Mayor Greg Nickels announces Seattle faces at least a $50 Million General Fund budget gap in 2003
Mayor orders budget cuts

General Fund Spending & Employment, 1997 and 2002

City of Seattle Budget Problem:
Page 1 | Page 2 | Page 3 | Page 4

Calling for "fundamental change" in the way city government does business, Mayor Greg Nickels today directed departments to make substantial spending cuts as they prepare their 2003-2004 budgets. The police and fire departments will cut their budgets by five percent; all other departments must cut their budgets by at least nine percent.

The cuts to the 2003 baseline aim to close an estimated General Fund budget gap for 2003 that has grown to at least $50 million, up from a January estimate of a $30 million to $40 million gap. Estimates are based on revenue projections derived from assessments of the local and national economy, and on a "baseline budget" that represents maintaining current programs plus inflation, and adding operating costs for new facilities.

The mayor said he wants to look at a variety of actions to save money and increase efficiencies in city operations. The options include consolidating city departments and making reductions in the city work force.

"With these latest revenue forecasts, it's clear we must get control of spending now - city government must start living within its means," Mayor Nickels said. "In the 2003-2004 budget, I plan to cut overhead first and direct services last, protecting basic services as much as possible."

City expenses since the mid-1990s have steadily increased while revenue growth has declined:

• Seattle has added about 1,000 full-time equivalent employees since 1998;
• Councilmanic debt (City-issued debt that does not require voter approval) has steadily increased since 1995;
• The city's employee health care costs have steadily increased since 1997;
• In 2001, tax revenue growth slowed considerably and barely kept pace with inflation; this year, revenue growth is expected to fall far short of inflation; and
• In 2001, for the first time in more than 31 years, sales tax revenue was less than the amount collected the previous year. (Sales, and business and occupation taxes traditionally fall when the economy declines.)

Nickels' 2003-2004 spending guidelines, based on the city's General Fund revenue forecast, were released to departments today. These guidelines are the first official signal of how much city departments, particularly those who receive General Fund support, will have to cut from their 2003-2004 budgets.

The city budget process lasts several months. The mayor will formally present his proposed budget to the council in September.

In January, Nickels announced the city faced a General Fund shortfall of at least $30 million in 2003. In mid-March, to better prepare the city for dealing with the 2003 challenges, Nickels announced a package of spending reductions for 2002 that included:

• $37 million in spending reductions by Seattle City Light;
• $11.6 million in spending reductions by Seattle Public Utilities; and
• $7 million in spending reductions by General Fund-supported departments.

The mayor also extended the city's hiring freeze through the remainder of the year.

City Finance Director Dwight Dively emphasized that while the city faces a serious short-term budget problem, the city's long-term fiscal health is good, noting it has more than adequate reserves to meet its long-term obligations.

Nickels' 2003-2004 budget will reflect further spending reductions while incorporating his overall priorities for Seattle. Departments submit their 2003-2004 budget and 2003-2008 Capital Improvement Program to Department of Finance on July 1. Nickels will spend July and August making his budget decisions, presenting his 2003-2004 budget to the City Council September 23. The Council is expected to adopt the budget by late November once it concludes its deliberations. State law requires the city budget be balanced.