There are costs in the city budget which the city is obligated to pay - fixed costs. Once the city knows how much it can expect to receive from all sources in the next year (for more on this, see the page "How Does Proposition 2 1/2 Work?"), we must first set aside funds for these fixed costs before allocating any funds remaining for the rest of the city's programs and services. In lean economic times, these are line items that may not be cut; we remain obligated to pay them.

By far the largest fixed cost in the city's budget is the provision of health insurance benefits for employees and retirees. In Ficsal Year 2009, it accounted for a little more than $9 million, or about 12.5% of the entire General Fund budget.

Debt Service accounted for another nearly $6 million in fixed costs. Retirement costs were another nearly $4 million.

Altogether, fixed costs totaled just over $24 million, about one-third of the General Fund budget.