# OC Cities Grapple with 2026–27 Budget Deficits

> Multiple Orange County cities remain under active fiscal pressure ahead of the November 3 ballot, where Santa Ana's Measure N and Orange's sales-tax and hotel-tax measures will be decisive; Huntington Beach continues absorbing a 17% police raise against a projected decade-long deficit near $90 million, and Irvine is weighing a $27 million cut plan to close a projected $37 million structural gap by 2028.

- Canonical: https://ocint.app/situation/oc-cities-budget-deficits-2026
- Markdown: https://ocint.app/situation/oc-cities-budget-deficits-2026.md
- JSON: https://ocint.app/api/situations/oc-cities-budget-deficits-2026
- Status: active
- As of: 2026-09-28T23:00:28.002658+00:00
- Started: 2026-06-13T07:00:00+00:00
- Cities: Anaheim, Fullerton, Huntington Beach, Irvine, Santa Ana
- Publisher: OCINT (https://ocint.app)

## Who / What / Where / When / Why

**Who:** City councils and finance staff in Huntington Beach, Fullerton, Orange, Santa Ana, Costa Mesa, Anaheim, and Irvine; police and employee unions; OC County government.
**What:** Five or more OC cities are managing structural budget deficits simultaneously, with labor cost increases, late budget adoptions, and November ballot measures as the primary drivers.
**Where:** Orange County, California — spanning Huntington Beach, Fullerton, Orange, Santa Ana, Costa Mesa, Anaheim, and Irvine.
**When:** Fiscal pressures emerged in spring 2026; key votes occurred August–September 2026; the central inflection point is the November 3, 2026 ballot.
**Why:** Rising public-safety labor costs, post-pandemic revenue normalization, one-time fiscal patches running dry, and voter-dependent revenue measures combine to produce multi-city structural shortfalls.

## Narrative

## Current Status

Five or more Orange County cities remain under active fiscal pressure as the November 3, 2026 ballot approaches. Huntington Beach is absorbing the full-year cost of a 17% police raise package ratified Sept. 1. Orange has begun contingency planning for a $27.6 million deficit. Santa Ana's sales-tax permanence measure is on the November ballot. Fullerton continues operating under a late, cut-heavy budget. Costa Mesa has approved new labor agreements projecting a shortfall beginning in fiscal 2027. Irvine is formally weighing a sweeping cut-and-revenue plan to close a projected $37 million structural deficit by July 2028.

## Huntington Beach — Police Contract In Effect

On Sept. 1, 2026, the City Council voted 4-3 to ratify a three-year Police Officers Association contract: an 8% raise retroactive to July 1, 2026, followed by 4% and 5% increases in subsequent years (17% cumulative), costing an estimated $9.8 million through June 30, 2029. Voting yes: Andrew Gruel, Butch Twining, Gracey Van Der Mark, and Chad Williams. Voting no: Mayor Casey McKeon, Don Kennedy, and Pat Burns.

The city's Finance Commission found the deal could add $2.7 million to this year's deficit and approximately $7 million by 2035, with the projected structural deficit approaching $90 million within a decade. General-fund reserves sit just under $100 million — roughly 3.5 months of spending. City Treasurer Jason Schmitt has warned of a potential Chapter 9 bankruptcy scenario by 2030. Mayor McKeon called the approved deal unsustainable.

## Orange — Contingency Planning Underway

According to Voice of OC, the Orange City Council directed staff in mid-September to plan for the failure of its two November ballot measures: a 13-year 1% sales-tax measure and a 4% hotel-tax increase, which together would raise roughly $40 million over their combined terms. If voters reject them, the city projects a $27.6 million deficit, possible layoffs after labor agreements expire June 30, 2027, unfilled public-safety vacancies, potential changes to fire staffing and deployment, and cuts to permitting, parks, and infrastructure. Orange is also asking voters to make it a charter city.

## Santa Ana — Measure N on November Ballot

Santa Ana voters will decide Nov. 3 whether to make the city's 1.5% Measure X sales tax permanent, preserving approximately $84 million a year and keeping the city's combined rate at 9.25% — tied for the highest in the county. The council placed it on the ballot 5-2. The OC Register editorial board urged a No vote, noting the city's unrestricted net position worsened from −$501 million in FY2018 to −$568 million in FY2025 despite years of Measure X revenue.

