San Diego Mayor Todd Gloria released a $6.4 billion proposed budget last week that would close a $146 million deficit by reducing funding for arts, libraries and recreation centers. The plan prioritizes public safety, homelessness, road repair and traffic safety while reducing funding for other services.

"It makes the tough decisions now—including targeted reductions to staffing and support functions—to protect the services San Diegans rely on and keep the city on solid footing," Gloria said. Arts and culture advocates protested that the plan would eliminate nearly all arts funding and curtail hours and programs at libraries, parks and recreation centers.

"When we cut the things that make San Diego or any city great, the things that bring us together as a community… I shudder to think what we end up with," said Patrick Stewart, CEO of the San Diego Library Foundation.

Growth of local sales, property and hotel tax revenues has been minimal. Hotel tax revenue is projected to grow by 1.5 percent this year, down from 6 percent last year. Property tax growth is expected to slow as the number of home sales drops, and the region has a deep housing shortage, limited inventory and high mortgage rates. Inflation has reduced consumer spending, tourism and home sales, which are key sources of local tax revenue.

"Costs are going up faster than our revenue growth," said Rolando Charvel, chief financial officer for San Diego. Costs of car parts for city vehicle fleets and asphalt for street repair have increased, making maintenance and operations more expensive.

The mayor's office estimates it would cost $118 to $120 million more to run city services at the same level as last year, plus another $26 million for legal mandates, settlements, FEMA accreditation and other fixed expenses. The city also has a backlog of maintenance for sidewalks and other facilities and must meet state mandates to upgrade its stormwater system. Federal cuts to housing assistance and inconsistent state funding for homelessness response have increased costs.

In 2024, San Diego voters rejected a one cent sales tax by less than one percentage point. A report by the San Diego Taxpayers Association stated that the city's workforce grew about four times faster than its population over the last 15 years, and that middle-management positions increased by 461%, from 70 to 393. City officials said many middle-management positions were funded by specific grants and some have since been reduced.

A November report by the National League of Cities stated that 55% of cities found it harder to balance their budgets in 2025 than the previous year, compared with 11% in 2022.