Thurston County budget team warns of multi‑million structural shortfall; proposes quarterly monitoring and containment planning

Thurston County budget staff told the Board of County Commissioners on Feb. 26 that recent state revenue volatility and local receipt patterns have increased the risk of a recurring structural deficit and that staff will present quarterly updates and containment options before building the 2026–2027 biennial budget.

The budget office’s presentation, led by Summer Miller, budget manager, showed that Washington state’s general fund revenue forecast shifted by roughly $400 million between late fall 2024 forecasts and later revisions. Miller said November 2024 collections were about 1.3% lower than forecast (just under $78 million), December was about 1% lower (about $47 million), and January 2025 reversed that trend with receipts about 2.6% higher than forecast (about $61 million). The department said those month‑to‑month swings underline a need for more frequent monitoring.

County staff ran multiple forecast scenarios that assume limited out‑year growth. Using the county’s longstanding model, staff showed 2024 projected year‑end general fund revenues of about $124 million (budgeted) with actual receipts just under $123 million — a gap of roughly $2 million to date. The presentation estimated the county’s 2024 fund balance at just under $27 million and highlighted a projected ongoing annual shortfall that staff said averages roughly $10–14 million under current assumptions.

Miller and county financial staff described three illustrative responses: (1) maintaining current practice (the baseline forecast), (2) a 6% county‑wide “containment” (expenditure reduction) exercise layered on historical 3% reversion assumptions, and (3) a 10% containment exercise. The 6% scenario still yielded a steadily declining fund balance and a negative position in out years; a stylized 10% containment scenario reduced the deficit trajectory further but left a small fund balance (about $964,000 projected in 2034 in that exercise), which staff said remains far below prior levels.

County managers emphasized that the models shown do not assume negotiated contract outcomes, full inflationary pressures, or pending programmatic changes such as public‑defender caseload standards; those items would increase budget pressure if included. Staff also flagged that the forecast models do not include a continuing transfer from the county road fund after 2025.

Commissioners and staff discussed next steps. Miller said staff will return in March with more developed revenue options and then seek board direction on containment approaches; staff plan stakeholder engagement over spring and summer so operational impacts can be explored before finalizing the 2026–2027 budget. Commissioners pressed for containment planning to be front‑loaded and for broader stakeholder input to surface cost‑saving or revenue ideas early in the process.

County staff credited internal auditors and financial services for daily monitoring of receipts and quarterly forecasting as part of a more iterative approach to budget planning. Staff said they will work to remove reliance on a built‑in reversion assumption over time and to provide clearer indicators used in forecasting so offices and commissioners can understand the underlying drivers.

Commissioners offered direction to prioritize containment planning and early stakeholder engagement while also asking staff to continue researching revenue options and federal/state funding opportunities that could offset reductions.

The board did not take any final votes on policy changes or budget amendments during the work session; staff said formal recommendations and options will return to the board for direction in March and again during the spring/summer cycle.