Phoenix ended the 2025-26 fiscal year with a $266.4 million general fund balance, about $7.2 million more than budget projections, city officials said Oct. 13. The difference between the forecast and the final balance was among the city’s narrowest in years. The surplus will remain in reserve while staff develop Phoenix’s 2027-28 budget. Budget and Research Director Aaron Mertz said city officials plan to present an updated general fund outlook and multiyear forecast to the City Council on Feb. 23, 2027. General fund resources totaled $2.2084 billion, exceeding estimates by $17.7 million, or 0.8%. Higher-than-expected city and state-shared sales tax collections contributed to the increase. Those collections included revenue associated with a 0.5-percentage-point rise in the city transaction privilege and use tax rates. Spending reached $1.942 billion, or $10.5 million above estimates—a 0.5% variance. The city attributed much of the difference to salary savings that were slightly lower than forecast. The modest surplus comes as Phoenix anticipates significant cost pressures. City officials have pointed to rising employee benefits, particularly public safety pension contributions and health care, as well as negotiated labor increases, aging infrastructure and deferred maintenance. The voter-approved 2023 general obligation bond program is also expected to bring additional ongoing operating costs, while departments may seek expanded services. Mertz said the city has begun reviewing spending at the line-item level, with central expenditure reviews planned for December. Updated public safety pension rates, based on an actuarial valuation dated June 30, 2026, are expected in December. At a prior budget discussion, District 7 Councilmember Anna Hernandez welcomed balanced finances but raised concerns about how the city’s spending priorities reflect its values. Police, fire and parks received the largest shares of the general fund operating budget last year, Mertz said.