Looming in 2026: Cuts in federal funds deal blow to Oakland’s deficit-laden budget

First in a three-part series about Oakland agencies preparing for major federal funding cuts.

Oakland is bracing for nearly $25 million in federal funding cuts — a blow to the cash-strapped city that has been grappling with budget deficits.

The cuts represent a 34% decrease in federal funding from the previous year, according to an Oct. 1 memo from the city administrator. 

The city expects to receive about $49million in federal funds in the current fiscal year, which ends June 30. The memo warns that this reduction poses “significant uncertainty” for core programs in housing, homelessness response, youth services, public safety and public health.

Oakland is in a precarious financial position, facing a structural deficit in its general purpose fund, which pays for police, fire and other essential operations. Since January, the Trump administration has enacted two waves of federal spending reductions, including cuts to grants supporting housing, homelessness prevention, youth programs, senior services and public health initiatives in Oakland. 

While these federal cuts are not the primary cause of the city’s estimated $290 million budget gap for 2025-27 fiscal years, they compound existing pressures and could force further reductions in critical social services unless alternative funding is secured. 

Oakland is running into new federal hurdles that could limit its ability to secure federal grants, the city administrator’s report warns. New executive orders now require applicants to show that their requests align with the administration’s priorities. Also under-staffing at federal agencies may slow down the process. 

“These changes put Oakland’s competitive applications for housing, transportation and public safety grants at greater risk of delay or denial,” the report read. 

The city as well as nonprofits rely on federal support to serve vulnerable populations.

City Council mostly silent

City officials have not yet addressed the looming funding gaps. While the mayor proposes the city’s nearly $4 billion two-year budget, the City Council is tasked with amending and passing it. Mayor Barbara Lee, who ran on a promise to bring federal money into the city to boost services, did not return a request for comment.

Councilmember Ken Houston, who represents parts of East Oakland, said he doesn’t think the city should rely on taxpayers to fill the gaps. 

Councilmember Charlene Wang said the city was alerted informally about the U.S. Department of Housing and Urban Development backing off of a model that had prioritized securing housing over requirements such as sobriety.

“We were notified that HUD is changing direction,” she said. “Many programs, particularly those that rely on permanent supportive housing, are now at risk under the Trump administration.”

Sean Maher, city spokesman, did not respond to multiple requests for information and comment about how the city will make up for the lost funds. 

Councilmember Zac Unger said only, “I wish I could help, but I don’t think I have anything relevant to add to this discussion.” 

The other council members did not respond. 

Oakland historically hasn’t faced broad federal cuts, said Dan Lindheim, former Oakland city administrator and adjunct professor of public policy at UC Berkeley. The challenge has come when temporary federal funding expires, leaving the city to absorb the fallout, he said. 

Lindheim noted that while Oakland doesn’t receive much money from the federal government, residents are exposed. Head Start funding has already declined, he said, forcing the city to backfill, and any reductions to Medi-Cal or CalFresh will have “have serious impacts on residents.”

The council allocated a one-time expenditure of $2 million to the current general purpose fund to stave off any potential loss state or federal grant losses in fiscal year 2026-2027. An additional $700,000 from vacant property tax revenues was earmarked for a new reserve account to fund homelessness programs if federal funding for those services is cut. 

In April, the U.S. Justice Department terminated 365 competitive grants nationwide, costing California more than $80 million. Some of that money supports Oakland-based programs that for victim services, youth intervention, reentry from prison and community policing. 

Making matters worse for some nonprofits, early this year, the city cut $2.6 million in contracts to organizations providing housing, health care, senior services and violence-prevention programs. 

That cuts have been catastrophic for Youth ALIVE and show the ripple effect of the federal government’s actions. Lauren Greenberg, director of development and communications, said positions that become vacant were not refilled and the organization has had to adjust the scope of its work. 

“It means that we have to be really strategic about the programs that we can do,” she said. “It means that we’ve got less emergency resources for clients that need them. It means that we can’t continue to expand our work to meet the need, and that our professionals are doing more with less.”

Next: Oakland health advocates prepare community for Medi-Cal freeze

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