Seattle City Council Select Budget Committee October 11, 2023 Session II

Good afternoon and welcome back to the Select Budget Committee meeting of the Seattle City Council.

Today is October 11th, 2023, and the time is 2 p.m.

I'm Teresa Mosqueda, Chair of the Select Budget Committee.

The Select Budget Committee meeting will resume from recess.

If the clerk could please call the roll, that would be appreciated.

Council Member Herbold.

Here.

Council Member Juarez.

Council Member Lewis.

Present.

Council Member Morales.

Here.

Council Member Nelson.

Present.

Council Member Peterson.

Present.

Council Member Sawant.

Present.

Council Member Strauss.

Present.

And Chair Mosqueda.

Present.

Eight to present.

Thank you Madam Clerk.

Colleagues thanks for joining us for the second part of this day one.

I'm here.

I'm sorry I'm I'm I'm here, Madam Chair.

Sorry, Council Member Juarez.

Thank you very much, Council President.

Council President Juarez is noted as present as well.

Thanks all for joining us again for the second part of the first day in our overview of the proposed 2024 mid-biennial adjustment discussion.

We will continue with central staff presentation.

This afternoon, we'll have item number three, which is the general fund balancing analysis up first from Deputy Director Ali Panucci and Tom Meisel of central staff.

And we will conclude this afternoon with the jumpstart fund balance analysis from central staff as well.

Madam Clerk, could you please read item number three into the record?

Agenda item three, general fund balancing analysis for briefing and discussion.

Wonderful.

Thank you so much.

I should pause to make sure that we have our friends from central staff on the line here.

Hi, Tom.

Good to see you.

And hello, Deputy Director Panucci.

Welcome back and thank you.

Your praises were being sung earlier this morning.

Thanks as always for diving into the proposed budget and helping us deconstruct the proposal that we've received and going over the general fund balancing components in this portion.

I'll turn it over to central staff for your presentation.

Thank you, Chair Mosqueda.

I'm just going to turn it right over to Tom.

Thank you.

Thank you, Allie.

Good afternoon, members of the Select Budget Committee, my solicitor central staff.

I'm going to continue this first day of budget presentation with a dive into the general fund balance analysis.

At this point, this presentation should be fairly familiar to you because this is, I think, the third year that we've had this run through that shows at a high level how the decisions in the mayor's proposed budget hang together and affect the general fund balance.

If we could go to the next slide, Patty, please.

So the agenda for this presentation, which I would note is backed up with a detailed staff memo that was submitted with the agenda and which will basically follow the same contour of the presentation.

The agenda is as follows.

First, I will just start with a brief touch on where the budget ended last fall when the original 23-endorsed-24, or 23-adopted-24-endorsed budget was decided and what that financial plan looked like.

Then I will run through some of the decisions that have been made so far this year with regards to the general fund, revenue and expenditure, related, um, turn them to the proposals that are included as budget legislation with the mayor's 2024 proposed adjustments to the budget.

Um, then, um, conclude the look at 23 with a jump into the, uh, the 24 proposed adjustment, um, including revenues and expenditures, and then, um, wrap with a, um, touching, touching back onto the kind of longer term look of how those, those choices, the proposals, um, impact the general fund sustainability.

And then all those due to use of the fiscal reserve during the COVID pandemic, I will conclude with a look at the status of those fiscal reserve funds.

So if we could turn to the next slide.

So this should look familiar.

And again, These presentations generally are fairly detailed.

I will try to provide the high-level points that you should look at.

I do tend to follow a theory of transparency and showing my work and showing how things hang together.

So if there are any questions along the way, please do stop me and ask.

I appreciate that, actually, because the intent is to have you come away from this presentation with an understanding of how, at least at a high level, how the general fund is down.

So the table is the the 2324 adopted endorsed budget.

It starts from a 2022 ending fund out so that the column on the left of $155 million was what was projected to be the resources at the end of the 22 budget those carry through the 2 years to arrive at a 0 out budget.

I would note one thing before we look at the next slide, that there is a planning reserve row.

So one of the key factors is I am not creating anything new with this.

I'm taking work that's done by the executive and I reframe it to kind of allow for visualizations of the funding gap.

This shows the budget as transmitted by the city budget office.

So it puts some amount of resources in an unappropriated line called planning reserves, which is largely things like labor and other legal or planning costs that are determined to be necessary for expenditure, but they're not yet make it into the appropriation.

And then finally, the bottom row, I'm noting that in the 23-24 budget, there was an assumption of $20 million of underspend each year.

And that's important because that assumption is unchanged as we move to the 24-24 adjustment.

So let's look at the next slide.

Can I just ask, 20 million in underspend, how does that relate to how much we've seen in underspend in previous years?

Thanks for the question, Madam Chair.

That underspend is actually lower.

I believe a year ago we did an analysis of underspend and it was looking to be on the order of $50 million per year.

And so that is somewhat similar to the result that we're just got in a May presentation, the Finance and Housing Committee, where even after applying the underspend for last year, with 2022, which was $10 million, there was still excess resources left over at the end.

So the history of underspend has been higher than $20 million in past years.

Thank you so much and I, and I bring that up as a good illustration of the work that we've been trying to do over the last 3 years of having less underspend year over year.

So that it's more.

Accurate budgeting, at least that we try to adjust for either mid year with the supplemental or in our end of year budget deliberations.

And that's good to know that the trend is improving and yet still work to be done to the tens of millions of dollar tune.

But that is a notable improvement over previous years and appreciate again, central staff led by you, Tom, and the work that you've done to compare.

what the City of Seattle does to other jurisdictions and thanks for the partnership to CBO and Director Julie Dingley for their ongoing work with us and central staff on how to make improvements to that system.

So a notable improvement and still work to be done to reduce high levels of underspend year over year.

So we can look at the next chart.

So this It takes the prior slide and adds a couple of years.

So you'll still see the numbers are the same for 22 through 24. And then we've added 25 and 26 to show the multi-year financial plan.

One thing I would point out before I get to the key takeaway from this slide is that the planning reserve line in this format is a smaller dollar amount.

That's because what I'm doing is including anything above the 2022 level, which is $38 million in the second row from the bottom.

I'm showing that as an expenditure, because that's essentially what it is.

It's money that will be spent.

It just has not made it into the appropriated budget yet, depending on when contracts get settled and things like that.

So I just want to point that out, because that's a difference in display.

However, the underlying number, the underlying assumptions are the same.

But with that, I will then kind of turn your attention to the green highlighted cells in the table, which will also be familiar.

These represent the indication of the projected operating gap in 25 and 26 of on average $212 million.

And if we look at the next slide, you can see it visually.

the kind of the benefit of showing those planning assumptions as expenditures as you get to visualize what the gap looks like.

And I would just say, besides the obvious that there is a deficit, which the committee is aware of at the end of last year's budget adoption, that in fact, because of the use of fund balance from prior, from the end of 22 to balance, 23 and 24 were also being balanced with one-time resources.

It really is the expiration of the one-time support from the Jumpstart Payroll Expense Tax Fund that expiring in 25 that makes the gap even larger.

So that's kind of just a recap of where we were and things have occurred and things are proposed and so we can go then to the next slide and start to review some of the things that have occurred so far in 2023. So the first kind of change that has occurred, and there will be a slide in a bit further into the presentation that pulls all these numbers together to kind of show kind of the high level how the change occurs.

And so I'm just going to point that out, and it's included in the memo as well.

And also, I had promised myself that I would be keeping you apprised of where in the memo I'm referring to.

So this slide actually pulls from data in pages 6 through 7 of the staff memo, which, of course, has even additional detail.

So the first notable change for 2023 was that 2022 ended better, and this kind of piggybacked on the chair's point about the underspend and how we actually, the city outperformed the underspend and underspend even less or even more than what was projected.

And the 23 starting balance is actually $167 million higher than what was originally projected.

And that's because of essentially higher than anticipated revenues and lower than budgeted expenditures that caused that balance to be larger.

So because the original 2023 budget relied on a starting balance that was $193 million, we can now count on that additional money to be available for spending in 2023 and 2024. And indeed, some of that, a large portion of that resource has been spent so far in 2023 by way of 12 separate pieces of legislation that have been approved to date that have spent a total of $191.3 million.

And the memo on pages 5 through 6 detail what those individual appropriation bills are.

The largest ones are going to be the carry-forward bill in the earlier part of the year, and then the mid-year supplemental bill, which are the kind of comprehensive pieces of legislation.

But there are some other smaller bills that have both accepted grants and spent resources for other things as well.

So that's basically, in total, how much was spent.

Also, those bills decreased revenue by $24.8 million.

And so the question is, why did the bill decrease revenue?

The answer is that a large portion of that was the revenue impact due to the reduction to the Jumpstart Fund transfer to the General Fund, which was, in fact, made possible by the better than expected 2022 results.

covered with better than expected general fund revenues in the August forecast and a downgrade in the jumpstart fund forecast for 23. So that was the principal reason why revenues were decreased through approved legislation earlier in the year.

Also, what has occurred is there was an August revenue forecast by the joint efforts of the of the economic and revenue forecast in the city budget office, which in fact increased the projected revenues for 2023 by $106.3 million.

And so it's a kind of a mixture of better than expected fund balance, expenditures for supplemental and carry forwards, a bit of a shift in revenue due to better than expected 22 results, allowing to relieve the pressure on the Jumpstart Fund, given that it was supporting the general fund in 23's budget.

And then finally, a beneficial revenue forecast.

And then I will talk about the revenue forecast a few times, because it impacts not just this year, but next year as well.

And note that when those that join a forecast office and the budget office do their forecast, they relied on a 50% baseline probability forecast.

So at that time, it was 25% likely that it would be worse, 25% likely that it would be better.

So they chose the middle of the road, and that was endorsed by the Forecast Council in August.

If we go to the next slide, we can talk now about some of the proposals.

So there are two key bill in terms of budget legislation that are submitted with the 2024 proposed adjustments.

And they include year-end supplemental, which would increase revenues to the general fund by $5 million and increase expenditures by $16.9 million with a combined balance impact of $11.9 million in red.

So it would draw down that resource by $11.9 million.

By way of the revenue change noteworthy noteworthy ones are for 4.7 million dollar decrease an additional decrease in the transfer from the jump start on the general fund which when combined with the 3534 million dollar reduction to the transfer that was approved in the mid-year supplemental it reduces the total 23 transfer from the jump start on the general fund to $71 million.

Going in the other direction is a $3.6 million general fund increase from the Coronavirus Local Fiscal Recovery Fund to support a variety of Seattle Fire Department firefighter emergency medical service labor costs.

Those are kind of the larger revenue changes that are kind of standalone.

There were some adjustments to the finance general reserve, so that's kind of the non-departmental account where that tracks reserve and transfers between funds.

One with a 2 and a half million dollar drawdown in the in the paper and we've caught which we're not we're not needed.

As the ad budgeted also a just shy of a million dollar reduction for to reflect a full payment of an ear on long so this was in a long from the general from the a variety of funds to the general fund, which we waited for jumpstart payroll expense tax revenues to be collected.

And that loan expired at the end of 22. There is a $336,000 decrease to true up finance general debt service budget.

And then finally, a $320,000 decrease, which will eliminate the remaining balance in the alternative 911 response reserve, because all those funds are now budgeted.

in 23 and now when we look at 24 in the Community Safety and Communications Center budget.

A few more finance general adjustments.

And I will largely focus on finance general because other departments will be subsequently covered in later presentations this week.

But one significant noteworthy adjustment is an $8.5 million increase in the transfer to the emergency fund.

So there was a significant drawdown in the emergency fund during the COVID pandemic.

