Olympia presents a plan to shrink $11.8M operating budget deficit for 2025

Olympia City Manager Jay Burney presented a plan to the City Council to reduce a projected $11.8 million deficit in the city's 2025 operating budget to $6.7 million through staffing reductions, delayed hires, and revenue adjustments.

"We're at a time where we may need new revenues, but we're also at a time when we need some permanent reductions," Burney said at the city council meeting on Tuesday.

Burney explained that the city had initially faced an $11.8 million deficit in the 2025 operating budget.

Through extensive work with department directors and the finance team, Burney claimed he has brought that balancing position down to $6.7 million.

Baseline adjustments

Burney enumerated some of the key baseline adjustments made to achieve this reduction:

• Wage Increase: Burney adjusted the proposed wage increase for independent employees from 3.42% to 3.8%, adding $160,000 to the budget.
• Workers' Compensation: By reducing the workers' compensation rates, the city was able to save $140,000.
• Pay Equity Study: Burney reduced the budget for implementing the class and compensation study from $2.5 million down to $1 million, saving $400,000.
• Facilities Budget: The city made a $640,000 reduction to the facilities operating budget.
• Capital Fund Balance: Burney proposed using $865,000 from the facilities capital fund balance to help balance the budget.

In total, the city manager said these baseline adjustments allowed the city to reduce the initial budget deficit by $2.4 million.

Staff Reductions

"We're going to have a lot more conversations about potential reductions when it comes to our expenses, but I wanted to get an early start on looking at possibilities for permanent reductions and or some funding transfers," Burney told the councilmembers.

One proposal involves shifting some customer service positions that handle parking citations to be funded by the parking fund, rather than the general fund.

Burney also said the city has a claims manager position set to retire, and he feels comfortable holding that position vacant for about six months, which would save $66,000.

The most significant staffing reduction proposal was eliminating one of the two assistant city manager positions. Burney explained this would be a permanent reduction. In addition, the city manager proposed eliminating the Office of Performance and Innovation and its director position, with the performance management work being absorbed into the city manager's office.

Burney proposed that Debbie Sullivan would remain as an assistant city manager in 2025 to help with special projects like community oversight of law enforcement and the youth council. Then, when Sullivan retires in 2026, Stacy Ray, the former director of the Office of Performance and Innovation, will become the sole assistant city manager alongside him.

Burney said the city would eliminate the vacant position in the Office of Performance and Innovation, but he proposed keeping the Performance Management Specialist position to continue the work of performance management and communication with the community. "I believe we can do all of that work within a new structure, within the city manager's office," Burney said.

In total, Burney said these staffing reductions would save the city $454,000 in the 2025 budget. He emphasized the need to make tough choices, starting with reductions in his own office, to address the budget deficit.

Delayed Hires

Burney also outlined several positions that the city plans to delay hiring for the 2025 budget.

In the police department, Burney said the Olympia Police Chief Rich Allen recommended holding off on hiring two community service officers, a new crime analyst, and an outreach specialist for the coming year, without significant impact on operations.

Olympia Fire Department Chief Matt Morris felt comfortable delaying the hiring of a BLS (Basic Life Support) position and a CARES position, as the department has already hired a significant number of employees for those programs.

Burney also noted that the finance director position, which is currently vacant, will remain unfilled through the first quarter of 2025.

During the Finance Committee meeting on Monday, Burney announced that Aaron BeMiller, who held the Finance director position, left Olympia.

In total, Burney said the staff reductions and delayed hires would save the city approximately $1.4 million.

Burney also recommended a series of revenue adjustments and fund transfers, including maintaining current sales tax projections to gain $1 million, increasing business and occupation tax revenue by $530,000 from a new audit team, and using $300,000 from the insurance trust fund balance, totaling approximately $2 million to apply towards the $11.8 million budget deficit.

Burney mentioned several directions he issued to department directors. In addition to asking them to limit spending for the rest of the current year, Burney said he has asked all department directors to provide recommendations for what a 7% reduction would look like within their departments.

"A 7% reduction across your general fund is about $6.7 million," Burney explained. "I'm not at this point recommending that you cut $6.7 million out of your budget, but I do think we need to get at it. I think we need to try to cut it in half, at least, at least try to cut three, three and a half, $4 million permanently moving forward, to get at your bow wave."

While Burney noted he has not made a final decision on the hiring freeze – from Oct.1 to the end of the year, he believed it would be an additional measure to help the city save money and build up its financial capacity leading into the 2025 budget.

The discussion on budget balancing will continue in October.