Budget Q&A with City Manager Yi-An Huang

Q: Could you tell us a bit about the budget process and what it is like?

Yi-An Huang: The budget process is a partnership, and I’m grateful for the partnership with the City Council and our Finance Chair Patty Nolan. Each year, we have worked to bring more transparency to the budget: starting the process earlier, discussing our longer-term projections, including assessments of our local economic conditions, and holding open budget hearings to review how our public dollars are being spent.

This process resulted in the City Council adopting the FY26 Budget on June 2. I’m grateful to the City Council, community members, and all the City leadership and staff who worked so hard throughout this process.

Q: What current considerations specifically impacted this year’s budget process?

Yi-An Huang: This was a difficult budget given the economic uncertainty we are facing as a City. Even before the new federal administration started, the City had projected an economic inflection point as development across the region slowed. This was in response to higher interest rates, higher construction costs, and growing office and lab vacancies. Our ability to sustain existing programs and invest in new initiatives will depend on preserving our financial strength. For that reason, we agreed to set targets for budget growth going forward.

In addition, the federal ARPA program is winding down. This pandemic funding provided $88 million for the City and community partners to invest in everything from cash transfers to low-income families, to homeless services and shelter, and to new nonprofit programs. But the scale of the program is beyond the City’s capacity to backfill and over the coming year, we will see much of that money spent down.

Q: How does the FY26 budget respond to this economic uncertainty?

Yi-An Huang: The FY26 budget reflects fiscal moderation. We met our target for moderating budget growth, which was discussed with the City Council in the fall, and approved a budget that grew 3.8% in FY26. This growth is significantly slowed compared to 8.1% in FY25, 7.2% in FY24, and 7.1% in FY23. Yet, while moderating budget growth, we remain committed to the critical investments and programs that the City has always supported. Along those lines, we have maintained significant funding across the Council’s priorities. Planned expenditures in FY26 include $49 million of funding toward affordable housing, $17 million toward homelessness, $17 million toward economic equity and opportunity, $18 million toward our Climate Net Zero goals, $21 million toward climate resilience, $35 million toward universal pre-kindergarten, and so much more.

Q: What changes were made to the FY26 budget from its original submitted version?

Yi-An Huang: This budget reflects changes as a result of Council direction. There was significant concern from the Council to invest more in homeless services given the planned closing of the Transition Wellness Center homeless shelter. In response to Council feedback, we added $1 million to the budget to create additional municipal housing vouchers. These vouchers help transition more people out of homelessness and into permanent supportive housing, and this change also addresses the Council’s desire to pilot municipal vouchers. This funding is in addition to investments of more than $18 million in funding from the Affordable Housing Trust, through which we have funded three projects that have built a total of 96 new units of permanent supportive housing across the City.

We have also allocated $5 million of Free Cash to a Federal Grant Stabilization Fund. This change is in recognition of the significant threats of funding cuts from the federal government, which may especially impact programs serving the most vulnerable.

Q: Do you have any other reflections to share on this year’s budget process?

Yi-An Huang: I’m grateful to City leaders and staff and the Budget and Finance team for all of their work throughout this process, and for the City Council as we have built a more transparent and engaged process. As we enter this coming year, it will be even more important to have Council and community conversations early and often as we assess the impact of potential federal funding changes and how they may affect our community. And as with all our efforts, we will face our challenges together.