Cuts in staffing and public services are necessary to balance Federal Way’s 2011-2012 budget.

The 2011-2012 deficit is estimated at $4.5 million — roughly 11 percent of the operating budget. Due to the economy, budgets passed within the past few years have been based on conservative revenue predictions. Even so, revenues fell much more than anticipated.

“It is clear an economic rebound has not reached Federal Way,” City Manager Brian Wilson said.

Wilson is proposing a budget that calls for staffing and program reductions, to the tune of $2.3 million a year over the next two years. Layoffs are unavoidable. Cuts in full-time employees will happen before cuts to programs. Layoffs will come from all areas of staffing, including public safety, which accounts for roughly 50 percent of the city’s employees, Wilson said. Ten or more non-police staffers could be let go, city spokeswoman Linda Farmer said. The police department could face between 10 and 12 cuts to administrative personnel and officers.

Deficit

Extreme revenue changes began in March, Farmer said. Overall, revenues are now 3.3 percent below 2010 estimates, Wilson said. A decrease in utility taxes has hit Federal Way hard. Revenues from electricity, natural gas, cell phones and solid waste are 9.7 percent below what the city expected, according to a memorandum by Wilson. Warmer weather, decreased consumer use and a 16 percent rate reduction, beginning in late 2009, contribute to the projected deficit.

The city council has directed Wilson and his staff to focus primarily on presenting a balanced budget for the upcoming year and stabilizing the long-term budget when the economy recovers.

“We are focusing on balancing the 2011-2012 budget, but we are also paying close attention to our long-range financial health to 2016,” Wilson said at a May 18 city council meeting.

Balancing act

The public will suffer if the budget is adopted as proposed. Services will be cut. Others will be scaled back, such as the annual street asphalt overlay, so money can be shifted to balance the budget.

“We were already a pretty lean city to begin with,” Farmer said.

City employees will be expected to pull more weight. While their medical costs rise 10 percent, salaries are expected to remain stagnant, with no cost of living adjustments (COLAs) and only stepped wage increases, Wilson said. A task force will be formed to examine how to keep health care costs affordable for the city and its personnel.

“It will be essential for all employees and our labor partners to communicate, collaborate and coordinate to address the deficits we are facing,” Wilson said.

The actions are affecting morale at City Hall. This is the third time in a year employees have been warned they could lose their job.

“Right now the feeling is grim,” Farmer said.

Economic forecast

Since last year, the city’s management staff and the city council have feverishly tried to stay ahead of falling revenues and increasing expenditures. In June, the 2009-2010 budget was revised to avoid a projected gap that arose due to falling tax revenues. The measure brought the restructuring of 15 staff positions.

The mid-biennium budget process began just six months later in November. By that time, revenue projections made in June were already off-base. More layoffs took place. A little more than $2 million previously allocated to the purchase of Camp Kilworth was redirected back into the budget. A transfer of real estate excise tax and red light photo revenues helped balance the budget.

Federal Way’s economic forecast is glum now, but it could change. The state predicts a 12.2 uptick in revenues in 2011-2013, according to a May 18 Washington State Department of Revenue local government partnership meeting. Federal Way is just starting its budget process, and if the numbers change, there is time to revise the budget that Wilson has tentatively put forth.

Wilson will present a budget calendar to the city council at the 7 p.m. June 15 city council meeting at City Hall, 33325 8th Ave. S. Community meetings about the budget will be held in August and September. The full budget will be presented to the council in October. Public hearings on the budget will take place in November. The city council is expected to adopt the 2011-2012 budget in early December.