Late last year, after 43 long days, Congress passed a temporary spending measure to end the longest federal government shutdown in history. Congress’ failure to agree on a spending plan before the deadline, and the shutdown it caused, had immediate and real-life consequences.

Federal workers were furloughed or worked without pay and left anxiously wondering how they would cover rent or mortgage payments. Critical federal assistance programs that people rely on, like the Supplemental Nutrition Assistance Program, were delayed, reduced, or disrupted. Overnight, 5.5 million Californians, including 3.5 million seniors and children, worried whether they would be able to feed their families. 

The reality is that Congress rarely follows its own appropriations process. In the nearly five decades under the current budgeting system, Congress has completed its appropriations process on time only four times. Instead, Congress relies on temporary spending measures and omnibus appropriations packages to keep the federal government open. The current temporary spending measure runs through the end of January. If history is any guide, cities can expect more threats of a shutdown, another temporary spending measure, or another actual shutdown in 2026 — all of which will undoubtedly impact families and disrupt local communities.  

The state’s fiscal forecast is also sobering. Although enthusiasm around artificial intelligence and gains in the stock market have driven strong income tax collections, the Legislative Analyst’s Office (LAO) estimates the state is facing an $18 billion budget deficit. A flat economy with few new payroll jobs and weak consumer sentiment, along with uncertainty around tariffs and federal policy, is dampening sales and corporate tax revenues. In its analysis, the LAO encouraged lawmakers to address the shortfall through a combination of spending reductions and/or revenue increases. 

Local governments are confronting fiscal headwinds driven by that same confluence of factors. In its recently released 2025 City Fiscal Conditions Report, the National League of Cities reported that only 45% of municipal finance officers reported feeling optimism about meeting their jurisdiction’s financial needs in the next fiscal year, a notable drop from 64% from last year. 

While cities don’t control state and federal budgets, they are pivoting to meet their own fiscal challenges with pragmatism, resilience, and creativity. “We won’t let the gridlock in D.C. stop us from doing the right thing here at home,” San Diego Mayor Todd Gloria said in a post on Instagram during the federal shutdown last fall. City leaders are echoing this sentiment in words and actions every day.      

As cities navigate fiscal uncertainty, Cal Cities remains vigilant in protecting local revenue streams and authority — just like we’ve done before. After years of state raids on local revenue streams, Cal Cities in 2004 led the charge alongside counties and special districts to protect these funds and strengthen local control with Proposition 1A, which passed by an overwhelming margin of 83.7%. 

In 2024, Cal Cities again led the way to protect local revenues and authority by opposing the Taxpayer Protection and Accountability Act, an existential threat to local communities’ ability to raise revenues for essential local services. Alongside a broad and powerful group of local governments and labor, we supported the legal challenge to the measure’s constitutionality. The California Supreme Court agreed with us, deeming it an unconstitutional revision to the state’s constitution and striking it from the ballot.

Our advocacy to protect local revenues and authority doesn’t end at the ballot box or in the courts. In the Legislature, Cal Cities advances laws to strengthen local revenue streams and pushes back against costly, unfunded state mandates. Last year, Cal Cities muscled through a well-funded opposition campaign to get a new law enacted that makes it easier for cities to collect the local short-term rental taxes they are owed.

We will also be reengaging with state policymakers in the new year to improve a major law that governs local government meeting requirements. While Cal Cities applauds the effort to improve transparency and public engagement, there are legitimate concerns about the costly mandates for local governments embedded in the new law. 

At the federal level, Cal Cities will remain a strong partner with the National League of Cities to protect vital federal funding streams, like the Community Development Block Grant Program, HOME Investment Partnerships Program, and the Federal Emergency Management Agency grants, that cities rely upon to support essential local services and recover from disasters. 

No matter the fiscal challenges ahead in 2026, I continue to be confident in and inspired by the local leaders who continue to rise to the occasion with courage, creativity, pragmatism, and a deep passion for serving their communities.

As we’ve done every year since 1898, Cal Cities is eager to leverage the collective power of our united voices in Sacramento and Washington to protect and promote the common interests of cities on behalf of the millions of Californians who call our cities home.