And at the time, there was a change in the reserve and the emergency fund policy to allow for a five-year repayment scheme of those funds.

I believe in 23, those amounts were $3.5 and $8.5 million.

in future years.

And so this is basically using runtime resources to increase those transfer and payback emergency funds quicker than what was planned in the budget last year.

And then finally, there's a $1.5 million transfer to the School Safety Traffic and Pedestrian Improvement Fund, which essentially corrects an error.

Those funds should have been transferred to that fund in the last two years.

given a lapse in some temporary provision that diverted those funds to the general fund.

And then in their work, CDO caught that error and is now reimbursing that TPI fund to what its balance should be.

Great.

And I just want to note for members of the public or the press or our colleagues who are following along, all of these details that were just summarized by Tom are on page eight of his analysis, middle of the page, in case you're looking for the smaller dollar numbers that help total up the 5.7 million in net costs increase to Finance General.

Okay, let's pause on just each bullet.

If each one's going to have that much detail included in each bullet, let's just pause at the end of this one.

Any questions on what Tom summarized?

Again, information, page eight of his memo, middle of the page, noted under notable general fund expenditure changes.

Council Member Nelson.

You are on mute still, I'm sorry.

Could you please talk a little bit more about the 2.3 million dollar reduced spending?

I think you said it was for paid family leave.

I'm reading the memo here and it's a whole bunch of things.

So, can you just give some more information?

Because it looks like it's overtime for detectives and the Internet crimes against children task force investigation.

So, do you have any information about why?

Thanks for the question, Council Member Nelson.

So the item that you're referring to is actually, I believe, $2.2 million, which is for a grant for Internet Crimes Against Children.

There's also a $2.5 million decrease in finance general reserves.

So the finance general reserve is an amount that's set aside to pay paid in family leave costs as they are incurred.

So they make an estimate of what they think those costs are gonna be when they build the budget.

And when the costs come in lower, then they can eliminate the ballot.

So those are two separate items, the reduction in the reserve of $2.3 million, and then the increase to the general fund budget or the grant revenues for the ISDAP.

Okay, thank you.

Yeah, good question.

I think that that question and the answer helps illustrate.

The projected costs that the department tries to hold on to for pay family leave and then what the actual costs are.

So, definitely think it's a good question because you don't want somebody to take away from that that there was reduced funding for family leave or something like that.

Yeah, and I was just wondering if it was because those employees were no longer there.

Question.

Council Member Nelson, I would have to dig deeper into the assumptions that CBO originally made when they set that reserve up to find out the reasons why they didn't meet that.

All I know is that they estimated an amount, and that full amount was not necessary, and so they left in the remainder.

But I'm happy to follow up.

Thanks.

Yeah, and I'll just add, Council Member Nelson, sometimes, you know, like Tom said, it is an estimate, and we'll look into it more, but if throughout the year there's other sort of savings within the department's budget, they might use those funds first prior to needing to request an increased appropriation from the reserve.

So this is CBO right-sizing it, but trying to be efficient in sort of using one-time savings within a department for these types of expenditures that come up as people take paid leave during the year.

Let's continue.

That was the detail of the finance general reserves, $5.7 million.

There is a $750,000 that's representing a swap of the debt service cost from the general fund to the transportation fund, supported by commercial property taxes.

There's a $5.8 million increase to the Seattle Fire Department.

There's additional detail provided in the memo, but in general, it's supporting a variety of new costs in 23 for fire services.

And then the $8.5 million transfer of the emergency fund, which I didn't cover already.

And then there's $5.8 million of expenditures backed by new external revenue.

And so a portion of this is the $2.2 million for the internet crimes against children, the detail that's provided in the memo.

And a few of the other items that are also listed are $1.8 million of a reimbursement to SPD, the Seattle Police Department, for staffing the major league all-star game and $139,000.

That's an increase to build revenues to the fire department for overtime costs, providing EMS services and fire guard services.

Tom, I would just maybe ask for you to speak up a little bit.

It's a little hard to hear on my end, but I wanted to ask Councilmember Herbold if you had anything to add to this.

I think your comments from earlier relate to this section of the agenda regarding the FTEs and the Seattle Fire Department.

So I just wanted to make that connection here from our earlier discussion, please.

I appreciate that.

I am curious, and you may have addressed this already, Tom, but how is it that the coronavirus local fiscal recovery funds are able to be used in the way that the proposed budget uses them?

There's flexibility to use those funds for fire department costs?

I would have to dig further into the rationale of the use of those funds.

I believe that they're used for a specific response purpose, if allowed.

But again, I'd have to dig more to find out.

I'm assuming that's valid, though the fair question, I'll follow up.

Um, Tom, if I could, I can, I think I can answer that question in, um, in that 1st year where we spent where you were getting the 1st allocations of the funds and then in subsequent years, a portion of that was revenue replacement.

So it was to help address.

And so I believe that this is a continued.

use of revenue replacement and it's specifically allowed for public safety uses.

This is definitely authorized use of those federal funds.

Thank you so much.

All right.

Let's go.

Just to close on this slide with regards to the grant-backed items, One thing that we did know in the review is that there are some items like the Internet crimes against children that are not, that don't have an acceptance associated with them.

And so as the committee will recall, external funds have a two-step process where they are reviewed by the committee and then spent.

So there's an acceptance first and then the expenditure.

And so In past years, the ICAC money have been part of the acceptance, though we did not see them this time around.

So we are doing a follow-up review of the materials to ensure that all the acceptances that are required are in place.

And so now we can look at the next slide.

And so this is slide 7, which refers to page 9 of the memo.

And so the other piece, so most of the prior comments in the prior slide were regarding the year-end supplemental.

There is also a year-end grant acceptance and expenditure bill.

And so that bill essentially would accept $42.3 million in total, of which $8.8 million would go to the general fund.

And that $8.8 million is supported fully by the external revenue source.

So it's revenue neutral for the fund.

And then attachment A, included with the staff memo, includes the list of all the acceptances that are included in that bill.

So in total, the proposed legislation decreased the 23 resources by $11.9 million.

So this next item, revenue adjustments overlaps.

This is a technical item.

In reviewing the budget adjustment that was submitted, it appeared that there were some overlaps between things that were included in the August forecast and things that were accounted for as separate legislation, including both would have actually resulted in a double count.

So given that that occurred, it's necessary to apply a $14.5 million kind of line item adjustment to account for things that are showing up in both places.

And that largely was with regards to items that are grant acceptances that were accepted in legislation that also were included in the August revenue report.

And then finally, There's a change of $5 million, a reduction to the planning reserve.

That frees up resources, which are due to support spending in 2023. And then I believe the next slide pulls it all together, referring to page 10 of the memo.

So this is all the steps that we've worked through, where the 23 adopted budget had an ending unreserved balance of $107.5 million.

Better than expected 2022 result added $167.5 million.

Approved legislation during the year spent $216 million.

The revenue forecast in August added $106.3 million.

Proposed budget legislation had the net impact of $11.9 million reduction.

The adjustments for the overlap that I just mentioned removes a 14.5 so that we don't double count things that are two different places.

And then the change to the planning reserves, since they're reserving less, that's actually a positive number, and that adds 5.4.

And so that brings the 2023 revised unreserved ending ballot to $144.1 million, which is a $36.5 million change.

So that's additional resource after all of the um, actual and proposed, um, activity in 2023 that can now be, that is deployed in the, um, Mayor's 2024 proposed adjustment.

And since there's a lot of detail here, I will pause for a minute and see if there are any questions.

Thank you so much, Tom.

Are there any questions on the first eight slides here?

Okay.

I see Council Member Nelson, please go ahead.

All right.

So does the $407 million worth of change that was noted earlier this morning include expenses that use the $144 million?

Thank you for the question.

Governor Nelson, I believe that the presentation this morning was focused squarely on the 2024 proposed adjustment.

The 23 unreserved funding balance would be now the new starting balance for 2024. So some portion of that, I mean, originally the budget was using $107.5 million of starting balance for spending.

Now the general fund proposed budget Is going to use 144.1Million dollars.

To support spending, so there's an additional 36.5Million dollars.

That is spent in 2024, a portion of which is going towards.

Some of those items that were in Ed's presentation this morning.

Yeah, so basically the, the 400Million, 407Million dollars worth of changes in the.

Mayor's budget is. could be assumed to be using the unreserved ending fund balance of 2023. So that money is available for those changes.

It's not like, is that where that money came from to allow for those changes is what I'm trying to get at?

It's part of that.

So part of that $400 million is from general fund spending.

And part of the general fund spending is this $36 million that we will, all the projections hold, that will roll into 2024 to be spent.

And then you'll see later on in the presentation that there is actually revenue coming in from the August forecast that also adds into that picture as well.

But yeah, this is the piece of that larger puzzle, absolutely.

Thank you.

And thank you so much.

Deputy Director Panucci did you have something as well.

I saw you come off mute.

Nope I was just going to reiterate the point but Tom and Council Member Nelson I think got there together.

Thank you.

So let's let's go to the next slide and we'll begin the discussion of the 24 proposed adjustment.

And so it'll be somewhat similar kind of a linear linear structure that I built.

First, I'll look at the revenues, and then I'll turn to the expenditures, and then bring it back to the entire budget picture, and then we'll look at the financial plan.

The first adjustment is the August revenue forecast.

So I mentioned that the August revenue forecast improved 2023 revenues by a bit over $100 million.

And they also upped the expectation for next year by $47 million.

But I want to point out, and this is highlighted on page 11 of the memo, that if you look in the future years, the 2025 upgrade was only $18 million.

And in 2026, it actually was a reduction.

So what appears to be happening in the economic news and in the revenue collection as we see them is we are outperforming in the near term, meaning there's more money than we expected coming in.

But forecasters are very kind of cagey about the future, a lot of uncertainty on the horizon.

And in fact, at one point, there was an expectation of a small recession.

That doesn't appear to be included in forecasts, but there's still a lot of uncertainty.

So that's a long way of saying that though the August revenue forecast improved revenues for next year by $47 million, the best way to think of that money is one time in nature.

So it's not like they improved every single year of the financial plan by $47 million.

It was really a larger impact in 23, smaller impact in 24, and then near to almost a negative impact by 2026. So that's a large number, largest number on the table.

And it adds to money that can be spent in 2024, but it's one-time money.

And then this table kind of summarizes some of the details that I'll cover in subsequent slides.

It groups it into, so this is basically all of the kind of proposed, the non-forecast changes that are included with the budget.

There's a series of technical changes There are some new revenues that are supporting new spending.

In that case, in that sense, it's sort of revenue neutral.

There are changes to the jumpstart transfers.

And then again, similar to with the 2023 analysis, there are some items that showed up in both the forecast and in proposed adjustments.

And so I have to adjust to those double counts.

In total, it's really a small adjustment.

It's about a half a million dollars, but there's a lot of at the next slide, which kind of covers detail on pages 11 through 12 of the memo.

We'll kind of dive into some of the detail.

The largest change, one of the larger changes is the $4.6 million reduction.

So this is the Department of Finance and Administrative Services kind of discounting the fact that they do not collect Fault alarm fees and vehicle impact and vehicle impound fees.

And this is essentially a revenue neutral.

It should be a revenue neutral change.

But the issue is that the $4.6 million increase to the budget was included in the forecast.

So this shows as a $4.6 million reduction.

But because of that technicality, the other side wasn't included.

But it needs to be highlighted for this analysis.

Revenue-supporting expenditures, a $12 million increase, $6.4 million of it is ongoing.

And this is all supporting new spending in the budget.

So when we look at subsequent slides talking about general fund spending proposals, these dollars are being used to support some of those proposals.