## Fullerton — Late Budget in Effect

Fullerton is operating under a 2026–27 budget adopted 3-2 on Aug. 18 — more than six weeks past California's July 1 deadline. The plan closes an approximately $7 million gap by defunding 26 vacant positions (including 6 police officers and a fire marshal), cutting roughly $300k from library staffing, programs, and book budgets, reducing graffiti-removal funding by $150k, eliminating the New Year's Eve event, scaling July 4 to fireworks only, and reducing security at City Hall, community centers, and Hunt Library. An active recall effort and a prior multi-million-dollar accounting error on reserves provided the backdrop to the delayed adoption. A forensic audit remains an outstanding risk factor.

## Irvine — Target '28 Plan Under Study

According to Voice of OC, Irvine's City Council voted 5-2 on Sept. 22 to continue studying City Manager Sean Joyce's "Target '28" plan — approximately $27 million in spending cuts combined with $10 million in new fee revenue, with no tax increases — as the city faces a projected $37 million structural deficit by July 2028. Separately, Voice of OC reported on Sept. 25 that Irvine is scrambling to curb its budget shortfall, with paid Great Park parking and credit-card fee pass-throughs among the options still on the table. The council had also quietly doubled members' personal discretionary budgets shortly before the deficit became public.

## Costa Mesa — Raises Approved, Shortfall Projected

On Sept. 1, the Costa Mesa City Council unanimously approved two-year MOUs with police, police management, and city employees, adding approximately $6.8 million in pay and benefits and projecting a $2 million shortfall beginning in fiscal 2027.

## Other Cities

**Anaheim's** proposed budget reflects roughly 8% spending growth including added fire and police resources, though its deficit is consuming an estimated half of the $120 million in new tax revenue projected for the year. A Voice of OC analysis from Sept. 17 noted Anaheim's general fund is up 85% since the 2015 budget, with its police budget up 84% over the same period.

## What to Watch

The November 3 ballot is the central near-term inflection point: Santa Ana's Measure N and Orange's sales-tax and hotel-tax measures will significantly shape both cities' fiscal trajectories into 2027. Huntington Beach's next budget cycle will reflect the full-year cost of the police contract. Fullerton's forensic audit findings remain an outstanding risk factor. Irvine's council is expected to take further action on the Target '28 plan as the deficit horizon approaches.

## Timeline

- **2026-06-13T07:13:36+00:00:** OC Register reports Irvine is considering paid parking at the Great Park and credit-card fee pass-throughs to close its budget gap.
- **2026-06-15T06:18:20+00:00:** OC Register reports Fullerton's budget adoption is delayed pending the outcome of a forensic audit.
- **2026-06-16T18:00:12+00:00:** Voice of OC reports Santa Ana officials plan to purge city commissions to help close a $13 million budget gap.
- **2026-06-17T17:00:29+00:00:** Santa Ana City Council approves a balanced 2026–27 budget described as protecting services and continuing investment in public spaces.
- **2026-06-17T20:00:00+00:00:** Voice of OC reports auditors have questioned whether Fullerton is properly overseeing its budget, underpinning the delayed adoption.
- **2026-06-18T12:58:00+00:00:** Voice of OC reveals Irvine City Council quietly doubled members' personal discretionary budgets shortly before the deficit became public.
- **2026-06-22T06:51:42+00:00:** OC Register reports Anaheim's proposed 2026–27 budget reflects approximately 8% spending growth, including added fire and police resources.
- **2026-06-24T12:58:00+00:00:** Voice of OC covers Santa Ana's commission purge in the context of its bleak budget outlook.
- **2026-06-24T18:00:00+00:00:** Voice of OC reports Anaheim's deficit is consuming roughly half of the $120 million in new tax revenue projected for 2026–27.
- **2026-06-24T20:00:00+00:00:** Voice of OC reports Irvine is formally exploring paid Great Park parking and credit-card fee hikes to address its deficit.
- **2026-06-26T12:58:00+00:00:** Voice of OC publishes a consolidated overview of OC cities' budget deficit challenges as the dominant civic story of the period.
- **2026-08-18T00:00:00+00:00:** Fullerton City Council votes 3-2 to adopt its 2026–27 budget more than six weeks past the state's July 1 deadline. The plan cuts roughly $7M: 26 vacant positions defunded (including 6 police officers and a fire marshal), ~$300k from library budgets, $150k from graffiti removal, elimination of the NYE event, July 4 reduced to fireworks only, and reduced security at City Hall and community centers.
- **2026-08-18T12:58:00+00:00:** Huntington Beach Council votes 4-3 to send a proposed 18% three-year police raise package to the finance commission for review before a September vote. City Treasurer Jason Schmitt warns the city could face Chapter 9 bankruptcy by 2030 under current projections; police account for ~30% of the general fund.
- **2026-09-01T00:00:00+00:00:** Huntington Beach City Council votes 4-3 to approve a three-year POA contract: 8% retroactive to July 1, then 4% and 5% (17% cumulative total), costing an estimated $9.8M through June 30, 2029. Yes: Gruel, Twining, Van Der Mark, Williams; No: Mayor McKeon, Kennedy, Burns. The Finance Commission warned the deal could add $2.7M to this year's deficit and $7M by 2035, with the projected deficit approaching $90M within a decade against reserves of just under $100M (~3.5 months of general-fund spending).
- **2026-09-02T03:00:00Z:** Costa Mesa council unanimously approves two-year MOUs with police, police management and city employees worth about $6.8 million in added pay and benefits, with a $2 million shortfall forecast from fiscal 2027.
- **2026-09-07T13:00:00Z:** OC Register editorial board opposes Santa Ana Measure N, which would make the 1.5% Measure X sales tax permanent (about $84 million a year); the council put it on the Nov. 3 ballot 5-2.
- **2026-09-14T12:58:00Z:** Orange directs staff to plan for a $27.6 million deficit and possible layoffs if voters reject its 1% sales-tax and 4% hotel-tax measures on Nov. 3.
- **2026-09-22T00:00:00Z:** Irvine City Council votes 5-2 to keep studying City Manager Sean Joyce's Target '28 plan — roughly $27 million in cuts and $10 million in new fee revenue, no tax increases — against a projected $37 million structural deficit by July 2028.
- **2026-09-25T17:00:00Z:** Voice of OC reports Irvine is scrambling to curb its budget shortfall, with paid Great Park parking and credit-card fee pass-throughs still among options under consideration.

