This afternoon, Mayor Jenny Durkan officially released her budget proposal for next year. Let’s dive in to the details and see what’s in there.
First, a few quick housekeeping notes:
- As usual with my annual deep-dive on the budget, there are lots of charts and graphs below. This year, for the first time, they are all inflation-adjusted to 2020 dollars (though I didn’t adjust the 2021 numbers since it’s anyone’s guess what inflation will end up being this year).
- You can find the entire proposed 2021 budget here.
- For the most part I’m sticking with the original 2020 adopted budget, even though the Council approved a “rebalanced” budget last week. The rebalanced budget wasn’t built from scratch, but rather as a list of changes from the adopted budget, and the city hasn’t consistently made available updated numbers for all revenues and expenditures (the 2021 budget book lists them in some places, but not others). Besides, neither the original budget nor the rebalanced budget necessarily reflect what is likely to get spent by the city through the remainder of the year, given the ongoing arguments between the Mayor and the City Council.
The Mayor has articulated six priorities in her budget proposal:
- Sustaining the city’s response to the COVID-19 pandemic;
- A new $100 million investment in BIPOC communities, while protecting existing ones (like the Equitable Development Initiative);
- Removing some functions out of SPD to start the process of re-imagining public safety;
- Preserving essential public services and supports;
- Expanding efforts to address homelessness and the housing crisis;
- Minimizing impacts to the city’s workforce.
But as the “rebalancing” exercise that just concluded demonstrated, this is a tough year for both revenues (which collapsed) and expenses (which exploded due to COVID, the economic meltdown, and the West Seattle Bridge shutdown — among other factors). The city is required to pass a balanced budget, which means that revenues constrain spending. And there’s the rub: when revenues are going down, it’s hard to make spending go up.
On top of that, the Mayor (and City Council) need to address the calls for a major downsizing of the police department.
And there are other nagging issues, such as the renewal of the Seattle Transit Benefit District on the November ballot, and the pending state Supreme Court ruling on Tim Eyman’s most recent effort to cut car tabs. Both of those have impacts on SDOT’s budget.
In most years, General Fund revenues (the kind of flexible-use dollars that elected officials can actually make decisions about how to spend) have progressed in a steady, unremarkable march upward. And if you simply look at the bottom line in the Mayor’s 2021 budget proposal, that trend hasn’t changed much: revenues are up about $14 million over the original 2020 pre-COVID budget, now just shy of $1.5 billion. Given everything that’s happening, it’s surprising to say the least that General Fund revenues are up.
But underneath the covers, a lot has changed. Most of the major revenue streams that contribute to the General Fund have dropped in 2020, and few are expected to recover quickly in 2021. Property taxes are the notable exception in that they have stayed strong, but sales taxes are expected to be about $62 million off from the original 2020 budget; B&O taxes will be $40 million down; utilities taxes will drop $11 million; and paid parking will be off by $15 million.
But the flip side is that the Council passed a new payroll tax (and overrode the Mayor’s veto) that is currently projected to bring in $214 million next year. The Council approved a spending plan resolution laying out its preferences for how that money should be spent in 2021, including:
- $86 million to replenish the city’s two reserve funds;
- $96 million for continuity of city services;
- $26 million to continue COVID-19 response efforts.
In the graph below, you can see the effect of the COVID recession on overall general fund revenues, and how the payroll tax (in dark blue) neatly filled that gap:
In past years, there were four revenue sources that provided more than 70% of the General Fund revenues: property taxes, sales taxes, utility taxes, and B&O taxes. Now with the addition of the payroll tax, it’s become the “big five” sources, and collectively they represent 79% of General Fund revenues.
Here’s one more look at the historical trend for various revenue sources, that once again makes clear how dominant the “big five” revenue source are — and how vulnerable the city is to fluctuations in those five. Property taxes and utilities taxes are stable; B&O and sales taxes took a big hit. Changes in most of the other revenue sources are rounding errors in comparison.
There are about thirty departments in Seattle city government, but the ten largest ones represent 82.9% of the city’s expenditures. We could spend a lot of time digging through the finances of the other twenty (which do important work), but the numbers are so small for most of them that the return on our time investment largely isn’t worth it if we’re trying to understand where the money goes.
In fact, half of the spending is in two departments: Seattle City Light and Seattle Public Utilities, both of which largely run as separate businesses (the city can’t siphon off their business revenues for other city purposes).
Looking across the “top ten” departments, it’s difficult to see a lot of austerity budgeting; the city seems to be managing to sustain spending in most areas, with the notable exception of SDOT — though compared to 2019 and earlier, it still looks robust.
- The Parks and Recreation Department is seeing a 12.9% cut over its original 2020 budget, about $34 million; $10 million of this relates to restricted-use revenue sources such as fees it charges for access to facilities; another $19 million is a REET revenue shortfall. The department, where it can, is delaying capital projects such as field conversions and building refurbishments, and redirecting savings to support operations.
- The Human Services Department is the big winner: the Mayor has protected its budget, and in fact extended it by $26 million with a federal grant to immediately expand homeless shelter services. HSD will also be spending $2.9 million to provide inflationary increases to its contracted providers.
- SDOT will see a revenue shortfall of about $85 million; $25 million will be covered by a loan, and the remaining shortfall will result in reductions and project delays. There will be hits to capital spending and basic maintenance — but not to bridge maintenance, which is already dramatically underfunded. Additionally, the city is moving forward with a $100 million bond to cover the West Seattle Bridge response.
