San Diego is slashing funding for arts, libraries and recreation centers, as it stares down a $146 million budget deficit that’s forcing unpopular spending cuts.

It’s not alone. Other California cities face similar gaps, including Los Angeles with a $200 deficit, Sacramento with a $66 million shortfall and San Francisco facing a $643 million gap over the next two years.

The cities’ financial woes echo the state’s projected deficit of $3 to $18 billion, as inflation collides with cuts in federal aid. In San Diego, lackluster growth of local sales, property and hotel taxes create an additional squeeze.

“What we’ve been seeing over the last several years after COVID and inflationary pressures, is that it has affected prices across the nation, across the world,” said Rolando Charvel, chief financial officer for San Diego. “Costs are going up faster than our revenue growth”

San Diego Mayor Todd Gloria released a $6.4 billion proposed budget last week, revealing a barebones spending plan that shored up public safety, homelessness and road repair and traffic safety, but slashed other services.

“It makes the tough decisions now—including targeted reductions to staffing and support functions—to protect the services San Diegans rely on and keep the city on solid footing,” Gloria said in a statement.

That infuriated arts and culture advocates, who protested that the mayor’s plan would eliminate nearly all arts funding and curtail hours and programs at libraries, parks and recreation centers.

“When we cut the things that make San Diego or any city great, the things that bring us together as a community… I shudder to think what we end up with,” said Patrick Stewart, CEO of the San Diego Library Foundation.

San Diego City Council members were pleased to see strong public safety funding, but aren’t comfortable with dramatic cuts to the arts, council President Joe LaCava said. “People will pull out their pencils and start scouring the mayor’s budget to see if we can tackle that going forward.”

Adriana Heldiz

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CalMatters

How California cities are falling short

Amid statewide budget woes, San Diego offers a case study in how city spending can fall into the red.

“We’re being hit both on the cost side and the revenue side,” said Alan Gin, an associate professor of economics at the University of San Diego.

Costs are up for everything from car parts for city vehicle fleets to asphalt for street repair, making maintenance and operations pricier, Charvel said. Meanwhile, inflation suppresses consumer spending, tourism and home sales — all key sources of local taxes.

That’s partly due to forces outside local control.

“Federal immigration policy, tariffs and other dimensions of trade policies, are putting cost pressures on deliverers of services in all sectors, and state and local governments are no stranger to that,” said Jeffrey Clemens, an economist with UC San Diego.

A November report by the National League of Cities stated that most cities were bracing for belt-tightening, as they contend with rising costs, infrastructure demands, tariffs and other challenges.

Its survey of local governments found that 55% of cities found it harder to balance their budgets in 2025 than the previous year, compared to just 11% in 2022.

Pandemic aid is expiring as cities confront new budget crunches, said Ben Triffo, a legislative advocate for the League of California Cities.

“I think we’re seeing the slow shift from recovery to restraint,” he said. “Our cities’ revenues are flattening; they’re not keeping pace with the costs.”

In San Diego, property tax growth is expected to slow this year, as the number of home sales drops, Charvel said. The region has a deep housing shortage, and limited inventory with high mortgage rates means fewer homes are selling.

Federal cuts to housing assistance, and inconsistent state funding for homelessness response, have also cost San Diego, LaCava said.

Ongoing inflation, fueled by tariffs and rising gas prices from the war in Iran, is suppressing consumer spending. In San Diego, sales taxes are projected to grow by half the rate they did last year, Charvel said. In 2024, San Diego voters rejected a one cent sales tax by less than one percentage point.

“Consumers are feeling squeamish in the general sense, in particular in the housing market, and that’s creating statewide and national pressures on property tax and sales tax revenues,” Clemens said.

San Diego’s tourism industry is also bracing for a slump; hotel taxes will grow just 1.5 percent this year, down from 6 percent last year, as both group travel and international visitation decline, Charvel said.

“For example, Canadians are boycotting the U.S.,” Gin said. “We’re affected by that in San Diego, because we’re a big tourism destination.”

As revenue stagnates, costs are piling up. The mayor’s office estimates it would cost $118 to $120 million more to run city services at the same level as last year, plus another $26 million for legal mandates, settlements, FEMA accreditation and other fixed expenses. San Diego has a backlog of maintenance for sidewalks and other facilities, and has to meet state mandates to upgrade its stormwater system, Charvel said.

Some critics say San Diego’s spending priorities are misplaced, pointing to bloated middle management and inadequate infrastructure investment. A report released this month by the San Diego Taxpayers Association stated that the city’s workforce has increased about four times faster than its population growth over the last 15 years.

During that period, middle-management positions grew 461%, from 70 to 393, the report stated. San Diego officials pushed back, stating that many of those positions were funded by specific grants, and some had since been reduced.

Other big California cities are also in dire straits. San Francisco’s government spending has far outpaced local tax growth, and the city struggles with federal cuts to food stamps and Medicaid.

Last week San Francisco workers protested the first wave of layoff notices after Mayor Daniel Lurie’s budget office warned departments to prepare to eliminate 500 jobs. The city also plans to cut disability assistance, environmental programs and legal aid.

In February, Los Angeles City Controller Kenneth Mejia wrote that the city is projected to overspend by $200 million, as it contends with last year’s Palisades and Eaton wildfires, “tariff levels unseen since the Great Depression, and aggressive federal immigration enforcement.” In a separate report on the last fiscal year Mejia warned that overspending, rising liability costs and stagnant revenue has led to “crumbling infrastructure and deteriorating services.”

Who bears the brunt of cuts?

As cities try to close their budget gaps, public officials and advocates should think hard about who will fall through the cracks, Clemens said.

“We should be worried that when cuts are being considered, the cuts will be to things that don’t have voices among well-organized stakeholder groups, that are the easiest, from a political perspective, to pull back on,” he said.

San Diego plans to close its budget hole by eliminating 101 jobs, placing employees on furlough for one week per year, and making steep cuts to selected departments.

San Diego’s 37 library branches will have to trim $2.5 million in hours of service, Stewart said, along with programming, books and materials. The city is also ending a matching grant fund that helped libraries drum up private donations. The city council will decide when and where to limit library hours.

The deepest cut was the near elimination of arts funding. The mayor’s budget proposes to zero out an $11.8 million arts and culture grant program, leaving just $2 million in a separate account.

“The mayor is proposing decimating a long-standing, critical source of revenue for what is now nearly 200 organizations across San Diego,” said Jessica Hanson York, executive director of the Mingei Museum and president of the Balboa Park Cultural Partnership, which represents the museums at the city’s historic cultural center.

Many of those provide free events, performances and education programs, she said. In what York called a “double punch,” San Diego imposed controversial parking fees at Balboa Park earlier this year. Since then museum directors have reported a drop in museum visitation, while parking fees are bringing in less money than originally planned.

York questioned whether the $11.8 million savings would provide meaningful relief to the city’s multi-billion dollar budget, but said collateral damage could ripple out to other sectors and dampen spending on entertainment and tourism.

“When you cut quality of life services you absolutely undermine future economic opportunities, revenue, development and investment opportunities,” Stewart said.

At a packed hearing earlier this week, hundreds of residents spoke against gutting the arts program, and the city council plans to hold additional public hearings to refine the city’s spending plan. LaCava hopes to soften the blow of the deepest cuts but acknowledged there will be stark choices.

“Nobody is going to be happy with the budget as it’s going to be adopted in June,” he said. “My job as council president is to make it an open and transparent process. I hope at the end people will feel they had a fair chance to make their case.”