## Primary sources

1. [Voice of OC: Irvine Scrambles to Curb Budget Shortfall](https://voiceofoc.org/2026/09/irvine-scrambles-to-curb-budget-shortfall/) (2026-09-25T17:00:00+00:00)
2. [Voice of OC: Is Orange County Running out of Cash for Cops?](https://voiceofoc.org/2026/09/is-orange-county-running-out-of-cash-for-cops/) (2026-09-17T12:58:00+00:00)
3. [Voice of OC: Orange Explores What to do if Sales Tax Proposal Fails in November](https://voiceofoc.org/2026/09/orange-explores-what-to-do-if-sales-tax-proposal-fails-in-november/) (2026-09-14T12:58:00+00:00)
4. [Voice of OC: Costa Mesa Bumps Pay for Police and Staff](https://voiceofoc.org/2026/09/costa-mesa-bumps-pay-for-police-and-staff/) (2026-09-09T20:00:00+00:00)
5. [OC Register: Huntington Beach approves 17% raise for police amid budget concerns](https://www.ocregister.com/2026/09/03/huntington-beach-approves-17-raise-for-police-amid-budget-concerns/) (2026-09-03T06:43:24+00:00)
6. [Voice of OC: Huntington Beach Approves Police Raises Amid Budget Deficit Projections](https://voiceofoc.org/2026/09/huntington-beach-approves-police-raises-amid-budget-deficit-projections/) (2026-09-02T20:00:00+00:00)
7. [Voice of OC: Can Huntington Beach Afford Raises for Police Officers?](https://voiceofoc.org/2026/09/can-huntington-beach-afford-raises-for-police-officers/) (2026-09-01T17:00:00+00:00)
8. [Voice of OC: Orange County’s Cold War on Labor: Frozen Vacancies and Limited Raises](https://voiceofoc.org/2026/08/orange-countys-cold-war-on-labor-frozen-vacancies-and-limited-raises/) (2026-08-31T12:58:00+00:00)
9. [Voice of OC: Huntington Beach Pumps Brakes on Raises for Police Amid Budget Concerns](https://voiceofoc.org/2026/08/huntington-beach-pumps-brakes-on-raises-for-police-amid-budget-concerns/) (2026-08-20T12:58:00+00:00)
10. [Voice of OC: Fullerton Defunds Vacant Positions, Library Services & More to Balance Late Budget](https://voiceofoc.org/2026/08/fullerton-defunds-vacant-positions-library-services-more-to-balance-late-budget/) (2026-08-19T17:00:00+00:00)
11. [Voice of OC: Fullerton Looks to Adopt New Budget a Month Late With Millions in Cuts](https://voiceofoc.org/2026/08/fullerton-looks-to-adopt-new-budget-a-month-late-with-millions-in-cuts/) (2026-08-18T12:58:00+00:00)
12. [Voice of OC: OC’s Biggest Civic Headlines as Cities Grapple With Budget Deficits](https://voiceofoc.org/2026/06/ocs-biggest-civic-headlines-as-cities-grapple-with-budget-deficits-2/) (2026-06-26T12:58:00+00:00)

