Press "Enter" to skip to content

General Fund Deficits Require Spending Cuts

The Green Bay Area Public School District, the City of Seattle, and the City of Coshocton (OH) have something in common. They’re all dealing with General Fund budget shortfalls for FY2023. In all cases, expenses have outpaced revenues, leaving budget directors scrambling to find solutions.

In Coshocton’s case, the deficit is about $500,000. While the City’s fund balance will cover the deficit, the proposed budget will claim about two-thirds of the city’s “rainy day” fund. The City’s General Fund cannot sustain another year of deficit spending.

The Green Bay Area Public School District is wrestling with a structural deficit. In FY 2023, the school district expects its General Fund to run short by about $18M. In Fiscal ’24, that number will grow to $32M, before topping out at $36M in FY 2025. Federal funding, which the district held onto, will initially delay the impact of the deficit in 2023 and 2024, however that support comes to an end in FY 2025.

The City of Seattle’s story is a little different. Until the pandemic, Seattle had experienced annual revenue growth of about 4%-5%. In the third year of the pandemic, however, the City’s expenses have climbed, wages have risen, and revenues have flattened, leaving the city with a seemingly insurmountable $117M deficit for FY 2023. According to the city’s budget director, Julie Dingley, there is “no obvious way to bridge the gap in 2023 or future years.”

The City’s previous budget director began sounding alarm bells in 2019, projecting a deficit of $116M in the City’s General Fund by 2023. At the time, his prescription was to spend cautiously. One-time funds enabled the City to cover its additional pandemic-related expenses, but those funds will dry up soon.

When General Fund revenues don’t materialize

There is a warning here for people who believe the way to resolve general fund deficits is to increase revenues. These three entities have already tried that. Despite seeing deficit conditions forming over a period of years, the entities adopted a “wait-and-see” attitude instead of acting.

To be fair, the pandemic interrupted a lot, and required immediate responses from all three entities. But that merely delayed the inevitable. Seattle’s former budget director characterized to deficit as a “misalignment between revenues and expenses.

Raising revenues – e.g., increasing taxes – isn’t going to happen for any of these entities. That means the best way to address the deficits is by reducing expenses. Let me repeat:

When people adamantly oppose raising taxes, their only responsible course of action is to reduce expenses.

You can’t have it both ways.

Photo Credit: Phillip Ingham , via Flickr