SAN DIEGO (FOX 5/KUSI) — San Diego Mayor Todd Gloria delivered his State of the City address Tuesday, offering a blunt outlook on the city’s financial challenges as it faces a projected $258 million budget deficit for the 2026 fiscal year. “I want to primarily focus on the work ahead,” Gloria said. “Because while our persistence has yielded many achievements to celebrate, the stark financial realities we face today will be a true test of our resolve.” Gloria noted that the current deficit follows a $170 million shortfall last year, which the city managed to close through precise cuts and one-time measures. However, the situation is compounded by the failure of Measure E, a proposed one-cent sales tax that could have generated an estimated $400 million. City of San Diego five-year financial outlooks shows significant budget deficits until 2030 “As mayor, I've heard and I accept the will of the voters,” Gloria said. “Instead, we now must find another way to continue delivering on the core priorities that matter most to San Diegans.” Those priorities, according to Gloria, include maintaining essential services like police and fire departments. The mayor outlined plans to cut non-essential spending, including downsizing office space leases, to reduce costs. Gloria also addressed the city’s ongoing homelessness crisis, promising to expand shelter options and focus on permanent housing solutions despite financial constraints. Gloria also said that the county needs to shoulder more of the burden with the homeless crisis. “Implementing our comprehensive shelter strategy to reduce homelessness is my administration’s number one priority,” Gloria said. “And it will continue to be this year.” In addition, Gloria emphasized plans to fix roads, upgrade stormwater infrastructure, and create more affordable housing. He expressed optimism the city could transform its financial adversity into an opportunity for growth and innovation. City leaders are expected to begin discussions in the coming weeks to find creative solutions to San Diego’s financial challenges without jeopardizing critical public services.