Oakland's Rainy Day Fund Is Empty. Its Debts Hit $2.76B
Summary
Oakland's Vital Services Stabilization Fund -- the reserve the city's own fiscal policy requires be kept at 15% of General Purpose Fund revenue, for use only in a downturn -- has fallen from $10.5 million to zero over two fiscal years, and the newly adopted FY2025-27 budget formally suspends the requirement to refill it rather than meet it. At the same time, Oakland's combined long-term obligations -- pension shortfalls, retiree health care, negative fund balances, and unpaid employee leave -- total $2.76 billion, according to the city's own October 2025 budget book. The city closed its own projected $137.9 million gap for this fiscal year by cutting General Purpose Fund spending to $791.3 million, $23.2 million below what it actually spent two years earlier, even as pension and insurance costs kept climbing.
The VSSF is what a city holds specifically so it does not have to cut services or borrow the moment revenue drops -- the fiscal equivalent of a household's emergency savings account, sized as a share of the money the city actually collects. Oakland's Consolidated Fiscal Policy (CFP) sets that share at 15% of General Purpose Fund revenue and specifies how it gets refilled: at least a quarter of any 'excess' real estate transfer tax revenue -- collected when property changes hands -- is supposed to flow into the VSSF each year until it reaches target. The adopted budget explains why that mechanism produced nothing this cycle: 'due to a reduction in revenue generated from the RETT, there is no excess RETT projected.' With the automatic refill mechanism producing zero and the underlying policy itself suspended, the fund has no path back to its target under the current budget.
One reserve met its target. The other one is the one that got suspended.
Oakland's other required reserve tells a different story. The General Purpose Fund Emergency Reserve -- a stricter, narrower account meant only for 'unanticipated and insurmountable events' -- needed $59.08 million to hit its 7.5%-of-appropriations target for fiscal year 2025-26. The city's own budget book puts the estimated balance at $62.8 million, about $3.7 million above the requirement, with no withdrawals budgeted from it. So the harder of Oakland's two reserve tests, the one covering true emergencies, is passed. The softer one -- the fund meant to cushion an ordinary downturn before it turns into an emergency -- is the one the city chose to stop funding.
View data as table
| FY2023-24 (actual) | 10,485,706 | the fund's last closed-year balance |
|---|---|---|
| FY2024-25 (midcycle) | 0 | projected to close at zero |
| FY2025-26 (adopted) | 0 | budget suspends the refill requirement |
| FY2026-27 (adopted) | 0 | still zero in the second budget year |
The reserves are the smallest piece of what Oakland owes
The reserve shortfall sits inside a much larger picture. The same budget book's Overview of Long-Term Liabilities totals $2.76 billion across six categories: $1.924 billion in CalPERS pension shortfalls across the city's Safety Plan (65.8% funded) and Miscellaneous Plan (73.0% funded), as of the June 30, 2025 actuarial reporting date; $549 million in unfunded retiree health-care obligations (OPEB); $118 million owed by the closed, legacy Police and Fire Retirement System, which alone requires a $34.8 million contribution this fiscal year; $102.1 million sitting in funds that are already in the red, $1 million of which the city has no plan to repay at all; and $69 million in accrued vacation and sick leave the city's own workforce has banked but not yet used or been paid out. None of these come due tomorrow -- pension and retiree-health shortfalls are amortized over decades under actuarial schedules -- but together they represent money Oakland has already promised and has not yet set aside.
View data as table
| CalPERS Safety Plan | 1,000,000,000 | 65.8% funded, as of June 30, 2025 |
|---|---|---|
| CalPERS Miscellaneous Plan | 924,000,000 | 73.0% funded, as of June 30, 2025 |
| Retiree health (OPEB) | 549,000,000 | as of June 30, 2024 |
| Police & Fire Retirement System | 118,000,000 | closed legacy plan; $34.8M FY2024-25 contribution |
| Negative fund balances | 102,100,000 | $1.0M of it has no repayment plan at all |
| Accrued vacation & sick leave | 69,000,000 | owed to the city's own workforce |
Bond-rating agencies had already flagged the broader trend: at the end of 2024, all three major ratings firms took negative action on Oakland's debt in the same stretch -- Fitch downgraded the city two notches, Moody's one notch, and S&P placed its rating on Credit Watch Negative -- a signal that borrowing to cover any of this later will cost the city more.
How the budget got 'balanced' -- and what it cost elsewhere
Under Oakland's City Charter, the Council must adopt a balanced budget -- one where planned spending cannot exceed planned revenue -- every two years by June 30. Before the cuts that made this budget balance on paper, city finance staff projected the General Purpose Fund would run a $137.9 million deficit in fiscal year 2025-26 and a $126.8 million deficit the year after, under a 'baseline' scenario with no corrective action, according to a May 2025 Finance Department presentation to the Council. The adopted budget closes that gap primarily by cutting: General Purpose Fund spending for fiscal year 2025-26 comes in at $791.3 million, $23.2 million below what the city actually spent two years prior -- a real reduction, not just a slower rate of growth, achieved despite what the budget itself calls 'substantial growth in costs due to inflation, insurance, medical and pension' obligations.
