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With cuts beginning, officials sorting out COVID-19 budget damage from Seattle City Hall to Olympia

A view of Seattle during the COVID-19 crisis

Doesn’t look so bad from up here (Image: CHS)

As COVID-19 rages on both locally and nationally, one big question that looms over governments at all levels is what this means for budgets and the services they fund.

With weakening revenue forecasts and increasing unexpected expenditures, Seattle and the state are scrambling to rejigger budget estimates as they constantly evolve in a rapidly changing situation as a virus with over 7,500 cases as of Saturday rages on in Washington.

Seattle City Council member Teresa Mosqueda, who chairs the council’s Finance and Housing Committee, has been holding weekly check-ins with the City Budget Office to assess the impact this could have.

The 40% of the general fund made up by sales and business and occupation taxes is going to get hit pretty hard with less activity in the city, CBO director Ben Noble said. The B&O tax is paid quarterly and the sales tax comes on a six-week lag, meaning it can take time to fully understand the shortfalls that could result from such a devastating pandemic.

“We’re kind of blind to the impact in the moment and we don’t know how long this is gonna last,” Noble said. “There is a tremendous amount of uncertainty.”

The federal relief bill might give the city some “flexible money,” according to Noble, but not much.

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There is a hiring freeze in the city for jobs not related to the response and departments cannot sign contracts unrelated to COVID-19. The city, however, is also spending money on things it didn’t expect to, including more than $1 million on personal protective equipment like masks and gowns for police officers and firefighters. The city is also working with the county to “de-densify” the shelter system for more round-the-clock operations and to create more room between patrons, which also costs more.

Noble notes that much of what the city is spending on right now might be reimbursable from the federal and state governments and the budget office is working on that now as well as preparing a budget estimate that will probably be ready in a couple weeks.

The only way to save money as a city, Noble said, is laying off or furloughing workers, which is “an abstract possibility.” What is more likely is that these workers will be redeployed to other jobs related to the response to the virus. For example, parks staff have been working at shelters and if the city is forced to get into the meal delivery business due to social distancing, that could require additional staff.

The city has $125 million in emergency reserves in the $1.5 billion general fund, which will help “cushion this,” Noble said, but for now the biggest issue is time and how long that money could last.

“We don’t quite know how long we’re going to be home and what the impact will be,” said a council aide with knowledge of the budget process, who spoke on the condition of anonymity because she was not authorized to discuss the effects.

Until the CBO releases its economic revenue forecast, questions persist about how drastically this could affect the city especially as extreme social distancing continues for at least another month.

The council will likely get more information soon about how any shortfalls could be aided by backfilling from the federal government.

The situation is similarly fluid at Sound Transit, which has reduced its service and suspended fare enforcement amid the pandemic. Sound Transit CEO Peter Rogoff said at its March 26 board meeting that ridership has fallen by more than 80%.

“We won’t be able to really assess the impact of the epidemic until things settle down more,” Sound Transit spokesperson John Gallagher said in an email.

At the meeting, Tracy Butler, Sound Transit’s chief financial officer, outlined the financial impacts of COVID-19 on the agency, saying that a recession would threaten to close 90% of funding sources, such as sales tax and fares. She noted that the American Public Transit Association has estimated a 75% decline in sales tax revenue.

Like other levels of government, Butler emphasized the unknowns still up in the air in terms of the magnitude and length of the financial impacts of COVID-19, but she said a recession is most likely, which could jeopardize affordability and project timelines.

“The epidemic has created high market uncertainty, which has potential consequences for our program costs and delivery schedules,” Rogoff said.

Early estimates from Sound Transit show that it will receive about $152 million in relief from the federal government after Congress passed a stimulus package last month and Rogoff said at the meeting that he hopes additional federal resources will be specifically directed to agencies disproportionately impacted by the loss of sales tax revenue.

At the state level, Gov. Jay Inslee has vetoed $445 million in spending from the state operating budget, which included money for paraeducator training, school counselors in impoverished districts, and fighting climate change.

“Under normal circumstances I would not veto bills that are good policy and smart investments over time, but, simply put, these are not normal times and we cannot sleepwalk our way through this fiscal crisis that the state of Washington will be in in the months, and perhaps years, to come,” Inslee said.

Over the weekend, King County reported its 208th death due to COVID-19. More than 330 people have died across the state.


More coverage…

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