The deficit
Menlo Park's proposed budget plans to spend more than it expects to collect. The City has to close that gap. This page lays out exactly what's on the table — laid out neutrally, so you can form your own view.
New to deficits? The plain-language version is shorter.
For FY 2026-27 (July 1, 2026 – June 30, 2027), the City's proposed General Fund budget shows a baseline deficit of about $2.5 million — $88.0 million in revenue against $90.5 million in expense (June 9 staff report). The staff report notes the deficit rises to about $2.8 million if $0.3 million of expenditures going to Council on June 23 are incorporated — AFSCME pay agreement, BCJPIA insurance, and the Downtown Development Financial Feasibility Study. Council is considering $703,055 of service-level reductions on June 9; staff states adoption would reduce the deficit from $2.5 million back to about $1.8 million. For FY 2026-27, the gap is balanced by drawing down $2.5 million of unassigned fund balance.
›Show source
Revenue and spending are summed from the General Fund records in the City's general ledger for fiscal year 2027 (revenue and expense lines). The published headline figures ($88,000,000 and $90,500,000) are rounded versions of these totals. Source: OpenGov transparency portal and the May 28, 2026 public budget workshop deck.
New to this? The plain-language explainer walks through what a deficit is and the three ways a city can close one.
How we got from $7.8 million to $2,500,000
Here is the part most residents don't hear about. When City staff first started building the FY 2026-27 (July 1, 2026 – June 30, 2027) budget months ago, the projected gap was much larger — about $7.8 million.
By the time staff brought the budget to the public workshop on May 28, 2026, that gap had been reduced to about $1.8 million. So roughly $6 million of the shortfall had already been closed. How?
- A Cost of Services Study and updated fee schedule. The City reviewed what it actually costs to provide specific services (building permits, planning review, recreation, and so on) and adjusted the fees it charges to match more closely. The new fee schedule takes effect July 1, 2026. This raises revenue without raising taxes.
- Expenditure reductions. Departments tightened operating budgets. Per staff, about $0.7 million came from cost-saving measures and deferred expenditures — work being slowed or pushed to later years.
- Operational efficiencies. Improvements to internal processes. The Administrative Services Department also adopted a new investment methodology that brought in about $1.3 million more from the City's pooled investment portfolio.
- Every department contributing. Staff were explicit that the closure was citywide, not concentrated in any one department.
That work brought the gap to about $1.8 million by the May workshop — but the story didn't stop there. Between the workshop and the June 9 staff report, new budget line items pushed the projected gap back up to the proposed budget's baseline deficit of about $2,500,000. The roughly $703,055 in service-level reductions now before the Council on June 9, 2026 — itemized in the cuts list below — would, if adopted, trim that back to about $1.8 million. Until then, the baseline deficit stands at about $2,500,000, balanced for the year partly with one-time money (covered further below).
›Show source
The $7.8 million starting gap, the roughly $6 million closed before publication, and the $1.3 million investment-income improvement are from the City of Menlo Park Public Budget Workshop, May 28, 2026— comments by Administrative Services Director Brittany Mello (~11:40) and supporting department directors. The increase back to the about $2.5 million baseline deficit, and the roughly $703,055in proposed service-level reductions, are from the City's FY 2026-27 budget staff report to City Council, June 9, 2026.
The five-year trajectory
A General Fund that ran a surplus four years ago now runs a deficit. Each bar is that year's revenue minus expense — above the line is a surplus, below it is a shortfall.
›Show source
Revenue and expense are summed from gl_transactions for the General Fund by fiscal year (FY 2023–24 actuals, FY 2025 estimate, FY 2026 adopted, FY 2027 proposed); net is revenue minus expense. The FY 2027 bar (−$1.9 million) is revenue minus the OpenGov export expense ($89.8 million); using the June 9 staff report's $90.5 million expense, the same figure is the −$2.5 million baseline deficit. The $0.7 million difference is the post-export adjustment described in the reconciliation note above.
Why this year's balance doesn't mean the problem is solved
Reserves are thin by local standards, and they are projected to keep falling. Menlo Park's General Fund Reserve is about 37% of operating expense at FY 2024-25 close — the lowest among 8 peer San Mateo County cities in the staff report comparison (Foster City 114%, Belmont 109%, East Palo Alto 102%, San Bruno 82%, Burlingame 57%, South San Francisco 57%, San Mateo 56%; Table 3). The staff narrative adds that peer cities' total General Fund balances average roughly 100% of operating expense, compared with about 40% for Menlo Park including non-spendable fund balance.
On a same-basis recalculation from Table 2, the reserve ratio is projected to fall to about 33% by end of FY 2025-26 and 28% by end of FY 2026-27 as reserves continue to draw down. Both of the City's two main policy reserves — the Emergency Contingency Reserve (15% policy minimum) and the Economic Stabilization Reserve (20% policy minimum) — are no longer maintained at minimum policy levels. The five-year forecast projects the total General Fund balance falling from $29.2 million to $12.9 million, with the Emergency Contingency Reserve no longer fully funded beginning FY 2029-30.
FY 2026-27 through FY 2030-31 (Attachment F)
Forecast to deplete by FY 2029-30 (Attachment F)
›Show source
One-time fund-balance drawdown, the 37% reserve comparison (Table 3), and the five-year forecast and Emergency Contingency Reserve depletion (Attachment F) are from the City of Menlo Park FY 2026-27 budget staff report to City Council, June 9, 2026.
1. What the City has proposed to cut
City staff have put forward about $703,055 in specific reductions for the City Council to consider. Here is the full list, grouped by department.
Library and Community Services
-$273,655- Library program reductions-$169,255
Fewer library programs, plus small cuts to materials and outside contracts.
- Indoor recreation reductions-$104,400
Fewer indoor recreation programs, with some staffing efficiencies.
Public Works
-$429,400- Safe routes to school-$105,000
Less spending on the program that helps kids walk and bike to school safely.
- General non-herbicide weed removal-$91,600
Less hand weeding in public areas — the kind that avoids chemical herbicides.
- Tree lighting-$70,000
Holiday tree lighting scaled back.
- Landscape median and right-of-way maintenance-$69,800
Less upkeep of landscaped street medians and the strips along roadways.
- Mechanical non-herbicide weed removal-$50,000
Less machine weeding that avoids chemical herbicides.
- Downtown/Santa Cruz median & street tree lighting-$43,000
Reduced lighting on downtown medians and the street trees along Santa Cruz Avenue.
These cuts add up to about $703,055 (Table 1). If adopted, staff states they would reduce the deficit from $2.5 million back to about $1.8 million. The remainder of the year's gap is covered by drawing down $2.5 million of unassigned fund balance. The cuts narrow the gap; they do not, by themselves, fix the structure underneath it.
›Show source
Each line is a proposed budget change from the City's pending budget records, shown in full with no items omitted. Amounts are the reductions staff have recommended for fiscal year 2027. Source: May 28, 2026 public budget workshop deck.