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The Perfect Budget Storm 

Mayor West presides over a shrinking city

At a press conference at Spokane City Hall last week, Mayor Jim West, looking like he'd just lost a favorite uncle and flanked by a projection of forbidding budget numbers, lamented that "It was not my desire to preside over a shrinking city."

On Tuesday, the former chairman of the state Ways and Means Committee in Olympia -- the top acrobat in the state's budget balancing act -- presented to the city clerk's office his 2005 line-item budget proposal. It's a document $12 million and 126 jobs lighter than the mayor ever expected.

The details, by now, are familiar. Mayor West's budget is a slash-and-burn job of cut programs, reduced funding and laid-off city employees. His office has advocated reducing city fire stations to four-man units, laying off police officers and collapsing management ranks, trimming down libraries' operational hours, cutting funds to the Parks Board and chopping services to youth and seniors. It's the ugliest financial moment in many decades, a regular Nightmare on Post Street.

City officials are calling it "the perfect storm," meaning that the budget crisis that faces Spokane today is the product of a number of slowly brewing systems that have been weakly restrained for years, but are now striking in tandem. Do Charley, Frances, Ivan, Jeanne and Bonnie ring a bell?

The first monsoon, the catalyst, came ashore in January, in the form of a budgeting shortfall. When in 2003 the city wrote its budget, it planned for $114 million in revenue but padded its spending limit, thinking it would still have $9.8 million in the piggy bank by year's end. When the piggy only coughed up $6.7 million in 2004, that left the city with an almost $2 million gap between the revenue they expected and the money they'd already committed.

Any kid with a lemonade stand will tell you that you can't buy all your fruit in February; if the summer's soggy, you'll be broke by July. But for years, West says, the city's been doing just that -- spending more money than it takes in.

Today's city officials point to that kind of fiscal management as one of the reasons for the current budget crisis. Gavin Cooley, who took over as the city's chief financial officer in the spring of 2003 under Mayor John Powers, says, "It was apparent from the day I arrived that the budget was in serious difficulty...[it's] been eroding for a long time."

That erosion, he says, is due in large part to previous administrations fowarding their problems on to the next administration. "One mayor can leave another mayor just sucking wind," Cooley says.

So far Mayor West has been sucking typhoons. The biggest of these has been a series of long-deferred disputes with labor groups from uniformed police officers to firefighters. The former has been resolved; the latter will be hashed out in the coming months, though the mayor said recently that it's "not looking good." The cost of these negotiations has, so far, run $4 million over budget; by way of context, that's about how much the city spends per year in maintaining its streets.

The other big storm has been the recent astronomical rise in the cost of health insurance. Though it's affected Spokane for years, the price tag for employee health insurance hit the city hard in 2004, and may hit even harder in '05. City officials say that such costs will rise 19 percent next year. Mayor West suggests that this was at least partially due to a deferral by city officials to recognize those rises.

City spokeswoman Marlene Feist clarifies, stating that there was a "decision by previous administrations to minimize insurance impacts on the budget" -- meaning that instead of acknowledging the soaring cost of health insurance and working it into the budget, officials simply softened the blow with money from the piggy bank. Now that the bank is nearly empty, the city will finally feel the full effect of that increase.

But while expenses have waxed, revenues have waned, particularly from the state and federal levels. Though the flow of sales taxes to Spokane has kept rising at a slightly promising 2.5 percent increase in 2003 and 2004 (and probably 2005), other state revenues have been in a steady downward spiral.

The 2000 passage of I-695, which set the cost of license plate tabs at $30 for Pintos and Hummers alike, has cost Spokane $4 million a year, and all Washington cities over $100 million a year. Gas tax revenues have also declined, in some part due to increased diffusion of state money as more cities in Washington incorporate (like Spokane Valley). Meanwhile, other Washington cities have considered un-incorporating because they don't have the money to keep their doors open. That's a fact city officials like to point out -- Spokane isn't alone.

Other officials point to e-commerce and Homeland Security as sources of the city's current budget woes. Internet commerce alone, suggests Cooley, has cost the city a couple million dollars per year, as Spokane residents shop online without paying any sales tax. Meanwhile, Homeland Security has imposed greater restrictions on local law enforcement, while moving more funds to the state level for equipment and technology.

Higher costs, more expenses, less revenue, arbitration, procrastination, miscalculation, the security of a nation -- all of these storms have buffeted Spokane this year, taking the city's budget from a comfy surplus to a $2 million gap to an almost $5 million crater. Hence Mayor West's first round of one-time and permanent cuts, in which he finally balanced the city's 2004 budget in September.

But if the September cuts were a tourniquet, the 2005 budget is a lobotomy. Not only does it represent a considerably downsized city government, but some city officials see it as a statement about Spokane's very identity -- that the city has to stop living on borrowed time, spending money it doesn't have. The city does hold a modest private reserve (estimated at a little over $4.3 million), but on Monday night, Mayor West proposed using some of that money to fund early-retirement programs for city employees. Despite this plan to dip into city savings, Mayor West, like other officials, insists that "we must live within our means."

After West turns his budget over to the City Council this week, council members, with public input, will review and possibly change the budget, then vote on it and return it to West for his signature (or veto).

Many citizens are already planning to defend their favored programs, from police to libraries to senior centers, and a series of public hearing scheduled over the next few weeks should be lively. The entire process is expected to be wrapped up in December.

If the budget cuts hurt the local quality of life, however, the budget process may provide a silver lining of sorts. Though it's been met with frustration by some city employees, many others have already begun to sing the praises of the new Priorities of Government system, which prioritizes city services within seven broad categories and compels city department heads to provide detailed bids for services they want the city to buy. Citizens can even try the Priorities of Government budget system on the city's Web site (see "Sim Spokane," page 15).

In the midst of a budget crisis, CFO Gavin Cooley says, "I think we've probably got the best budget system ... maybe in the country right now." Not only does it emphasize fiscal and performance-based accountability, and Mayor West's brand of use-the-money-you've-got philosophy, but, Cooley says, "POG is about doing what you do better," providing fewer, but better services. "It has a lot to lend [to] a building-up of the budget." The city has even begun to preach the system to cities across the country, including Austin, Texas. Selling its knowledge and experience could actually become a modest revenue stream for the city.

So it's a shrinking city, but city officials, at least, say it's only shrinking to its natural size -- the size it can currently afford. Nobody's singing "Blue Skies" yet, but from here, there's gotta be nowhere to go but up. Right?


The Spokane City Council has scheduled a series of public hearings to allow citizens to discuss the proposed cuts. On Monday, Nov. 15, they'll look at three categories: Leadership, Strong Economy, and Mobility. On Monday, Nov. 22, the entire session will be devoted to Public Safety. On Monday, Nov. 29, three categories will be discussed: Healthy Citizens & amp; Environment, Growth & amp; Learning, and Reduced Vulnerability. At the final meeting, on Monday, Dec. 6, the citizens can testify as the entire budget will be reviewed. For more information, call 625-6740.

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