In a presentation to the City Council's Budget Committee today, Beth Goldberg, Acting Director of the City Budget Office proposed mid-year budget reductions for the City's General Fund. The reductions result in savings of $12.4 million dollars but eliminate 53 jobs.

Mid-Year Reductions:

In April, the CBO announced a projected $11.7 million General Fund shortfall for 2010. This shortfall is driven by three factors:
* 2009 ended with a negative balance of $4 million - $5 million less than projected when the 2010 budget was adopted - as a result of continued sluggishness in the economy and its related impacts on revenues (primarily sales tax and B&O tax).
* This weakness in revenues is projected to persist in 2010, resulting in $2 million less revenue than previously assumed.
* Expenditure pressures in 2010 that could add $5 million in additional General Fund costs.

In addition, the CBO announced a projected 2011 General Fund shortfall of $56 million.

As a result of the 2010 budget situation, the Mayor asked General Fund-dependent departments to submit mid-year reduction proposals for 2010. Most departments were asked to develop reductions totaling 3% of their General Fund budgets. Recognizing the importance of public safety and human services in protecting Seattle residents, Police, Fire and Human Services were asked to develop reduction proposals totaling 1.5% of their General Fund budgets. However, in light of the tragic events in the Fremont neighborhood over the weekend, no reductions to the Fire Department budget are being proposed at this time to ensure that the city has an opportunity to review impacts on public safety of any changes to the Fire budget.

Since a deficit is also projected for 2011, the Mayor asked city departments to develop 'on-going' reductions (i.e. reductions that will continue into 2011).

Including plans from multiple departments, the City Budget Office has developed a plan that will generate $12.4 million in savings to the General Fund for 2010, and will reduce the anticipated 2011 gap to just below $50 million.

Specifically, the plan captures $10.4 million in mid-year savings, an additional $300,000 in savings from a focused review of departments' travel and training budgets, and reductions in expenditure pressures of $1.7 million. These changes will result in the unfunding of 53.2 FTEs (Full Time Employee or equivalent) including 17 APEX/SAM FTEs ( Accountability Pay for Executive/Strategic Advisor or Manager). Of the 53.2 FTEs, 9.3 are currently filled. The incumbents in these positions have been notified. Layoffs will be effective July 20, 2010.

Looking Ahead to 2011

To close the 2011 deficit, Mayor McGinn asked departments to develop target reductions. Typically, departments are given a single target reduction amount based on a percentage of its overall budget. For 2011, McGinn decided to take a slightly different approach. In order to have a more complete and full discussion about programmatic trade-offs and priorities in the face of constrained resources, the Mayor is asking General Fund-dependent agencies to develop target reduction proposals based on a range, as follows:

Department Reduction Range
Police & Fire 1.0 - 5.0%
Human Services 5.0 - 10.0%
All Other Agencies 9.5 - 14.5%

Because Police, Fire and Human Services comprise such a large share of the General Fund (49%) and because there is a portion of the General Fund (13%) that is not subject to reductions (i.e. debt service payments and pension contributions), smaller reduction targets for public safety and human services functions, result in larger reductions for the remaining City functions supported by the General Fund. For example, 1.0% reduction to Police totals $2.5 million, while a 14.5% reduction to Parks totals $13.2 million. Conversely, a 5.0% reduction to Police totals $12.5 million, while a 9.5% reduction to Parks totals $8.7 million. In other words, we have some very hard choices - with distinct trade-offs - ahead of us. CBO and the Mayor's Office are working closely with departments to develop options for closing the 2011 gap. Again, emphasis is being placed on protecting public safety and preserving the safety net. In addition to exploring efficiency and reduction options with departments, we are also reviewing employee suggestions for cost savings ideas and have met with the unions to solicit their ideas. We have also approached the unions about potential options for savings in labor costs for 2011. Finally, we are also exploring revenue options to help close the gap. Closing a budget gap of $50 million will require a comprehensive approach.

The City's General Fund is not the only fund that is seeing constrained resources.

