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Sunday, August 9, 2020  Spokane, Washington  Est. May 19, 1883
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City of Spokane braces for budget cuts

UPDATED: Mon., July 20, 2020

Spokane City Hall, as seen in 2012. Spokane officials are planning for significant budget cuts caused by the pandemic.  (JESSE TINSLEY)
Spokane City Hall, as seen in 2012. Spokane officials are planning for significant budget cuts caused by the pandemic. (JESSE TINSLEY)

Lawmakers in the city of Spokane are working to cover a nearly $19 million budget shortfall in 2020.

City officials discussed a menu of options to make up the gap on Monday that included refinancing city debt, dipping into city reserves, and slashing department budgets.

City Chief financial Officer Tonya Wallace briefed the Spokane City Council’s Finance and Administration Committee on a budget proposal that would combine all three cost-saving measures without resorting to layoffs or furloughs. But the fiscal outlook remains troublesome in 2021, when the city’s finance team expects Spokane to face a $14 million deficit.

Although the solution will be complex and the impact long-lasting, the problem is relatively simple. As the economy slowed due to the coronavirus earlier this year, so too did the revenues brought in by the city of Spokane.

Sales tax accounts for nearly one-quarter of the city’s $207 million in general fund revenue. To date, sales tax revenue is about 14% below the target for 2020. After a stellar first three months of the year, the economic turmoil brought on by the coronavirus caused taxable sales to drop noticeably compared to the same months last year.

Because the money it takes in through taxes and fees will be less than anticipated, the city is left with few choices.

The plan proposed on Monday calls for closing the 2020 fiscal gap with an $8 million reduction in department spending, the use of $6.4 million from city reserves and $4.3 million in savings from refinancing a public safety loan the city took out in 2014 to buy police and fire vehicles and other equipment.

The plan does not call for layoffs or furloughs of existing employees, largely because the city implemented a hiring freeze in April. To date, the city has saved $4.8 million in the salaries of positions that have gone unfilled. An additional $1.6 million has been cut from city supplies and services, and $1.2 million in other cost reductions have been made.

Because positions have gone unfilled, “departments are really going to have to manage that workload,” Wallace said.

“That workload, if it’s there, is going to fall to existing staff,” Wallace said.

Longterm, the city will have to look at ways to find greater efficiencies, she added, because residents expect city government to continue to provide services.

The outstanding amount on the public safety loan, taken from the Spokane Investment Pool, a fund of city reserves that’s invested, totals $19 million. It will be extended over 15 years and cost savings will be realized immediately, but the loan can be repaid at any time.

The city’s reserves totaled $44.5 million as it entered 2020. Wallace emphasized that, compared to many other cities, Spokane is in a good position to handle the current financial stress because of its stable reserves. But she warned that the city needs to continue to be prudent and careful.

The cuts were proposed Monday after every city department was asked to contemplate how cuts of 6% and 12% would impact their budgets. The city’s finance staff reviewed the departments’ submissions to formulate its plan, which prioritized limiting the cuts’ impact on existing employees and maintaining core city services.

With the City Council’s input, city staff will craft a special budget ordinance to enact the plan.

The city also will contemplate one-time investments to help restart the economy, Wallace said. She argued spending that generates economic output from local businesses would ultimately benefit the city’s revenues.

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