- The “personnel compensation trust” covers benefits for most of the city’s 11,000 employees. Nearly all of it covers healthcare: over $275 million of spending in the 2021 budget.
Seattle Police Department
Of course, all the attention is on the police department funding. On paper, SPD will be taking a 12.1% cut of almost $50 million and reduce headcount by 334 positions.
The Mayor has proposed moving four units out of the department. The 911 Call Center and Emergency Operations Management will be spun out into a new department: the Seattle Emergency Communications Center. The parking enforcement unit will be transferred over to SDOT, and SPD’s victim advocates group will move to HSD. Here’s what budget and headcount look like for those four teams:
- 911 call center: $18.2 million, 140 headcount
- Emergency Operations Management: $2.46 million, 14 headcount
- Parking Enforcement: $14.9 million, 120 headcount
- Victim Advocates: $1.28 million, 11 headcount
In total, these four groups represent $36.4 million and 285 headcount. So outside of those transfers, SPD’s budget and headcount will be reduced $12.45 million and 49 headcount. If you’re of the mindset that transferring groups out of SPD is a good start with shrinking and transforming SPD, then you probably like this a lot. But it still falls far short of the 50% cut that advocates continue to push for, and that many Council members verbally committed to.
I reran the numbers for my deep-dive on SPD’s budget from June. It’s difficult to do a historical comparison when four groups are being spun out, but a few other things did pop out as interesting notes.
First, the employees of the four groups transferring out of SPD represent some of the lower-paid employees in SPD, so the department’s budget per employee actually went up with this change.
The transfers out and other headcount reductions are mainly in operations and administrative overhead groups. Patrol operations is cut by 48 positions, but half of that is in the administrative group; another 14 are cut from the Southwest Precinct, and the remaining ten are scattered across the other four precincts.
Cuts to the investigations unit are minor.
In short: if you want to see big cuts in SPD’s sworn officers, this is not the budget proposal you are hoping for.
So with no drastic cuts to any departments, how did the City Budget Office balance the budget? Through a combination of actions:
- The payroll tax. The Mayor’s budget does not follow the City Council’s stated intention of using $86 million of payroll tax revenues to replenish the city’s two reserve funds: the Revenue Stabilization Fund, and the Emergency Fund. It invests nothing in either fund.
- Depleting the emergency funds. In fact, not only does the budget proposal not replenish the funds, it spends almost everything remaining in them: it withdraws about $73 million, leaving only $6 million in the funds. The forward-looking revenue projections suggest that the economy will have recovered enough by 2022 that the city won’t need to dip into the funds any more, but that’s a gamble — particularly given the run of bad luck the city has had recently with bridges and piers.
- Tightening the belt. The Mayor’s budget proposal extends into 2021 several of the savings initiatives rolled out this year, including a hiring freeze; pay freezes for employees not represented by unions; eliminating travel and training budgets; reducing consultant budgets; deferring one-time expenditures on equipment, IT, and vehicles; and reducing staffing (up to 40 positions) in ways that don’t impact the community.
- Re-prioritizing funding. Where allowed, levy and other voter-approved funding will be redirected toward support for basic services. The City Budget Office confirmed that some of those changes will require the City Council to take legislative action.
The Mayor also left open some other questions. She will be asking the task force she is convening to recommend new sources of revenue to sustain the one-time $100 million investment in BIPOC communities into future years. In a press briefing this morning, she also made clear that she believes that Seattle should have a city-specific income tax (including the possibility of a flat income tax, part of which is used to reduce other, more regressive taxes), and that the payroll tax should be regional, not Seattle-specific, to avoid creating incentives for companies to shuffle employees between cities to avoid paying the tax.
How will the City Council react to the Mayor’s budget? There are parts that many of them will like, including the absence of “austerity budgeting” in many departments. But they may not be happy about the redirection of payroll tax revenues to support General Fund spending.
The Council will also likely push for many of its own priorities as it goes about editing the Mayor’s proposal. Things sure to be at the top of their list:
- Deeper cuts to SPD. Council members will continue to feel strong pressure from advocacy groups to slash SPD’s budget, including laying off more sworn officers.
- Reconciling community investments in public safety. The Council just put $3 million in its own department budget for 2020 to start a community-led re-imagining process for public safety, as well as $14 million for capacity building in community-led organizations. In the meantime, Mayor Durkan has allocated $100 million for BIPOC community investments and is launching a community-led task force to guide how the $100 million is spent as well. Having the City Council and the Mayor running independent, parallel efforts is the height of dysfunction, and the Council will no doubt have something to say about that.
- The Navigation Team. The Council cut the 2020 funding for the Navigation Team. The Mayor has not done so in the 2021 budget, but she said today that she expects to make a separate announcement this week about the future of the team and of responsibility for dealing with homeless encampments that present hazards and obstructions.
- Homeless investments. The Mayor put more money into expanding homeless shelters, but lately the Council has had strong notions of how such money should be spent. Expect at the very least some provisos.
- Transportation cuts. To the extent that there are capital projects cut or deferred from SDOT’s budget, the Council will want to make sure that they are spread around the city an not just concentrated in lower-income communities. There will also be debates about vehicle infrastructure versus pedestrian, bicycle and e-scooter infrastructure priorities.
Tomorrow morning, the Council begins its budget deliberations with three days of department-level presentations dissecting the Mayor’s budget proposal.
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