* Seattle City Light is struggling to contain costs in the face of double-digit increases in rates and a dramatic decrease in surplus power revenues as a result of low snow pack.
* Department of Planning & Development is seeing reduced permitting activity in the face of the depressed construction climate.
* Seattle Department of Transportation is facing challenges as a result of greater demand for Gas Tax revenues than is available.
* Seattle Public Utilities is seeing increased cost pressures from Federal and State regulations, as well as decreased revenues as a result of the weak economy.

Like with the General Fund, CBO and the Mayor's Office are working closely with these agencies to also contain costs in these departments.

The Mayor will present the results of this work to the City Council on September 27, 2010.

Seattle Parks Department proposes cuts
The Seattle Parks Department submitted an initial proposal for mid-year reductions totaling $2.5 million.

Here are the proposed reductions, which will take effect July 1:
· Transfer of surplus fund balance from the Park Fund to the General Fund. At the end of 2009, the surplus was $1.6 million and Parks will use about half of it ($0.8 million) to replace 2010 mid-year reductions (the remaining half will prevent some 2011 cuts). This excess fund balance exists because each Parks and Recreation employee spent only what was absolutely necessary in 2009.

· Reduction of $0.2 million in the Parks utility budget. Parks has been working to use water, sewer, gas, and electricity more wisely, and these efforts are apparently paying off. They anticipate, however, that utility rate increases will erase this surplus by 2011.

· They have identified savings of $0.1 million in training and travel by following the Mayor’s directive to limit expenditures on these items.

· They are holding one position vacant in the Superintendent’s Office and one in the Finance and Administrative Services Division for a total savings of about $0.1 million for the half-year.

· They will hold three park maintenance positions vacant in each Park District for the last half of 2010. This will save about $0.3 million but will have an impact on their ability to maintain high quality standards. The Parks Division is also working on some ways to test different reduction strategies this summer to try to identify the ways that have the least impact on the public.

· The only facilities that will close or will have their days of operation significantly curtailed are wading pools. For the summer of 2010, Green Lake, Volunteer, Lincoln, Magnuson, and Van Asselt wading pools will be open every day of the week through Labor Day. Ten wading pools will be open three days a week for an eight-week season beginning June 26. Ten wading pools will be closed (five of them for construction or conversion to spray features). Five are closed because of budget cuts. While this will have an impact on families and children, it will save the City $0.2 million.

Mayor Mike McGinn’s comment on 2010 mid-year budget reductions

“Seattle is facing difficult choices relating to the financial health of our city. In difficult times, we look to the values of our community, and seek to safeguard those values even while we are scaling back to meet budget deficits.

Over the past five months, I’ve held dozens of community town halls and met with hundreds of citizens and community leaders. Today’s mid-year budget release reflects the shared values of the community as expressed in those conversations.

Budget Director Beth Goldberg drafted a budget that is fiscally responsible, protects public safety and human services, and prepares us to deal with reductions in revenue in 2010 and going into 2011.

The tragedy in Fremont this past weekend gave us a concrete example of the importance of protecting our public safety budget; in light of that event, I am not proposing any reductions to the Fire Department, giving us an opportunity to fully review the safety implications of any potential reductions.

I am also pleased to announce that we’ve been able to keep our public swimming pools and community centers open through the end of 2010.

But, make no mistake. We continue to face difficult choices in the city budget, and the projected deficits for 2011 will require us to work even harder to provide the needed services.

We’ll continue to let our values as a community guide us in those decisions.”

Seattle City Councilmember Jean Godden's statement on Mayor McGinn's mid-year budget cuts

"I want to thank the Mayor and his staff for their thoughtful approach toward mid-year spending reductions. The Mayor has taken the appropriate steps to minimize the impact these decisions have on residents' daily lives.

"I am concerned that the Mayor has slowed the hiring of police officers this year. We remain committed to working with him to implement the Neighborhood Policing Plan as soon as possible.

"I look forward to working with the Mayor this fall to provide necessary public services while making the tough choices required to pass a balanced budget. We must brace ourselves for the deep impacts of cuts likely in the 2011-2012 budget process.

"The council has received considerable and heartfelt input from residents. These comments and peoples' commitment to a compassionate city inform our ongoing budget and economic development work."