As Budget Gap Opens, Walnut Creek Keeps City Paychecks Unclaimed

WALNUT CREEK, CA — In a move to stop a developing deficit sink hole in Walnut Creek's budget from getting deeper, and taking more jobs down with it, empty desks at city hall will remain vacant.

Walnut Creek City Council voted Tuesday to leave one in ten city desks vacant —and paychecks unclaimed— to shield local services from a growing budget shortfall.

Facing a $6.3 million gap driven by a sudden drop in sales-tax revenue, officials are relying on a strategy that leaves one in ten city jobs unfilled but avoids cuts elsewhere.

Councilmembers unanimously backed a staff plan to keep a 10–11 percent vacancy rate citywide and, according to a staff report, save from tapping the general fund for salaries.

City officials blamed the gap on a slip in sales-tax revenues — particularly from auto and transportation businesses — after the California Department of Tax and Fee Administration changed reporting practices.

Administrative Services Director Kirsten LaCasse told councilmembers the city noticed the drop in fiscal year 2025. Sales tax from the autos and transportation sector fell 11 percent, a decline consultants attributed to the reporting change rather than reduced activity. The issue is still under state review and may affect revenue through at least 2027.

City officials estimated Walnut Creek will collect about $29.67 million in sales tax in the 2026 fiscal year, roughly $2.11 million below budget expectations, according to the city’s second-quarter financial report.

Budget pressures mount

The council’s move is part of wider efforts to rebalance a $6.33 million shortfall for fiscal years 2026 and 2027. To reduce spending, the city has already taken several steps, including:

• Eliminating 1.25 full-time positions
• Cutting hourly staffing and overtime
• Reducing operations and maintenance spending

These reductions are intended to save about $3.31 million. The city also tapped $3.02 million in short-term measures, including reserves, pension trust funds, and reduced general fund support for capital projects.

Despite the shortfall, the city expects the 2026 fiscal year to remain balanced, helped by salary savings from vacancies and lower operating costs.

Staff presented three options for addressing the future deficit, including maintaining the current 10–11 percent vacancy rate, 2 percent ongoing departmental cuts, and tapping more reserve funds.

City staff recommended the vacancy strategy to protect services while the city waits for clearer answers on the state tax change, a citywide fee study, and updates to the long-term financial forecast.

If the vacancy rate holds, departments would continue to deliver services with fewer employees, without immediate program cuts.

City Manager Dan Buckshi said Walnut Creek is not alone in grappling with the sales-tax shift. He said a dozen other cities with auto-dealer agreements also saw revenue changes as a result of the reporting adjustment by the state tax and fees authority imposed without an explanation.

It took "months and months" to decipher the report to understand if this was an error and that is why it took nearly a year to report the issue, Buckshi said. "It’s been extremely frustrating working with the state bureaucracy on this and I am really hopeful that our legislators can help untangle that bureaucracy for us.”

Mayor Kevin Wilk said the city has contacted state lawmakers for help. Walnut Creek sent a letter to Sen. Tim Grayson and Assemblymember Rebecca Bauer-Kahan urging them to examine the issue with the tax agency. The effort was received "very well" by state representatives, said Wilk.

Councilmember Cindy Darling asked whether the state might ultimately reverse the reporting change. LaCasse said the state has not made a final decision, leaving the city with the option to appeal the outcome once the review concludes.

For now, councilmembers said leaving positions vacant is the least disruptive way to protect services while waiting for clarity from Sacramento. But they did not clarify how the decision would directly affect residents.