BUDGET 2011: WHAT WE KNOW SO FAR (October 19)

On Monday, September 27, Mayor McGinn delivered his proposed budget for 2011-2012 to the Council.  Details of the Mayor’s budget are usually not revealed in advance of the formal presentation, but this budget process was somewhat less transparent than past budgets have been.  Key policy proposals were not discussed with Councilmembers in advance, and outside agencies and constituencies whose funding was cut or eliminated were generally not consulted.

The Council has two months to review and approve the budget. We are working hard to understand the details and identify critical policy decisions and potential budget changes prior to beginning to make decisions in early November.

Here’s a snapshot of what we know to date:

General Fund (excluding transportation).  Proposed at $888 million, $13.7 million less than the 2010 adopted budget. 

  • Although General Fund resources are down $13.7 million from the 2010 adopted budget level, the Mayor suggested that he faced a $67 million deficit in the projected 2011 budget.  This is based on a number of assumptions, including not carrying forward reductions already taken in 2010.
  • Other key drivers include the effects of cost of living clauses in labor contracts, increasing health care costs, and the need to add funds for pension liabilities, which add up to a projected increase in expenditures of around $35 million.
  • In addition, a number of one-time revenue sources were used to balance the 2010 budget, including more than $11 million of the City’s Rainy Day Fund.
  • To balance the revenue shortfalls, increased expenditures, and loss of one-time revenues, the Mayor is proposing a series of spending reductions, revenue increases, and $11 million in newly identified one-time sources.
  • Some $12 million was already cut from the 2010 budget in mid-year reductions, most which carry forward into 2011.
  • Renegotiations of cost of living increases save about $2 million for the general fund, and the reduction of some 294 positions, mostly in the general fund, essentially cover the gap between revenues and expenses.  Some of these positions reflect streamlining and efficiencies, while others are actual reductions in services.  For comparison, 235 positions were eliminated in the 2002-2003 recession.
  • Proposed revenue increases total $23 million.  The majority of these are vehicle user charges, including $10+ million from increased parking rates and fines and $3.4 million from vehicle license fees.  Most of the rest comes from various fee increases at community centers, the library, and public safety inspections and other fees.
  • Almost all police, fire, and human services programs take only modest reductions, mainly in staffing.  Some of these, such as cuts in domestic violence service providers, are significant, but the total reductions are relatively small.
  • Major reductions in Parks and Community Centers include ending environmental learning centers and significant service reductions at Rainier Beach, Alki, Ballard, Laurelhurst, Queen Anne, and Green Lake Community Centers.
  • The Seattle Public Library budget is cut by 8.5%, but a new system for managing branch libraries will cushion most of the impacts, with no cuts in hours and modest cuts in the collection budget.
  • The Department of Neighborhoods has the most significant reductions, with seven of the thirteen neighborhood service centers closed and an $800,000 cut in the Neighborhood Matching Fund.

Transportation.  The budget increases by about 1%, from $310 million in 2010 to $313 million in 2011.

  • About one-third of this budget is for major capital projects.  Most of these have dedicated funding sources, often from federal or state grants, and the funds cannot be used for other purposes.  Bids for some of these projects are coming in lower than engineering estimates, and any city funds involved can potentially be reprogrammed at some point.
  • Funds for major maintenance projects and operations come from a blend of general fund, the Bridging the Gap program, and grants and bonds.  There is more flexibility in this funding, although the Bridging the Gap funds do have specific goals.
  • The Mayor’s budget reduces general fund support by about $6 million from 2010 to 2011.
  • The Mayor adds $9 million from a $20 Vehicle License Fee and the already approved 2.5% additional parking tax dedicated to the seawall project (bringing the parking tax to 12.5%).  The Mayor also proposes $10 million from an additional 5% parking tax.
  • These funds are spread over a variety of transportation functions.  Since the Council already told the Mayor that we are unlikely to approve the additional parking tax, we will have to cut or find replacement revenues for about $10 million in the Transportation budget.

Utilities.  The Mayor proposes rate increases of 4.3% for City Light rates, 7.5% for solid waste, 12.8% for drainage, and 4% for wastewater, along with an already approved 3.5% water rate increase.

  • The Council has reviewed the drainage and wastewater proposals, and the Committee has approved budgets generally in line with the proposals.  These are the smallest components of the utility bill, and the increases are necessary for several reasons, most saliently in order to fulfill the terms of a compliance order from the Environmental Protection agency requiring improvements in the City’s management of combined sewer overflows.  These are critical steps towards reducing pollution in Puget Sound.
  • The solid waste rate increases are driven by the rebuilding of the North and South Transfer Stations.  Once those are completed, the rates are likely to be stable in the future.  The Council has approved a pilot program to study moving to every other week garbage collections, which could reduce future budgets by about $6 million annually.
  • The Council is most concerned about the increase for City Light.  While the proposal is relatively modest, there have been two increases in the last year, which were intended to stabilize City Light’s difficult financial situation.  The Council will thoroughly review this proposal before taking action.

The City’s budget picture is difficult, but not as challenging as the State or County situations.  The Council will have some difficult choices – whether to approve the parking meter increases, what to do about the several million dollars in cuts to important community services, how to manage the transportation department problems and what do to about City Light.

These problems may be exacerbated by the November election.  If the initiatives to repeal the candy tax and realign the liquor sales system are approved, there will be an additional $5 million revenue reduction to manage for 2011, with greater impacts in the following years.