Thurston County budget update shows multi‑million shortfall; staff outlines containment and levy options

At a May 13 work session, Thurston County budget staff told the Board of County Commissioners that a point‑in‑time review of the general fund shows a declining fund balance and a projected multi‑million dollar shortfall in the coming years, and presented a menu of options ranging from hiring freezes and program reviews to voter‑approved levy lid lifts.

The presentation, led by Summer Miller, budget and finance manager for the commissioners’ office, described a May 5 point‑in‑time estimate in which the county’s beginning 2025 fund balance is about $32.1 million and the projected year‑end 2025 balance is roughly $17.1 million. Miller said the county’s Auditor Financial Services office is projecting a higher year‑end balance — between $22.5 million and $24.0 million — based on more up‑to‑date receipts and payables. “We’re estimating that the beginning fund balance will be about $32,100,000,” Miller said.

Why it matters: County staff told commissioners that, under current revenue and spending assumptions, the general fund would decline to low single‑digit balances by 2026 and could move into negative territory in later years if no revenue increases or sustained expenditure reductions occur. Staff framed the numbers as a planning tool — not a decision — and urged early action to preserve core services.

Key numbers and assumptions: Budget staff outlined the point‑in‑time estimates and the assumptions used to project out‑year results. Those included a 3% property tax assumption, a 1.5% sales tax assumption (revised from prior assumptions), a 3% placeholder for salary increases (noting collective‑bargaining impacts were handled separately), a 2.5% benefit increase, 2% for supplies and services, 5% assumed interfund increases, and a 3.5% reversion rate in the graphic used for planning. Staff reported projected shortfalls on the order of roughly $15 million in 2025 and nearly $16 million in 2026 under the scenario shown; the presentation characterized an average ongoing shortfall in the mid‑teens of millions of dollars.

One‑time versus ongoing receipts: Commissioners and staff discussed large one‑time receipts that boosted some 2024 actuals. Miller said miscellaneous revenue in 2024 included interest earned on 2022 bond proceeds — roughly $6 million — and cautioned that such receipts are not sustainable ongoing revenue. As Miller told the board, the bond interest “is not something that we would want to build into our model and continue on in the future.”

Data and system note: County management and budget staff said their work is complicated by the ongoing TC Connect financial system migration. County Manager Mary Hernandez said staff “are working still through the transition of TC Connect,” and that migration issues have required extra verification and coordination. Commissioners were told the Auditor Financial Services office continues to close out the 2024 fiscal year and that point‑in‑time budget office estimates and month‑end financial service reports can differ until closeout is complete.

Containment and reduction options: Staff presented possible containment measures that would require further analysis and consultation with departments. Examples included freezing nonessential hiring and nonessential spending, restricting equipment purchases, evaluating programs implemented since 2020 (including one‑time federal COVID or ARPA‑funded programs), reviewing intergovernmental agreements, and pursuing vacancy control/position‑control actions. High‑level estimates presented by staff placed potential containment savings in a range roughly from $800,000 to $2.5–3.0 million, depending on the mix and timing of actions. Miller and the county manager stressed these are preliminary, point‑in‑time estimates and that detailed review is required to identify statutory constraints, implementation time, and service impacts.

Revenue options: The presentation offered a menu of revenue measures counties commonly use, noting state limits on property tax growth and that voter approval is required to exceed the 1% growth cap (a levy lid lift). Staff showed examples of levy lid lift scenarios: Thurston County currently collects about $0.75 per $1,000 of assessed value; staff illustrated a hypothetical permanent multi‑year increase to about $1.27 per $1,000 that, under the example and current assessed values, could increase collections by tens of millions and would materially change the out‑year gap. Staff emphasized these were exercise examples and that detailed work with the assessor’s office would be required to produce precise estimates and ballot language.

Board direction and next steps: Staff recommended maintaining a status‑quo approach to the first amendment of fiscal 2025 (limiting new general‑fund requests while the board evaluates the outlook), continuing detailed work with general‑fund offices on containment strategies, and returning in the coming weeks with a full analysis of potential revenue options and known timelines. Commissioners indicated general agreement with the approach and asked staff to return with more detailed analyses before the summer recess so the board can weigh containment versus revenue strategies and any proposal to take measures to the voters.

What staff said next: Miller said staff would return with more detailed breakdowns and incorporate feedback — including clearer labeling in public materials to mark one‑time receipts — and the county manager emphasized the need to coordinate closely with the Auditor Financial Services office until the 2024 closeout is complete.

A forward look: Commissioners and staff asked for a follow‑up meeting within weeks to examine the amendment requests that have been submitted, a detailed review of potential new revenue options (including levy scenarios, sales and excise taxes, user fees and special districts), and program‑level analysis to identify discretionary versus mandatory services before any final board decisions or ballot measures are proposed.