By Dan Carson and Elaine Roberts Musser

A newly published long-range financial forecast for the city brings dire warnings of shortfalls and outright deficits over the next few years. Below, we outline tough but fiscally responsible actions the Davis City Council should immediately take to rein in this serious fiscal mess, substantially of the City Council’s own making.

The May 27, 2025 analysis prepared by the Baker Tilly Advisory Group in collaboration with city staff found the city faces budget shortfalls of roughly $3 million each of the next two fiscal years. They estimate this would leave the city with a bare-bones General Fund reserve, in a period when the risks of recession and inflation are dramatically rising nationally because of severe funding withdrawals in Washington DC and Sacramento.

Second, absent some painful but unavoidable decisions, the analysis found that the city will likely be completely financially underwater within five years, with annual spending exceeding annual revenues.  In other words, we are rapidly moving from having inadequate reserves to having no reserves at all, as well as serious deficits projected to grow to $5 million annually. Even these numbers may be a bit optimistic. The forecast assumes 2.5 percent annual growth in city pay even though newly signed contracts allow up to 4 percent pay growth for many workers supported from the General Fund.

Few Davis residents likely know about this serious financial predicament. The forecast report was released to little fanfare and sparse news coverage in a Council workshop held in the late afternoon at the Senior Center, instead of the City Council’s usual meeting in the evening in Council Chambers. As this is written, no city press release has been issued to highlight these grim developments.

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By Elaine Roberts Musser and Dan Carson

During the last few years the city has consistently failed to make the hard decisions needed to manage its finances. The proposed new city budget released on Friday is more of the same. What follows are just a few examples of how the latest city budget proposal for 2025-2027 digs the city ever deeper into an embarrassing financial morass. 

Having 10.3% and 10.2% reserves for the city’s General Fund for the next two budget years — as the new city budget plan proposes — might suffice in better times. Property and sales taxes are historically stable revenue sources for Davis and other California cities that can enable them to survive troubled times. But a 10% reserve is inadequate for the next two fiscal years given the treacherous economic circumstances the city is in. And coming are the all but certain massive state and federal funding cuts for local government programs. 

In earlier budget discussions, City Council’s direction to staff was to get the city’s General Fund reserve back to 15% over the next 2-3 years.  That plan is now dead. No specific proposal to get there is being offered — just a vague statement that new revenues or budget reductions will have to be found somewhere. This dire circumstance should trigger immediate action to put the General Fund reserve back on track to 15% in 2-3 years. 

Don’t count on that happening, though. Even as these budgetary dangers loom, another item on the Council’s consent agenda for Tuesday would make things worse: the ratification of a very rich and unwise employee contract with the Davis City Employees Association (DCEA). One that will probably set the stage for another wave of contracts for other city employee groups.

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