(The Center Square) – Despite a $3.8 million projection in May, Spokane officials reviewed data Thursday that show the city’s general fund deficit heading into 2026 is now at $13.4 million and rising.
If left unaddressed, the revenue shortfall could snowball to more than $50 million by 2031. The Spokane City Council and Mayor Lisa Brown balanced a $25 million hole heading into 2025. Similarly, that general fund deficit was projected to reach about $50 million by 2027 had they not acted.
When they passed a balanced budget in December, many hoped it was the end of their worries.
By 2031, the cumulative deficit is expected to exceed $200 million. In May, the budget staff put that delta at $137 million by 2030, but it seems those projections underestimated the impact of rising costs and federal cuts. Now, reserves and the unappropriated fund balance could be gone by 2027.
“Another gap is emerging, and it’s coming at us pretty fast,” Brown told the council and finance officials. “It’s partly on the revenue side and it’s partly on the expenditure side, but once again, we’re going to have to take some fairly significant actions to bring those lines together.”
“I’m just kind of setting the table here that this is the not-good-news session,” Brown continued.
The United States isn’t in a recession yet, but consumer confidence is trending in that direction.
People aren’t spending as much, leading to declining sales tax growth, one of the city’s largest sources of revenue. Thursday’s projections don’t assume the 1% annual property tax increase allowed by state law, but that wouldn’t significantly impact things under the current financial climate.
The state attempted to raise the voter-approved 1% cap on annual property tax hikes earlier this year, but the effort stalled. City officials say fire department overtime, rising jail costs, upcoming increases in healthcare premiums, and collective bargaining agreements are also to blame.
Fire Chief Julie O’Berg said cuts to reduce overtime won’t come without service-level impacts.
Much of the Spokane Fire Department’s budget is contractually obligated. In the past, officials have discussed closing a fire station to offset overtime costs. O’Berg said SFD hasn’t discussed closing a station as an option with the unions yet, but she also didn’t rule it out as a possibility.
“Theoretically, to your point, you could say, ‘okay, that staff is is going into the relief pool,” Chief Financial Officer Matt Boston said, “but based on the contractual obligation, you still need 71; so even if, if those people are in the relief pool, you need at least 71 working any given shift.”
Budget staff said the union contracts signed during the COVID-19 pandemic are “unsustainable entirely,” and required the city to dip further into its reserves. They discussed limiting salary and benefit increases to 3% annually, but doing so would still result in a $26.9 million annual deficit in 2031.
They discussed potentially cutting personnel and exploring new revenue streams through state and federal grants or voter-approved tax hikes. Spokane balanced the budget heading into 2025 by cutting personnel and vacancies, dipping into reserves and relying on on-time fund transfers, while also raising taxes; however, the city officials don’t have as many options this time around.
“So what can we do?” one budget staffer asked. “Ultimately, we need to control costs.”
“What you can do is call me a paramedic,” Council President Betsy Wilkerson said jokingly. “I think I need some resuscitation right now.”
