Jackie Krentzman is a Bay Area-based writer and editor. 

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Editor’s Note: This story was written several weeks before the October 2025 federal government shutdown. 

Like a lot of city officials, Moreno Valley City Manager Brian Mohan is worried about the impact deep federal cuts will have on his city of 208,000 in Riverside County. In recent months, the Trump administration has slashed funding to cities and states, warning that almost every federal funding stream is under review.

“The uncertainty keeps me up at night, wondering how the cuts and proposed cuts will affect the city’s operations, in particular public safety,” he says.

Fortunately, many cities have healthy reserves and have been preparing for worst-case scenarios. Moreno Valley diversified its revenue streams over the past decade to reduce its reliance on federal and state funds. Unfortunately, the financial pressures cities are now facing are myriad.

“These are unprecedented times and giving local governments new challenges they have never faced before,” says Emily Brock, the director of the Government Finance Officers Association’s (GFOA) Federal Liaison Center.

In some cases, the federal government has revoked promised funds. But many cities have already signed third-party contracts for services — services they now can’t pay for. Some are worried about sweeping cuts to SNAP, school lunch programs, and other safety net programs.

“While it isn’t the city’s responsibility to provide food for school-age children while they are at school, how does that new level of food insecurity impact our families?” says Mohan. “How will students learn if they are hungry? The city and its partners will need to step in.”

But actions by the federal government may trickle down even further. Moreno Valley stands to lose roughly $3 million a year in federal housing grants. A rise in prices (notably building materials) driven by new tariffs, as well as a corresponding loss in sales tax revenue and dampened consumer spending, could compound those losses.

Perhaps the greatest harm will be to health care, says Chris Hoene, the executive director of the California Budget & Policy Center. A Kaiser Family Foundation study estimates that California faces a $150 billion decrease in federal allocations over the next 10 years. A University of California, Berkeley study found that millions of Californians will lose Medi-Cal insurance or have it severely restricted as a result.

“I wish I didn’t have to say this, but it’s going to be hard for cities to expect much of the state, which currently provides about 3% of cities’ revenue streams,” Hoehne says. “In particular, one-time pots of funding like for housing and for homelessness are vulnerable and may become places where the state will retract its commitments because it’s going to have to shift its priorities to immediate essentials like health care.”

But food and housing aren’t the only things at stake. California cities receive billions of dollars a year for transportation and infrastructure from the state — more than any other category — often in the form of pass-through funding. But as the state shifts to meet more immediate needs like health care and food, cities may be left out in the cold.

“We have two freeways that butt up against our jurisdiction, so federal cuts to transportation funding and resources for the state mean we would have to take up some of the burden for transportation infrastructure,” Mohan says.

Dennis Kauffman, a Roseville assistant city manager and chief financial officer, says that withdrawn solar tax credits may affect the city’s ability to procure and build renewable energy. “Changes in those federal incentives could greatly affect the economics of planning for our utility infrastructure,” he says.

Other cities worry that projects already underway will stall out. Emeryville, a small city nestled between Oakland and Berkeley, has been planning for this moment for a long time.

“When we began hearing a year or 18 months ago, the [campaign] messaging from the current administration about cities and states needing to reduce their reliance on federal funding and threatening cuts, we understood that every city in California was going to be on that list,” says LaTanya Bellow, Emeryville city manager.

Emeryville immediately realized that a $32 million street project funded in part by the federal government would be the most likely target. The project would make a busy intersection safer and more efficient for pedestrians and bicyclists while reducing travel time for buses. The city enlisted Congresswoman Lateefah Simon, a former Emeryville resident, to help protect the allocation secured by former Congresswomen Barbara Lee. Simon is also working to secure more funding for this project.

What can cities do?

While cities can’t stop these cuts completely, they can take steps to mitigate them. The first step is to stay informed. “It’s like the early days of the pandemic when we were paying attention every day to the news, because circumstances were changing regularly,” says Kauffman. “Now, change is arriving even faster and more frequently.” 

GFOA’s Brock advises cities to comb through their revenue and expenses more frequently. “Make sure you are aware of every revenue stream,” she says. “Track your tax revenue losses. For example, if you are reliant on hospitality, a bill that calls for no tax on tips or overtime can have a huge impact on your revenue. Next, document your policies, practices, and letters of [grant] awards. As a city, you will likely be managing several third-party contracts to deliver services and goods, such as from the state and highway contractors. You don’t want to be stuck flat-footed.”

Cities will also need to proactively explore new revenue streams. Emeryville audited business licenses to ensure that businesses are paying their fair share and is looking at ways to supplement its budget, such as a sales tax ballot initiative.

“We are looking at every way we can get more juice for the squeeze,” says Bellow.

Some cities have already brought tax measures to the ballot. Last November, Moreno Valley voters approved a one-cent sales tax increase, adding $30 million to the city’s coffers.  

Cities can also band together to leverage economies of scale and provide otherwise cost-prohibitive services. Emeryville has worked with Berkeley and Oakland for years on animal control and homelessness services. The trio is exploring expanding those partnerships to cover other services, as well as forming a new alliance with other Alameda County cities.

“We all don’t need to do the lift independently,” says Bellow. “We are members of the Alameda County City Managers Association, and we are saying to each other, ‘Hey, we both are running essentially the same program. Can we combine them?’”

Moreno Valley is also meeting more often with other cities in the region. It is partnering with the International City/County Management Association, the Western Riverside Regional Council of Governments, and the Southern California Association of Governments to lobby for state and federal resources.

Hoene says cities might have to break some unwritten rules, such as stockpiling large reserves. “A lot of city leaders like having a high reserve fund balance, which is often a kind of badge of honor for saying, ‘Look how well we’ve managed our finances!’” he says. “But they’re the whole point of those reserve funds is to use them when you are in crisis.”

“Our reserve policies are designed to maintain a healthy level of reserves for our General Fund and for our utilities to buffer against volatility, like we’re seeing now, and to make sure we can maintain services during economic downturns,” says Roseville’s Kauffman. “But reserves aren’t meant to be untouchable.”

“Cities will do whatever they can,” says Brock. “But in the end, we are all just going to have to roll with the punches and adapt.”