Tucson City Council approves $2.4B budget

The city council unanimously approved a $2.4 billion fiscal budget Tuesday night that includes pay raises for employees and added funding for “critical needs” in lieu of a sales tax proposal rejected by Tucson voters earlier this year.

The budget includes $23.6 million for employee raises, nearly double what the city added to its budget last year, said Tucson City Manager Tim Thomure.

The city’s fiscal year begins July 1.

Pay raises

A 1.5% raise will be effective July 13 for all employees hired prior to June 29, according to Thomure’s June 3 memo. Pay raises in the upcoming fiscal year won’t be tied to “individual employee performance,” but in the 2026-2027 fiscal year, “employees will need to meet or exceed performance standards to receive the pay increase” that will be scheduled in that fiscal year.

Health insurance costs, for both employees and retirees, are budgeted for an additional $4.83 million, about 8.5% more than the year prior.

The largest expenditure expected to come out of the city’s general fund is for “Total Estimated Personnel Compensation” costs, at about $507 million, which includes wages, retirement costs, healthcare, and “other benefits” for about 3,500 full-time employees.

Prop. 414

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The budget includes a $15 million investment into a “small group of supplemental requests and reallocations” aligned with areas originally included in Proposition 414, the half-cent sales tax that city voters rejected in March.

The rejected proposition would have generated in an estimated $80 million annually, the majority of which would have been spent on police and fire services and equipment.

Budget forecast woes

Tucson Mayor Regina Romero said the main challenges in forming this budget were impacts on state-shared revenue, noting the state flat tax enacted in 2021, and the “continual onslaught” of federal economic policies. The adopted Tuesday represents the second consecutive fiscal year of declining state-shared revenue.

The city faced a projected $27 million budget deficit when it started working on next year’s budget.

Thomure, in the recommended budget he originally presented in April, said sales tax collections through the end of December this year were up over 7% compared through the same time the year prior.But through the end of March, sales tax collections only grew 1.1% when compared to the same time the year prior, a “sharp decline” Thomure said is “unprecedented in recent years.”

Thomure said in his April 22 recommended budget that while U.S. economic strengths included unemployment below 4% and slowing rates of inflation at that time, “more recent on-again, off-again tariff and trade policies, declining consumer confidence, record-high stock market volatility, and overall housing market uncertainty make this a particularly challenging time to prepare an annual spending plan and five-year forecast.”

“Most recently, we have seen declining collections in local revenues (mostly sales taxes, use taxes, and hospitality revenues) that have resulted in lower revenue projections, particularly in the General Fund,” he said. “Monitoring for and reacting to a potential recession and tariff-related inflation are top concerns and a priority for us in the coming weeks and months.”