Finance & Management Committee
September 30, 2025
AGENDA REPORT
TO: Jestin D. Johnson FROM: Jan Mazyck
City Administrator Interim Director of Finance
SUBJECT: Appropriations Limits for FY 2025-26
DATE: September 24, 2025
City Administrator Approval Date:
RECOMMENDATION
Staff Recommends That The City Council Adopt A Resolution Establishing An Appropriations Limit For Fiscal Year 2025-26 Pursuant To Article XIIIB Of T he California Constitution.
EXECUTIVE SUMMARY
California Government Code section 7910(a) requires the governing body of each local jurisdiction to establish, by resolution, its appropriations limit for the fiscal year pursuant to Article XIIIB of the California Constitution. Approval of this proposed resolution will bring the City of Oakland (City) into compliance with Government Code section 7910(a).
A government entity cannot appropriate the proceeds of taxes it receives in excess of the Appropriations Limit during any fiscal year. The City’s Appropriations Limit for Fiscal Year (FY) 2025-26 is $1,210,099,371. The FY 2025-26 Adopted Budget appropriates $1,023,451,912 in proceeds of taxes , inclusive of $40,900,000 in state identified subventions , which is $186,647,459 under the appropriations limit.
BACKGROUND / LEGISLATIVE HISTORY
California Proposition 4 (November 1979) established Article XIIIB of the California Constitution, which governs limitations on government appropriations. Effective July 1, 1980, it created an upper limit on the annual amount of funds that can be appropriated by the State and local governments. The appropriations limit is sometimes referred to as the “Gann limit,” after Paul Gann, one of the proposition’s authors.
Article XIIIB, Section 1 of the California Constitution states that the annual appropriations limit of “…each local government shall not exceed the appropriations limit of the entity of government for the prior year adjusted for the change in the cost of living and the change in population...” Further, Article XIIIB, S ection 1.5 states that “the annual calculation of the appropriations limit under this article for each entity of local government shall be reviewed as part of an annual financial audit.” Many local government appropriations are subject to the limit, although there are exemptions, including appropriations related to capital outlay and debt service.
Jestin Johnson (Sep 25, 2025 20:18:01 PDT)
09/25/2025
Jestin D. Johnson, City Administrator
Subject: Appropriations Limits for FY 2025-26
Date: September 24, 2025 Page 2
Finance and Management Committee
September 30, 2025
California Government Code sections 7900- 7914 contain specific directions regarding the implementation of Article XIIIB and the calculation of the appropriations limit. Section 7909 requires that “no later than May 1 of each year, the Department of Finance shall notify each local agency of the change in the cost of living or change in California per capita personal income, whichever is less, and population for each local agency for the prior calendar year.” Section 7910 requires that “each year the governing body of each local jurisdiction shall, by resolution, establish its appropriations limit and make other necessary determinations for the following fiscal year pursuant to Article XIII B of the California Constitution at a regularly scheduled meeting or noticed special meeting.”
In March 2024, City of Oakland voters passed Measure D, which increased the City’s appropriations limit (GANN Limit Override) until March 5, 2028 to allow the City to continue to spend tax revenue from twelve (12) voter -approved local tax measures, including Measure M (The Emergency Medical Services Retention Act of 1997), Measure N (The Paramedic Services Act of 1997), Measure C (The Library Services Retention and Enhancement Act of 1994), Measure C (Transient Occupancy Tax - Hotel Tax), Measure Z (The 2014 Public Safety and Services Violence Prevention Act), Measure HH (Sugar Sweetened Beverage Distribution Tax), Measure D (The 2018 Oakland Public Library Preservation Act), Measure W (Oakland Vacant Property Tax Act), Measure Q (The 2020 Oakland Parks and Recreation Preservation, Litter Reduction, and Homelessness Support Act), Measure AA (The Children’s Initiative of 2018), Measure T (The Business Tax Ordinance of 2022), and Measure Y (The 2022 Oakland Zoo Animal Care, Education, and Improvement Ordinance) . Election results were certified via Resolution 90195 C.M.S. and can also be found at https://www.acgov.org/rovresults/251/ .
