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Spokane around $500K under budget at mid-year review, $50 million deficit looms

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(The Center Square) – The mayor of Spokane and her chief financial officer updated the city council on Thursday about this year’s ongoing budget review, proposing a few changes to the city’s various funds.

The conversation follows months of debate over Spokane’s approximately $50 million structural deficit. The financial turmoil started during the pandemic, as federal aid poured in and one-time relief funding was devoted to recurring expenses.

Five years ago, Spokane’s financial reserves were approximately $28.3 million. Now, they sit at about $7.6 million, and the General Fund deficit has grown to roughly $25 million. The city’s 2024 budget totaled approximately $1.2 billion, with 21% arising from that general fund.

“A year ago, I think you were grappling with about $9 million over what you had budgeted [for in the general fund]. We’re pleased to report with the recommendations that were making that we could come in half a million under,” Mayor Lisa Brown said on Thursday. “That does not resolve our structural issues of how expenditures and revenues are projected to grow, but it does give us a little bit more of a cushion.”

However, despite Spokane expecting to break even this year, it still has a large deficit to balance ahead of next year. On Thursday, CFO Matt Boston proposed several changes to the city’s various funds, giving more flexibility in dealing with the deficit while also balancing current projections.

“While this is a general fund problem,” Boston said, “it’s not just a general fund problem; we need to be looking at the organization as a whole.”

Boston’s first proposal involved increasing general fund revenue by almost $1.9 million while reducing its expenditures by approximately $950,000. He said the increase in revenue reflects current estimated projections while reducing expenditures comes with various cuts.

General fund reductions include cutting vacant positions within the Spokane Police Department and reducing its operating budget. He said other anticipated cuts include reducing the Legal Department’s travel budget and adding furlough days for Brown’s cabinet.

The increase in revenue and decrease in expenditures total approximately $2.8 million. Boston said Spokane would increase general fund appropriations by $2.3 million, saving a little less than $500,000 that will go toward the depleted reserves, as Brown previously noted.

Boston attributed the increase in appropriations to ongoing departmental needs. However, a portion will also go toward hiring a new budget analyst and internal auditor as the city prepares for next year’s budget and shifts toward a new model.

“As you all know, we’re moving towards not only a book one and book two budget, but we’re also going towards a biennial budget,” Boston said. “That is a heavy lift for the budget department.”

Last month, Brown proposed a two-book outlook for next year and a shift toward a two-year, or biennial, budget model. The book one model considers a budget without allocating any one-time funds toward recurring expenditures; additionally, it involves a 10% citywide budget reduction. The other outlook examines how the budget would fare with Brown’s Community Safety Levy, which could increase tax revenue around $40 million annually if eventually passed.

Boston’s next proposal involves increasing Enterprise Fund appropriations by approximately $4.75 million, sending a little less than half of that back to the General Fund while reappropriating the rest to the Internal Services Fund for fleet repairs and maintenance.

While the appropriations from the Internal Services Fund would consequently rise, Boston said the city did identify around $450,000 in savings from that pool of money. His last proposal included changes to the Special Revenue Fund, such as SPD’s $520,000 request.

Spokane will continue to identify other reductions as it anticipates building next year’s budget; however, the proposed reductions do little other than preventing the deficit from increasing further.

“Tightening your belt or sharpening your pencils is never an easy exercise for a service organization like the City of Spokane,” Boston said.

The proposed changes to this year’s budget are expected to be voted on by the City Council on July 8. Until then, officials will consider changes to the city’s municipal code to ensure that each shift follows applicable regulations.

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