When it comes to your budget, it’s always a good sign when you have money left over after covering your expenses.
The City of Carlsbad looks for the same thing at the city, and in most years has funds remaining after each fiscal year ends on June 30. This could be due to changing needs, new efficiencies, projects being reprioritized and revenues coming in higher than expected.
In Carlsbad, the city has a process in place for what to do with these surplus funds. That process dictates how the city reviews and analyzes the best way to use the money in a fiscally responsible way, instead of simply rolling those funds over. In that light, on Tuesday, the City Council approved how we will use the excess funds, called “carry forwards.”
Budget policies
Together, the city's budget policies formalize strategies and best practices for the city’s long-term fiscal health. One of these policies puts a framework in place for how to use unspent funds from the previous fiscal year:
Priority 1 – Ensure we have enough money in our rainy day fund
The City Council’s policy is to keep an amount equal to at least 40% of the annual General Fund operating budget in a reserve account. This year, the city's General Fund reserve is healthy at $146.9 million, which is 61% of the adopted budget. That is about $50 million above the 40% target, so the City Council moves on to the next priority.
Priority 2 – Manager pension costs
The City Council has two policies that help the city remain among the best funded pensions in the region:
- One sets a goal of keeping the city’s pension plan 80% funded
- The other established a separate pension trust account where the city can manage how funds are invested, as opposed to ceding that control to the California Public Employee Retirement System.
These policies are projected to save $8 million over five years. On Tuesday, the City Council approved adding $7.5 million from last year’s savings to the pension trust.
Priority 3: One-time expenses for other needs
After meeting the first two priorities, remaining funds go toward one-time expenses aligned with the City Council’s Five-Year Strategic Plan. This year’s investments include:
- Traffic safety projects
- Encampment cleanups
- Police vehicle improvements and new city vehicles
- Affordable housing
- Improvements to IT services
- Accessibility upgrades to the city’s website
- Storm water system maintenance
The City Council also approved carrying forward the $5.2 million it had budgeted in fiscal year 2023-24 to use as matching funds for a grant to study and design putting the railroad tracks below street level through the Village and Barrio, roughly between the Agua Hedionda Lagoon and Buena Vista Lagoon. The city is partnering with SANDAG and NCTD to pursue the grant funding and project.
See the full list of funding approved Tuesday and read the Fiscal Year 25-26 budget on our website. You can also learn more about the budget and see all the policies we use to safeguard the city’s financial health.