There is a $6.5 million one-time decrease to the transfer to the Jumpstart Fund, of which $5.5 million is one time, actually $1 million is ongoing.

And there's a memo and presentation that Deputy Director Panucci will cover that digs into the implications of it from the perspective of the Jump Start Fund.

And then finally, there's a technical correction to adjust for overlaps of $419,000.

And if we could look at the next slide, I believe we will do the kind of same quick run-through.

And again, I'll reiterate, this is a very high-level view.

More detail on a lot of the proposals will be included in subsequent presentations by my colleagues.

So this detail is covered on page 12 of the memo.

And there's actually an attachment to the memo, attachment B, that includes detail on on all of this line by line, which can be helpful to track it at the department level.

So in total, the budget adds $51 million of new proposed spending and appropriations.

Of that amount, nearly $28 million is ongoing, so it continues in the future years.

And 23.3 or so is in one time, so it's only in 2024. And again, I grouped it into categories, technical and policy.

And I will just say that there are, and I believe it's covered in the memo, it's a, I'm just caveating that these are my own interpretations of what is policy and what is technical.

Technical items are things where you update a formula and you get a result and that's the number you use or inflation has changed or something on that order.

And then policy is where there's a decision, a little bit more discretion being made.

But really, it's all policy.

I mean, they're all policy decisions in a sense.

So I'm just pointing that out because I'm grouping these in a way somebody else might choose to group them differently.

It just helps to kind of put things into useful buckets for analysis.

And so now I'll kind of go through some what some of these include if we look at the next slide.

So first the technical changes.

So these are kind of similar to the technical standard items that were covered in Ed's presentation this morning.

There's a $12.4 million ongoing increase.

And there's one item that I've highlighted here because this is, again, this is in that area where It's a technical change, but there is an embedded policy decision that is part of that technical change.

And I want to highlight that for you.

And this is with regards to the employer's contribution rate for the city's retirement system.

So the city operates its own retirement system, which has, I believe, around 9,000 active employee members, and then also retired and terminated members as well.

who are beneficiaries to this defined contribution or defined benefit retirement fund.

And as part of that fund, there is an actuarial study that is done that determines how close to being fully funded that system is.

I believe at last look, it was on the order of 77% funded, meaning that the assets were able to meet able to meet 77% of the liabilities.

And they do this projection using a closed loop.

So they actually analyze the assumptions that are being made from now through 2042. So the goal is to have 100% funded status by the end of 2042. And so as part of the process for determining how much the city should contribute to members' retirement, of contributions, the contract with an actuary who studies a set of assumptions about investment earnings, earning rates of employees, the additions of new employees, a whole myriad of factors that they include in determining what the city needs to contribute to the retirement system.

And on June 8th of this year, the CSRS board heard from the actuary, and the actuary said that the rate of employee salary that should be contributed to the system is 15.17% of member payroll.

So that's the third bullet down, the actuarial rate.

The actual proposed budget that's submitted includes a rate of 16.22%.

So that is, in essence, putting more towards the employer contribution to retirement than is actuarially necessary to meet that fully funded status plan.

and I see a question.

Thank you.

The recommended rate of 15.17 for the city employer contribution, where does that get us as it relates to, does it get us to 100% for a fully funded or does it get us somewhere between where we are, I think you said 77% and 100%.

Thank you for the question.

So that's a useful question because the table below shows when the actuary, so this is the economist slash accountant specialist who does this work, when they look at all of the assumptions they say, these are the rates that you need to charge to meet your 100% goal.

So they said in June that the city could contribute 15.1% .17 percent in 24, 15.28 percent in 25, and 15.6 in 26. And that we wouldn't actually need to contribute 16.22 until 2027. So the 16.22 is higher than what is actuarially necessary.

And so what is the policy objective that's being advanced by a larger city contribution than what the actuarial consultant recommends?

What contributing more to, it's the same thing as for an individual.

If you're contributing more, you are putting more in the market and it has a slightly longer time period.

You have more money that's compounding for a longer time period.

However, in this instance, we would be contributing more.

that we would need to, which is not a bad thing, but it's an issue that I highlight because in this context of other challenges on other city funds, either which the general fund, it's a choice and it's not necessary.

In fact, the actual serves a board of administration who reviews the actuary's work, they actually recommended a rate of 15.82%.

So that's the middle number in the way here.

So again, you can contribute more towards your retirement, which that will ultimately do is perhaps need less earnings on their investment portfolio or require lower rate in the future.

But again, next year, they will look at the performance of the fund and they will determine, the actuary will determine what the rate is needed then, and that's the actual actuarial rates, sorry, that's a hard word for me to say, that will be recommended.

So, and in the past, the service board has made the decision to recommend to the council a slightly higher rate, like for example, they will just say, let's just use last year's rate to keep it consistent.

But again, that's a choice.

And really the only requirement is stated in Seattle Municipal Code that the actual rate is what is the positive.

And just one more if I may.

I see that only a portion of the difference here is general fund dollars.

What is the other tranche, to use a word that we once upon a time used a lot.

So that would be all the other city funds with employers that are members of the system.

So pretty much every city fund.

The only city employees that are not part of the STRS are going to be fire and police personnel.

So it's up there.

portion of its general fund.

The rest comes from all the funds that go to support city employees.

Exactly.

Got it.

Yes.

Thank you.

All the other funds.

Thanks.

Thank you.

Council Member Peterson.

Thank you chair Mosqueda and I want to thank central staff for over the past few years really delving into the pension costs.

I don't think the public is aware that Seattle taxpayers When we say the city contribution, it's really Seattle taxpayers contributing a substantial amount of money each year.

And it's not shown here or in the budget document, but it's approximately 150 million dollars a year that taxpayers contribute toward the expensive pension system for city government employees.

These future expenses, and then when we try to look at these rates, it's difficult to estimate, and that's why we have the actuary do that for us because we're trying to predict nearly 20 years into the future.

I realize we're trying to strike a balance between the sustainability of the retirement system for city government employees in the future and then grappling with these, priorities today, the declared emergency on homelessness, for example.

So I really appreciate central staff raising this issue, providing options.

I know in your, the central staff memo that's attached to the agenda, there's a four page memo at the end, attachment F dedicated to this subject.

So appreciate the range of options and explaining those options.

So, um, I think I think you're going to get to this in the next slide, but that option B.

Is very attractive because you're talking about.

meeting the 100% funding goal, the actuary says we can do that with your option B, but then today we can save $10.6 million, $3.4 million of which is from the flexible general fund, so we can address immediate priorities such as homelessness, public safety, infrastructure, and other needs that we have.

So I'm very interested in Pursuing that savings and still meeting the sustainability of the retirement system.

So, I just want to signal that that's potential source.

Of funding, thank you.

Thank you so much and I don't want to get too ahead before we explore those options with central staff, but thank you.

flagging your interest in B.

I would also, if I'm recalling correctly, Tom, I would also want to note for the record that our retirees who are represented by RC have noted that they have a much lower cost of living adjustment for the retiree pensions at the city compared to the county and I believe compared to the state as well with a 1 percent cost-of-living adjustment and that being lower than our county colleagues.

Maybe something for us to also consider as we think about the sustainability of our city.

We want to be a place that is attractive for people to work and having a sustainable and reliable retirement that also meets cost-of-living needs is important.

There is some communication that we received from RC on that issue earlier this year.

I'm not teeing that up for a budget ad this year.

I just wanted to flag it because I think it would require council action and I believe additional discussions with the city union and labor relations if I'm not wrong.

But I did just want to put on the record out there the concern that they raised about having a cost of living adjustment that's only about 1%, clearly not meeting inflationary adjustments in our region right now.

and not on par with what colleagues at the county receive.

Just additional food for thought as we consider the health and sustainability of the retiree population, but also being an attractive place for future employees to want to come so that they can see the possibility of retirement if they choose to work at the City of Seattle.

Let's keep going.

We can look at the next slide.

This next slide, I think it essentially puts forward the alternative identified.

And again, these are just the two clearest alternatives.

One is, so the issue is the 2024 proposed adjustments rely on a CSRS fee contribution rate of 15.2% of active member salaries, which is higher than the actual actuarial rate and higher than the CSRS board recommended rate.

So the two options would be to use the CSRS board recommended rate of 15.2 percent or use the actuarial rate of 15.17 percent.

But above 15.17 percent, an alternative option could be chosen as well.

These are just the two obvious points of departure.

Thank you again Councilmember Peterson for flagging your interest in option B here.

I appreciate that.

Any additional comments before we move on?

Okay, let's keep going.

Okay, let's look at the next slide.

So rounding out the technical adjustments is a $2.7 million ongoing increase, which built into the 2024 budget that is decisions that were made during 2023. So these are the standalone and comprehensive legislation that approved spending in 23 that have ongoing impact, and the budget builds those in.

And then finally, there's a technical adjustment to reserves and transfers and debt service, a $7.9 million increase, $1.2 million of which is ongoing.

And then a large share of that is $4.7 million going to the Judgment and Claims Fund.

Now, if we can look at the next slide, there is a neutral item, which is $2.7 million that shift one-time increases in the budget to an ongoing status in department.

There are revenue-supported changes, so this is the other side of the ongoing revenue that's being accepted in the budget.

I guess actually $1.3 million of it is ongoing, but it's a total of an $11 million increase.

There are Jumpstart adjacent changes, which include a $4.5 million ongoing increase to fund human service provider contract costs.

And for 2024, this item is supported by a one-time transfer from the Jumpstart fund that was described previously.

And then there's a $1 million increase in the general fund to the city budget office to evaluate Jumpstart Fund spending.

And finally, a $2.3 million ongoing reduction to the Office of Housing Budget that reflects a shift of administrative cost from the general fund to the Jumpstart Fund.

And similar to the revenue side, these will be covered in more detail in the Jumpstart Fund balancing analysis.

And then other proposals is kind of a catch-all for a myriad of policy proposals.

The $13.5 million increase of which $3.7 million is ongoing.

The largest piece of this is an $8.5 million increase in the financial transfer to the emergency fund.

So this will sound familiar because the proposed adjustment includes a similar increase in 2023. So these are one-time changes that actually have some measure of sustainability impact because they move transfers that were originally planned last year to be made in 25 and 26, that moved them forward into 23 and 24. So their one-time money is supporting these changes on a one-time basis, but it means we don't have to make those payments back to the emergency fund in 25 and 26, which slightly decreases the ongoing shortfall identified in the first few slides.

And then finally, this is kind of in the non-appropriated category.

So it's that planning reserve element where there are labor agreements and other items that are kind of budgeted, that are planned but not making it into the budget.

And there's a $32.8 million increase there.

20 million of that is ongoing in nature.

And those items were covered on pages 14, 15, and 19.

Thank you so much.

And I appreciated that Council Member Peterson was helping to identify revenue sources just a minute ago.

Obviously, we're all going to be asked to share some thoughts on that if you have them.

I would note on the middle bullet here under Jump Start, $1 million for ongoing increased costs to CBO to evaluate Jump Start spending.

We have built in funding for the accountability and admin costs, but for the 1 point for the 1Million dollars here, we flag that as well for central staff, noting that the jumpstart oversight board has yet to be convened as a body.

We will be moving forward.

the recommendations in conjunction with the mayor's office for the oversight body.

But it seems to me that a $1 million increased amount for oversight might be an area where we have some additional funding that we could free up as well.

Just in the spirit of the earlier comment, I thought I'd offer that and flag for folks that There's also going to be an opportunity to move forward the oversight board members that both the executive and the council will be able to put forward for future work in 2024 and beyond, but still looking into that total amount that's listed there.

Council Member Herbold, one second.

Let me just see if Deputy Director Panucci had something to add.

