Snohomish County report: sales-tax funds largely obligated; officials warn of tight 2027-28 outlook

Snohomish County officials on Tuesday told the Health & Community Services Committee that the county's chemical dependency and mental health (CDMH) sales tax fund and the newer affordable housing and behavioral health sales tax fund are largely obligated to projects and programs, leaving little cushion if revenue declines.

The human services presenter said the CDMH fund's human-services expenditures are about 47% halfway through the biennium, close to the expected roughly 50% pace, but warned the fund currently has no balance to cover future shortfalls. "We do not have a fund balance currently in CDMH," Caramine Hester, the county's chief budget officer, said, adding that staff salaries and benefits will require re-evaluation for the 2027-28 budget.

Why it matters: the funds support capital projects, operating costs and program delivery for behavioral health and affordable housing. With several multi-million-dollar projects obligated, county staff said they are balancing the need to accelerate construction against the risk of losing federal or state matching funds if projects are delayed.

What county staff told the committee

Cynthia Foley, council staff, summarized two administrative items before the committee. The human services presentation then outlined both funds' purposes: the CDMH sales tax supports chemical dependency and mental health treatment, housing and therapeutic-court programs; the affordable housing/behavioral health fund pools two sources created under House Bill 1590 and related legislation.

The presenter said roughly $13.3 million has been obligated for two NewStart Centers (including the Lynnwood Crisis Response Center), with $11 million expended on construction in 2025. Site-operator contracts recently approved include $2.68 million for the Salvation Army and $2.1 million for the YWCA to operate NewStart Center services. The presenter said the county also obligated $3 million via an interlocal agreement with the North Sound Behavioral Health ASO on behalf of Lynnwood.

On project recommendations, the Policy Advisory Board has proposed awarding the $3,000,000 1590 behavioral health facility allocation to Granville Homes LLC for the Holman Recovery Center and advancing roughly $20 million (two $10M appropriations) to several affordable housing projects, including Helping Hands supportive housing, an Everett Gospel Mission expansion, a Housing Hope'Everett United Church redevelopment for seniors, and transit-oriented projects around Everett Station and Haskell 200th Street redevelopment.

Legislative changes and flexibility

Presenters told the committee changes under consideration in both House and Senate versions of legislation would broaden allowable uses for HB 1590 funds statewide. The proposed changes would allow funds to rehabilitate existing affordable housing (including emergency and supportive housing), pay operating and maintenance costs for existing and new units, provide ancillary services and rental assistance, and permit interlocal pooling of tax receipts to preserve continuity if federal programs shift. "This slide is no longer valid. Forget about this slide," the presenter said when noting that earlier legislative-status slides were out of date.

Questions from council members and possible tradeoffs

Committee members pressed staff on whether the county anticipates lower sales-tax collections and what programmatic cuts might be considered. Staff cautioned that sales-tax projections vary, historically ranging 5—7% in some lookback periods, and current global events have increased uncertainty.

When asked for examples of potential reductions, the presenter offered illustrative options, not formal recommendations: lowering funding for the Nurse-Family Partnership program or reducing the number of seasonal shelters. "These are strictly examples," the presenter said, adding the county had not yet completed the analysis to pick specific cuts.

Next steps and evaluation

NOFOs (notices of funding opportunity) for behavioral health capital and housing projects have been released and applications reviewed by the Technical Advisory Committee and Policy Advisory Board; selected projects will come to the Health & Community Services Committee and then to county council for consideration this month. Staff said they will begin evaluations of NewStart Centers once residents move in and that administration and operations spending will ramp up as facilities become operational.

Speakers quoted or referenced (first reference uses role and name where available): Caramine Hester, chief budget officer, Executive's Office; Cynthia Foley, council staff; Human Services presenter (human services team). The committee moved two administrative motions to the March 18 consent agenda for council consideration.

The committee adjourned after the presentation and questions.