With expenses growing faster than revenues, City of Portland prepares for cuts to balance the next budget

News Article

Mayor Ted Wheeler issues budget guidance, preparing for transition to a new mayor and expanded city council in new form of government.

Over the next few months, Portland officials will identify ways to cut costs so they can balance the city's next budget - the first in a new form of government.

Mayor Ted Wheeler issued budget guidance today, directing most city services to develop concepts for cutting at least 5 percent from current budgets. Further cuts would be required to offset any new spending.

"Simply put, expenses are growing faster than revenues," Wheeler said. "We owe it to Portland's incoming leaders, and to our community, to prepare now for the tough choices ahead."

Each year, the City of Portland allocates about $8 billion to deliver services, solve problems and improve outcomes for Portlanders. The city's budget cycle runs from July 1 to June 30.

The city's financial leaders laid out the city's economic forecast at a city council work session this week. Although many national economic indicators are positive, "for Portland, it's a more nuanced story," City Economist Peter Hulseman told the council.

Portland's population and employment are trending flatand remain below pre-pandemic heights. Vacancy in downtown buildings remains an ongoing challenge. Although tourism is picking up, it has not yet returned to pre-pandemic levels - and business travel remains slow. All these factors contribute to slower-than-usual revenue growth.

In addition, the city has relied on over $700 million of one-time resources over the past five years, which funded everything from homeless shelters to gun violence prevention to ongoing fire operations. Some of that money comes from federal pandemic resources, while some comes from local funding that was available on a temporary basis. City leaders must identify ongoing funding to maintain some of these high-priority programs.

Meanwhile, pressure mounts on the city's spending. City costs have experienced the same inflationary realities that have affected all consumers. Additionally, the city also faces legal obligations, high overtime costs to maintain public safety services, and urgent community needs such as addressing homelessness and improving safety.

Healthcare and personnel costs are increasing, with a question mark lingering for active labor negotiations with three of the city's 14 bargaining units. Any new funds committed to those contracts - affecting more than 2,000 employees - would deepen the spending cuts needed to balance the city's budget.

Following Wheeler's guidance, leaders will begin working across the city administrator's office and the city's six service areas to identify ways to reduce spending. The 5 percent target may be updated based on input from the person elected as Portland's next mayor in November and an updated economic forecast expected in December.

By the end of February, the city leadership team will present a holistic, balanced "trial budget" for community feedback. From there, it's up to the mayor and then the new 12-member city council to refine and approve the budget.

"I have great optimism that, despite the hard realities, a better budget process is going to be a positive for the city," Jonas Biery, the deputy city administrator for Budget & Finance, told city councilors this week.

At the work session, both elected leaders and city executives said they aim to minimize the impact on community members and employees - but acknowledged that reductions to services and jobs will need to be considered.

"We will need to make hard choices," City Administrator Michael Jordan said. "We will have to be strategic about what we must invest in, and to do that we will need to reduce spending in other areas."

Learn about the City of Portland's budget process

Overview of Mayor Wheeler's Budget Guidance

• Required 5% cuts for all bureaus that receive general fund except Police, Fire and Emergency Communications, plus scenarios for an 8% reduction.
• 5% reductions for internal services such as technology, fleet and facilities
• 5% reduction in rate increases previously forecasted for Water and Environmental Services (max combined increase of 5.94%)
• Larger cuts to bureaus whose funding sources are seeing more dramatic declines, such as Parks and Permitting & Development
• New spending restricted to legal obligations, priority programs with expiring one-time resources and critical ongoing operations.