In November 2024, City of Oakland voters passed the Oakland Community Violence Reduction and Emergency Response Act of 2024 (Measure NN) certified via Resolution 90587 C.M.S .
Measure NN contains language that constitutes voter approval to “increase the City’s spending limit in an amount equal to the revenue derived from the tax for the maximum period of time as allowed by law” and therefore operates in addition to the GANN Limit Override.
In the Budget Act of 2022, the California Legislature adopted changes to Government Code Section 7903 t o require city governments to include specified state subventions within the appropriations limits commencing with the fiscal year 2021 -2022. The State Department of Finance requires Oakland to include $40.9 million in state identified subventions into the GANN calculation for FY 2025-26.
ANALYSIS AND POLICY ALTERNATIVES
Pursuant to Article XIIIB, Section 10.5 of the California Constitution, for fiscal years beginning on or after July 1, 1990, the A ppropriations Limit is required to be calculated based on the limit for fiscal year 1986 -87, adjusted for inflation and population factors. Each year, the limit is recalculated by multiplying the previous year’s limit by adjustment factors for population growth and inflation. Proposition 111, passed in June 1990, gave cities the option of using their own growth or the growth of the entire county in which the city is located as the population adjustment factor. Cities were also given the option of using the increase in California Per Capita Income or the increase in the assessed valuation of non -residential property in the City as the inflation adjustment factor. Cities have the option each year of deciding which factor to Jestin D. Johnson, City Administrator
Subject: Appropriations Limits for FY 2025-26
Date: September 24, 2025 Page 3
Finance and Management Committee
September 30, 2025
use. For 2025-26, Oakland is using the population growth of the County of Alameda and the increase in California Per Capita Income. These adjustment factors must be applied to retroactively recalculate the appropriations limit for 1987 -88 (i.e., the base year) and each year thereafter in order to arrive at the limit for FY 2025-26.
FY 2024-25 Appropriations Limit $834,898,966
FY 2024-25 Adjustment Factors
County of Alameda Population Change = 1.0031 (0.31%) California Per Capita Income Change = 1.0644 (6.44%) Combined Change = 1.0031 x 1.0644 = 1.0677
FY 2025-26 Appropriations Limit
(After Adjustment for Growth Factor of 1.0677) $891,421,626
GANN Appropriations Limit Override Total: $318,677,745
Measure D*:
2412 Emergency Medical Services (Measure M) 2,734,302
2250 Paramedic Services (Measure N) 2,179,432
2241 Library Services Retention & Enhancement (Measure C) 20,859,459 2419 Transient Occupancy Tax - Hotel Tax (Measure C) 527,658 1030 Sugar Sweetened Beverages Distribution Tax (Measure HH) 6,150,000 2243 Public Libraries Preservation (Measure D) 16,862,394 2270 Vacant Property Tax (Measure W) 7,440,000
2244 Parks & Recreation Preservation (Measure Q) 34,141,547 2261-3 Children’s Initiative of 2018 (Measure AA) 47,283,169 1010 Business Tax Ordinance (Measure T) 129,533,110
2253 Oakland Zoo Animal Care Ordinance (Measure Y) 15,537,382
Measure NN
2255 Oakland Community Violence & Emergency Response Act of 2024
35,429,292
TOTAL Gann Appropriation Limitation with Override $1,210,099,371
*The GANN Limit Override to raise the spending limit for the special taxes is required to be renewed by voters every four years, which will be resubmitted to voters by 2028.