Thank you, Chair Mosqueda.

I just wanted to clarify one piece on this slide.

Bullet under JumpStart, so not to add to confusion when I present later or when our colleague Jen is presenting on the human services budget tomorrow, the $4.5 million of JumpStart funds used for the human service provider pay is a one-time transfer to support an ongoing expenditure.

There was an error in the budget.

information that was sent to us.

It was coded as an ongoing transfer and that's described in Tom's memo.

But I just wanted to flag that it is a one-time transfer, one-time reliance on the Jumpstart Fund, but an ongoing spending obligation.

Great.

That might be along the lines that Council Member Herbold was going to speak to too.

Please go ahead, Council Member Herbold.

Thank you.

Yes, stole my thunder.

Yes, I was going to lift both that fact up and also express my appreciation for the good budget chair for identifying the fact that using Jump Start for an ongoing cost associated with human service provider wages may not be the most sustainable approach, and appreciate the opportunity to get into that more later.

Thanks so much.

Excellent, thank you.

And we will see more of that in the upcoming presentation.

Adding to what the vice chair said and what the chair of human services said is clearly their support for human service provider contract.

Very much support for child care appreciation allotments, both of which could continue to be funded if the transfer from jumpstart dollars that was in general fund is not now that move back into jumpstart.

So more to come on that, but clearly.

I and I believe as you just heard from the Vice Chair, there's ongoing support for the items, just a change in the potential fund source and the final budget to sustain those.

Council Member Nelson, please go ahead.

Thank you.

Going back to the $1 million item that I think is being suggested is, we don't really have to do that.

The memo notes, it is worth noting that this was included in the mayor's 2024 proposed budget proposal and ultimately was not included in the budget.

The council endorsed for 2024. I think I remember the, the, the council budget action that it had something to do with.

Um, we, the board has not been in paneled and so this, this, uh, this money wouldn't be needed, but we'll put it off until the future.

I think, can you please remind me?

But I remember the discussion being something that we, we can't use this money yet because certain conditions were not in place and I, I. Made the point that well, doesn't isn't it required that we do and panel this oversight board and on and monitor ongoing.

So, can you please remind me what the status of that is now?

Council Member Nelson, I might ask that we wait for the next presentation.

That is an issue number four that I will be presenting in the jumpstart paper related to that $1 million specifically.

But the short story is that the conditions have only changed slightly whereas that we're closer to seeing appointments come through for the board, but it is still not yet established.

I'll say more about that when we get to that item in the next presentation, if that's okay.

Okay, well, you caught me not having read that yet.

Sorry.

Thank you.

No, it's I jumped in on that 1 to council member Nelson.

And so we will try to hold off on that.

But just to preview, there is action that's being suggested for both the executive and the legislative branch to be able to panel that body.

here soon and will follow Deputy Director Panucci's lead to hold off on additional comments on that.

But more information coming from both the executive and our office about getting that body set up here relatively soon.

Thank you.

Okay, Tom.

If we could look at the next slide, Patty, which references back to page 15 of the memo.

This pulls in the kind of different data points that we've covered thus far to show the impact.

It shows really, it shows two key takeaways.

It shows kind of the sustainability tilt, the ongoing and one-time impact, and then kind of the total balance impact of these changes.

And so, the familiar numbers, the adjusting the starting balance, so there's $36.5 million that carries into 2024. The forecast update was $47.1 million better in August.

And that's really one-time money.

There are some proposed revenue changes in the Mayor's 24 proposed adjustments that in total add about a half a million dollars.

But there's a kind of a shift between the ongoing one-time nature of those.

So if you look at kind of the middle row, there's $83.6 million of one-time resource and not very much ongoing resource to be allocated in the budget.

The proposed expenditure changes are $51 million, $27.8 million of which are kind of recurring, ongoing spending on 23.3.

It's just one time.

And then the changes to the planning reserve for that $32.8 million, which includes that $27 million increase in 24 plus the adjustment in 2023. And a large measure of that is ongoing.

And so you can kind of see at the bottom row that there is a net $48.4 million of one-time resource that is being used to support $48 million of ongoing spending with a net impact on the budget of just shy of a half a million dollars.

And so if we look at the next table, we can see now we've kind of re-expanded back to the longer term view to see what the impact is.

And recall at the start of analysis, there was a $212 million gap.

So revenues were $212 million shy of the revenues that they were intended to support.

And now based on these 2020 proposed adjustments and all the material we've covered on this afternoon, it's now a 200, basically a $247 million gap in 25 and 26, slightly smaller in 27, but it's on order of the same magnitude.

And if we look at the next slide, you can see the visual depiction of this.

And really, if we look at the next slide, it covers the main high points.

And in Finance and Housing Committee in August, Staff provided a general fund deficit analysis to kind of track the history of how we got to where we are.

And some of the similar themes that were covered in that slide are present in this budget.

Use of one-time funds, one-time revenues, and one-time spending reductions to support ongoing increases.

And then underlined projections of base revenues have not recovered to pre-pandemic levels.

And as Allie indicated, there is an upcoming, or maybe it was Vice Chair Herbold, there is an upcoming revenue forecast next week.

So perhaps those projections will improve.

But if we can go to the next slide, which the forecast that we'll be talking about next week is based off the September underlying national forecast, which may or may not include some of these things.

One thing, it's difficult to look at the news these days with the ongoing and increasing international conflict, political uncertainty with the recent vote to remove the Speaker of the House, which is the first in our history of that happening, the expiration of consumer-level fiscal policies like the pause on student loan debt repayment, consumer mortgage rates that are approaching 8%, and then it's unclear if the implications of remote work have fully worked their way through commercial real estate markets.

So these are just risks to point out.

We live in interesting times, and we are looking at a budget sustainability issue of approximately $247 million next year.

So I believe in the memo there's point made that, and I believe it was made earlier today, that there's clearly decisions to be made when the next year's budget comes around, the biannual budget, and there's no guarantee that the items that are added in this budget are the items that ultimately are applied to solve that problem.

So just a note on that.

And this just leads to a kind of a high-level issue identification.

And I believe it's similar to an issue ID on the next slide that we included last year in light of the sustainability challenge.

So I believe we had it, Patty, the next slide.

Yeah, thank you.

So due to one-time revenues and reductions being used to support ongoing budget increases, the general fund operating deficit increased to $247 million, 25 and 26. So the the option that we can apply or none of these are easy.

It's very clear.

But these are kind of the measures that will ultimately be applied reject one or more ongoing expenditure increases in 2024 as identified attachment due to the memo or identify other ongoing spending reduction in 24. Making the jumpstart fund transfer permanent and tied to inflation beyond 2024 is an option.

Right now, that transfer expires at the end of next year.

Identify one or more new general fund revenue sources to support some or all of the proposed new general fund budget act.

Adopting a statement of legislative intent or a resolution that outlines the process for making longer term budget decisions to address the deficit.

starting in 25, and then some combination of all of the above, or no change.

Because the budget as proposed is, in fact, balanced, it's in the following year where the sustainability challenge will be realized.

And so that concludes the kind of general fund look.

We'll pause, see if there are any questions, before going to the next piece on fiscal reserves.

Great.

Tom, I'm going to ask if you could show us slide 10 one more time.

Thank you, Patty.

I don't know who's driving the slides, but thank you.

That's Patty.

So I want to ask you, colleagues and central staff, just to look at one more time at the slide.

And then what I'd love to do is actually do a comparison between slide four and a slide that you went by relatively fast on, but your memo clearly describes slide 18. So if we look at this, you see in the second bullet there that there's 12 million in increased new revenue.

And I think another slide of yours showed that line really clearly as well.

that there's $12 million in new proposals, new expenditures.

Half of that, you see half of that amount looks like it's coming from transfers of Jumpstart and transfers of other one-time funding for the remaining half.

But $12 million in new revenue is something that I want my colleagues to think about as we think about the ongoing need for existing programs and existing services.

The 2nd thing that I'd like folks to contemplate as you evaluate the proposal in here, the department by department analysis over the next 2 to 3 days is sustainability.

And here you will see, if you look at slide 4, compared to slide 18. Patty, if you don't mind toggling as I chat.

the ongoing concern that we have about out year sustainability absent additional new revenue sources.

So this is what the council adopted and endorsed for our biannual process in the out years of about $212 million in the future years annual average for a gap between revenue and projected need.

And then if you go to slide 18, you see the mayor's proposed budget that came in having a proposed gap between revenue and expenditures of now upwards of $247 million of annual projected gap between revenue and expenditures.

So, on 1 of the 3 pillars that I mentioned this morning, being sustainability, I want to continue to center the why we were coming back to sustainability and how revenue conversations will need to tie into this discussion.

in the budget process, because even if this council as a legislative separate branch of government agreed with every proposed change that the executive through the mayor's office has suggested in this proposed budget, even if we agree with all of the proposed investments, there would still be a gap in expenditures versus revenues to the tune of nearly $250 million each year for the next six years.

If we can center our conversation about what expenses or expenditures we're putting forward in this 2024 budget with the thought about how this impacts future sustainability for the city, that would be very appreciated because I think it will all help us be on the same page for how we ensure sustainable investments year over year.

Again, I'm not impugning any decision that was made in the executive branches team or the city budgets office and how they chose to make investments.

There are increased need, no doubt.

And as I mentioned before, a 21% increase in our population and the fastest growing city of large cities in the nation.

as of last year.

So there is increased need.

But I raise this to really elevate the importance of us having a conversation both about the next 12 months and about the sustainability for at least the next six years as we deliberate over the next six weeks.

Additional comments from my colleagues or any questions that folks have.

Central staff, Deputy Director Panucci.

Thank you, Chair Mosqueda.

I just wanted to highlight, because you may not have gotten to it yet, in the 50-page packet for this memo, there are a lot of details in the appendices.

And in particular, attachment D to the memo details all of the new spending and how Tom categorized them.

So you can review that.

And as you're thinking about these sustainability issues and priorities, that provides much of the detail behind the new spending and revenue changes.

Thank you.

And thanks for that detailed work, central staff.

Council Member Nelson, please go ahead.

So I appreciate your comments about sustainability and looking six years down the road.

And I made the point when we had our budget overview with the CBO that Not a lot of people will be here next year and who knows in six years.

But my point is that this is a mid biennium adjustment year.

So is it normal or was it anticipated that we'll be contemplating?

It sounds like this is where this discussion is going.

Policy changes or new initiatives that that will solve for what could be perceived as a lack of sustainability.

I think that's a question for me, or if central staff, I see you off mute, too.

Okay.

You know, I think that it is always a challenge to have a conversation just solely about the budget, but every year when we take up the budget, there's always corresponding budget-related legislation.

So as we get towards the end of this month, I believe October 27th, or it might be the We will have a chance to flag other legislative strategies that would need to accompany the proposed budget.

Any legislative strategies that would be desired from council members to see as part of our budget deliberations do need to be worked on by central staff so that they can make it on the introduction and referral calendar.

to our November 13th meeting.

So tied into the discussion later in the process will be a conversation about budget-related legislation, some of which our colleagues have already teed up.

Councilmember Peterson, if you don't mind, I'll tee up two of yours.

One is related to the water tax and separate legislation that would be corresponding as you've proposed it.

But separate would be capital gains, Councilmember Herbold has in her committee teed up a discussion around fee legislation for deactivation services that are tied to legislation that we passed earlier this year and are also part of our deliberations for ensuring enforcement and education with Office of Labor Standards.

So there's some legislation that colleagues have already teed up that we anticipate to be in the hopper for later this year as we finalize our budget process.

