Keeping Employees Informed on FY 2025-26 Budget Pressures

The message below was shared with City of Portland employees to provide early context on emerging Fiscal Year 2025-26 budget pressures, and the known next steps for addressing them. 

Date: Jan. 7, 2026
To: City Employees
From: Raymond Lee, City Administrator

City Employees,

As I begin my role as City Administrator, I had hoped my first messages to you would be on a more positive note, but it's important to me that I share news as I have it: transparency is not just one of our City's values, it's one of my own. So, I am writing today to draw attention to emerging budget pressures for Fiscal Year 2025-26.  

I recognize this is not an easy message to receive, and I want to acknowledge the concern this news may raise. As I was able to share during my employee meet and greet, my focus as your City Administrator is to support our people, maintain organizational health, be responsive and create a solutions-focused culture. These values will guide how we navigate challenges ahead and I want to navigate them together. 

City budget and finance staff have identified that revenues in the FY 2025-26 budget are coming in lower than previously forecasted, and expenditure savings are not tracking as expected. Preliminary analysis suggests a General Fund shortfall of up to $22.5–$26.5 million, driven primarily by:

• Revenue reductions of approximately $13.6 million;
• Lower than anticipated savings from vacancies, projected at $8–$10 million; and
• Lower-than-expected savings from core functional realignment processes, estimated at $1–$3 million.

Similar to adjustments Council addressed during the Fall Technical Adjustment Ordinance in November for FY 2024-25, adjustments to the current year's budget may be needed to maintain balance.  

At this stage, no decisions have been made, and analysis is ongoing. We have already identified likely possibilities to address roughly half of this gap with solutions that do not require additional current-year cuts. Our goal is to develop a comprehensive plan that balances short-term actions with long-term fiscal stability.  

Councilors were briefed yesterday about what we know to date and budget staff are continuing to refine an analysis in preparation for a discussion at a Council work session later this month. Tomorrow, I will meet with bureau leadership to discuss the issue in more detail and review specific action items to support the next phase of work. As this process unfolds, I am committed to keeping employees informed with clear and timely updates. 

I truly value the contributions and professionalism each of you bring to this organization, and I do not take lightly the responsibility we have to our employees. My focus is on addressing these constraints in a way that is measured, responsible and centered on sustaining our people and our organization for the long term. 

Thank you for your commitment to the City, your teams and the community we serve. I will continue to provide updates as more information becomes available. 

Respectfully,

Raymond C. Lee III (he/him)
City Administrator
City of Portland