As I wrote yesterday, a work group in Seattle has come up with nine options for new revenue for the city. The following chart is from the revenue work group’s report. It shows that the city increased general fund spending in recent years above the amount of available ongoing revenues (even though revenues have been increasing since 2020 and are above 2019 levels) and filled the gap with one-time resources. It indicates shortfalls in 2025 and 2026. According to the report, the significant growth in projected spending in those years is due mainly to anticipated labor agreements. But it’s important to note that budgets have not been adopted for those years yet. The city could choose to reduce spending to better match existing revenues.

In the meantime, the Seattle City Council’s Finance and Housing Committee discussed the work group’s revenue options at a meeting this morning. During the meeting, and in a memo, the Council’s central staff provided detailed background on the budget issues in the city’s general fund.

The memo summarizes,

The City has an ongoing GF deficit because, after nearly a decade of rapid economic growth and service expansion by the City, the Covid-19 pandemic abruptly reduced GF revenues, while at the same time new ongoing GF expenditures were approved. To meet the statutory balanced budget requirement, this imbalance between base GF revenues and expenditures has required the infusion of temporary, one-time revenues and expenditure reductions. Beginning in 2025, these one-time measures will either expire or be diverted back to their originally intended purpose, and revenue growth will lag expenditure growth, resulting in a projected deficit.

I think this summary puts too much emphasis on the revenue impacts of the pandemic. As central staff describes later in the memo, the city knew it had a structural deficit in the general fund at least as early as 2019. Revenue losses in 2020 didn’t help (they have since rebounded), but spending was already expected to exceed revenues before that. Nevertheless, the city adopted a huge new payroll expense tax in 2020 and dedicated it to new spending.

For context: in terms of all governmental expenditures (not just the general fund), Seattle’s per capita spending was $3,721 in 2022. According to data from the State Auditor’s Office, that was the highest per capita spending by any city or town in Washington, and it was substantially higher than the next highest, which was $2,949 in Tukwila. Further, Seattle’s per capita spending (adjusted for inflation) has especially outpaced spending in other cities and towns since the Great Recession.