And as I noted in our budget committee earlier this year, thanks to the work of the Revenue Stabilization Work Group, I have asked central staff to do some additional analysis on those revenue streams where we have the legal authority to move forward on possible revenue streams, but have not opined or weighed in on if or when the council would take up such action, but I've asked central staff to look into those possible legislative options.

which would then be up for our final discussion and deliberation as part of the process later this year.

Much more I'm sure to come on that, but I just wanted to do an illustrative example of the sustainability issues and to flag that for our consideration as we think about where investments have been changed in the proposed budget relative to last year and how that is impacting the sustainability in the out years.

Before I go to Councilmember Peterson, Deputy Director Panucci, anything to add?

Yes, thank you.

I just wanted to turn your attention to the page 17 of the memo and it's noted in the executive summary.

I think it is up for you all to decide if you will take actions this year that have long lasting or make progress on addressing the long-term sustainability issues or if you sort of deal with 2024 and look to next year to really think about the longer term solutions.

But I think one option available to this council is to take some action during this process that would help establish what that process is, how the council and the mayor will work collaboratively and what those decision points are.

And so that is, there's a paragraph on that at the bottom of page 17 for your reference.

Thank you.

Council Member Peterson.

Thank you, Chair Mosqueda.

And if we could go back to the presentation to that slide 18. So just for the viewing public and the media that might be watching this, I just wanted to put a finer point on it, that this is just one fund of the budget.

It's the most flexible fund.

It's the fund we talk about a lot, the general fund, abbreviated here as GF.

And the general fund sustainability, that does not include the rest of the $7.8 billion budget, a lot of which is Seattle Public Utilities, Seattle City Light, and capital projects.

But there are other funds, there are other revenue sources, there are other policy choices we're making.

So I think there is a way, I mean, obviously we've received a balanced budget and our job is to pass a balanced budget.

And there are different ways of doing that.

I know that can get controversial because there are things that we want to spend the money on.

There was a jumpstart spend plan that many of us had approved.

the general fund portion of the general fund portion of the general fund portion of the general fund portion of the general fund portion of the general fund portion of the general fund portion of the general fund portion of the general fund portion of the general fund portion of the general fund portion of the general fund portion of the general fund portion of the general fund portion of the general fund portion of the general fund portion of the general fund portion of the general fund portion of the general fund portion of the general fund portion of the general fund portion of the general fund portion of the general fund portion of the general fund portion of the general fund portion of the general fund portion of the general fund portion of the general fund portion of the general fund portion of the general fund portion of the general fund portion of the general fund portion of the general fund portion of the general fund portion of the general fund portion of the general fund portion of the general fund portion of the general fund portion of the general fund portion of the general fund portion of the general fund portion of the general fund portion of the general fund portion of the general fund portion of the general fund portion

Yeah, Madam Chair, there is actually a bit about the fiscal reserves that's more positive news, I suppose, to end the presentation.

If we could go to the last slide, second to the last slide, Patty.

Yeah, thank you.

So this is an assessment of where we stand with regards to our two main fiscal reserves.

We have an emergency fund for unplanned emergencies that happen.

as prescribed in state law, and then a revenue stabilization fund to support unanticipated downturn.

And we had both things happen during the COVID pandemic, and we used a substantial portion of both of these reserves, and so we've been steadily paying them back.

And this just shows the kind of transfer plan in 23 and 24, and where we stand at the end.

So the actual revenue stabilization fund, based on council's deposit in the last few years that has been 100% fully funded status.

So we're kind of on maintenance mode with regards to that reserve.

And then the emergency fund, which was drawn down at a much lower level, has the five-year repayment plan.

And you can see here that the 23 and 24 transfers from the general fund to the emergency fund at $15 million in each year.

And that's as a result of the additional $8.5 million that are included in the mayor's 24 proposed adjustment.

And then that will bring, by the end of 24, the emergency fund up to 89% of the policy level.

So that's good news in terms of the risk that we face and where those things are looking.

And I see a question from Council Member Peterson.

Okay, thank you.

Council Member Peterson, please go ahead.

Thank you for bringing up the fiscal reserves.

I had thought, and maybe this is, I can infer this from the footnote there, but because there's a five-year period to pay back the emergency fund, but I thought I had read in the budget we received from the Harrell administration that they were actually paying it down quicker than that five-year period.

So in some ways, are we, meeting the policy at 100% if we, because we're already paying it, reinvesting at a higher rate?

Isn't it?

That is a good question, Councilor Peterson.

It allows me to provide a little detail.

The budget adopted last fall paid back the emergency fund within the five-year time period as well.

It just paid it back in a slower cadence.

So there were more transfers in 25, higher transfers budgeted in the financial plan in 25 and 26, and lower transfers in 23 and 24. And so what's happening in the proposed adjustments is $8.5 million more is being applied toward the emergency fund to accelerate the repayment.

But there's no stipulation in the resolution 32024 of how the cadence of payment goes.

It could all be in year five.

The executive may disagree with that approach, but the resolution is violent on how quickly that gets repaid.

So this just shows we would be at 100% of policy after five years with the budget that was adopted last fall as well.

It just would have taken the slower pace.

Follow-up question, Council Member?

Thank you.

I was just trying to find in the budget where they said the executive said they were paying it down faster.

But I guess that's if you just divide the number by five years or they're just assuming a consistent repayment, but the law does not require that.

That is correct.

They are putting more towards that transfer than was adopted last fall.

And so there was more money going into the fund than was originally budgeted last year.

But it ultimately will be at 100% either way.

It's just a matter of how quickly those money go into the emergency fund.

OK.

Thank you.

Thank you.

Good fly.

Any additional comments here?

Tom, thank you as always for your detailed analysis.

And I do appreciate the central staff memo as well that went along with this.

So colleagues continue to read through that as Deputy Director Panucci noted 50 pages.

50 pages is the attachments that go along with the 19 page memo.

So there is a very small font table that corresponds with the memo that we've received.

And if you're like me and I just got glasses two weeks ago for reading that small font, put them to use and we can continue to ask questions of central staff, but also probably it's going to be relevant for some of the shifts in policy choices and fund sources.

that we will discuss over the next two days as well.

Okay, so there's still time to read all 50 pages if we haven't gotten the attachments.

Tom, thanks so much for your analysis.

And speaking of budget-related legislation, thanks for the work that you've also done with City Budget Office and other members of the Central Staff team, specifically Ali Panucci, on the budget transparency legislation.

We talked about it in the Budget Committee earlier, or the Finance and Housing Committee earlier this year, about trying to codify some of the recommendations that CBO and Central Staff came up with.

as part of the work group to ensure greater transparency and sustainability for the budget in the future years.

Some of those recommendations will be part of our budget legislation deliberations later this fall, so thanks for that work that you've done on budget-related items year-round, but happy to have your good work highlighted every fall here.

Let's move on to the last item on the agenda.

Madam Clerk, could you please read item number four into the record?

Item four, Jumpstart Fund Balancing Analysis for Briefing and Discussion.

Excellent and welcome again, deputy director, thank you for your memo on this and for the presentation that we have in front of us.

I know there's been a lot of teeing up of this discussion throughout this morning and many of the discussions that we will have tomorrow, Friday and Monday relate to.

The use of jumpstart as well as a fund source for some of the proposed changes in the mayor's proposed budget.

So thanks for spending time providing a deep dive analysis here on how the use of jumpstart has been.

A woven into the proposed budget that we've received, and I'll turn it over to you to walk us through that.

Great.

Thank you, Chair Mosqueda.

So as Chair Mosqueda noticed, this analysis focuses on the use of revenues and expenditures from the Jumpstart Payroll Expense Tax Fund that I will just refer to as the Jumpstart Fund.

Moving forward, if we can move to the next slide.

So today I will provide some background.

I will walk through how the fund is balanced in the proposed I will describe some proposed changes to the policies related to flexible use of the funds, changes to expenditures, and a proposal to extend a deduction that exists in the fund policies today or the tax policy.

On background, this revenue source was authorized by the council in 2020, and at the same time, council adopted a spending plan for use of these revenues that plan focused The investments on 4 key areas, housing, economic revitalization, equitable development initiative and the green new deal.

Each year since the fund was established, the executive has proposed modification to those policies that would change the intended purpose of the fund, and the council has countered with the less flexible but still modified version of the spending plan.

This year, the executive's proposed adjustments are, I would say, more restrained than previous years, but not insignificant.

This continues to illustrate that there's a mismatch between the council's priorities and the mayor's priorities when it comes to how jumpstart funds.

should be allocated.

We can move to the next slide.

The proposed adjustments, there are many ins and outs, but at a high level, the proposal would reduce expenditures from the Jumpstart Fund categories by 8.2 million or a total reduction of spending of 8.2 million compared to the endorsed.

It reduces the transfer from the jumpstart fund to the general fund by $10 million compared to the endorse.

And then it modifies expenditures approved in that endorsed budget, prioritizing the use of higher than anticipated general fund to replenish emergency, excuse me, emergency reserves and other new expenditures ahead of funding the expenditures from the jumpstart fund categories that were approved in the endorsed budget.

And this includes a proposal to amend the policies that I'll talk about more in more detail throughout the presentation.

We can move to the next slide.

So, as a starting point 2024 revenues from this fund, or from this revenue source are projected to be 21.6Million dollars in 2024 below what was assumed last year when you were endorsing a budget.

The reduction in projected revenues required adjusting expenditures.

So this included reducing the Jumpstart Fund reserve by $10.5 million, reducing expenditures by a total of $8.2 million, and assuming a $3 million underspend.

So at a high level, that is how the fund addresses the revenue decrease in the projections from last November to today.

Can I just move to the clarify something though?

I think I think it's and you stated this clearly as well, but just just so that we're all clear, there's still more funding coming in for jumpstart.

above the amounts that we anticipated when we passed the spend plan in 2020. So in the endorsed budget for 2024 and the codified budget for 2023, general fund, excuse me, jumpstart revenues were still surpassing the expenditure specific for jumpstart categories, even though jumpstart revenue was slightly down in the revenue forecast earlier this year.

So I just wanted to clarify that as well.

Yeah, that is correct Councilmember, Chair Mosqueda, excuse me.

And I would, you know, in the, based on the 2020 estimates, it was assumed that in 2024, jumpstart revenues would be about $225 million.

I don't have the exact numbers right in front of me.

And so you can see here, even with the reduction of $21 million, That's, you know, it's 289 compared to 225, so still coming in, you know, fairly significantly above what was assumed when you adopted this.

Tax in 2020.

Great, thank you.

I just wanted to offer that because when we talk about revenues being slightly lower for jumpstart in my mind, and I think I've said this before a number of times that does not necessitate.

A 2024 budget, reducing expenditures in that category when that specific fund source is still coming in higher than the expenditures for jumpstart.

All right, thank you so much.

Just wanted to draw that out.

Yeah, thank you.

Okay.

Unless there are other questions, I'll move on to the next slide.

So, jumpstart fund, um, part of the jumpstart fund is used to help offset.

Uh, or help pay for expenditures in the general fund, uh, 2024. The policies for the jumpstart fund that were amended last year by the council say that up to $84 million of projected 2024 revenue may be transferred into the general fund if necessary to support the programs and services funded by the general fund in the 23 adopted and 24 endorsed budgets that are in excess of available general fund revenues.

This illustrates this table illustrates how last year, the 84Million number was calculated what the transfer would be if the same approach was applied to the updated revenue projections and how we can best understand the executive proposals to reduce the transfer by 10Million dollars.

So, in the 2024 endorsed column, you can see that what we were looking at was.

you're comparing the anticipated general fund resources to the endorsed expenditures.

What you can see is that for all the expenditures that the council included in the endorsed budget last year, without an $84 million transfer from the jumpstart fund to the general fund, you could not have included all of that spending.

