Though $1.7 billion is a far cry from pocket change, it averages out to a 5.8% annual increase over the five-year period, a time when annual inflation was about 5%.
“We’re barely treading water there. [The budget growth] is primarily driven by baseline and technical adjustments, responding to historically high inflation,” said Aly Pennucci, deputy director of the City Council’s central staff at an April 17 Budget Committee meeting.
Those are the topline takeaways from the staff’s new five-year budget analysis. The analysis comes as the city grapples with a projected $241-million-and-counting budget deficit beginning in 2025.
Released April 30, the 224-page analysis digs into every department’s budget from 2019-2024 to understand how and why the city budget has changed — a far deeper dive than the City Council usually performs when tackling annual budget writing.
“What we have before us is something that’s never been done by central staff in the last 25 years,” said Councilmember Dan Strauss at a May 1 Finance, Native Communities & Tribal Governments Committee meeting. “This document is going to inform our work throughout the remainder of the year.”
A chart from the Seattle City Council showing total budget growth.
The projected deficit loomed over last year’s City Council elections, and Councilmembers Joy Hollingsworth, Bob Kettle, Cathy Moore, Maritza Rivera, Rob Saka and Tanya Woo all promised to perform an audit of the city budget before taking any other steps to close the gap.
Seattle is legally required to have a balanced budget, and has relatively few tools available when its revenues don’t match spending. City leaders can cut staff and services, they can raise taxes, loosen restrictions on taxes earmarked for certain programs, and they can nibble around the edges with things like hiring freezes, which Mayor Bruce Harrell implemented in January. The new Council majority has said they’d prefer to find places to cut before considering any new taxes. and the deep analysis is meant, in part, to help them figure out where to do so.
The analysis is organized in an upside-down pyramid, with each layer showing how much the budget has grown over five years. The top layer is total budget growth from 2019-2024. The next layer separates departmental budgets into six policy areas — Administration; Arts, Culture and Recreation; Education and Human Services; Livable and Inclusive Communities; Public Safety; and Utilities, Transportation, and Environment — and groups each city department into one of them. And finally, the document looks at each department’s major program areas to identify where the growth stems from.
The Livable and Inclusive Communities policy area — which includes the Office of Housing, Construction and Inspections, Economic Development, Civil Rights and more — saw the largest five-year growth. Budgets in that grouping grew by $363.8 million or 174% since 2019. Much of that comes from the $270 million growth in the Office of Housing budget as the city has rapidly expanded its investment in subsidized affordable-housing construction.
The Education and Human Services policy area had the next largest five-year growth, up $196 million or 65% since 2019. More than $142 million of that increase comes from the Human Services Department, which contracts with nonprofits to provide social safety-net programs to address homelessness, food insecurity, elder care and more.
The city’s internal operations costs have also risen sharply in the past five years. The Administration policy bucket — which includes IT, human resources, the mayor’s office and the legislative department, among others — grew by $387.2 million, a 33% increase. At the May 1 Finance Committee meeting, Strauss said he was interested in digging much further into that policy bucket to understand the cost increases.
Rounding out the policy areas: Arts, Culture and Recreation grew by $109.7 million or 28%; Utilities, Transportation and Environment grew by $573.6 million or 17%; and Public Safety grew by $115.1 million or 16%.
A chart from the Seattle City Council showing budget growth by policy area.
Tom Mikesell, a central staff policy analyst, explained at the April 17 meeting that about 75% of the five-year budget growth stemmed from budget amendments meant to keep up with inflation — whether from expenses and fees the city pays or from worker wages. Those labor costs include wage increases for city employees as well as for workers the city has contracted with to provide services.
Pennucci pointed out that although labor costs have increased, the city’s workforce has not expanded significantly. Between 2019 and 2024 the city added only 591 full time employees.
The City Council recently voted unanimously to increase wages for about 7,000 unionized city workers along with another 3,000 non-union city workers. The roughly $10 million in additional costs for the city is already reflected in the $241 million projected deficit for next year. That deficit will increase further thanks to significant back pay the Seattle Police Officers Guild just negotiated in its recently approved contract.
Although the central staff analysis is far more in-depth than normal, it does not provide granular details about whether a given program should be deemed successful or might be susceptible to cut. At the May 1 Finance Committee meeting, Strauss and Councilmember Maritza Rivera both encouraged their colleagues to dig even deeper into the departments that fall under their committee assignments.
A chart from the Seattle City Council showing revenue versus inflation over 10 years.
The city’s budget deficit stems from pandemic fall out. After a decade of steady growth and low inflation, tax revenue dropped precipitously in 2020. Tax revenues have recovered some since, but property, retail sales, business and occupation, and public utilities taxes are all still lagging. High inflation is exacerbating the deficit.
Council staff chose the 2019 budget as the baseline for their analysis because that was the last year the city’s revenues matched spending. During the pandemic, Seattle relied heavily on one-time federal grants to close the deficit. The city also took money from the Jumpstart Payroll Tax on large businesses, which has continued to outperform expectations.
Jumpstart revenues are meant to be spent only on affordable housing, economic revitalization for small businesses, the Equitable Development Initiative and Green New Deal climate programs. For the past several budget cycles, however, the Council has voted to allow one-time uses of Jumpstart to close gaps, including shifting the 2024 budget $85.6 million of the roughly $395 million Jumpstart is projected to raise this year. The Council could draw from Jumpstart again to close next year’s deficit, though doing so takes money away from its intended housing, climate and economic development goals.
In addition to taking on the deeper budget analysis, the City Council is diverting from the normal budget process by starting things much earlier. In a typical year, the Mayor’s Office drafts its proposed budget in the spring and summer before passing it off to the City Council for amendments, balancing and final adoption in September. This year, the Council held its first Budget Committee meeting in April.