## Factoids

- **Municipal Budget Cycle** (regulatory): California cities are generally required to adopt a budget before the start of the fiscal year on July 1. A delayed adoption, as in Fullerton's case, is procedurally unusual and typically requires a continuing resolution or interim spending authority.
- **Forensic Audit** (definition): A forensic audit goes beyond a standard financial review to investigate potential irregularities, misappropriation, or systemic control failures. Results can lead to corrective action, personnel changes, or referrals to law enforcement.
- **Structural Deficit** (definition): A structural deficit exists when recurring expenditures exceed recurring revenues independent of one-time factors. It cannot be resolved with one-time fixes and typically requires permanent spending cuts or revenue increases.
- **Credit Card Surcharge Rules (CA)** (regulatory): California law historically restricted merchants from adding surcharges on credit card transactions, but a 2024 U.S. Supreme Court ruling and subsequent legal shifts have opened new questions about municipal fee pass-through practices. Specific applicability to city utility or fee billing varies.
- **OC County Budget Parallel** (historical_precedent): Orange County government is simultaneously managing its own budget shortfall, suggesting broad regional fiscal stress rather than isolated city-level governance failures.
- **Fullerton adopts late budget with ~$7M in cuts (3-2, Aug 18)** (source_doc) ([source](https://voiceofoc.org/2026/08/fullerton-defunds-vacant-positions-library-services-more-to-balance-late-budget/)): On Aug 18, 2026 — more than a month past the state deadline — Fullerton's council voted 3-2 (Jung, Dunlap, Valencia yes; Zahra, Charles no) to adopt a budget cutting roughly $7M: 26 vacant positions defunded including 6 police officers and a fire marshal, ~$300k from library staffing/programs/book budgets, $150k from graffiti removal, the NYE event eliminated, July 4 reduced to fireworks only, and security cut at City Hall, community centers and Hunt Library. Backdrop: a prior multi-million-dollar accounting error on reserves and an active recall effort against two councilmembers including the mayor.
- **Huntington Beach delays 18% police raise package 4-3 amid Chapter 9 warning (Aug 18)** (source_doc) ([source](https://voiceofoc.org/2026/08/huntington-beach-pumps-brakes-on-raises-for-police-amid-budget-concerns/)): On Aug 18, 2026 a split Huntington Beach council voted 4-3 (Kennedy, Burns, Mayor McKeon, Twining for delay; Gruel, Williams, Van Der Mark against) to send a proposed 18% three-year police raise package (8%/4%/5%; the MOU expired at the end of June) to the finance commission before a September vote — Councilmember Williams called it 'procedural sabotage.' City Treasurer Jason Schmitt warned Huntington Beach could face Chapter 9 bankruptcy by 2030 if current projections hold; police account for roughly 30% of the general fund, and per Councilmember Kennedy more than 20 PD employees out-earned the city manager last year.
- **Fullerton Budget Cuts — Aug. 18 Adoption Detail** (source_doc) ([source](https://voiceofoc.org/2026/08/fullerton-defunds-vacant-positions-library-services-more-to-balance-late-budget/)): The 3-2 adopted budget defunds 26 vacancies (6 police, 1 fire marshal), cuts ~$300k from library staffing/programs/books, $150k from graffiti removal, eliminates the New Year's Eve event, reduces July 4 to fireworks only, and cuts security at City Hall, community centers, and Hunt Library. A prior multi-million-dollar accounting error on reserves and an active councilmember recall were backdrop factors.
- **Huntington Beach Chapter 9 Warning** (source_doc) ([source](https://voiceofoc.org/2026/08/huntington-beach-pumps-brakes-on-raises-for-police-amid-budget-concerns/)): City Treasurer Jason Schmitt warned publicly on Aug. 18, 2026 that Huntington Beach could face Chapter 9 municipal bankruptcy by 2030 if current spending trajectories hold. Police compensation accounts for roughly 30% of the general fund; more than 20 PD employees reportedly out-earned the city manager last year.
- **Chapter 9 Municipal Bankruptcy** (definition): Chapter 9 of the U.S. Bankruptcy Code allows municipalities to restructure debts under federal court protection while retaining governmental functions. It requires state authorization (California requires a neutral evaluation process first) and is rare; Orange County's 1994 bankruptcy remains the largest U.S. municipal bankruptcy by assets at the time.
