(P.A.G.E. Press Release, August 10, 2025; Cover Image Credit: P.A.G.E.)
After the departure of the city’s third CFO in less than five years, Mayor Blad has, for the second time in three years, assumed control of the FY2026 budget process with his Chief-of-Staff as the lead. Without a professional CFO in place during this process, I believe the budget development lacked the critical financial oversight and guidance that a CFO brings to municipal budgeting.
On 06/10/25, with what was disclosed as a FY26 budget deficit of $1,308,254, the Council approved $531,008 in budget cuts. After adjustments and corrections, Council voted to cover additional deficit with $853,504 of General Fund Excess Reserves. On 07/10/25, following more adjustments and corrections, Council cut $31,500 in non-profit community requests to address the remaining $28,801 deficit. This brought “excess reserve” use (General Fund only) to approximately $850,805.
City Policy II (C) Current Funding Basis (Recurring Revenue) states: “The City shall budget and operate on a current funding basis. Recurring expenditures shall be budgeted and controlled so as not to exceed current revenues. Recurring expenses will be funded exclusively with recurring revenue sources to facilitate operations on a current funding basis.”
City Policy II (D) Use of Non-Recurring Revenues states: “Non-recurring revenue sources, such as one-time revenue remittance of fund balance in excess of policy can only be budgeted/used to fund non-recurring expenditures, such as capital purchases or capital improvement projects. This will ensure that recurring expenditures are not funded by non-recurring sources.”
While using one-time excess reserves to pay for recurring expenses may seem like a reasonable temporary option, Government Finance Officers Association (GFOA) best practices clearly state: “. . . using reserves to balance the budget may be considered but only in the context of a plan to return to structural balance, replenish fund balance, and ultimately remediate the negative impacts of any other short-term balancing actions that may be taken.”
Without a clear plan in place, the current approach may only defer and potentially escalate budget deficit problems.
One concerning budget approach includes directing additional interest revenue into the General Fund that was earned from Enterprise Fund reserve deposits. In my understanding, enterprise-earned interest revenue is typically considered by most cities as belonging to those respective departments (Sanitation/Water/WPC).
I have additional concerns about interest revenue projections. On 07/10/25, Council learned that the total interest revenue projection, previously increased from the initial CFO recommended $3.50M to $3.75M (with Council approval), had been increased to $4.988M. I question whether this projection is realistic, given that FY25 budgeted revenue was $4.6M, and current indicators suggest revenue may decrease in FY26. A more conservative approach would be to underestimate interest revenue and use any additional earnings for unanticipated expenditures and to boost reserves.
A third area of concern involves the Right-of-Way (ROW) interfund budget line items built into the three Enterprise budgets (Sanitation/Water/WPC) for “street maintenance.” Currently, these ROW costs are budgeted at $1,500,861. These Enterprise budgets determine our utility rates and transfer ROW money (collected from utility users) into the Street Fund as additional revenue. I believe these budgeted ROW costs may be problematic in light of the constitutional issues identified in Bradbury v. City of Lewiston, Nez Perce. I previously called on council to obtain an AG opinion as any risk of legal challenges could result in significant financial consequences.
To provide context, Pocatello began FY26 budgeting with what I calculated as an initial deficit of over $4M due to large, recurring expenditure increases including: $3,332,929.18 for estimated city-wide salaries; $828,820.99 for Medical Premiums (capped at a 9.9% increase for FY26 and projected at mid-double-digit percentage increases in FY27); and $441,214 for City ICRMP liability insurance. These were all line items anticipated to increase in FY26. Yet, this figure doesn’t include any increases for Materials & Operations (M&O).
State revenue adjustments (also increased from the initial CFO recommendations) is projected to yield approximately $500K in new revenue. FY25 city levy-ask was $34,117,711. For FY26, Council voted 4-1 to publish a city levy-ask of $35,865,971 (full 3% capped levy-ask + 1% foregone + new construction, etc.) That represents a $1,748,260 (or 5.12%) increase over last year’s appropriation to assist with addressing FY26 expenditure increases of over $4M.
I disagree with the Mayor’s explanation that the current deficit situation was driven primarily by medical insurance premiums (that increase was contracted for last year). Instead, it is the result from what I view as insufficient adherence to internal financial policies including one that requires budgeting to be done in conjunction with comprehensive five-year projections. City leadership was provided warnings beginning in 2021 about the need to address these fiscal trends. ARPA Funds and high interest rates may have only delayed what I see as an inevitable fiscal challenge.
Each year’s budget impacts future budgets. This year’s deficit situation reflects decisions made during the last four budget cycles. In my view, the only responsible action for FY26 budgeting would be to take immediate corrective action to address the deficit. Without such action, I fear the budget deficit threatens the city’s long-term financial sustainability.
