Seattle's budget deficit projected to grow to $260M as revenue falls

Decreasing revenue projections have members of the Seattle City Council concerned about a likely $260 million budget deficit in 2025.

Members of the Seattle Select Budget Committee were briefed Wednesday on the latest economic forecasts for the city. The main takeaway: the deficit is predicted to go up from an estimated $245 million.

During the committee meeting, Seattle City Council Chair Sara Nelson brought up the business and occupation tax revenue estimates dropping more than $5 million this year and next year. Nelson said that tax represents economic activity.

The tax is now estimated to collect $404 million in 2026, a decrease of $8.7 million from the April forecast.

“Those negatives reflect what is going on in our daily economy and that is impacted by the policies we make,” Nelson said at the committee meeting.

The city will likely rely more on its JumpStart Payroll Expense Tax, which has now updated its revenue projections to $430 million next year, according to the August forecast.

The tax is paid by Seattle businesses with at least $8.5 million in local annual payroll. The rate the businesses pay ranges between 0.7% and 2.4% on salaries and wages paid to Seattle employees who make at least $150,000 per year. Companies such as Amazon, Meta and Google would be subject to paying the tax.

Seattle previously authorized approximately $105 million in 2023 and $130 million in 2024 as the maximum amounts available to transfer from the JumpStart Payroll Expense Tax Fund to the general fund to address a looming $140 million revenue gap the city is facing.

Approximately 10,000 jobs within Amazon moved from Seattle to the neighboring City of Bellevue in response to the payroll tax. Nelson flagged that drop in employment will hurt JumpStart tax revenue in the future.

The Seattle City Council recently passed a new pilot program with the South Correctional Entity for additional jail services. That is estimated to cost between $1.5 million to $3 million per year, depending on utilization rate.

Prior to the vote, Seattle City Councilmember Tammy Morales brought up the budget deficit, calling out city officials for not prioritizing how these initiatives will be paid amid calls to reduce spending to address the budget shortfall.

“It is clear that it is going to be more than $2 million [for the program] and it is also clear that so far the mayor has only identified $600,000 to pay for this,” Morales said at recent council meeting. “So where does the balance come from?”

Morales also mentioned $7 million to $8 million in ongoing costs for 48 new positions included in the mid-year supplemental budget.

“We’re pushing our budget deficit ... close to $260 million without asking the hard questions of how we are going to pay for this,” Morales added.

The city council is now set to vote on a mid-year supplemental budget package on Aug. 13 as it continues work to address the budget shortfall.