- **Huntington Beach approves 17% police raise 4-3 (Sep. 1)** (source_doc) ([source](https://www.ocregister.com/2026/09/03/huntington-beach-approves-17-raise-for-police-amid-budget-concerns/)): On Sep. 1, 2026 the Huntington Beach City Council voted 4-3 to approve a three-year POA contract: 8% retroactive to July 1, then 4% and 5% (17% total), costing 9.8 million dollars through June 30, 2029. Yes: Andrew Gruel, Butch Twining, Gracey Van Der Mark, Chad Williams; No: Mayor Casey McKeon, Don Kennedy, Pat Burns. The Finance Commission said the deal could add 2.7 million to this year's deficit and 7 million by 2035, with the deficit projected near 90 million within a decade against reserves just under 100 million (about 3.5 months of general-fund spending); police is about 30% of the general fund. The mayor called the deal unsustainable. This followed the Aug. 18 4-3 vote to pause the contract for a bankruptcy-risk analysis after Treasurer Jason Schmitt warned of a possible fiscal emergency (structural deficit about 15.6 million). (OC Register Sep. 3; Daily Pilot Sep. 2; Voice of OC Sep. 2 and Aug. 20.)
- **Santa Ana Measure N would make the 1.5% sales tax permanent** (regulatory) ([source](https://www.ocregister.com/2026/09/07/endorsement-vote-no-on-measure-n-in-santa-ana/)): Measure N on the Nov. 3, 2026 ballot would remove the 2029 and 2039 sunsets on Santa Ana's 2018 Measure X 1.5-cent local sales tax, keeping the city's rate at 9.25% (tied for highest in the county; Tustin and Irvine are 7.75%) and preserving about $84 million a year until voters repeal it. The council placed it on the ballot 5-2, with David Penaloza and Jessie Lopez opposed. The OC Register editorial board urged a No vote on Sept. 7, noting the city's unrestricted net position worsened from −$501 million in FY2018 to −$568 million in FY2025 despite the tax.
- **Costa Mesa approves two-year raises for police and staff Sept. 1; city forecasts a $2M shortfall from FY2027** (source_doc) ([source](https://voiceofoc.org/2026/09/costa-mesa-bumps-pay-for-police-and-staff/)): On Sept. 1, 2026 the Costa Mesa City Council unanimously approved two-year MOUs (July 1, 2026 to June 30, 2028) with the Costa Mesa Police Association, the Police Management Association and the City Employees Association. Police and police management get four 2% raises (about 8.2 to 8.4% over the contract) plus a $200-a-month increase in the city's health contribution to $2,619 and 2.5% or 5% bilingual pay; CMCEA members get two 3% raises and health contributions rising to $2,000 on Jan. 1, 2027 and $2,200 in January 2028. The deals add about $6.8 million in pay and benefits over this year and next and roughly $3.7 million to next year's payroll; the city projects a $2 million shortfall beginning in fiscal 2027.
- **Orange plans for a $27.6M deficit if its November sales-tax and hotel-tax measures fail** (source_doc) ([source](https://voiceofoc.org/2026/09/orange-explores-what-to-do-if-sales-tax-proposal-fails-in-november/)): Voice of OC reported Sept. 14, 2026 that the Orange City Council directed staff to prepare, before the November election, for the failure of its 13-year 1% sales-tax measure and a 4% hotel-tax increase. Together the measures would raise roughly $40 million over a little more than a decade; if they fail the city projects a $27.6 million deficit next year, possible layoffs after labor agreements expire June 30, 2027, unfilled public-safety vacancies, potential changes to fire staffing and deployment, and cuts to permitting, parks and infrastructure. Orange is also asking voters to make it a charter city.
- **Police pay vs. structural deficits (VOC, Sept. 17)** (source_doc) ([source](https://voiceofoc.org/2026/09/is-orange-county-running-out-of-cash-for-cops/)): Voice of OC's Sept. 17, 2026 analysis: Anaheim's general fund is up 85% since the 2015 budget and its police budget up 84%; Huntington Beach officers asked for 18% over three years at a September meeting; the last county budget relied on about $75 million in one-time money, mostly reserves. Separately, Irvine's council voted 5-2 on Sept. 22 to keep studying City Manager Sean Joyce's Target '28 plan ($27 million in cuts, $10 million in fee revenue, no taxes) against a projected $37 million structural deficit by July 2028.
- **Irvine Target '28 Plan** (source_doc) ([source](https://voiceofoc.org/2026/09/is-orange-county-running-out-of-cash-for-cops/)): City Manager Sean Joyce's 'Target '28' plan proposes approximately $27 million in spending cuts and $10 million in new fee revenue — with no new taxes — to close a projected $37 million structural deficit by July 2028. The Irvine City Council voted 5-2 on Sept. 22, 2026 to continue studying the proposal.

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