This fall, the City of Seattle will begin its annual budgeting ritual. If you have heard anything about the city’s current financial picture, you’ve probably heard about deficits and spending cliffs, crippling inflation – and without significant revenue increases – austerity and the end of critical programs.
Those soundbites are obscuring the real story, and they do us all a disservice. Budget talk isn’t the most headline-grabbing of topics, but the basics and the facts matter when you’re trying to solve problems.
For the last 9 months, I’ve been participating in a city-convened Revenue Stabilization Work Group and today the city issued a report on the group’s efforts. Based on the work done in that group, as well as the work we have done internally here at the Chamber, we’ve broken down the facts and analyzed the numbers.
The punchline? The City has collected new taxes totaling over $1 billion between 2021 and 2023, and General Fund revenues have grown every year for a decade. The city has a spending problem, not a revenue problem.
First, Seattle’s General Fund revenues – the money that pays for things like public safety and homelessness – are growing, not declining. From the report: “From 2017 to 2023, General Fund revenues grew, on average, 3.7%.” This figure does NOT include $300 million annually in newly adopted taxes – more on that in a minute.
Second, despite growing revenues, the city has been spending more than it is taking in. From the report: “From 2017 to 2023, the city’s General Fund expenditures have grown, on average, 5.5%.” This was true even though inflation during most of those years was 2.7%, and population growth was less than 1%.
Additionally, the city is on pace to have an eye-popping $221 million deficit in 2025, and an additional $207 million in 2026. These increases are not being driven by new services but by assumed increases in labor agreements yet to be negotiated. From the report: “85% of projected expense growth is due to anticipated labor agreements.”
Third, since 2017, the city has adopted a new payroll expense tax, a new tax on sugary drinks, a new tax on short-term rentals, and a transportation network company tax. These, together, amount to $300 million annually, but the city chose to restrict those funds from paying for things in the General Fund like public safety or homelessness spending. From the report: “Restricted: Dedicated taxes restricted by City ordinance (e.g., JumpStart Payroll Expense Tax, Sweetened Beverage Tax, Admissions Tax, Transportation Network Company Tax): $.3 billion.
Pulling that all together: the city has collected new taxes totaling over $1 billion between 2021 and 2023. With the exception of 2020, the city’s existing general fund revenues have grown every year in the last decade, and even in 2020, the city received an infusion of federal funds, over $300 million, well exceeding lost revenue. These are the facts. And if there is a problem with the budget, the facts suggest that it is a spending problem, not a revenue problem.
But you wouldn’t know all of that based on the soundbites.
Lack of budget transparency, accountability, and practical problem-solving is why voters remain frustrated with the city’s response to its public safety crisis, a protracted homelessness crisis, and trailing housing affordability – a fact we know based on our public opinion research. And despite all these additional taxes, progressive revenues, and increased spending, we have fewer officers in SPD, no police alternatives at scale, a fentanyl crisis that is killing people every day, and more people experiencing homelessness. That’s why the Index also found 65% of the voters don’t currently trust the City of Seattle to spend their tax dollars responsibly and 82% don’t believe the city has an effective plan to address the critical issues we face.
So what should we do now? The report offers four approaches to solving its spending problems:
- Spending Reductions
- Re-Purpose Other Revenues and Reduce Spending Accordingly
- Grow the City’s Tax Base
- New revenues
In order to cover the anticipated budget deficit with new revenue – with spending at the current pace and new revenues still restricted – the city would have to adopt a new $225 million tax each and every year beginning in 2024. That’s not the answer.
Instead, the city should take these actions in this order:
- Get spending under control
- Revisit restricted revenues for General Fund use
- Grow the city’s tax base
The last consideration, not the first, should be new revenue.
City leaders should be doing everything in their power, every day, to generate and encourage economic activity – especially downtown, like Mayor Harrell is doing with his Downtown Activation Plan. They should also look at reducing or eliminating services that do not meet measurable outcomes, are duplicative of other agencies or entities, are no longer aligned with the city residents’ current priorities, or have grown faster than real-world demands. And they should look at all these expenditures against all revenues and then align clearly articulated plans to make progress against them. The list in the report is right, but it is backward. To be blunt about it, city leaders need to show that can govern in a way that gets results before there is any discussion of new revenue.
So, let’s do that! Let’s have a budget reset that brings daylight, transparency, and accountability to the process. Let’s have honest conversations about what’s working and what isn’t, what’s really important and what’s not, what’s showing promising results or was just a nice idea, and then let’s adjust our spending priorities accordingly. Let’s abandon the status quo that hasn’t delivered results and chart a new course of action predicated on getting things done for residents of this amazing city.
The city’s budget process starts in September, and we hope you will be a vocal advocate. If you want to learn more about opportunities to make your voice heard, click here.