South Bay City cut back millions, but forecasts multimillion dollar deficit

"Last year, the city predicted a $28.5 million budget shortfall by 2030. Since then, the city has cut positions and tightened spending to reduce that number by more than half by 2030, and expects a slight surplus for the next year."

"While revenue from taxes is largely expected to grow over the coming years, the cost of running the city is expected to grow faster, with salaries and benefits making up the bulk of the city's spending. After 2028, the city expects a budget shortfall that will grow by millions each year to an expected $19.2 million in 2031."

"The city also faces challenges familiar to many others across the state: hybrid work and online shopping that have cut back on retail and commercial development, issues with federal and state funding that could make some residents rely more heavily on city-level services, potential instability from tariffs and federal policy, and stagnating job growth across the state."

Milpitas has significantly improved its budget outlook compared to last year's projections. The city reduced its forecasted $28.5 million shortfall by 2030 to under $14 million and expects a slight surplus for the next year through strategic spending cuts and position reductions. However, long-term challenges persist. While tax revenue is expected to grow, operational costs—particularly salaries and benefits—are projected to grow faster, creating deficits starting after 2028 that could reach $19.2 million by 2031. The city faces additional pressures from hybrid work reducing commercial development, online shopping impacts, federal and state funding uncertainties, potential tariff effects, and stagnating job growth. City officials acknowledge progress but recognize substantial work remains to address the structural budget imbalance.

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