Finance Committee Mid-Year Budget Review - January 15, 2026

The Finance Committee convened on January 15, 2026, to conduct a mid-year budget review, examine the monthly revenue and expenditure reports, and discuss reserve fund adjustments. Budget Manager Kim Kaufman presented the findings, highlighting fiscal variances from the FY25 audit, the impact of stalled capital projects, escalating health insurance costs, and the stagnation of sales tax revenue compared to pre-2020 growth rates. Council members expressed strong positions regarding contract fairness for School Resource Officers (SROs), the sustainability of current healthcare cost trajectories, and the need for careful capital management.

Consent Calendar

• Review and discussion of the monthly revenue and expenditure reports for December (covering October–December FY25-26). No formal motions were taken, as the committee reviewed the data to inform ongoing budget discussions.

Public Comments & Testimony

• No formal public testimony or comments from the general public were recorded during this meeting transcript.

Discussion Items

• General Fund Fiscal Status and Capital Restrictions:

  • Budget Manager Kaufman explained that FY25 ended with a fund balance of $11.6 million, approximately $400,000 less than the $12 million budgeted, largely due to unliquidated purchase orders (encumbrances) totaling $3.5 million.
  • Councilmember (implied) expressed concern regarding the rigidity of the voter-approved seven-tenths of a percent sales tax earmark for capital projects ($18 million annually), noting it creates a "hard string" that limits operational flexibility when new opportunities arise.
  • The committee agreed that while sales tax revenue has plateaued, the 25% revenue growth seen between FY2019–FY2023 is unsustainable, and future growth is attributed to population increases rather than per-capita retail shifts.

• Public Safety Sales Tax (PSST) Fund & SRO Contract:

  • PSST expenses were lower than budgeted ($2.6M budgeted vs. $212k actual subsidy) due to unused purchase orders, resulting in a fiscal year-end balance of $54,145.
  • Councilmember expressed strong opposition to the current SRO reimbursement contract with Norman Public Schools, citing a potential $2.2 million discrepancy between the fully funded cost of the program (including overtime) and the actual reimbursement received.
  • Councilmember positioned the current contract as unfair compared to the Cleveland County agreement, which prohibits overtime and utilizes less experienced officers yet costs significantly less. Councilmember argued that fully trained officers are being overcompensated in the current arrangement while the school district pays less.
  • Staff indicated that overtime management has improved via active management, but the major and chief acknowledged the pressure of concurrent high school football games driving overtime costs.

• Health Insurance and Risk Management:

  • The Risk Management Fund is in a deficit of $804,445 for the first half of FY26 due to higher-than-anticipated health claims. Kaufman noted that while prescription drug costs are rising, hospitalization and doctor visit costs are decreasing in metro comparisons.
  • Councilmember expressed skepticism about the sustainability of the current healthcare system, acknowledging that some employees incur half a million dollars in annual prescription costs, which is critical for life or death outcomes but fiscally difficult to sustain.
  • Staff confirmed that the city is self-insured with a stop-loss cap of $250,000 per person (with a total cap of $5 million), and that the cost of stop-loss premiums is increasing.

• Park and Rec / Room Tax Fund:

  • Parks Department has a negative reserve in FY27, meaning no new capital appropriations are projected for the upcoming fiscal year under current room tax rates.

• Public Transportation / Micro-Transit:

  • The Public Transportation fund (Fund 27) currently requires a $39,000 subsidy. If a $665,000 micro-transit program (added in FY26) is not renewed, the fund projects a surplus of $16,000 in FY27. Council must decide whether to fund micro-transit in FY27 entirely from the General Fund.
  • Councilmember expressed reluctance to support a request from a commissioner to change downtown courthouse parking to timed parking (hourly) rather than single-day, noting that parking is available in other areas, though acknowledged the revenue potential.

• Capital Fund Management:

  • The Capital Fund holds a healthy balance of $70 million, largely tied to specific bond projects and reserves for existing obligations, leaving $0 available for new projects.
  • Staff explained that the $4.7 million annual general fund capital outlay is typically fully consumed within the fiscal year by vehicle and computer replacements, with most other requests denied due to rising costs (e.g., fire trucks doubling in price over five years).

• Norman Forward Fund:

  • The fund is projected to have a $7.7 million balance in FY26, growing to $22 million by FY2031 if no new projects are identified.
  • Council discussed utilizing this surplus for approved but unfunded projects, such as the River Park project, gymnasium expansion at the senior center, turf fields at Griffin, and potential upgrades to Reeves Park.

Key Outcomes

• Mid-Year Budget Review Adopted in Principle: The committee accepted the staff recommendation to freeze fiscal year 2027 expenditures at current levels (rollover budget) unless significant variances occur. This strategy aims to restore the General Fund balance to a healthier level without entering deficit.
• Reserve Fund Decision (Rainy Day): The committee deferred a decision on depositing the $463,021 surplus into the Rainy Day Fund. Staff recommended leaving the funds in the General Fund, as the current balance ($5.32 million) already exceeds the $636,058 minimum requirement, preserving flexibility for future emergencies.
• PSST Fund Sustainability: The PSST fund is projected to require a $336,000 subsidy from the General Fund in FY27 to remain in the black, with future years projected to require less as tax revenue grows and expenses stabilize.
• Rate Increase Considerations: Wastewater rates are identified as a necessary area for a potential rate increase, likely to be brought to council for voter consideration in November 2026, to maintain the 125% debt coverage ratio for bondholders.
• Administrative Directives: Staff was directed to reapproach Norman Regional regarding a potential pharmacy partnership for employee prescriptions and to prepare a report analyzing on-demand parking revenue and enforcement costs for the Finance Committee.
• Meeting Adjourned: The meeting concluded with the committee adjourned after reviewing the monthly reports and acknowledging the staff's performance in staying within budget.