Seattle Faces Nearly $43 Million Budget Deficit

Deborah Wang
04/07/2009

Seattle's Mayor Greg Nickels is working on finding more ways to cut the city's budget. The city's finance department issued new revenue estimates yesterday that show a 43 million dollar budget gap.

The city's finance director, Dwight Dively, says the last time he had to issue a revenue projection, back in November of 2008, the global financial crisis had just hit. Dively says nobody really knew what the effect on the city's revenue would be.

Dively: "At the time we had to do our last revenue forecast, we had no data, real data of what had happened to the economy since the financial meltdown in mid–September. So we had nothing to base a forecast on."

Since then, Dively says, what we have seen is the worst recession since the Great Depression. The nation has lost 3 million jobs lost in the last five months. And consumer spending has nearly ground to a halt.

Dively: "People who still have jobs are saving a lot of money because they are afraid they are going to lose their job. And while that is normally a good thing, in a recession when people are saving money it means they are not spending money, and therefore they are not buying stuff and therefore we are not collecting any sales tax."

And the effect on the city's budget has been dramatic. Sales tax revenue is down 10% from its peak, and business and occupancy tax revenue is down 8%. Those two taxes account for about 40% of the city's general fund. That pays for basic services like police, fire and human services.

Seattle also collects an excise tax on real estate transactions. With the real estate market in the tank, the city brought in 60% less revenue from the tax last year than in 2007.

So the city is now faced with having to balance a budget that is close to $43 million out of whack. City Council member Jean Godden says the mayor and the council are not likely to cut money from essential services, like police and fire. She says they are looking at all other discretionary spending.

Godden: "Well, we may not do as much park maintenance. Unfortunately we may have to look a bit at libraries, we've asked the Library Board to look at it. We also are not inclined to want to take and make layoffs, there probably have to be some but we will hope that those can be kept to a minimum."

Godden says the city may draw down its $30 million rainy day fund. But that money is not enough to plug the entire gap. The city expects another $40 million deficit for 2010.

The Mayor has already directed city departments to trim their budgets, and has cut salaries of some city executives. He is expected to announce the next round of cuts sometime in the next few weeks.

I'm Deborah Wang, KUOW news.

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