspection and safety services.
• Previously Unbilled Expenses: An unexpected $164,000 in expenses not billed to the City in prior periods is now accounted for in FY 2025–26. These one-time costs needed to be recognized, further straining the budget.

In total, these new or previously unbudgeted costs amount to roughly $537,000. City staff indicated that these increases would be offset by cost reductions elsewhere (such as savings from vacancies, departmental cuts, or other efficiencies), so the net effect would not unbalance the budget. However, details on the offsetting reductions were not provided, leaving uncertainty about what trade-offs are being made. Councilmember William Ktsanes later voiced concern that such one-time or late-added expenses had not been included in the original budget plan and instead were being introduced as adjustments, a practice he cautioned against. This practice of adding expenditures mid-cycle has been observed in prior years – the Council often approves a budget in June, only for staff to return mid-year with additional funding requests for items not initially budgeted.

One-Time Expenditures and Impact on Reserves

Beyond the ongoing costs, the City administration proposed about $4.5 million in one-time expenditures for various projects and needs. As usual with midyear adjustments, funding would come from the City’s unrestricted General Fund reserves, not current year revenues. These one-time allocations were known in June yet the city did not include them in the original budget.

El Cerrito’s unrestricted reserve balance is currently about $11.3 million, which the City touted as a sign of improved fiscal stability. Importantly, however, this reserve level is only about $2.2 million above the minimum recommended by the Government Finance Officers Association (GFOA) for a city of El Cerrito’s size. (GFOA guidelines suggest maintaining at least two months of operating expenses in reserve – roughly 17% of the budget, which for El Cerrito equates to around $9–10 million in reserves​. In other words, the City’s current reserves are barely above the prudent minimum buffer.

If the Council approves the proposed $4.5 million in one-time spending, it will directly draw down the reserves by that amount. Reserves would drop from $11.3 million to approximately $6.8 million, essentially hitting the GFOA minimum level (if not dipping slightly below it, the City would no longer have any cushion above the bare recommended floor. Councilmembers and financial watchdogs noted that this would leave virtually no margin for error or economic downturn. Any unforeseen cost overruns, revenue shortfalls, or urgent needs (for example, a natural disaster or economic shock) could immediately push the City’s finances into dangerous territory. Public finance observers pointed out that relying on reserves for these expenditures continues the same risky practice that in past years led to “going concern” warnings from auditors and a downgraded credit rating​.

The staff presentation did include a chart of projected reserve levels, and even with optimistic assumptions, it showed a steady downward slope in the coming years. There was no clear plan presented for rebuilding reserves after this drawdown. This trend troubled some councilmembers who remember that El Cerrito had nearly depleted its reserves just a few years ago (around 2020), prompting state intervention and municipal payday loans. While federal COVID-19 relief helped the City rebuild the fund balance to the current $11.3 million, spending it again without a replenishment plan raises obvious red flags.

Economic Risk: Recession Concerns

Another glaring omission in the budget presentation was a discussion of economic risk scenarios. Councilmember Rebecca Saltzman observed that the budget proposal lacked any risk assessment, such as analyzing the impact of a potential recession on City finances. This concern is well-founded: economists have warned of a possible economic downturn in late 2024 or 2025. Various forecasts estimate a significant probability of a U.S. recession in the near term, ranging from roughly 40–50% likelihood according to some surveys up to 80% probability according to more pessimistic analysts. In other words, there is a material risk that revenues (like sales or real estate transfer taxes) could flatten or decline in the next year or two if the broader economy contracts.

The City Manager continues her annual claim that any substantial cuts would lead to service reductions but fails to articulate the details of such reductions.

Further, the City’s budget assumes normal revenue growth and does not appear to incorporate any contingency for an economic downturn. Saltzman noted that no sensitivity analysis or “stress test” was shown to model how the City would cope if revenues came in lower than expected or if costs spiked in a recession. The City’s failure to integrate recession risk into its financial planning leaves it vulnerable, especially considering that reserves would be minimal after the $4.5 million draw, providing little fallback. The City is spending its thin cushion now, even while acknowledging (in general terms) that “another economic downturn is always possible. This approach drew criticism for its lack of prudence: a truly resilient budget would set aside extra funds or identify cuts to weather a potential recession, rather than assume continued rosy conditions.

Pension Obligations and Missed Opportunities

Long-term liabilities, particularly pension obligations, were a significant undercurrent in the budget discussion. El Cerrito’s unfunded accrued pension liability (UAL) with CalPERS has swollen to roughly $90 million (as of the latest reports)​ . This figure represents the gap between the pension benefits employees earn (current and retired) and the assets the City has set aside to pay those benefits. To put it in perspective, $90 million is more than twice the City’s annual General Fund revenues – a massive debt that must be paid over time. In recent years, the UAL has nearly doubled due to various factors, including investment shortfalls and increased staffing costs (the City expanded personnel, especially in police, fire, and administrative ranks, without fully prefunding the additional pension costs that came with that growth).