The same fiscal strain shows up in two places voters specifically tried to insulate from budget cuts. Oakland's Democracy Dollars program -- a public campaign-financing system approved by ballot measure -- has a minimum funding set-aside in the City Charter; the adopted budget states plainly that 'due to the severe budgetary deficits in the City's General Purpose Fund, the 2025-27 Adopted Budget does not meet the minimum budget set-aside' for it. And the Office of the City Auditor -- the independent body charged with catching exactly this kind of problem -- has its own charter-mandated floor of 14 full-time staff, set by a 2022 ballot measure; the adopted budget funds only 10 in the first year and 13 in the second, invoking the same 'extreme fiscal necessity' finding that let the city bypass both requirements.
View data as table
| Emergency Reserve -- required (7.5%) | 59,080,000 | 7.5% of FY2025-26 GPF appropriations |
|---|---|---|
| Emergency Reserve -- actual | 62,800,000 | $3.7M above the requirement |
| Rainy Day Fund -- required (15%, May 2025 target) | 121,000,000 | 15% of GPF revenue, as stated in May 2025 |
| Rainy Day Fund -- actual | 0 | per the adopted budget's own FY2025-26 fund-balance table |
- Oakland's Vital Services Stabilization (rainy day) Fund -- required by city policy to hold 15% of General Purpose Fund revenue -- fell from $10,485,706 at the close of FY2023-24 to a projected $0 for FY2024-25 through FY2026-27; the adopted budget formally suspends the policy requiring it be refilled rather than meeting it.
- The city's other required reserve, the General Purpose Fund Emergency Reserve, is funded slightly above its own target: an estimated $62.8 million against a $59.08 million requirement for FY2025-26.
- Oakland's combined long-term liabilities total $2.76 billion across six categories: $1.924 billion in CalPERS pension shortfalls, $549 million in retiree health-care obligations, $118 million in closed-plan pension debt, $102.1 million in funds already in deficit, and $69 million in unpaid employee leave.
- All three major bond-rating agencies took negative rating action on Oakland's debt at the end of 2024 -- Fitch downgraded two notches, Moody's one notch, and S&P placed the city on Credit Watch Negative.
- The adopted budget closes a staff-projected $137.9 million FY2025-26 deficit mainly through spending cuts -- $791.3 million in General Purpose Fund spending, $23.2 million below actual FY2023-24 levels -- and invokes an 'extreme fiscal necessity' finding to underfund both the charter-mandated Democracy Dollars public-financing set-aside and the City Auditor's own minimum staffing requirement.
Figures in this piece are drawn from two City of Oakland Finance Department documents: the October 2025 FY2025-27 Adopted Budget Book (the enacted budget) and a May 2025 staff presentation to the Council (a pre-adoption forecast). Both are official city documents, not an independent audit -- Oakland's own reserve and liability figures, as the city itself reports them. The $2.76 billion long-term liability total is this piece's own sum of six distinct categories the city lists separately; it is not one debt coming due at once, and pension and retiree-health shortfalls are paid down over decades under actuarial funding schedules, not all at once. The $121.0 million VSSF target cited for comparison is the figure city staff stated in May 2025; the adopted budget's own later fund-balance table, not restated as a dollar target, shows the account at zero. A reserve or liability figure changing between these two snapshots reflects the normal budget-adoption cycle -- the May presentation is a forecast staff made before the Council acted; the October figures are what the Council actually adopted.
Sources(2) ▾
- City of Oakland — Finance Department, City of Oakland — FY2025-27 Adopted Budget Book (full) (2025-10-10) — The City of Oakland's official, City Council-adopted biennial budget for fiscal years 2025-26 and 2026-27, adopted after a multi-month process addressing what the Mayor's own budget message calls the city's 'years long cycle of financial instability.' Contains the city's Long-Term Liabilities summary table, its Reserve Funds compliance section (Emergency Reserve and Vital Services Stabilization Fund), fund-balance projections by fund, and charter-compliance findings including the suspended Democracy Dollars set-aside and reduced City Auditor staffing. oaklandca.gov · original document
- City of Oakland — Finance Department, City of Oakland — Finance 2025 Deep Dive Presentation (2025-05-08) — A City of Oakland Finance Department staff presentation delivered roughly five months before the FY2025-27 budget was adopted, showing the pre-cuts 'baseline' revenue-expenditure gap for FY2025-26 and FY2026-27, the reserve-fund shortfalls as they stood at that point, and a June 30, 2024 actuarial snapshot of the city's three pension plans. Used here only for figures that predate, and are clearly dated against, the October 2025 adopted budget -- to show the size of the gap the adopted budget closed and the pension trend over the following year. oaklandca.gov · original document
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Oakland keeps two legally required rainy-day accounts. One of them is empty. The city's FY2025-27 Adopted Budget Book⧉, the City Council-approved spending plan published October 10, 2025, shows the Vital Services Stabilization Fund (VSSF) -- Oakland's designated reserve for economic downturns, which its own Consolidated Fiscal Policy requires be funded to 15% of General Purpose Fund revenue -- projected at exactly $0 for the current fiscal year and the one after it. Two years earlier, at the close of fiscal year 2023-24, that same fund held $10,485,706. Rather than rebuild it, the adopted budget takes the more direct route: it "temporarily suspends the Vital Services Stabilization Fund (VSSF) policy and does not make additional contributions to the fund."