The holiday season brings opportunities for reflection. In that spirit, I’d like to provide some reflection regarding my 2009 city budget proposal in the context of the national economic downturn and its local impacts.

The city of Spokane is in a somewhat enviable financial position this year compared to many other jurisdictions. Much of our current good fortune is due to careful financial planning over the past several years. During “boom times,” many other governments hired large numbers of employees and expanded their expenses. In Spokane, however, we funded our reserves and made one-time investments in our community. As a result, we are much better positioned to work through the difficult economic conditions facing us.

My proposed 2009 budget maintains current city services and staff levels, while retaining reserves of about $30 million (about 20 percent of the city’s general fund). The general fund pays for police, fire, libraries, parks and streets and is funded primarily by property, utility and sales taxes.

Early this year, when we first began to note slipping income, we started making adjustments to maintain services. We’ve tackled expenses ranging from requests for new employees to cell phones, from fuel purchases to application rates for de-icer. Nothing is beyond scrutiny as we search for ways to cut costs.

City services are critical – keeping the public safe, maintaining public infrastructure, supporting economic growth, protecting the environment, assisting the vulnerable. As we have reduced expenses, we have tried to retain core services.

We went through devastating cuts in 2004 and 2005, and thereafter adopted a number of budgeting principles that have positioned us well to endure ups and downs in the economy. We now use a six-year budget forecast as a foundation for annual budgeting.

As forecasts for 2009 worsened, a variety of decisions were made during the year to respond to negative news – a freeze on new positions that would increase the general fund; cutting in half the fund used for small capital improvements; and, perhaps most significantly, postponing the hiring of police officers and firefighting positions.

When the 2008 budget was developed back in 2007, we included 12 new police officer positions and six Fire Department positions, and planned to do the same in 2009. The officers are needed to complete the Neighborhood Policing Program and improve basic fire operations.

But in this changed economy, we have budgeted for only six police officers and one fire position, only for the second half of 2009 and only if we meet our revenue projections.

Although we made pessimistic assumptions about 2009 revenues, we also built contingencies in case 2009 is even worse, including: not hiring police and fire personnel at all; further reducing spending on deferred maintenance; and potentially accessing our untapped reserves.

This year we also made a needed accounting change. In past years, the city exempted a number of revenue items within the city utilities from taxation, including revenue collected for capital projects by the water and wastewater utilities. Correcting this accounting method resulted in an additional $4.5 million in revenue to the general fund.

We chose to pass this cost on to the utilities, rather than the customers, in 2009. We are taking a long-term approach to this issue, however, and have begun a comprehensive utility rate study to guide future use of utility taxes and examine options to reduce costs in our utilities. Ultimately, we would like to reduce the utility tax rate if we can keep the utilities financially whole while doing so.

There is tough work ahead of us. We developed the 2009 budget as part of a two-year balanced budget strategy and plan to formally revisit our budget at midyear 2009 to address anticipated changes in the economy.

To reach our 2010 goals, we need to cut $2.3 million from the general fund, and we are already hard at work finding ways to make these cuts without reducing service levels to you, our citizens.

We are aggressively and systematically pursuing suggestions raised by our employees, City Council members and citizens, exploring alternative service delivery models to determine their cost-effectiveness. Meanwhile, all city departments continue to deliver essential services with fewer resources.

These economic times present an opportunity to be thoughtful. We must find new ways of doing business. We must bend to changed conditions without breaking our commitments to our citizens.

On reflection, I believe my proposed 2009 budget is a good compromise that considers the nation’s economic realities and Spokane’s needs. It is a reasoned approach in an uncertain time.