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Early Direction for the Fiscal Year 2024-25 Budget <br />March 19, 2024 <br />Page 3 <br />• Employee pension unfunded liability contributions as estimated by CalPERS, <br />increasing due to the CalPERS investment losses in FY 2021-22; <br />• Contributions to, and uses of, the Pension Stabilization Account have been <br />included to smooth the pension debt fluctuations; and <br />• Inflation Factor for all other spending. <br />The graphical results of the Outlook indicate that expenditures are increasing faster than <br />revenue, creating a deficit beginning in FY 2025-26. When the Measure X rate decreases <br />in 2029, that deficit will increase significantly. <br />y $590 $577.2 <br />c <br />o <br />$550 <br />$510 <br />$470 <br />$41 <br />\ <br />$430 <br />$411.8 <br />$400.8 <br />$407.4 <br />$390 <br />$i460.8 <br />$350 <br />,R! $450.6 b494.5 <br />436.1 $441.8 <br />FY23.24 FY24.25 FY25.26 FY26-27 FY27-28 FY28-29 FY29.30 FY30.31 FY31-32 FY32-33 <br />+Revenue (Spending <br />There are three basic options to rebalance the budget in the future: <br />1. Request voter approval for a revenue measure; <br />2. Reduce service levels to fit within available resources; and/or <br />3. Encourage new development to increase the tax base in the City, which may also <br />necessitate increased spending to serve additional residents and businesses. <br />The FY 2023-24 Measure X spending plan is attached to this report as Exhibit 2. The <br />detailed spending plan identifies expenditures that may be considered if and when it <br />becomes necessary to reduce costs to rebalance the budget. <br />City Council 26 — 3 3/19/2024 <br />