One topic that arose was why El Cerrito did not attempt to refinance or reduce this pension debt by issuing Pension Obligation Bonds (POBs) in the past few years, as some other cities have done. Councilmember Lisa Motoyama commented (in response to a public query) that the City hadn’t issued POBs because it “lacked the funds” to do so. However, this explanation is incomplete – El Cerrito’s poor credit rating was the fundamental constraint. By 2020, the City’s general credit had fallen to BBB- (just one notch above junk status) due to fiscal problems . Even after a slight improvement, the City’s rating is in the low BBB range, and the city continues to have a cash flow problem. At such a rating, issuing a large bond would carry high interest rates (if investors even showed interest), negating much of the benefit of a POB. In short, it wasn’t just a lack of cash stopping a pension bond (bond proceeds themselves would have provided the cash); it was the lack of creditworthiness and the risk that borrowing might worsen the City’s finances. Motoyama’s statement highlights some confusion among city leaders about past fiscal decisions, or an attempt to gloss over the severity of the City’s credit constraints.

Regardless, the pension liability looms large. Yet, as some observers pointed out, the budget presentation virtually ignored the $89–90 million “elephant in the room.” There was no detailed analysis of pension costs or how recent salary increases will compound the long-term pension debt​. The City’s annual required pension contributions are significantly rising year-over-year (for example, FY 2024–25 saw around $7–8 million in payments, which will squeeze future budgets. The City is leaving a significant risk unaddressed by not addressing this in the FY 25–26 plan. Essentially, the budget stays “balanced” in the short run by not proactively dealing with this known liability.

Unfunded Liability Strategy: Section 115 Trust

The City’s paid consultants advised the City to open a Section 115 trust with no less than $5 million, however, the City ignored their own consultants’ recommendations. City staff mentioned efforts to set aside additional money for long-term liabilities. Specifically, the City has a Section 115 pension trust – a restricted fund where it can deposit money now to be invested and later used for pension costs. However, the scale of funding planned for this trust is minimal compared to the need. The City has only about $1 million in the Section 115 Trust earmarked for pension obligations​. That is just 1% of the $89+ million liability​. In the new budget, the City proposes contributing less than $2 million to the trust (including the existing $1M). In other words, even after the next contribution, the trust would cover at best 2% of the pension debt – barely a token amount.

During the study session, Councilmember Gabe Quinto urged the City to increase its contributions to the Section 115 Trust to tackle the pension issue. While this suggestion is fiscally responsible in theory, critics argue it is largely symbolic given the scale of the liability. For El Cerrito to substantially dent a $90 million UAL, it would need to invest tens of millions into the trust or make aggressive extra payments to CalPERS – a far cry from the ~$1–2 million currently on the table. Quinto’s recommendation, which did not come with a specific dollar figure increase, was the only proposal related to pension funding put forward by the Council. It underscores a growing awareness that more should be done, and the political and financial difficulty of doing it. As a community group dryly noted, setting aside $1–2 million against an $89 million debt is not a serious solution​ ; it’s akin to “throwing a cup of water on a house fire.”

Council Reactions and Transparency Issues:

The Council’s discussion during and after the presentation reflected a mix of concern and frustration:

• Councilmember William Ktsanes asked staff why the one-time expenditures (the $4.5 million) were not identified in the original budget draft. He highlighted a pattern where such items are added later as budget amendments, drawing from the General Fund, rather than being planned for from the start. Ktsanes suggested that this approach undermines transparency and structural balance – the public doesn’t see the proper spending plan until after the fact, and the City uses reserves for unforeseen things. Her comments advocate for including all known expenses (even one-time items) in the adopted budget, so that trade-offs can be evaluated in advance and the budget isn’t “balanced” on paper by deferring certain costs.
• Councilmember Rebecca Saltzman zeroed in on the lack of risk analysis. She noted that the presentation failed to address how the City would handle potential adverse scenarios, such as economic recessions, revenue dips, and cost overruns. Saltzman appeared concerned that the budget was presented with overly optimistic assumptions and no contingency, which could lead to mid-year scrambling if things go off track. Her point reinforces the need for a more conservative approach: building in a cushion (as the City’s Financial Advisory Board had recommended) or at least acknowledging risks. Notably, the City’s Financial Advisory Board had advised budgeting a $1 million surplus in FY 2025–26 as a buffer​. However, this idea was not adopted – the Council chose to use every dollar, leaving no margin. Saltzman’s critique suggests she finds that strategy unwise.
• Councilmember Gabe Quinto reiterated his stance on addressing long-term obligations, urging some action (however modest) on the pension front by bolstering the Section 115 Trust. Quinto also generally supported the budget but emphasized planning for the future. Unfortunately, his words mean little because the proposed increase in the Section 115 Trust amounts to about 1% of the liability – a meaningless gesture.
• Mayor Carolyn Wysinger attempted to conclude the discussion by directing staff to implement specific changes (potentially related to the concerns raised). However, the City Clerk intervened, saying to the Mayor and Council that because this was a study session (and not an action item on the agenda), the Council could not give formal direction to staff or make decisions that evening. All they could do was provide feedback. As a result, the Mayor’s attempt to mandate adjustments was halted. This guidance was incorrect – the council can make a motion whenever they want.   This somewhat awkward moment highlighted process constraints: any substantive changes must come back as formal proposals at a future meeting for approval. The Clerk’s intervention, while procedurally correct under California’s open meeting (Brown Act) laws, deferred any concrete action. It ensures that decisions will be made transparently at a later date, but it also means urgent issues (like reserve levels and risk planning) remain unresolved for now. In the future, the Mayor should pay particular attention to the wording on the agenda and not get caught in a position where she has her hands tied.

