(The Center Square) – Spokane officials are looking at budgeting strategies after what Mayor Lisa Brown’s administration calls years of unsustainable spending left the new administration with a $50 million deficit.
The hole stems from directing unallocated reserves and one-time funds toward ongoing expenses throughout the pandemic. Since 2019, Spokane’s financial reserves have gone from $28.3 million to $7.6 million; meanwhile, the general fund deficit has grown to $25 million.
During last week’s City Council Study Session, Chief Financial Officer Matthew Boston said the pattern started in 2021 when the prior administration used one-time federal funds to pay for overtime expenditures and general fund reserves for a retroactive police union contract.
The practice continued over the following years, but Boston said the city also chose not to save funds for expiring union contracts that needed renegotiating; instead, Spokane used one-time reserves and federal relief to pay retroactive and current pay adjustments.
“It’s not unique to pull from unallocated reserves for strategic investments,” Boston said, “but the decisions that were made from [2021] leading into the 2024 budget were primarily using one-time revenue for those ongoing expenditures, which again creates that structural gap.”
The two-budget-book scenario involves two models: one matches ongoing expenditures to the existing revenue sources, eliminating one-time funds for ongoing expenses, while the other model looks at how the administration’s strategy would have fared.
Brown previously advanced a community safety levy that voters would have decided on in August; however, she pulled it from the ballot amid numerous concerns. If passed, the levy would have cost taxpayers $1 per $1000 of assessed property value, raising around $40 million annually.
“I think it will better illustrate for the council and the public the implications of a no-new-revenue budget and of a budget,” Brown said, “that, in fact, we would like to advocate for.”
She said the two-model method allows constituents to weigh the consequences of the budget being adjusted with current revenue streams this far into the year. However, as part of the book one scenario, Brown asked each department within the city to plan for a potential 10% reduction, which would could entail personnel cuts.
“That is not what we are advocating for,” Brown said, “but we are preparing for that scenario should that be the place where we end up.”
Boston said that while Spokane’s deficit totals around $50 million, the city’s overall budget is approximately $1.2 billion across seven funds.
However, since each fund comes with specific constraints on how the city can spend its money, balancing the budget is more complicated than filling one shortfall with the revenue of another fund, he said.
For example, Spokane’s general fund supports basic city functions, such as public safety, city hall and parks, raising money through local property and sales taxes. In comparison, special revenue funds are allocated for specific projects and raised through relevant taxes.
However, since the general fund supports multiple departments, there are fewer hoops to jump through, making it easier to move money around for expenditures as needed.
“This isn’t just a general fund problem, this an organizational-wide problem,” Boston said.