If we apply that same logic To this year's proposal, we don't look at the, we don't look as a starting point as the, the, the new expenditures proposed.

We look at the expenditures that were included in the endorsed budget that were approved in the endorsed budget.

And, you know, it's not explicit in the code, but it seemed reasonable to adjust those for inflationary and baseline costs.

So we did that here.

and to show the increase in the 2024 reserves.

If you apply the same logic that was used in developing that modification last year, it would result in a transfer of $56.6 million, about $27-ish million below what was in the endorsed.

However, I can see how one way the executive may have considered it if you use the general fund expenditures in the proposed budget, and that results in about a $10 million reduction in the transfer.

I see I have a question from Council Member Nelson.

I recall it was at a finance meeting.

I believe it was earlier this year.

There was a discussion of underspend.

I think it was 31 million underspend from the Jumpstart Fund in 2022. Could you kind of nod if I'm recalling correctly?

But where does this, does the 2024 endorsed account for the potential for underspend that has maybe been the historic trends and underspends in Jumpstart.

So, I mean, it's a fairly new fund, so I would say it's harder to point to historic trends.

I think what you're recalling is a conversation that happened between the April forecast and the August forecast.

The April forecast projected an even lower number for the 2023 and 2024 jumpstart revenues.

So, at that time, The proposed approach by the executive was to underspend in the jumpstart fund to help balance both 23 and 24. the August revenue forecast Increased the assumed revenues for the jumpstart fund in both 23 and 24 and included an increase in general fund revenues.

And so rather than needing to assume an underspend, a big underspend in the fund, they were able to release the holds on spending.

At reduce the transfer in 23 from the jumpstart fund to the general fund to keep the fund in balance.

So the 2024 proposed budget.

Only assumes a 3Million dollar underspend and because this fund is allocated to specific programs and services, it would it's.

I would say it's a little premature to know what the historic, um.

what the right underspend assumption is, because many of them are going out to capital programs for investments in affordable housing and that sort of thing.

So I think five years from now, we'll have a better sense of what is a reasonable expectation.

But right now, in order to balance with the proposed, they had to assume an underspend across the biennium, but I don't know that we could advise on assuming a higher underspend.

But the actual was, in fact, 31Million.

Oh, and 2022. Yeah, I don't I'm sorry.

I don't.

Yeah.

Sorry.

I totally missed your question entirely there.

Uh, I, I would, I'll need to get back to you on that.

Okay.

If there was a 22Million dollar underspend that was not reallocated, that is all assumed in the starting balance for the, like, it would roll into 23 and then would roll into 24. so it would be captured in the jumpstart fund starting balance that I don't have right in front of me.

So I'll follow up.

Thank you.

Thank you.

And just because, um, the direct deputy director Pannucci's comment reference, the mid year discussions that we were having with.

Um.

When there was the potential concern for.

Jumpstart revenues coming in even lower, we do appreciate that the city budgets office and the mayor's office released the 14Million that was on hold for jumpstart earlier this year and we're able to add about.

9Million to the Nova for affordable housing and the remaining amounts that went into green new deal equitable development and.

Economic resilience, so that was that is good news to some of my colleagues comments from earlier today.

It aligns with the goals that I also have about making sure that the dollars that are in hand are getting directly out to the community at need when there's such pressing needs out there.

So very appreciative that we found resolution on that component from earlier this year.

And that's specific to 23 investments for jumpstart.

Thanks, Chair Herbold.

Liz, go ahead.

Thanks.

I just, I think we might be using sort of the concept, the word underspend to describe two different concepts.

I think sometimes underspend is a strategy to reduce spending in areas we had planned spending because of revenue that is lower than anticipated.

even though the council has allocated funds, the budget office, together with the departments and hopefully in collaboration with the council, works to identify a target underspend.

We are not going to release X number of dollars to adjust for this new situation.

I think that's the underspend, Council Member Nelson, that you're referring to.

There's another kind of underspend, which I think Deputy Director Panucci was also talking about, and that's sort of the – and yourself as well, Council Member Nose, the historical underspend.

That is like just sort of naturally dollars sometimes just don't get out the door as quickly as we think they will.

And so I think we might be collectively conflating those two concepts, which I myself can find useful but confusing.

But I appreciate that and I am, you know, that was 1 of the things that I was keenly tracking or concerned about when we, when we increase the parks district spending plan was that how are we going to spend all of this?

And what are we going to do?

You know, we're shifting.

We're relying on.

you know, property tax and are we using it when the people on fixed incomes could be using it themselves?

But anyway, I'll have to go back in my materials and try to find the discussion in committee because I do not believe it was a planned underspend, but to be continued, thank you.

Yeah, thank you.

I'll just add and thank you for that clarification.

Council member her bold.

I think it might be helpful to use sort of the lapsed balance at the end of the year.

Like, when all when we close the books on 2022 and account for all outstanding invoices and all of that, what is left in balance in the fund?

That's kind of the historic underspend or natural and then there is the.

sort of directed in-year underspends to address shifts in revenue and adjust spending.

So I might use lapsed balance moving forward and appreciate that clarity.

And then Council Member Nelson, I believe what you might be looking for is Tom's memo presented to the Finance and Housing Committee in May that provided an analysis of the April forecast.

So we will follow up with you after the fact, but I think that's what you're looking for.

Okay.

Should we move on to the next slide?

So some of this I just covered, but again, because the general fund forecast has increased compared to the endorsed and the jumpstart forecast has decreased compared to the endorsed, You can think about there could have just been a shifting of those, those resources to balance both funds.

And so overall central staffs analysis, as I said before, would be that.

Uh, based on the account, the legislative intent last year, the transfer would have been reduced by 27Million dollars, which both would have both avoided.

cutting spending in the jumpstart categories by 8.2 million and that could have increased spending in some of the categories, the proposed adjustments reduces that by 10 million dollars.

And if we could move on, I think, to the next slide.

And so that this just sort of sums it up that, you know, the 8.2 million dollar reduction in spending was not necessary.

I will just flag that without some of these changes without the reductions and the other adjustments, the new expend expenditures from the jumpstart fund described on that we'll get to on the next slide and other new expenditures funded from the general fund and the proposed adjustments may not have been possible.

So that includes.

paying back the emergency fund faster, that includes the investments in human service wages.

As a theme we keep coming back to, there are trade-offs with every balancing strategy, and this is one of them.

The council could choose to further reduce the amount of JumpStart funds transferred to the general fund in 2024, but that would require reducing general fund spending or other spending from the JumpStart fund in the flexibility category by the same amount.

Okay.

To the next slide, please.

So the 2024 proposed budget adjustments assumes passage of legislation that would amend the jumpstart fund policies.

The most substantive proposed changes is to expand the temporary flexibility for specific expenditures that were authorized in the 2024 endorsed budget.

So last year to prevent program reductions in city services, the council past what we often refer to as the fund flexibility ordinance.

This allowed for the flexible use of jumpstart funds in 23 and 24 only for four specific expenditures.

Those are the items listed in the 24 endorsed column that have a dollar amount in that column.

The proposed adjustments would add four new areas of spending that depart from the flexibility approved last year, and so funded with jumpstart funds.

And that includes adding a code compliance analyst in the Seattle Department of construction and inspections, providing the required startup costs for the social housing, public development authority investments and child care workers and the human services provider pay.

So we can move to the next slide.

This is a bit of a wonky central staff slide, but this slide highlights the relevant pieces of the flexibility provisions added next year that will frame the upcoming discussions.

That ordinance reads that after subtracting out the amount of jumpstart funds transferred to the general fund.

for revenue backfill and then subtracting out any jumpstart fund spent under the specific flexibility allowed last year, you then allocate the remainder to each of the categories.

However, When the council adopted the budget last year and endorsed one for 24, the flexible uses of jumpstart funds were intended to be capped at the level of funds that would otherwise be allocated to the up to five percent of jumpstart funds for administration and evaluation.

That was clearly expressed in the attachment that actually listed the specific expenditures.

Frankly, in the pace of budget, the order of operations was not captured accurately in the fund flexibility ordinance.

So with that in mind, if we could move to the next slide, we have looked at the proposed, oh, go ahead.

Madam chair, may I ask a quick question?

Always, Council President, please go ahead.

Hey, Allie.

So I'm looking at slide eight and the jumpstart flexibility, I get it.

So I know this sounds kind of nerdy, but on the former presentation on page 15, the new term, which I like the jumpstart adjacent.

Um, tell me what, what that means.

Is that the same thing?

Like basically jumpstart adjacent is really jumpstart flexibility because we've allowed within the ordinance or the, yeah, to, um, to be flexible about what the four additional issues that we were going to use the jumpstart for.

Is there a difference there or, um, not it you're,

Mostly right, but Patty, if you could go to the previous slide on slide 7. What is challenging to trace in what is going on is that.

Some of these expenditures that are flexible uses in the proposed budget departments are spending directly out of the jumpstart fund to pay for them.

And some of them are.

first transferred to the general fund and then spent out of the general fund.

So Tom's general fund adjacent is capturing the portion of these expenditures and some other transfers to the general fund related to admin costs that are general fund adjacent.

So basically those expenditures from the general fund are made possible by transferring some of this money, uh, to the jumpstart fund.

And I'll try to say that another way, cause it took me some time to, to, Understand this, but essentially.

The mayor reduced the transfer that was a lot that from the jumpstart front to the general fund for general.

Balancing purposes and the general fund, so they moved 10Million from general fund back to jumpstart.

And then they took.

4.6 million of that and moved it back to the general fund for the human services provider pay.

It's a little difficult to see exactly how those expenditures are supported.

But my understanding is they did that with an intent to indicate that they are not assuming that the human services provider pay will be an ongoing liability from the Jumpstart Fund.

It is somewhat of a very, very in the weeds budget.

Budget transaction.

Okay, so let me ask Madam Chairman, ask a follow up.

Yeah, of course.

So, on page 7, as you shared with us, the flexible use of the funds, the 1st, 4 were 1 time.

I remember when we did this for the outreach and the sweet and beverage tax.

1 time, and now we have, so the other 4 coming in now.

the code compliance, the startup costs for the housing PDA and all those other four.

What are you categorizing?

You're categorizing those as flexible, not adjacent or...

Yeah, under the Jumpstart Fund provisions, they are flexible.

Identified, like, the, there is attachment age, the fund flexibility ordinance that you approved last year that listed those 1st, 4 items and said only in 23 and 24. can you can you spend on those things?

Right?

The mayor's proposal amends that attachment and adds these 4 and says only in 24, can you fund these from the jumpstart fund?

but some of them are ongoing.

So they're having an impact on the sustainability of the general fund.

So the code compliance analyst, that's an ongoing position.

The human services provider pay is an ongoing position.

So that, you know, because some of that money is getting transferred back into the general fund before it's getting spent, that is sort of the general fund adjacent using Tom's description in his memo.

But we're kind of, we're coming at it from different angles.

Okay, so the last 4. That that are, um, we're not in the 2024 endorsed that are the 2024 proposal.

Those are not 1 time.

Those are, like you said, ongoing some of that to the code compliance and the human services provider pair ongoing.

Expenditures, but the budget does not assume that they're paid for in an ongoing way from the jumpstart fund.

Okay.

So, it assumes in the future that.

We figure out how to address the 250Million dollar.

Deficit in the general fund, so all these and all the other things can continue ongoing.

Okay, madam chairman, I asked a question that maybe just a little bit out of line, not out of line, but out of bounds just.

Just a little bit ahead.

No, that sounds good.

Go ahead.

And I want to build on some of the questions that you have as well.

Okay.

