2019-2020 Proposed Budget
King County provides critical local and regional services to millions of people, with a two-year budget of $11.3 billion, 14,000 employees and more than 60 lines of business. The 2019-2020 biennial budget provides further opportunities to build on our efforts to make King County the best-run government in the country.
Executive Dow Constantine has set five goals for the 2019-2020 budget process:
- Develop balanced budgets for all funds.
- Continue to work toward the Executive priorities of Equity and Social Justice, implementation of the Strategic Climate Action Plan, and progress with the Investing in You strategy, which aims to build a workplace where County employees have the tools and support to innovate, achieve their career goals and do their best work.
- Propose actions related to several policy priorities, including reducing homelessness, moving toward zero youth detention, creating a Department of Local Services, expanding efforts in water quality and habitat restoration, reforming the tax structure, and enhancing mobility (including making Metro Transit its own department).
- Continue to make King County the best-run government, including expanded focus on customer service improvements and performance tracking.
- Increase efforts to manage costs through efficiencies and engagement with employees.
County agencies will develop budget proposals this spring. The Executive’s Office and PSB will review proposals over the summer. The Executive is scheduled to present his Proposed Budget to the King County Council on September 24. Council action to adopt a budget will occur before Thanksgiving.
State law and County policies mean that King County County’s budget is split among more than 100 different funds, each with specific revenue sources and programs. County leaders generally do not have flexibility to shift money among funds, so the financial condition of County funds varies.
The strong economy and excellent fiscal management mean that many of our funds are in good condition and County leaders will be able to consider expanding and improving services to our residents. This is the case for Metro Transit, the Wastewater Treatment Division, the Solid Waste Division, many of the funds that are supported by voter-approved taxes, and several other agencies.
In contrast, the County’s General Fund faces continued financial challenges. Approximately 60 percent of the General Fund’s revenue comes from property taxes. Under State law, property tax revenue can grow only 1 percent per year, plus the value of new construction. That means the General Fund’s largest revenue source grows about 1.5-2.5 percent per year, significantly less than the combined rate of inflation and population growth (typically around 4.0 percent).
This limitation was imposed in 2001 so the General Fund has been under significant financial pressure for nearly two decades. Despite finding efficiencies and a few small new revenue sources, General Fund programs have been steadily reduced.
The same situation is likely for the 2019-2020 budget. Current forecasts project a deficit of about $20-$25 million for the upcoming biennium. There is also significant pressure to expand some services, including response to homelessness, additional programs to divert youth from detention, and improved maintenance of County facilities. Further budget cuts are likely for many General Fund agencies.
The Public Health Fund also faces continued financial challenges due to inadequate state and federal funding. State funding for core public health functions was flat for about 15 years. Small increases in 2017 and 2018 are helpful but are not sufficient to offset a long period of no growth. Federal funding has been cut significantly in the last five years. As a result, the Public Health Fund has a projected financial shortfall for the 2019-2020 budget at the same time as it faces challenges in responding to a growing number of disease outbreaks and other critical public health issues.
The Behavioral Health Fund is managed by the Department of Community and Human Services (DCHS) and provides funding for mental health and substance use disorder services. The County provides some of these services directly, such as involuntary treatment assessments, and contracts with other organizations to provide treatment and related services. Washington State is changing the behavioral health delivery system for Medicaid-eligible patients to become fully integrated managed care. Under this model, physical and behavioral health care will be administered jointly through managed care organizations, which should improve whole person care.
While this approach generally makes sense, we are working to assure that implementation is in alignment with local resources. The County puts close to $100 million annually in local funding into the system, which is far more than in any other part of the state. The change to fully integrated managed care is set to occur on January 1, 2019 in King County. The County is working with the managed care organizations to build a new partnership for service delivery, but it is not yet clear how this will turn out. Final decisions by the State Health Care Authority won’t be known until sometime in the summer, which means there is great uncertainty about the behavioral health budget. There will almost certainly be some reduction in available funds, but the change ranges from relatively minor to very significant.
There are other parts of the budget that are reasonably stable in the near term but are inadequate to meet demand, including the Roads Fund, which supports roads, bridges, and related infrastructure in the unincorporated area. Several studies have determined that current funding levels are less than one-third of the amount needed to simply maintain the existing infrastructure. A regional effort to identify new funding sources is underway but any meaningful new options will require approval by the State Legislature. The Roads budget for 2019-2020 will continue the trend of having to make difficult choices about which investments to make and which facilities will continue to deteriorate.
Similarly, the General Fund’s financial challenges have led the County to underinvest in maintenance of general government buildings over the last fifteen years. While there was a modest increase in funding in the 2017-2018 budget, this did not begin to address the growing backlog of projects. Several major building systems will need replacement in the next few years and paying for those will require further difficult choices.
The Executive will be proposing three major organizational changes as part of the 2019-2020 budget.
- The Metro Transit Division of the Department of Transportation (DOT) will become its own department. Metro Transit is the County’s single largest agency and serves more people than any other County service. The Marine Division of DOT will become part of the new Metro Transit Department.
- The Executive also is proposing a new Department of Local Services (DLS) to improve services in rural areas, as well as major remaining urban unincorporated communities. The Road Services Division and Department of Permitting and Environmental Review will become a part of the new department, as will the Community Services Area program currently located in the Department of Natural Resources and Parks. As part of the DLS reorganization, Fleet Services and Airport divisions will become part of the Department of Executive Services (DES).
- The third proposed organizational change is to take the Human Resources Division out of DES and make it into its own department. Effective human resources efforts are critical to improved delivery of services, so having this function directly report to the Executive will allow greater attention to this work.
The Executive is pursuing two major initiatives in response to the financial challenges facing many of the County’s programs. The first initiative is to continue and expand efforts to manage costs. Several efforts have been underway for the last eight years, including deployment of the Lean continuous improvement methodology, working with employees and labor unions to manage health-care costs, deployment of new technologies to reduce costs, and expanding efforts in risk management to identify and avoid potential risks.
For the 2019-2020 budget, a specific new effort is underway with some of the larger internal service agencies, such as King County Information Technology (KCIT) and the Facilities Management Division (FMD). The goals of this effort are to hold cost growth below the projected trend and to identify lower-value services that could be reduced or eliminated.
The new business planning process underway to support the 2019-2020 budget also will help manage costs. This process includes clearer identification of goals, outcomes, and performance measures for each program.
The second major initiative is to develop and analyze ideas to reform Washington’s antiquated state and local tax system. The basic structure of the tax system was established in the 1930s and was relevant to the economy of that era. Today, Washington’s tax structure is usually evaluated as the most regressive in the nation, which means the tax burden is much greater on lower-income individuals than on high-income people. The system also is becoming less productive over time, especially because the sales tax is still applied mostly to sales of goods in a time when the economy continues to shift toward services.
The need for tax reform was further highlighted by the Washington Legislature’s decision to increase state funding for basic education by imposing a new statewide property tax, which led to increases in 2018 bills of over $500 for a typical single-family household in many parts of the county. In subsequent years, the burden of this new tax will fall disproportionately on King County property owners because property values are increasing faster there than in the rest of the state.
The tax reform effort involves both identifying options and developing an evaluation framework for them. This work will be completed by September 2018. Any meaningful tax reform will have to be approved by the Legislature since counties have almost no revenue flexibility under current law.