How to deal with a large budget deficit was the looming issue at Monday’s Ceres City Council meeting with city staff instructed to flesh out two scenarios – both which involve dipping into reserves at differing amounts.

Just how heavy dependence will be on using General Fund reserves to cover expenses for the coming 2026-27 budget year remains uncertain. The council expects to see some solid numbers – and how they affect staffing levels – when it next meets on Monday, June 1, just 29 days before a budget must be in place by July 1.

One big unknown is how much of an increase the city will be paying to the city of Modesto for fire service. In April’s budget workshop, the preliminary cost increase for fire services was estimated at approximately $1.5 million. Since then, Modesto has reduced the impact by roughly $500,000. This includes a direct decrease of $482,000 to the General Fund, partially offset by a $200,000 increase in the Legal Services contract.

Finance Director Vanessa Portillo said after tinkering with the budget the city is projected to use $2.1 million in reserves and not the $2.4 million previously discussed. That would draw down reserves from $4 million to about $2.24 million, or 7.3% of budgeted expenditures. That level is greatly less than the council’s established minimum reserve of 18 percent.

The budget deficit has been growing over the years due to inflation, the rising costs of personnel in terms of wages, pensions and benefits, she said.

Portillo presented three options for the council:

• A – Make spending cuts without using General Fund Reserves;
• B – Limit the use of reserves to a specific amount set by the council;
• C – Proceed with the city manager’s recommended budget and using approximately $2.16 million in reserves.

Portillo discussed her analysis of police department overtime costs and fire contract costs.

She said funding for more police officers or for more police personnel would not necessarily reduce the overall overtime cost. Instead, it would shift some of the costs from overtime into regular salaries and benefits.

She also noted that the fire contract with Modesto is less expensive than had the city kept its own service. The costs of that contract are covered 20 percent from Measure H tax dollars and 80 percent from the General Fund.

Portillo looked at whether the city would save by hiring a full-time Community Development director and senior planner instead of hiring contract planners. She concluded that when development activity is slow – and it presently is – then contracted services provide “an efficient and flexible way to fill operational gaps.”

Councilwoman Rosalinda Vierra expressed concern about rising city attorney costs and if the city is getting its bang for the buck from the cost of a grant writer.

“We really, really need to get a hold of (police) overtime because that’s really bleeding us and I would like to see what steps we’re doing to try to minimize that,” said Vierra. “I know we need our police officers but almost $100,000 a month is just not okay in my eyes for any department.”

Portillo said overtime is “just inherent” for a police department.

Police Chief Trenton Johnson said his department should be at full staffing by July 1 and return to normal 11-hour shifts which should save about 20 percent of overtime costs. In October he noted 1,600 plus hours of overtime were used with 28 employable officers while April saw 36 officers and 700 hours of overtime.

“I plan to continue to keep officers in the police academy,” said Johnson. “That is a very good strategy moving forward, but it takes a year. So what will happen is if we lose an officer and we don’t keep recruits in the academy, it takes a year for us to replace them, which then your overtime is going to increase. If we keep this pipeline of them in the academy and we can bring them in, we’ll make sure that we always have our patrol filled and that’s the majority of the overtime.”

Addressing rising city attorney costs, Vice Mayor Daniel Martinez said the $500,000 with White Brenner for our city attorney is less expensive than if the city were to hire an in-house attorney.

“We would need probably legal secretary and the attorney, and anytime that attorney doesn’t specialize in whatever that court case may be,” said Martinez, “they may need to go out themselves and get assistance from other attorneys. I don’t see hiring an in-house attorney at this time being financially responsible.”

Mayor Lopez said he isn’t in favor of balancing the budget with personnel cuts.

“If we were to ask for a balanced budget, that would be jobs that would be lost and I just could not sleep at night, if that was the case,” said the mayor. “And I think that we’re smarter than people believe that we are, that we have other plans to make sure that we come out on top at the end.”

He suggested that forecasted budget deficits in past years have turned out to be smaller as a fiscal cycle progressed.

Councilwoman Cerina Otero asked if the city had leeway to negotiate levels of service with Modesto to which Modesto Chief Andrew Hunter said Ceres is allowed to adjust staffing levels.

Otero insisted said the council needs to curb its own expenses for professional development, health benefits and the monthly stipend.

“This is a part-time position,” Otero said of council service. “There are part-time employees who do not receive health benefits. We also need to contribute to resolve this current issue and … if it’s $20,000 (for health benefits), it’s still money that needs to be given back somewhere else into this budget. So I would hope that that’s something that the council would consider.”

Councilman James Casey opined that Ceres has the best fire and police personnel “but the fact of the matter is, if we can’t afford it, we can’t afford it.” He said he supported Option C to proceed with the city manager’s recommended budget and using approximately $2.16 million in reserves.

Martinez said he supported A, making spending cuts without using General Fund Reserves.

Interim City Manager Steve Williams said he and Portillo have “come up with strategies that would reduce it even further from $2.1 million down to a threshold that you would set and all the way down to zero. So we have worked through some of those potential strategies just in internal communications. I’m certainly not prepared to present those now but we have done some preliminary work that would reduce it further than $2.16 million.”

Both Vierra and Otero liked Option B, which involves limiting the use of reserves to a specific amount set by the council after seeing where cuts would land.

“I’m a little scared about layoffs and furloughs,” said Vierra. “Employees are really, really scared and they have reached out to me and that is something I told them I would try my very best. I don’t want to start losing employees.”

But she also stated she is not okay with the projected $2.1 million dip into reserves.

“Otero added: “I worry with this kind of deficit that it’s going to affect our public safety and we already don’t we are fully stopped at the 47, but we still have unfunded positions and that concerns me.”

She wants to see what service levels look like if the council limits the dip into reserves by $1 million. Martinez said he could live with $1.5 million tap into reserves.

The council decided to hold a special meeting at 5 p.m. on Monday, June 1 with budget options finalized on June 8.