There are only two levers to fix the City’s budget deficit – either reduce expenses or increase revenues. In Work Sessions this fall, the City Council is considering available revenue sources and proposed decreases to expenses to maintain services in the City’s General Fund. The balance of funds at the end of one fiscal year must be at an appropriate level to pay expenses for the following fiscal year in July, August, September, and October – before receiving property tax revenues in November. An appropriate fund balance also helps maintain the City’s credit rating - which reduces the borrowing costs for taxpayers when the City issues bonds.

The following table shows a status quo forecast with the currently adopted staffing levels in the FY 2024 budget. In this display, the City is out of compliance with the fund balance policy in FY 2025. The following year, the City would not be able to adopt the FY 2026 budget which begins July 1, 2025.

FY 2024 - FY 2028 Summary (in millions)

Definitions

Beginning Fund Balance:

The fund balance at the beginning of the fiscal year. For FY 2024 the fund balance is preliminary based on the closing of FY 2023 and may be adjusted up until the audit is complete at the end of December 2023.

Ending Fund Balance:

The fund balance at the end of the fiscal year.

Fund Balance:

The cash available that is carried over from one year to another.

Net Expenditures:

The total budgeted expenditures (full cost for all positions and programs) less unspent contingency and a 2.5% savings estimate for vacant positions.

Unspent Contingency:

The City budgets $3 million in the General Fund for contingency, but anticipates only spending $500,000. This can vary greatly depending on whether funds are needed throughout the fiscal year.

2.5% Savings:

The City budgets fully for all positions (similar to other Oregon cities) as if they will be filled for the entire year. However, the City historically has seen savings due to vacancies and turnover. This line accounts for that natural savings that occurs throughout the year for more realistic fund balance projections.

Fund Balance Policy:

The City Council has an adopted fund balance policy (C-11) of 15% of budgeted revenues.

Fund Balance Spend:

This line displays how much is spent (negative number) or added (positive number) to fund balance each fiscal year.

Over (Under) Policy:

This line displays compliance with the City Council adopted fund balance policy. If the amount is negative, the fund balance is out of compliance with the policy.

General Fund Reduction Scenario

The table below displays the effect of Leadership Team recommended reductions to the current and future City fiscal year budgets. The Leadership Team consists of Department Directors, Deputy City Managers, and the City Manager. The recommended reductions are explained in greater detail below. The objective is to stay above fund balance policy throughout the forecast period.

FY 2024 - FY 2028 Summary (in millions)

Step 1: In FY 24 Budget, eliminate new operations fee-funded and other new positions

The City Council approved an increase to the City Operations fee effective July 2023. The purpose of the increase was to fund the first part of the Safe and Secure Community funding proposal. The increase would have funded a portion of current services as well as some new positions. Without new and ongoing additional revenue, the funding from the increased City Operations Fee will be needed to maintain current services and the following positions, which are vacant, are recommended to be eliminated, including:

• Two park ranger positions
• Two Code Compliance Officers
• Four positions for a planned expansion of SOS Team by three days a week
• Support services to City business including one Security Officer position at Civic Center, two human resources business partner positions, one human resources specialist, the DEI coordinator, one senior fiscal analyst, the grants administrator, one Community Services management analyst, one Community and Urban Development administrative analyst, one legal Assistant City Attorney, one Library supervisor, a crime analyst, a fire training officer, and one IT supervisor and two other IT administrative positions.

Step 2: Continue reducing services and increasing cost recovery

The reductions of the City Operations Fee and other new General Fund positions are not enough to maintain an appropriate fund balance. Additional positions, organized by budget year, represent ongoing reductions in service.

FY 2024 - July 1, 2023, through June 30, 2024

• West Salem Library Branch closure. The West Salem Library would no longer operates 5 days/week @ 5 hours/day (25 hours/week), eliminating six vacant staff positions.
• Eliminate six vacant Fire positions used to maintain minimum staffing requirements and reduce overtime cost.
• Eliminate four vacant Police positions including two officers used in high-level drug trafficking cases, a sergeant to provide managerial oversight of patrol officers in the field during high-risk situations, and a lieutenant used in strategic response to the complex problems within the community.
• Reduce environmental and hazardous waste cleanup in waterways, riparian areas, sidewalks, and other publicly owned locations.

