Sacramento Metropolitan Fire District’s Fragile Finances

Stories of local government financial distress usually revolve around cities and school districts, but California special districts also face challenges. In a new California Policy Center study, my colleagues and I found a new local government not far from the state capitol that could face financial distress in the coming years. The Sacramento Metropolitan Fire Protection District (Metro Fire), which serves over 720,000 residents in the eastern portion of the County carries debt equal to over 2.5 times annual revenue.

This debt burden does not include the $415 million of new general obligation bonds being issued under Measure O to fund new equipment: debt service payments for these bonds will be levied directly upon local taxpayers.

Instead, the $836 million of debt we found in the district’s latest audited financial statements arise from unfunded liabilities for pensions, retiree healthcare (OPEB), and compensated absences (i.e., unpaid sick and vacation time).

When a government agency owes two-and-a-half times its income just for past promises to employees, it does not have much wiggle room for the present. Every dollar spent paying down this mountain of debt is a dollar that cannot be spent hiring new firefighters or keeping fire stations open.

The district’s own budget projections confirm that money is tight. According to the FY 2025-26 Final Budget, Metro Fire’s General Fund reserves are forecasted to drop well below the board’s own policy target of 15%, which, in turn, is below the Government Finance Officers Association recommendation of 16.67%.

Despite a booming property tax base, the district projects its reserves will fall to 10.5% this fiscal year and continue falling to 8.2% by 2030. This is a dangerously thin margin for a district facing wildfire risks, economic uncertainty, and federal funding cuts.

Federal Funding Risk

Metro Fire’s fragility is compounded by its reliance on a complex federal funding scheme that is currently on the chopping block. The district currently generates approximately $26.6 million in net annual revenue through “Intergovernmental Transfers” (IGTs). Under programs like the Voluntary Rate Range Program (VRRP) and Public Provider Ground Emergency Medical Transport (PPGEMT), the district effectively sends its own cash to the state to trigger a federal “match,” which is then sent back to the district with a bonus.

This bureaucratic alchemy turns a standard $339 ambulance ride into a reimbursement of over $1,100. But the “One Big Beautiful Bill Act” (OBBBA), signed into law on July 4, 2025, threatens to curtail this practice.

The new legislation limits so-called Medicaid provider taxes starting in 2028. The Act also eliminates the federal match for undocumented residents and imposes strict work requirements that will likely cause “churn,” leading to thousands of eligible losing Medi-Cal coverage and federally subsidized ambulance transportation.

A Tale of Two Districts

Metro Fire’s own budget documents offer a revealing comparison to the Orange County Fire Authority (OCFA), another large independent fire agency in California. 

While Metro Fire spends approximately $452 per resident, OCFA spends just $273—a difference of $179 per person. OCFA’s long term liabilities are also considerably lower than those of Metro despite the Orange County district’s larger size.

Since 2015, OCFA has been employing its “Snowball Plan” to aggressively pay down pension and OPEB liabilities, reducing its debt burden year over year. Metro Fire, conversely, is watching its reserves dwindle while its unfunded liabilities balloon to nearly a billion dollars. 

Golden Parachutes for Public Safety

How did Metro’s debt get this high? It is not due to mismanagement of fire operations, but rather the result of generous benefits negotiated by public sector unions and agreed to by governing boards which did not set aside funds to pay for these benefits. Among Metro Fire’s challenges are the following:

• Retiree Healthcare: Firefighters can retire as early as age 50 and receive 100% of their health insurance premiums paid by the district. This continues for up to 15 years before they become eligible for Medicare.
• The “Inversion” Problem: The district now has more retirees collecting benefits than active employees contributing to the plan. This demographic imbalance places a heavy weight on current operations.
• Cash Payouts: Upon retirement, firefighters can cash out 100% of their unused vacation time (which accrues up to two months) and 40% of their unused sick leave. The remaining sick leave converts to service credits, boosting their pension checks for life.

The Path Forward

To its credit, Metro Fire has begun to address the problem. The district is contributing to the California Employer’s Retiree Benefit Trust (CERBT) to pre-fund some of these obligations.  But to really make a dent in its unfunded obligations, the District would need to make larger prefunding payments and reduce benefits where possible. This is especially true of the retiree health benefit which is among the most generous we have seen.

Metro Fire and other California agencies should stop putting retiree benefits on their credit card. As our study shows, California’s public sector is already consuming over 20% of the state’s GDP. For agencies like Metro Fire, the bill for decades of generous promises has finally come due. We should not expect the next generation of taxpayers to pay it.