San Diego forecast shows $5.1M surplus for 2028, then shortfalls growing to $62M by 2032

San Diego's general fund will open the 2028 budget year with a projected $5.1 million surplus, the city's Department of Finance reported Nov. 6. The same forecast shows shortfalls returning the following year and growing to $62.1 million by fiscal 2032 once planned costs are counted.

The Fiscal Year 2028-2032 Five-Year Financial Outlook projects baseline general fund revenue of $2.323 billion against $2.318 billion in spending for the year that begins July 1, 2027. Mayor Todd Gloria's office said in a news release that the city "will head into its next fiscal year with a balanced budget and avoid additional reductions to services and programs."

"In plain terms: the money the City expects to take in next year covers what we expect to spend," Chief Financial Officer Rolando Charvel said in the release.

The release says the city faced a $136.8 million deficit in fiscal 2025, $258 million in fiscal 2026 and $88.8 million in the current year. It credits about $323 million in ongoing changes: roughly $180 million in cuts over two years, including department consolidations and position reductions; about $80 million a year from the trash collection fee that followed voter approval of Measure B; and about $63 million a year from the Measure C hotel tax, other tourism tax revenue and opioid settlement funds.

The report's own tables show the balance is thin. Baseline spending exceeds revenue by $5 million in fiscal 2029, $8.8 million in 2030, $21.6 million in 2031 and $36.2 million in 2032. The baseline assumes no contributions to the city's general fund or risk management reserves and no charter-required Proposition H infrastructure fund contributions until fiscal 2032.

When the Department of Finance adds operating costs for new and expanded facilities and proposed reserve contributions, the fiscal 2028 surplus drops to $1 million. The revised shortfalls are $27.4 million in fiscal 2029, $29.6 million in 2030, $48.3 million in 2031 and $62.1 million in 2032.

The report says the later gaps differ from past structural deficits because they are "mostly attributable to the financing of planned infrastructure investments." It cites an audit that put the city's combined maintenance and deferred maintenance needs above $1 billion, and it says no additional funding is programmed to address deferred maintenance comprehensively.

Pension costs help the forecast. The general fund's share of the city's annual pension payment is projected at $378.3 million in fiscal 2028, $18 million less than this year, because of smaller negotiated raises, a new actuarial experience study and investment returns above the 6.5% assumption. The report projects pension costs to keep falling as older unfunded liability payments are retired. The baseline also assumes 3.1% annual raises in future labor contracts.

General fund emergency and stability reserves are expected to end fiscal 2027 at 10.6% of average general fund operating revenue, below the city's 16.7% policy target. Finance staff propose rewriting the reserve policy to set that lower level as the new minimum, with contributions to maintain it starting in fiscal 2029.

Gloria said in the release that a balanced budget does not mean the work is finished. "We still have more infrastructure needs than resources to pay for them, and I won't pretend otherwise." He said he will "continue to hold the line on spending."

The Outlook is a forecast, not a budget. The City Charter requires the mayor to propose a balanced fiscal 2028 budget by April 15, 2027. The Independent Budget Analyst had not published its review of the Outlook as of Nov. 9.