Cerritos Adopts $152 Million Budget, Taps $10.6 Million in Reserves as Fiscal Pressures Mount

Cerritos Adopts $152 Million Budget, Taps $10.6 Million in Reserves as Fiscal Pressures Mount

General Fund reserves could be depleted within six years as officials approve service reductions, facility closures and deferred infrastructure projects

By Brian Hews

CERRITOS — The Cerritos City Council unanimously adopted a $152 million Fiscal Year 2026-27 budget Monday that relies on a $10.6 million draw from General Fund reserves to balance spending, while warning that reserves could be depleted within six years if new revenues are not generated or additional service reductions are not made.

The adopted budget, which takes effect July 1, follows months of public workshops and community meetings examining the city’s increasingly challenging financial outlook.

For decades, Cerritos enjoyed a reputation as one of Southern California’s most financially stable cities, supported by strong retail activity, automobile sales and redevelopment-era revenues. City officials now acknowledge those traditional revenue sources are no longer keeping pace with rising operating costs, infrastructure needs and inflation.

“We also acknowledge that balancing our budget by transferring millions of dollars from our General Fund reserves is not sustainable,” Mayor Lynda Johnson said following the council’s vote. “My City Council colleagues and I remain committed to pursuing cost-effective budgeting, efficient practices, and revenue-generating strategies to improve our future fiscal position.”

City forecasts show that, absent new revenues and additional expenditure reductions, General Fund reserves could be exhausted within six years. Officials cautioned that reserves could decline even faster depending on the outcome of a pending initiative seeking to repeal recently adopted water and sewer rates. The city is also preparing for the end of annual payments associated with the former Cerritos Redevelopment Agency loan, eliminating another significant revenue source beginning in Fiscal Year 2028-29.

According to the budget report, overall revenue growth has remained relatively flat during the past four years. Fourth-quarter sales tax receipts declined 2.2 percent year over year, largely because of slowing automobile sales.

The trend is significant because sales tax remains the city’s largest recurring revenue source, accounting for roughly one-third of annual revenues.

While revenues have slowed, expenditures continue to rise.

Operating expenditures increased by approximately $2.7 million while capital project spending increased by approximately $8.6 million. Much of the increase was attributed to the emergency failure of the city’s C-4 water well and the resulting need to purchase imported water while repairs were completed.

“We cannot sustain the programs, services, and facilities residents have enjoyed for decades,” staff wrote.

The adopted budget includes a limited hiring freeze, deferred infrastructure and maintenance projects, reduced operating hours at several city facilities, and continued service reductions. Despite those cuts, the final budget deficit increased after the council delayed the next scheduled water and sewer rate increase until July 2027.

The city continues to face more than $225 million in long-term infrastructure needs while acknowledging that relying on reserve funds is not a sustainable long-term strategy.

Contact Brian Hews at editor or follow @cerritosnews.bsky.social.