Leading the process is second-term Councilmember Dan Strauss, who chairs the council's budget committee. On Tuesday, his office published a more than 200-page review of the city's budget over the last five years, the most comprehensive look back in recent memory.
"I will go as far as to say we are auditing our budget," he said, a nod to the oft-repeated line by candidates in the recent election.
Underpinning the budget chasm facing the city is a basic math equation dating back a decade: City Hall spent heavily from 2013 to 2019 to keep up with Seattle's ravenous growth, as sales tax revenues from construction easily outpaced inflation.
The pandemic reversed the calculation and now construction has slowed while inflation remains stubborn. The result is a revenue stream struggling to keep pace with the growing cost of labor and administration in the city: More than 80 percent of the budget's general fund growth in the last five years comes from inflation, with a smaller portion the result of new programs and policies, according to the review.
"There was a lot of growth that was going on [in the budget] and it was needed, otherwise you won't be able to become that big city," Strauss said.
Now, however, the city is facing a correction that leaves Mayor Bruce Harrell and the council with the choice of cutting staff, raising new money or repurposing funds from the city's payroll tax.
Though inflation is the primary driver of the gap, there are other factors, some structural and some onetime costs: Legal claims against the city have jumped, insurance premiums have increased, technology upgrades have ballooned.
The city's finance department grew 35 percent, or $118 million, since 2019. The department manages the city's facilities, and a couple of significant expenses have been the cost of replacing vehicles and of building a new North Seattle fire station.
The cost of internal-facing departments, like human resources and technology, have gone up by 50 percent percent as claim settlements and the cost of paying into workers' compensation have increased
Another big-ticket item is the city's response to homelessness. The city voted to provide regular raises to front-line service providers to try to stem the rampant turnover in the industry — which adds tens of millions of dollars to the cost of doing business.
Elected officials also stood up programs to respond to the economic blast radius left by the pandemic. Initiatives such as food vouchers for families earning below median wages were propped up by state and federal money, funding that has expired even as the council has sought to extend the programs.
The effects of 2020, still reverberate through the budget, both in terms of COVID-related costs and the city's response to the protests that year. The city launched a crisis response team and restorative justice programs, some of which were funded with finite pools of money.
The budget went out of whack with the city's revenues last year, but the city filled the hole with a new payroll tax on large businesses.
"We delayed that painful decision-making until today, when we're out of the pandemic, we're back meeting in person and we're able to focus solely on the budget rather than every other cascading problem that stemmed from the pandemic," said Strauss.
The city's total budget is currently $7.8 billion. Most of that is basic government — electricity, utilities, some pieces of transportation — that is less likely to be cut. Of that, the $1.7 billion general fund is the most flexible, but that, too, is taken up in large part by the police and fire departments.
The result is a relatively narrow slice of the overall budget the council can comb for cuts. More than 50 percent of the general fund is personnel, meaning trimming could lead to layoffs. At the same time, the new City Council has not shown any appetite for raising new taxes.
A possibly tempting avenue is to use the payroll tax, known as JumpStart, to plug the budget hole. Passed in 2020, it's intended to fund new affordable housing, among other priorities. Unlike the city's sales and business and occupation taxes, the payroll tax is far outpacing forecasts.
Already, the tax is keeping the budget afloat.
"Without JumpStart, we would have to lay off, I'm not gonna put a percentage on it, but a lot of staff," said Strauss. "Today, not next year."
A full audit, complete with evaluations of each program funded by the city, would be a far more expensive and timely endeavor. New members acknowledged early such an exercise would not be possible.
Strauss said he needs more time to understand where there could be program cuts and what it would mean for affordable housing construction if parts of the payroll tax were used for budget relief.
Meantime, the budget committee will meet at least once a month through the fall — a change from most years when it doesn't even convene until September.
©2024 The Seattle Times. Distributed by Tribune Content Agency, LLC.