Financial Summary Table

To summarize the key financial figures discussed in the session, the table below outlines the major budget components and their values:

Budget Item	Amount	Notes/Impact
Salary Increases (FY 25–26)	$256,000	Increased personnel costs, including City Manager and staff​ raises, are an Ongoing annual expense.
New Fire Inspector Position	$117,000	The cost of adding one full-time fire inspector in FY 25–26. Ongoing expense (salary & benefits).
Previously Unbilled Expenses	$164,000	One-time costs belatedly billed to the City (accounting adjustment for FY 25–26).
Cost Offsets	(Unspecified)	Staff claims that other budget cuts/savings will offset the above new costs, keeping the budget “balanced.” However, details were not clearly provided.
Proposed One-Time Expenditures	$4.5 million	The cost of adding one full-time fire inspector in FY 25–26. Ongoing expense (salary & benefits).
Unrestricted Reserve Balance (Current)	$11.3 million	One-time spending on special projects/needs​. Would be funded from reserves (not current revenue).
GFOA-Recommended Reserve (Min.)	~$9.1 million	The Present General Fund reserve (fund balance) is available. This is only about $2.2M above the minimum recommended safe level.
Reserve After One-Time Spending	~$6.8 million	Recommended minimum reserves (~17% of budget) for a city of El Cerrito’s size. (Roughly two months of operating expenses.)
Unfunded Pension Liability (CalPERS UAL)	~$90 million	Projected if $4.5M is spent. This would put reserves at or below the GFOA minimum, leaving almost no emergency cushion​.
Section 115 Pension Trust Balance	$1 million	Current set-aside for pension obligations (≈1% of liability)​ Established from prior one-time funds (e.g., federal relief).
Planned Section 115 Contribution	<$1 million (add’l)	Proposal to contribute under $1M more into the trust (bringing total < $2M) – a tiny step given the $90M liability​

(Sources: City of El Cerrito budget documents and ECCRG analyses as cited.)

The April 15, 2025, budget study session shed light on El Cerrito’s financial strategy for FY 2025–26, but also raised serious concerns. The City proposes to maintain services and make new investments (like the fire inspector and capital projects) without technically going into deficit. Still, it achieves this balance primarily by utilizing reserves and assuming ideal conditions. The financial highlights can be summed up as modest new ongoing costs (salaries and a position) and a large package of one-time spending, all made possible by drawing down an already thin reserve fund.

While this approach may fulfill the “balanced budget” letter, it appears to undermine longer-term stability. Reserves would be left at the bare minimum, providing little safeguard against shocks or surprises. Significant risks – such as a potential recession – are not accounted for, despite considerable warning signs. And long-term obligations – especially pensions – are acknowledged only superficially, with minimal funding set aside.

Councilmembers like Saltzman and Ktsanes have rightly pointed out that the City needs to plan for uncertainties and avoid repeating past mistakes of structural imbalance (where recurring expenses outstrip recurring revenues, masked by one-time fixes). The tension is evident: on one hand, there are community needs and deferred projects that the $4.5 million one-time funds would address; on the other hand, spending down reserves now could force painful cuts or emergency measures later if revenues falter. The lack of a robust contingency plan or surplus in the budget is a bet that everything will go as hoped in the coming year.

The session also highlighted misalignments in understanding – for example, the explanation around pension bonds suggests a need for better financial communication with the Council and the public. It is crucial that city leaders fully understand the reasons behind past fiscal decisions, such as not issuing pension bonds due to credit rating limitations, to make informed choices in the future.

El Cerrito’s FY 2025–2026 preliminary budget is a mixed picture. There are positive elements, and the City has come a long way since its near insolvency in 2020. However, the financial foundation remains fragile. According to the city’s figures, reserves will be just at the safety line, and huge liabilities will linger in the background. The study session ended with calls for more caution – whether the final adopted budget will reflect those calls is the next question. As the City moves from this study session to formal budget adoption, residents and council members alike will be watching for improvements: the incorporation of risk mitigation, greater transparency on trade-offs, and a more substantial commitment to securing El Cerrito’s financial future rather than simply hoping for the best.

Additional Sources: Official City of El Cerrito budget reports and reserve policy information; California state auditor and GFOA guidelines; El Cerrito Committee for Responsible Government (ECCRG) public analyses of the FY 25–26 budget, economic forecasts from CNBC and other outlets regarding recession probabilities​, cnbc.com​, and cnbc.com. All data and quotations are as of April 2025.