So we're putting together with customer mosquito and which.

names and, of course, I was going to say Ms. Pellett.

Allie is going to be on the oversight board with some other community members and the mayor will have some members.

So will the new council next year, will the oversight board commission, whatever, will they be the people that will, and you'll be there, to maybe to break this down easier so we understand or they understand Because you're talking about not just this year, but you're talking about, as the chair was saying, sustainability looking forward, well beyond some of us not being here.

Is that a role that you see for the Oversight Board Council, or maybe that goes to the chair?

Go ahead, Ali.

I do think that is a role for the oversight committee.

I think that, like, similar to the Green New Deal Board or the Sweetened Beverage Tax Board, they regularly advise on the proposed budget.

I believe the City Budget Office often consults with those organizations.

They often provide letters to all of you with their take and where they think it aligns or doesn't align with their priorities.

And so, If I have influence, well, as a member of that committee, I absolutely would want to talk that through because I think it would be helpful for the future council to get the input from that board on.

Here's what we think about how the proposed budget aligns and, you know, sort of describes those ins and outs.

Great.

Thank you.

And thank you council president for the work that you have done through your office and supporting the effort to try to get the oversight board members advanced.

We look forward to having that conversation and full council later this month.

And thanks to the executive for identifying folks as well.

The executive.

Also identify as 5 people very, very interested in standing that body up to provide that feedback to the council and the executive in future years.

So so that is a good work on the horizon to come and appreciate the question there.

I think the question that I was going to ask for central staff as well.

When we look at the investments here, and I want to again underscore my personal support, my interest in seeing these items that are listed in the last four areas receive funding.

The question that I'm raising is not about whether they should have funding, but the mechanism to allow for them to continue to receive funding through general fund versus having them swapped into Jumpstart.

Couldn't we have accomplish the same outcome of having that funding be provided by way of maintaining the $10 million from Jump Start that was going into the general fund and leaving that $10 million in the general fund and then just allowing those investments to be part of what the general fund then fulfills in 2024 instead of swapping it back into Jump Start.

Can I ask you a follow-up question, Madam Chair?

Yeah, let me see if Allie can answer that real quick.

Oh, I'm sorry.

You're still asking her question.

I apologize.

I missed.

I missed.

Okay.

Chair Mosqueda, yes, that is correct.

if the proposed budget had not reduced the transfer by $10 million, these four new line items could have been funded directly out of the Jumpstart Fund.

I wouldn't be here trying to explain moving it out and then moving it back in and all of those things.

Can I just ask for clarification?

You just said it would have been funded from the Jumpstart Fund.

Did you mean the general fund?

Yes, the general.

Let's do the full answer again just for the record.

Yes.

So that is correct.

Had the transfer not been reduced by $10 million, so we'd left that money or at least most of that money in the general fund, these expenditures, we wouldn't be talking about these or are they or are they not eligible for Jumpstart and is there an ongoing liability?

So they could have been facilitated The previous issue I discussed still would have persisted where our analysis is still the transfer amount should have been reduced, but it may have been a simpler decision for the council for this year's budget.

Great, yeah, because I know I know many of us are everybody everybody's had this conversation year over year, right?

We are tired of having this discussion and the question then gets complicated.

It's not a question about whether or not these are.

Important programs to invest in had the money from jumpstart remained in the general fund and these items been included in the proposed budget to come from general fund.

we would really be not even talking about fund source at this point.

I think that colleagues, I'm just teeing up for you that there is a option here, and I know we'll talk about it later, of keeping these items funded at the amount that the mayor's proposed budget includes, and having that amount continue to be taken from general fund and keeping the 10 million in general fund instead of transferring it back to Jumpstart.

Council President, I interrupted you earlier, Uh, but wanted to just flag for folks, you know, I know that we have been in this discussion budget over budget and everybody's getting tired of having that definition discussion and I don't want to have to compound that again this year.

So I think there's a simple solution that allows for these items to be funded and for us not to continue to go back to that.

Same definition and delineation discussion that we had year over year.

Council President, anything else to add or follow up?

No, I was just trying to distinguish between, obviously, these are intergovernmental, interdepartmental loans, they're just transfers.

And we did that, the sugar tax, we've done that with park revenue money, where, you know, we weren't loaning and adding an interest, we just said, hey, here's 10 million.

And okay, now we're going to get it back.

That I was just want to clarify that it just, and I know at some point, in please correct me, I read somewhere, but I'm sure Allie or Madam Chair will correct me, that we explore, maybe the Oversight Board can explore that, if there's just a standard way where a certain percentage, did you not agree to at some point, or did we, would go to the general fund beyond the purposes that the ordinance was set up for the payroll tax, right?

Go ahead, Allie.

So, There has never been an agreed upon percentage in the, in the 1st year, like the spending plan.

In the 1st, the original spending plan allowed in the 1st year, the 1st, you know, we were in 2020, you'll remember those challenges of budgeting that year going.

So it said for the 1st year in 2021, the revenue can be used to provide to backfill for lost general fund revenue and provide ongoing coven relief.

Like, funding for many of the coven relief efforts that you all were implementing in that at that time, and then moving forward, all of it gets allocated to the.

To the spending categories a year later, that was amended and there was a calculation.

There was a formula put into the fund policies that allowed.

for a transfer from jumpstart to the general fund.

If general fund revenues were below a static number that we, um, from a forecast from 20, but I think from 2020, so that is still in the policy that you can transfer if general fund revenues fall below that point, but we're, we're well beyond that point.

So it's basically moving.

Like, so there's no ongoing allowance and in, uh, few minutes, I will get to a, I will call that question about whether or not it's time to have that conversation about the, uh, uh, permanent, uh, change to those fund policies and offer some, uh, options for the committee's consideration, as well as an option to do what Chair Muscata just described for this year, which is simply to just not reduce the $10 million transfer and just pay for these things out of the general fund this year.

And, um, you know, wait for any discussion about longer term decisions, jumpstart funding, all the funds in the mix until next year.

So what I just want to thank you is that you've given a title or a name to what I was trying to say, and you did it obviously much better than I did.

And that is the, the, there is not an ongoing allowance going back and forth.

And, and, and you're right that I think that's right for discussion since this, we've passed this, but I, and I'm, I'm done.

Thank you.

I understand that the allowance that we're talking about is based on the jumpstart start law or S.

M. C.

53855, which allows for a transfer from the jumpstart payroll expense tax to the city's general fund for a given year.

They're projected to come in.

If.

If the general fund revenues are expected to come in lower than.

general fund revenues from 2020 when jumpstart was passed, that amount is one, let's see, 1,510,000, 1,510,000,029,000, something like that.

But anyway, there is a very specific amount, but that 2020 amount is not indexed to inflation.

And so one of the policy changes that Mayor Harrell suggested last year was to index that to inflation so that there would be a different trigger for the jumpstart transfer.

So, but note that This is not indexed to inflation, but the human services provider pay is.

And so that that's part of what is increasing this gap.

And last year also Mayor Harrell.

proposed to not tie the human services pay adjustment to inflation, but rather to 4%, and that didn't go down.

And both of those, because both of those pieces of legislation didn't go through, that's why we in part have this big gap that was shown in the previous presentation.

between revenues and expenditures and note that those lines do not account for per Council Member Peterson's comment, all the other revenue that we do take in that is not accounted for in the general fund.

So I guess I'm making my point that when we're talking about not spending that 10 million this year, that means that we have to spend it next year, which only increases our gap.

So we're making decisions not to close the gap.

And now this year we have an opportunity to decrease it a little bit.

And what I'm hearing is that there might be some desire not to do that.

And so if we're really gonna talk about long-term sustainability, there are policy choices that we have made and that we could make to decrease the need for looking at all these other different new revenue sources.

So, I just want to put that on the table when we're talking about jumpstart because we limited the amount that we can transfer based on a floor that that is not tied to inflation.

That's all I have to say.

Okay.

Shall I proceed?

Yeah, I think you can proceed.

I do also think though that it's important to note that the increased gap in expenses and revenue is not something that the council, the city council has opined on at this point.

It is an increase in expenditures versus revenue that's in the mayor's proposed budget.

Our budget that was codified in statute by the mayor still had a projected gap between expenses and revenue of $212 million per year each year over the next six years.

The mayor's proposed budget as received is a $248 million gap each year, year over year for the next six years.

So there's not something that the council is considering one way or the other.

right now that has added to that.

We're talking about the mayor's proposed budget.

The question is still a question for ongoing need.

If we're talking about increasing individuals' salary, that is an ongoing expense.

I look forward to diving into this deeper with my colleagues, but wanted to flag for clarification that there's not a proposal or discussion about widening the gap that the council has teed up here at this point.

Council Member Nelson, I'm going to keep going.

We're going to have a chance to come back and talk about this more.

Will we make the gap through our policy decisions?

Sure.

And we will have more conversations to come about whether or not we accept, reject, or modify any of the proposals that have come in the mayor's proposed budget that has proposed to widen that gap without additional revenue at this point.

Let's continue.

Great.

Okay, so, yes, thank you, Patty.

So, going back to the, maybe about 20 minutes ago.

in thinking through, walking through like the literal reading of the code and then the clear stated council intent in part of that ordinance.

This table illustrates how the jumpstart funds would have been allocated to the categories if the same logic that the council used last year was applied to the proposed budget.

And so what this shows is that because the council's intent based on the past legislation, was that the flexible uses were only coming out of the administration and evaluation category.

If you apply the same logic or that intent to the proposed budget, you can see that the administration and evaluation category would be overfunded compared to the spending plan and the economic revitalization and the housing categories would be below the levels included in the spending plan.

Uh, this if we can move to the next slide, this table.

That should be tied.

It's Table 3 in the memo, but I have a typo here on the slide.

This is Table 1. This table illustrates how JumpStart funds would be allocated, applying that literal reading and how we understand the executive applied the policies.

Using this framing, the categories meet the funding policy targets, but do require amending the policies to add those new specific uses to the flexible uses.

We can move to the next slide.

What does this all mean?

It's a lot of ins and outs.

It's hard choices for the council, but the flexibility provisions, as I've said before, didn't technically limit the amount to essentially what would be underspending the administration category.

And so if Council approves the legislation transmitted by the Council, this would indicate a change in Council's intent.

As I noted in my introduction each year, there have been changes to the fund policies that provide one-time flexibility.

for use of these funds in order to balance.

And at that time, at the time the plan was created, we didn't assume that the COVID emergency would persist for so long alongside the associated impacts to the community and the economy that persists today that are contributing to that increased spending in the general fund.

As we look ahead to 25 and beyond, the council will continue to be challenged to preserve the jumpstart funds for the specific spending categories approved in 2020 absent new revenue sources.

We offer this question for the committee's consideration.

Is it time to consider expanding the areas of spending in the jumpstart fund that can be used on a permanent basis?

If so, what does that look like and what is the process for making those decisions?

You can move to the next slide, please.

So there are a variety of options here.

Option A is what Council Member Mosqueda described, reject the proposed changes to the fund flexibility ordinance and reduce or find alternative sources to fund the expenditures added to the flexibility provisions.

Or excuse me, option B is more what she described.

Do not reduce the amount of Jumpstart funds transferred to the general fund by $10 million and fund those new areas of flexible spending that should be four new areas proposed by the mayor or amend the jumpstart fund policies to allow ongoing use of the jumpstart fund.

This could take a variety of forms.

This could include adding new categories and changing the percentages.

It could also include broadening the definition of what, for example, qualifies as investments in housing and services or in economic revitalization.

Is wage equity part of economic revitalization?

is providing temporary shelter until there is permanent housing available, part of the housing and services.

