The deficit, in plain language
You'll hear that Menlo Park has a budget deficit. Here's what that actually means — and what the City has to do about it.
The proposed budget for next year — July 2026 to June 2027 — plans to spend a little more than it expects to collect. Spending is about $90.5 million; revenue is about $88 million; the gap is about $2.5 million. The City's June 9 staff report flags that the gap is closer to $2.8 million once a few items going to Council on June 23 are added in — a labor agreement, an insurance adjustment, and a downtown development study.
What does that gap mean?
The City legally has to balance its budget. So a deficit like this has to be closed by doing one of three things:
- 1Spend less than planned — cut services or delay things.
- 2Find revenue that isn't currently in the plan.
- 3Use money from the City's savings — its reserves.
Council is considering $703,055 in cuts on June 9 — things like Safe Routes to School, tree lighting on Santa Cruz Avenue, and library and recreation reductions. If Council adopts those cuts, the deficit drops back to about $1.8 million. The full year is balanced by dipping into the City's one-time savings.
The bigger concern is the multi-year trajectory. The City's reserves are already the lowest of 8 nearby cities — about 37% of annual operating expense at last audited close, while peers range from 56% to 114%. As reserves are drawn down to close the gap each year, that ratio falls to about 33% next year and 28% the year after. Both of the City's main policy reserves are already below the levels the City's own policy sets as minimums. The five-year forecast projects the General Fund balance falling from $29.2 million to $12.9 million.
Want the full detail? The deficit page walks through exactly what's being cut, what isn't, and the full menu of options the City has — laid out neutrally, so you can form your own view. Or keep going to the last step below.