FY 2025 - July 1, 2024, through June 30, 2025

• Close micro shelter villages – State grant funds for micro shelter villages will be expended by July 1, 2024, and 180 temporary emergency shelter beds could close.
• Reduce Salem Main Library hours to 10am - 6pm Tuesday through Saturday and reduce programming resulting in eight fewer positions.
• Increase cost recovery at Center 50+ by reducing services and increasing user fees.
• Increase cost recovery at Recreation by increasing user fees.
• Reduce Parks operations by seven positions, reducing weekend maintenance, closing restrooms, and turning off irrigation, drinking fountains and splash pads.
• Reduce Transient Occupancy Tax direct grants to community events by 10%.
• Eliminate the Youth Development position and associated grants.
• Reduce the Police graffiti abatement team to one position.
• Eliminate social service grants to non-profits providing case management and other services.
• Eliminate Safe Park and emergency warming funding support.

FY 2026 - July 1, 2025, through June 30, 2026

• Close Navigation Center – State grant funds for Navigation Center will be expended by July 1, 2025, and 75 temporary emergency shelter beds could close.
• Close a Fire Station, reducing staff by nine positions.
• Reduce Police by 10 officers, eliminating homeless service team, police community action unit, and graffiti abatement services.

FY 2028 - July 1, 2027, through June 30, 2028

• Close a second Fire Station, reducing Fire by nine positions.

Prior to the pandemic and before adding new sheltering programs, the City anticipated difficulty in funding current services at a sustainable level as expenses continue to escalate at a faster pace than revenues in the coming years.

Cities across Oregon are facing similar structural imbalances between revenues and expenditures. The structural imbalance is rooted in property tax ballot measures from the 1990s, Measures 5 and 50 which limited the amount of property taxes that can be collected to fund the City of Salem and other tax-based districts in Oregon.  As a result, money the City receives from property taxes does not keep pace with inflation, population or development growth, and generally the increasing costs of providing City services.

Due to ever-increasing expenses, which have outpaced this tax revenue, the City of Salem consolidated positions and laid off employees in 2008. Since the great recession of 2008, the City has been able to keep General Fund services solvent by reducing services, consolidating duties, and adding the City Operations Fee in January 2020, based on the recommendation of the 2018 Sustainable Services Revenue Task Force.

Staffing levels in the General Fund have not recovered from the reductions made during the great recession (2008-2011).  Since then, Salem has grown by 26,000 people — equivalent to the population of Woodburn — but City staffing levels have not largely changed. As more people choose to live in our community, the need for and cost of services increase each year, but revenue to provide those services grows at a slower rate.

With the infusion of federal COVID-related CARES Act and American Rescue Plan (ARPA) funding, the budget was temporarily stabilized. Those funds have been depleted. Without these one-time funds, the City would have needed to reduce General Fund expenses sooner.

We welcome your ideas! You can use our budget simulation tool, Balancing Act, to share your opinion on what City services are most important and at what level the services should be provided. (Para Balancing Act en español oprima aquí.)

You may find these resources useful.

• Adopted City Budget Book FY 2024 Includes service area budgets for all City departments and project-level budgets for capital improvements.
• Adopted URA Budget Book FY 2024 Includes budgets for debt service and capital improvements in the urban renewal areas as well as budgets for the Salem Convention Center.
• The budget in brief provides a consolidated, summary-level view of current funding for City services. View the budget in brief for FY 2023-24. Mirar el presupuesto en breve FY 2023-24.

Balancing Act starts with the fiscal year 2023-24 General Fund Budget and lets you adjust the simulated City budget to increase or decrease programs and services. The simulation begins by using the deficit situation we are today, so you can consider reductions to existing City programs and services or the addition of revenue to balance the budget. The tool provides more context about each decision and guides you through the process. Each community member entry is like a response to a survey.

The adopted budget is approved by the City Council by the end of June. Prior to Council adoption, the Budget Committee recommends a budget to the City Council and approves the City's property tax levy rate. The City is required to have a balanced budget adopted by the City Council prior to July 1. The City of Salem budget is a legal document that provides the City authority to spend public money. The City budget is:

• a one-year financial plan based upon estimates for revenues and expenses,
• a guide to promote valid and accurate accounting, used by City Council, staff, and City auditors,
• a policy document that reflects the plans and priorities of the City and communicates these goals to the public.

Oregon Budget Law.

Salem's budget is prepared in accordance with Oregon Budget Law, Chapter 294 and must be balanced. The law establishes standard procedures for preparing, presenting, and administering the budget. State law defines the role of the Budget Committee and citizen involvement in preparation of the budget and public disclosure of the budget before adoption by the City Council. The City operates on a fiscal year, beginning July 1 and ending June 30.