EVERETT—It was revealed at Tuesday’s Finance Committee meeting, that Snohomish County is projecting at least a $23.6 million deficit for the 2025-2026 biennium, in addition to a $14 million year-over-year structural deficit extending through December of 2030.
“So, it’s a doubling of our structural deficit,” Mead said during Tuesday’s meeting. “So, our hair is on fire, but why is there not a column [in the budget presentation] here that tells me our hair is on fire?”
Driven primarily by lower-than-expected sales tax revenues and rising expenditures in key criminal justice departments, the budget situation is soon becoming a crisis that, according to current projection, could deplete the County’s Total General Fund balance from $73.2 million at the end of 2025 to negative territory by December 2028, two full years earlier.
“One of the benefits that we do have in this organization, specifically in our general fund, is we’re ending the 2024 year with $122 million. So, we do have a cushion there to right-size the ship and to make it,” Nathan Kennedy, Director of Finance, shared with lawmakers during his First Quarter update to the 2025-2026 Snohomish County Biennium Budget, which was presented almost three months late.
Director Kennedy shared that GDP decreased 0.3% in the fourth quarter of 2024, consumer confidence indices fell sharply in March 2025, and Snohomish County’s unemployment rate rose to 4.4% in March 2025 up from 3.6% in the prior quarter—factors he mentioned for his report that contributed to subdued revenue growth, particularly in retail sales tax.
For 2025 and 2026, the county budgeted a 5% increase in retail sales tax based on a 25-year historical average of 5.3% to 5.4%, but is currently tracking at approximately 2% for 2025, resulting in a $5.2 million shortfall compared to projections.
Kennedy explained that the 5% sales tax assumption led to the current shortfall in retail sales tax revenues for 2025 which will be partially offset by $1 million in higher-than-expected investment interest due to sustained elevated rates.
The drivers of the 2025 biennium budget deficit includes shortfall in retail sales tax, wage increases to address inflation and market competitiveness, as well as overspending in departments such as the Sheriff’s Office, Sheriff’s Office of Corrections, and Office of Public Defense. All three departments are projected to overrun their 2025-2026 biennial budgets by at least $19.4 million—Corrections requested $14.7 million in adjustments, Office of Public Defense is seeking an additional $4.7 million, and the Sheriff’s road patrol is anticipated to exceed allocations materially, though without a specific request, currently.
Councilman Sam Low echoed Mead’s concerns also stating, “I do believe our hair is on fire” and “we are facing a significant budget problem.”
“I think the Sheriff’s Office and Corrections already spent over $5 million in overtime this year, first quarter, which is our first six months, which is really what the two-year budget is for corrections,” Low shared with council members. “And so that money is not coming back. And we are going to have to find that hole.”
Kennedy reinforced councilmembers concerns stating, “I am concerned… when we have a structural deficit, an ongoing structural deficit, and then we have departments that are overspending, of course I’m concerned.”
Amid these challenges, council members explored potential revenue opportunities to close the budget gap.
Councilman Strom Peterson inquired about the impact of progressive real estate excise tax (REET) policies, such as higher rates on properties over $5 million, if enabled at the state level, though Kennedy confirmed no adjustments have been made to budget estimates under the current formula.
Finance Chair Megan Dunn confirmed with Kennedy the county’s untapped property tax bank capacity, which is estimated at around $4 million to $4.5 million from not utilizing the full 1% allowable increase.
As next steps, Kennedy recommended that the council engage directly with overspending departments to clarify issues and potential fixes, maintain a healthy fund balance to buffer sales tax volatility, and await an upcoming review by the Revenue Committee. He also shared that the Executive Office, led by County Executive Dave Somers, is deliberating on whether to propose mid-biennium budget amendments based on current forecast models.
Councilman Nate Nehring proposed inviting overspending departments to a future finance committee meeting for discussions on accuracy and controls, with Low suggesting inclusion of District Court as that department is showing signs of overspending.
“I share the concern that’s been expressed about the level of spending and the associated deficit,” said Nehring. “My question is if it’d be worth that a future finance committee may be having those departments that are overspending just come in so we can have a conversation about that.”
Mead advocated accelerating this to a weekly Administrative session, which the council did not object. Additionally, Low requested Kennedy to include the council in monthly sales tax updates, which he agreed to facilitate.
The second-quarter budget report is slated for release by the end of September 2025 with the Sheriff’s Office scheduled to report in front of the council on August 19 to review its proposed $14.7 million in additional funding request.
Author: Mario Lotmore
