Have you seen the agenda packet for Tuesday’s city council meeting? El Cerrito’s proposed budget for FY 2025-26 raises significant concerns about fiscal sustainability, particularly in its handling of unrestricted General Fund reserves and a growing budget gap.
According to the latest budget report, the City projects General Fund expenditures totaling $53.76 million, setting a clear benchmark for reserves based on City policy:
- Recommended Unrestricted General Fund reserve: 17%, or $9.14 million
- EDRF (Economic Development Reserve Fund): 13%, or $6.99 million
On paper, these policies are designed to protect the City’s financial health by ensuring reserves can buffer against emergencies or revenue shortfalls. However, reality tells a different story.
Currently, the EDRF holds approximately $9 million—well above the 13% minimum. The Council’s proposal? Withdraw $2 million from the EDRF, reducing it to the bare minimum of roughly $7 million, to cover a variety of one-time expenses.
At the same time, the City Manager’s proposed FY 2025-26 budget projects a deficit of nearly $5 million ($69.5 million in revenues versus $74.8 million in expenditures). That’s a significant gap, and the reliance on reserves to cover operating or one-time expenses is a troubling signal.
Key Takeaways:
- Use of reserves weakens long-term stability: Drawing down reserves—especially to fund non-recurring expenses—undermines the City’s financial safety net. If an unexpected crisis arises or revenues underperform, the City may lack the reserves needed to weather the storm. Notably, the City now holds reserves painfully close to the minimum recommended 17% in the unrestricted General Fund.
- Expenses are outpacing revenues: With a $5 million deficit projected for FY 2025-26, the City is spending more than it brings in. Rather than addressing this imbalance through structural reforms or revenue enhancements, the proposal leans heavily on reserves.
- Minimum reserves aren’t a spending account: While policies set a minimum reserve level, these figures represent a floor, not a target for routine drawdowns. Reducing reserves to the minimum should be a last resort, not a budget-balancing tool.
- One-time expenses deserve one-time funding sources: If the City must cover one-time expenses, it should prioritize one-time revenue sources or make cuts elsewhere. Using reserves intended for long-term stability erodes fiscal discipline.
- Transparency and accountability matter: Residents deserve clear explanations of how and why reserves are used. Depleting reserves without a solid plan to restore them risks undermining community trust.
El Cerrito is not merely at a crossroads—the City has been traveling this path for years. Without federal ARPA funds and the Real Property Transfer Tax from 2018, insolvency would have been a likely outcome. The reliance on one-time revenues and dwindling reserves has become a pattern, not an exception.
Call to Action:
It’s time for El Cerrito’s residents to demand accountability and fiscal discipline from City leadership. Attend council meetings, ask questions, and push for a budget that prioritizes long-term sustainability over short-term fixes. Your voice is essential to ensuring that El Cerrito’s future is secure, transparent, and financially sound.
El Cerrito Committee for Responsible Government (ECCRG) 