It's been clear from previous conversations that is not the intent of the original spending plan, but those are options on the table.

We also describe in that memo, given that these spending categories were designed to focus on intentional spending categories.

If there is interest in considering expanding or broadening the uses, the council could request that before making any permanent changes, that a racial equity toolkit is applied and there is work with the community to understand those impacts and what community input is about changing the fund policies.

Keep going.

No.

Okay.

Uh, so the next slide result relates to the reduction.

In the economic revitalization category and housing and services overall, compared to how much was funded and how much those categories were funded for in the 24 indoors.

So this is part of the total $8.2 million in reduced spending from the categories.

There's a $2.1 million reduction in the economic revitalization category.

Compared to the endorsed in the endorsed budget, there was 13.1Million dollars that was held in a reserve and finance general to implement the future of the Seattle economy, strategic framework and the forthcoming workforce development strategic plan that was reduced by 2.1Million in the proposed.

budget and the remainder is programmed primarily in OED's budget, the Office of Economic Development's budget, but as well in other departments and you'll hear more about that in presentations tomorrow.

This reduction does not reduce funding for any specific programs that were funded or services that were included in the 24 endorsed budget, but does reduce overall the resources available for this category.

And then in the housing and services category, there's a reduction of $3.6 million, which is reducing resources in the multifamily housing program.

In addition to that $3.6 million reduction in housing and services, the proposed eliminates $2.3 million of funding in OH's budget that was funded from the administration category.

And instead, those administrative costs will be paid for in 24. With funds allocated from the housing and service category so that further reduces the available resources for the development of an acquisition of affordable housing and associated services.

And this will be included in the office of housings presentation scheduled.

for tomorrow as well as a discussion of a transfer from the Office of Housing to the Human Services Department for relocation of a tiny home village.

In the second year of a biennium, one of the things that we were looking at was how, I guess there was an assumption that the endorsed expenditures would be maintained to the greatest extent possible before new spending was proposed.

Because these reductions were used to balance new expenditures both in the Jumpstart Fund and the General Fund, restoring funding to those 24 endorsed levels will require reducing spending elsewhere.

So the options are similar to what you have seen on previous slides, but they're here again for your consideration.

Keep going.

All right.

Next slide, please.

The next issue relates to a proposal for $1 million for administration and evaluation.

And Council Member Nelson, this gets back to the question you asked during Tom's presentation earlier today.

The proposed adjustments include a proposal that was rejected by the council last year to add a million dollars under the administration and evaluation category to the city budget's office, innovation and performance team.

This would support two evaluation advisors and some additional funding that they would use to conduct evaluation and reporting on the effectiveness of programs funded by the Jumpstart Fund.

At the time the jumpstart tax was adopted the council established this oversight committee to provide oversight on the services and programs supported by the tax and its impacts on the number of jobs and businesses in the city, and other data that directly relates to measuring the impact of the tax on the city's economy.

It also assumed that existing staff would provide technical support to that committee.

In fact, there are two staff positions, one from the executive and one from the legislative branch, and as Council President, Whereas noted before, I have the honor of being nominated by Chair Mosqueda, and that will be before you coming soon.

And so this is, the question here is really, is it timely to decide where to put these positions or if these additional positions are necessary before that board is formed and has an opportunity to provide input on what type of evaluation and innovation work Will be done and whether there are additional staff positions necessary in addition to the 1 already added in the Department of neighborhoods.

If the city budget offices, innovation and performance team is the appropriate home for those.

Um, for those positions, so the conditions that led to the council, not including this in the endorsed budget last year, or have not significantly changed this year.

So, the options are to reject that spending and that could be used to restore funding and some of the other categories, or be used for other purposes.

And I think maybe a hybrid to that is reduce if we think that the body will be stood up at some point next year.

I'm very thankful that the executive and Mayor Harold specifically and their team is interested in helping to stand this up.

I think that's going to be excellent.

It's been called for in the original legislation.

I'm very happy to see our collective efforts to move forward on that.

Allow for the body to be stood up next year, so the question isn't should there be oversight and investment?

There obviously should be.

That's why it was included in the base legislation that was passed in 2020. We want there to be an oversight board and ongoing evaluation.

I think the question that I was raising earlier and the option raised in a here is is a full 1Million dollars necessary when the body is still yet to be stood up next year.

And and and is that.

The appropriate amount, or is there a reduced amount that can help get the body stood up and help provide oversight and ensure greater transparency and information flow between CBO and central staff as we look to have this conversation in the future as well.

So excited about the oversight board coming together, obviously very supportive of oversight efforts that was included by us in the base legislation and just a question about the total dollar amount needed for 2024. Council Member Nelson, please go ahead.

So the argument I made last year for not cutting this oversight or this money to support the oversight board was that that was staff to empanel the oversight board.

Every other oversight board and commission and advisory body does have staff allocated to it.

I don't know if a million dollars is the right amount, but the condition that has not changed is the fact that there is no Support to impanel the oversight board.

And so I, I do think this is a very important expenditure could be tweaked lower.

I don't know.

But because in your wisdom, you established an oversight board in the original legislation.

I think that we need to do everything we can to stand it up.

And clearly, there are a lot of questions about, you know, we need an oversight board because.

The tax base from which we're drawing the revenue is is really changing.

That is why jumpstart revenues are coming in less than was anticipated it certain forecast during the past year.

But also remember that.

Overall revenue is coming in still at least 50 million more because there was a spending plan for about 219 million and then what projected revenues were expected to be 222. And we far surpassed that.

And so clearly we need to have this, we need to spend some money to get oversight off the ground.

And it's just late stagnant because we didn't do that last year.

Thank you very much for noting the wisdom of the authors of jumps.

I appreciate that.

But we do have funding for helping to panel the oversight board.

Thanks to Department of neighborhoods.

Thanks to the executive team.

We do have staff that is currently assigned to helping establish that board.

They are currently working on.

Gathering everybody's resumes, creating the packet for the executive and the council.

And have been working on identifying what's needed to stand it up.

So there is staff capacity.

I don't know director deputy director if you were going to comment on that.

I saw you come off mute, but would appreciate any additional clarification that you have.

On that.

Yeah, I wanted to clarify the 22 adopted budget added a position in ongoing funding from the jumpstart fund to the Department of neighborhoods to staff this oversight committee and and they are now working to get that that stood up so it is not accurate to say there is no staff to support that that committee what really we are honing in on here is Going back to Eden's presentation of earlier is all positions, all ongoing positions proposed should be looked at with scrutiny and whether or not they are critical.

Is this a critical need this year before longer term decisions are made to support the city's budget overall?

Or could existing staff be reallocated or reprioritized to provide technical support if needed once the board is stood up?

We don't yet know what the board is going to need to do or excuse me, the committee to do their work.

And so that is we offer in that spirit, but agree that this work is important.

And it right now, I think it's.

I still see this as potentially premature, but it.

Yeah, that's for you to decide.

Well, what was it anticipated to be used for?

What was the the original legislation was for just a panel or was it perhaps for external consultants to help with analysis and monitoring and an ongoing basis?

What I'm not sure what the original.

ordinance assumed that there would be technical support provided by the Department of Neighborhoods Director or other staff.

There wasn't a specific amount of funding that was specified to support the administration and evaluation of the board.

In 2022, again, there was a position added to staff this committee, but it has not yet been established.

Okay, I think you have one more slide.

Is that right?

I do.

Okay.

In addition to the changes to the spending policies described previously, the budget legislation would amend the tax policies and would include a proposal to extend for three years an existing deduction that applies to non-profit healthcare entities.

This exemption has been in place since the tax was enacted, and non-profit healthcare entities do receive other deductions or exemptions from certain state taxes.

I'll just flag here that Chair Mosqueda had previously asked central staff to prepare legislation that would only have included this change to the tax policies.

I'll just note that if this deduction did expire at the end of this year, so if the proposal to extend that deduction was not approved, the council could assume about $5 million more jumpstart revenue in the 2024 adopted budget and use that to increase funding in the spending categories.

If there are no questions, that is my final slide.

Woo!

Day one of three.

It's 4.30 almost.

And I know that that was a lot of information.

As I noted, much of the discussion that we've had today about assumptions or the endorsed process for 2024 that we reviewed with central staff this morning, And the proposed changes that we see, both in general fund and proposed use of jumpstart, those will be reoccurring themes over the next 2 to 3 days.

So, tomorrow all day, Friday all day, and then half the day on Monday.

So, of course, if anything comes up, that is a question for you, or a.

Issue that you want to circle back to central staff will be with us throughout the next 2 and a half days, or I should say 2 days as we go through this process.

And I know that there's no easy answers here, just like we've never had easy answers last year and we didn't have any easy answers in the 1st, 2 years of the pandemic, even though we had substantial new revenue coming in from the federal government, we will continue to have thoughtful and hard conversations about.

how to invest our existing revenue streams into the community priorities and additional clarification or information that you need helps all of us.

So thank you for continuing to ask your questions so we can really understand the proposal and thus then understand any potential changes that the council would like to consider.

I will save some of my comments about jumpstart and some of the strategies that have been outlined in the options as we get into some of the issues and see a little bit more about how those policy changes impact.

the intended outcome of some proposals, but I do want to say thank you to Deputy Director Panucci for teeing this up and to the full central staff team.

You saw the core components of our fiscal analyst team today, Director Handy, Deputy Director Panucci, Eden, and Tom.

Um, who've been really diving into each of the proposed areas that they went through today and then more subject matter subject matter expert issued deliberations will occur over the next 2 days.

So, of course, if you have any additional questions that you'd like to ask.

on the materials that we've received.

Central staff is available and at the ready to answer those or feel free to bring them up in our discussions as we get into certain policy topics and departments over the next few days.

Colleagues, I don't see any hands going up here, so I'm going to take that as an indication that folks are tired and full of information today and ready to engage tomorrow at 10 a.m.

And we will have the opportunity to jump right into the discussion, starting with office of housing and then human services department in the morning.

And our afternoon consists of arts and culture and office of economic development.

So, all very important issues that in some ways have been teed up today, as we've talked about revenue streams and potential changes in the budget.

We will again meet tomorrow at 10 a.m.

Public comment was subsumed into today's discussion, so we will not have public comment tomorrow or Friday given that we spent over an hour on public comment this morning and this is the first of a three-part discussion.

If there's no other business to come before the council, I see our good council president off mute and ready to go.

I was trying to say goodbye, but I want to thank everyone.

Did you just say that there was not I'm sorry.

Did you just say that there was not going to be a public comment on Friday?

There's not, you know, we got that this morning.

Yeah, we got clarification from our clerks and central staff.

I had said, you know, every meeting we intend to have at least 30 minutes of public comment.

They reminded me that today, tomorrow and Friday and Monday are all sort of part of the same report out process.

I'm happy to try to amend the agenda for Monday if there's burning issues that folks want to bring up after they hear more.

Of the presentation, we could always include public comment again on Monday, but for tomorrow and for Friday, the public comments already been accepted in this morning's presentation.

And if you'd like colleagues, I'll go ahead and amend the agenda for Monday because we haven't published that yet and include public comment for Monday.

Okay, it looks like that was a nod and a thumbs up.

Cool.

Okay, we will take that as a friendly amendment to the agenda for Monday and include a portion for public comment in case folks hear something over the next two days.

Anything they've heard today that they want to bring up for us?

Of course, they can.

And as a reminder, the evening on Wednesday is solely dedicated to public comment as well.

So there will be a chance to dial in at 5pm on Wednesday to provide public hearing and discussion.

Hearing no additional items, thank you so much for participating.

The time is 4.30.

Enjoy the rest of your day and I'll see you tomorrow at 10 a.m.

Thank you.

Bye.