Washington County's proposed budget shows $30M shortfall
Washington County has a $30 million budget shortfall to address for the next fiscal year, according to the budget statement issued by county administrator Tanya Ange this week.
The proposed budget issued by the county details "critical funding challenges" posed for the fiscal year 2022-23 budget, with expected expenditures outpacing revenues by millions. County officials pointed to the pandemic, low property tax revenues and other factors to explain the gap.
"As I provide the budget message this year, I first need to acknowledge the strange times we're all in," Ange said in a presentation to county commissioners on Tuesday, May 10. "The proposed budget for FY 2022-23 arrives as our community is emerging from over two years of challenges, the likes of which we have not seen in generations, including the pandemic, a recession and the housing crisis."
Last year's adopted budget totaled $1.4 billion, while this year's proposed budget contains nearly $200 million more in expenses. Nonetheless, while $30 million represents a relatively small amount of the total county budget, officials warned that this is indicative of larger work that needs to be done to put the county in a better state financially.
Ange stressed that the county's crucial services — like law enforcement, homelessness support services, and public health operations — will not be cut to address the shortfall. Instead, the largest cuts will be made to the county's general government spending and scheduled capital improvements, with the next year only funding the highest-priority capital projects.
Those steps include postponing a $4 million general fund allocation to the Housing Production Opportunity Fund (HPOF), and a $4 million savings from funding only the highest-priority capital project for the IT services department.
County officials stressed that this one-year delay in funding to the HPOF doesn't represent a large paring-down of the county's broader affordable housing priorities. Affordable housing support and homeless services remain a budgetary priority, the proposal states.
That fund is specifically used to assist multifamily housing developments that run into construction cost increases or other circumstances that delay completion. But there are other funds for building affordable housing that the county is prioritizing, the largest of which is its $50 million in regional affordable housing bond funding.
"In addition, the Housing Authority of Washington County, which has a separate budget from Washington County's, has an array of public and affordable housing programs and services," said county spokesperson Philip Bransford.
Other savings in the proposed budget come from freezing general fund allocations requested by several departments, including a scheduled transfer to the county department that manages its vehicle fleet.
Some additional revenues, like one-time federal pandemic assistance, will also help address the $30 million gap. However, county budget officials cautioned that relying too heavily on these stop-gap funding sources could "have the effect of masking ongoing structural problems in the county's financial approach."
County officials say they will continue to meet regularly to come up with other solutions that address these budgetary woes. Ange's aim is to avoid layoffs, furloughs or cuts to employee salaries.
The budget proposal states that high inflation and pandemic-related supply delays have increased some costs. But Ange also highlighted Oregon's property tax limits as a prime reason for revenues being lower than spending.
She said the 3% limit on property tax rate increases — one of several restrictions on taxes approved in the 1990s — leaves fast-growing counties like Washington County struggling to keep up with growing needs.
The county's proposed budget provides a graph using data attributed to Portland State University. It shows that Washington County's permanent property tax rate of $2.25 per $1,000 of assessed value falls far short of the needed rate to account for its 57% population increase since 1997.
Washington County's total real market value grew from last year, but by a smaller amount than during the hot real estate market of 2020 and early 2021. The proposed budget states that property values grew by about $11 billion since the last budget, substantially less than the $18.2 billion increase the county saw in the previous year.
This has led Washington County, and many other jurisdictions around the state, to rely more heavily on local option levies to fill the gaps.
Ange also pointed to the pandemic as a major source of dropping revenue. The tax collected on hotel and motel stays, called a transient lodging tax, almost completely dropped off as the hospitality industry was hit hard by COVID-19 closures and a public that was hesitant to travel, for example.
Another big drain on the budget is the rising cost of labor. It has grown by about 17% statewide since the start of the pandemic.
The sharp rise in oil prices, as a result of both inflation and the ongoing war in Ukraine, were also mentioned as a large factor.
"Taken together, supply-chain problems, wage increases and higher oil prices are all contributing to an inflationary environment for next year's county budget and possibly beyond," the budget statement says.
However, Ange was quick to point out that the pandemic isn't solely responsible for the tight financial spot the county finds itself in.
"The buildup to our current situation has been underway over the last several years," Ange's budget statement says.
She noted that interim county administrator Stephen Rhodes suggested fundamentally reshaping the county's budgeting process in the 2020-21 budget message, delivered when the pandemic was just months old.
Ange says the county needs "to more clearly assess community need, prioritize activities and services to meet that need and to design a stable revenue framework to fund these needs over time."
The county has several upcoming budget committee meetings, many focused on looking at specific departments and specialty funds on the county's books.
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