The Tucson City Council approved a $2.3 billion budget for next fiscal year that includes targeted funding for maintaining city services while preparing for financial hardships down the road.
Council members unanimously adopted the 2025 fiscal budget during a special meeting on Tuesday night. It begins July 1.
No changes were made from the tentative budget mayor and council adopted on May 21, but specifics, such as the pay raises expected by city employees this year, needed to be bolted down prior to its formal approval.
About $44 million has been earmarked for the third year of the city鈥檚 investment plan. It is comprised of funding the city has above its necessary reserve levels to spend down over five years. This year鈥檚 plan includes money for public safety equipment and facilities, upgrading collector streets and a $4 million investment in transit.
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Free transit fares
The city has included fare-free transit in its , through the 2028-2029 fiscal year.
According to an from City Manager Michael Ortega, funding for free fares will come for a combination of general funds and a partnership Tucson Medical Center, AHCCCS and use of the city鈥檚 hotel/motel surcharge.
Employee raises
Effective July 1, all active city employees will receive a 1.5% salary increase under a new compensation plan.
The budget adopted Tuesday night includes $10.8 million in-total for employee raises, but this 1.5% increase will only cost half that amount. This route was suggested multiple times by outgoing city manager Michael Ortega, who preferred a portion-distribution option because of the state flat tax that went into effect in 2021, which city budgets will especially feel beginning in the 2025-26 fiscal year, Ortega has said.
The unallotted $5.4 million will 鈥渂e left for consideration of additional employee compensation increases later in the year,鈥 Ortega said in a . The pay raises will not apply to elected officials, magistrates or election poll workers.
Sales tax
A placeholder of $40 million in revenues was included in the 鈥淕eneral Government鈥 department鈥檚 budget for this fiscal year, based on a potential ballot measure for a new city sales tax.
At their , mayor and council unanimously approved a special election for a proposed sales tax. Around that time, city manager Ortega made the case for Tucson officials to at least consider the city skip its role in RTA Next, the 20-year regional transportation plan that is set to go before voters in the spring of next year.
During that February meeting, Mayor Regina Romero said the tax would be used 鈥渢o fund community investments to promote the quality of life鈥 for Tucsonans. Specifics on such 鈥渃ommunity investments鈥 have yet to be provided, even after Arizona Attorney General Kris Mayes okayed a July 30 special election date for the tax in late-March.
Drop in state funding, future budgets
The 2024-2025 fiscal year is expected to receive nearly $30 million less in state-shared tax revenues than last fiscal year. Ortega says that funding was already about $27 million less than what the city received two years ago.
The 2024-2025 budget is balanced, both financially and 鈥渟tructurally,鈥 Ortega said on Tuesday. However, he said, revenue cuts from the state, due to its own budget deficit because of the flat tax are expected to the primary driver for what is forecast to be a $40 million operating deficit over the 2025-2026 and 2026-2027 fiscal years, combined.
鈥淚n order for us to balance the budget in (fiscal year 2026-2027), you鈥檒l have about a $40 million hole. That $40 million hole will equate to somewhere between (300-400) positions,鈥 Ortega said told the council in May. 鈥淭he reality is when you look at our budget, when we are so heavy, if you will, on the cost of staffing, there鈥檚 really not going to be a lot of places to cut back. That concerns me greatly.鈥
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