Sacramento could face a $40 million deficit for homeless shelter funding as early as next summer as it grapples with a surging unhoused population and calls from the public to expand shelter and housing options.
Though state funds covered the city’s $13.8 million homeless services funding gap this fiscal year, City Manager Howard Chan told the City Council in August it won’t be so easy to fill next year’s projected deficit.
“As early as July 1, that number jumps to $40 million that we don’t have funding set aside for — or any ideas for how we’re going to fill that gap,” Chan warned the council in August.
Chan said the city spends between $33 million and $40 million per year to maintain its existing 1,100 emergency shelter spaces, which are typically full on any given night. Those range from beds in traditional indoor shelters to dirt or asphalt lots where unhoused residents are allowed to camp or park their vehicle. The city pays for meals, security, case management and housing connection services at the sites.
Most have opened over the past five years with the help of state and federal money as Sacramento’s unhoused population has grown dramatically. That number reached nearly 9,300 people countywide, a 67% increase since 2019, according to a June report.
“We’re not going to be able to do this alone,” Chan told the council in August, adding that state funds could “make a dent” in the deficit.
Speaking at a forum last month, Sacramento City Council member Katie Valenzuela said the city’s expected shortfall is one reason to oppose Measure O on the November ballot. The measure would ban homeless encampments on public property but can only be enforced with the offer of available shelter space — space the city doesn’t currently have.
“If we add anything more, we’re not going to be able to afford it as a city,” Valenzuela told the crowd. “Then we are going to start talking about hard choices. Right, we’re going to start talking about ‘Do we cut the hotel programs? Do we cut other city services?”
Instead of requiring unhoused residents to move, as Measure O would do, Valenzuela said local government should help stabilize people where they are, provide them with comprehensive services and fund supportive homeless housing.
In contrast, Daniel Conway, who leads the Yes on Measure O campaign, said city leaders must reject “a status quo” that’s allowed encampments to grow across the city — and urgently find ways to shelter people.
“Our city leaders starting with the mayor and council and city manager need to prioritize the needs of this community,” said Conway, who heads a business-backed coalition that spearheaded Measure O, said in an interview last week. “And if homelessness is not something they see as a priority, then it’s disappointing and surprising given the overwhelming concerns that have continued to be expressed by the residents of Sacramento.”
Conway said Sacramento already has dedicated revenue to address homelessness through Measure U, a half cent sales tax passed in 2018. In addition, he noted the state has made a record amount of funding available for local governments to address the crisis.
“There’s really no excuse to let this situation in our community continue to deteriorate,” he said. “People are dying. People are freezing to death outside.”
In an email response to questions from CapRadio, Chan said the city would prioritize using state or federal dollars to close the funding gap for its existing shelters, not to create new ones.
City officials noted that Measure O, if passed, does not require Sacramento to open new homeless shelters unless it has a budget surplus of $5 million or more, something officials are not forecasting.
Last summer, the City Council passed a comprehensive siting plan with the goal of opening 20 homeless shelter sites, including outdoor shelters, across the city. Though a handful of sites opened, the plan has largely stalled due to unexpected costs, delays and community opposition, according to city officials.
In an interview with CapRadio this week, Sacramento Mayor Darrell Steinberg said Chan’s warnings about a homelessness budget shortfall are valid, noting “there is some potential for an economic downturn” that could further reduce funding.
He said the greatest hope for stabilizing the city’s homelessness budget lies in ongoing negotiations with county leaders to create a “partnership agreement.” If reached, Steinberg said the deal would ideally result in the county paying for mental health and addiction services both at city-funded shelters, as well as at area homeless encampments.
That potential deal is “the best chance we have to provide relief to thousands of additional people who are suffering and relief to our broader community,” Steinberg said.
The City Council in August amended Measure O to require a city-county partnership agreement be reached before the measure can go into effect, if it is approved by voters in November.
Steinberg supports Measure O but calls it “imperfect.” He added that negotiations with the county are going well and that he’s “cautiously optimistic” a deal will be reached.
Sacramento County Executive Ann Edwards agrees, her spokesperson Kim Nava said in an email. “She too is hopeful and cautiously optimistic that both sides will reach an agreement.”
“The discussions are going well,” Nava added, “and staff from both organizations understand the importance of cooperation and coordination to address homelessness.”
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