Tucson drafts $2.5 billion budget as 2027 forecast improves

Tucson City Manager Tim Thomure has released his $2.5 billion 2026-27 budget proposal and it cuts programs to pay for priority investments.

Ever-tightening city finances may start a fight on the City Council over free transit.

Next year’s day-to-day operating portion of the budget (stuff like paychecks and
gas for police cars) is projected to come in $12 million less than the current
year. Total revenues across all categories are expected to be
$53 million more than fiscal year 2026.

Thomure’s plan – subject to City Council approval and changes – is to keep making investments in priorities set by the councilmembers, like housing, climate and police hiring, while raising fees and trimming the budget elsewhere.

The spending plan looked a lot worse earlier in the year, when city staffers were projecting a current fiscal year deficit of $25 million, which would have swallowed the city’s surplus and left Tucson $10 million in the red. Revisions and changes to projected revenues has shrunk the deficit to $1.9 million as the fund balance has improved to $80 million, but that’s not necessarily money that can be spent on anything the Council decides.

Thomure will present the projected budget to the City Council during the Tuesday study session.

The total Tucson city budget may stand at $2.5 billion, but budget discussions focus on the general fund, which equals one-third of overall spending. This is the spending the City Council truly controls with maximum discretion. 

The rest of the budget is made up of restricted dollars flowing in places like enterprise funds and grants. Money collected for Tucson Water can only be spent on water programs. Cash won through grants to do specific things can’t be spent on different things.

The city’s numbers are wobbly because the future is so hard to predict in the face of war, tariffs and mass deportation, Thomure said.

“This
volatility and unpredictability make it particularly challenging to
project future revenues, prepare an annual spending plan, and develop
confident five-year forecasts,” Thomure wrote in a budget memo. “Monitoring for and
reacting to a potential national and global recession, and
tariff-related inflation are top concerns and a continuing priority
going forward.”

Thomure’s budget cuts $2.3
million in operations by holding on filling vacancies, cutting recreation programs like tennis
and eliminating fire education programs. 

The budget is also buoyed somewhat by another $2.3 million in fee increases the Council seems ready to impose. Councilmembers have approved notices of intent to increase fees for development services, environmental services and parks and recreation. They would take effect July 1, the date the new budget year starts.

City policy calls for a year-end fund balance equal to 10 percent of the general fund. That’s right about where the fund balance would stand in 2028 under the projections. So there’s not much wiggle room.

Bond ratings agencies want to see big, stable surpluses when deciding what is essentially the city’s credit score. That score determines the interest rates to be paid on city debt.  

Tighter city budgets have left free transit ripe for discussion. Services like Sun Tran have been free since 2020, when the Council voted to use federal coronavirus relief funds to cover what the bean-counters call “fare box recovery.”

During the last full year of fares, passengers paid about $13 million to keep the $57 million system working. The COVID money stopped flowing and the city has been picking up most of that cost, while Tucson Medical Center and the Arizona Health Care Cost Containment System have added some transite revenue.

With the budget shaky, Councilmembers Nikki Lee and Paul Cunningham have been advocating for some
charges to transit users. Councilmember Miranda Schubert has opposed
any bus fares.