Clallam County administrator presents 2026 budget with five options to close gap; $1.93M shortfall remains after adjustments

Clallam County administrators and finance staff presented the administrator-recommended budget for fiscal year 2026 at the Oct. 6 work session and outlined a range of options to address a structural deficit.

Staff said the county's underlying fiscal pressure is largely driven by labor costs: salary and benefits account for roughly 71% of general fund expenditures and staff estimate year‑over‑year payroll and benefits growth of roughly $3.0 million to maintain current service levels. The finance team reported the preliminary 2026 shortfall at about $3.25 million, and said a combination of revenue updates, transfers and identified expenditure reductions reduced that gap to roughly $1.93 million in the administrator's recommended budget.

Revenue adjustments included a modest upward revision to local sales‑tax collections based on stronger summer receipts, one‑time transfers from other funds (including working capital from a county water project), and estimated receipts from surplus property sales. Expenditure reductions and adjustments included identified professional services savings, reductions in ER&R (equipment) rental costs from vehicle retirements, grant‑funding carryovers, and a reduction in a general placeholder for open labor contract costs after a recently ratified agreement.

The administrator presented five possible policy paths for the commissioners to consider:

1) Adopt the recommended budget using one‑time adjustments and reserves (no FTE reductions). Staff noted this approach is feasible for 2026 but is not sustainable long term and raises implementation pressure for 2027–28.

2) Adopt the recommended budget and pursue a local criminal‑justice sales tax (a county option that requires training and administrative steps); partial near‑term revenue from a July 1 start date could reduce headcount risk.

3) Use timing of grant cash flows and other accounting moves to accelerate revenue recognition in 2026 (e.g., HTA reentry grant timing) to reduce the 2026 shortfall at the cost of shifting pressure into later years.

4) Narrow assumptions about payroll underspend (treat underspend more conservatively) and implement a quarterly repurposing of realized underspend to capital and one‑time needs (a "set‑aside" or "Christmas fund" approach) to align one‑time revenues with one‑time expenditures.

5) Pursue a balanced budget that aligns ongoing expenses with ongoing revenues; staff estimated this would require roughly 11 general‑fund FTE reductions (the exact number depends on which positions are affected and the mix of wages/benefits).

Commissioners asked for more time to consider the options; staff said they will continue department‑level budget meetings, provide clearer cost and timing estimates for DNR timber‑sale revenue forecasts, and return with refined numbers. Finance staff also warned that the county's projected year‑end reserves remain above a county minimum but that relying on reserves is a one‑time tactic and does not address the underlying structural growth in personnel costs.

No final budget decisions were made at the work session; staff will present refined options and department requests in subsequent meetings and recommend a path for adoption at a future date.