Not all City appropriations are subject to the limitation of Article XIIIB. The intent of Proposition 4 was to restrict only the appropriation of “proceeds of taxes.” Determining which appropriations are subject to the limit requires classifying each funding source as either proceeds of taxes or non-proceeds of taxes. Property tax and local taxes are subject to limitation. State taxes that are subvented to the City count against the City’s limit if their use is unrestricted, as in the case of sales tax and motor vehicle in lieu. State subventions that are restricted in use are applied against the State’s limit rather than the City’s, so they are considered non- proceeds of taxes for Jestin D. Johnson, City Administrator
Subject: Appropriations Limits for FY 2025-26
Date: September 24, 2025 Page 4
Finance and Management Committee
September 30, 2025
the City’s calculation and includes Measure B and BB sales tax and gas tax. In the Budget Act of 2022, the California Legislature adopted changes to Government Code Section 7903 to require city governments to include specified state subventions within the appropriations limits commencing with the fiscal year 2021- 2022, and are considered proceeds of taxes included in the Grants and Subsidies category. Interest income is prorated so that the interest earned on tax revenue is included as proceeds of taxes.
Most of the City’s other revenue sources are classified as non -proceeds of taxes: franchise fees, fines and penalties, license and permit fees, service charges, rentals and concessions, federal grants, internal service revenues, and other miscellaneous revenues. Exempt from the limitation are enterprise funds such as sewer service charges and golf course revenues, special benefit assessment districts such as the Landscape and Lighting Assessment District, and redevelopment agencies , namely the Oakland Redevelopment Successor Agency reimbursements. Fund transfers are considered re-appropriations of revenue received in previous years; therefore, these funds were included in the calculation of appropriations, subject to limitation in the year they were received, and are not counted twice.
The City’s Appropriations Limit for Fiscal Year (FY) 2025-26 is $1,210,099,371. The FY 2025-26 Adopted Budget appropriates $1,023,451,912 in proceeds of taxes inclusive of $40,900,000 in state identified subventions, which is $186,647,459 under the appropriations limit.
The adoption of this resolution advances the citywide priority of a responsi ve, trustworthy government by adhering to California state law.
FISCAL IMPACT
Failure to adopt the proposed resolution establishing the FY 2025-26 GANN A ppropriations Limit puts the City in violation of the State Constitution, which may legally impair the City’s ability to appropriate the proceeds of taxes it collects. The City is required to adopt an appropriations limit each fiscal year , and if this resolution is not adopted, the City will be non -compliant with state law.
PUBLIC OUTREACH / INTEREST
California Government Code Title 1 (General), Division 9 (Expenditure Limitations), Section 7910(a) s tates that “Each year the governing body of each local jurisdiction shall, by resolution, establish its appropriations limit and make other necessary determinations for the following fiscal year pursuant to Article XIII B of the California Constitution at a regularly scheduled meeting or noticed special meeting. Fifteen days prior to the meeting, documentation used in the determination of the appropriations limit and other necessary determinations shall be available to the public.” In compliance with this requirement, the documentation was posted on the City's website 15 days prior to the full City Council meeting at which this resolution will be adopted.
Jestin D. Johnson, City Administrator
Subject: Appropriations Limits for FY 2025-26
Date: September 24, 2025 Page 5
Finance and Management Committee
September 30, 2025
COORDINATION
This report was prepared by the Finance Department and reviewed by the City Attorney’s Office.
SUSTAINABLE OPPORTUNITIES
Economic: No direct economic opportunities have been identified.
Environmental: No direct environmental opportunities have been identified.
Race & Equity: No direct equity opportunities have been identified.
ACTION REQUESTED OF THE CITY COUNCIL
Staff Recommends That The City Council Adopt A Resolution Establishing The Appropriations Limit For Fiscal Year 2025-26 Pursuant To Article XIIIB Of The California Constitution.
For questions regarding this report, please contact Brittany Hines, Assistant to the Director, at (510) 238-7078.
Respectfully submitted,
JAN MAZYCK
Interim Director of Finance
Reviewed by:
Michelle Soares
Senior Budget & Management Analyst
Prepared by:
Brittany Hines
Assistant to the Director, Finance
Jan Mazyck (Sep 24, 2025 16:32:17 PDT)