Salem, Ore. — On Wednesday evening, October 30, 2024, the City of Salem presented a preliminary five-year financial forecast for the general fund to the City’s Budget Committee.
The forecast is a planning tool to help the City Council and Budget Committee understand future financial trends to inform decision-making about service delivery to the community. The forecast models expected revenues and expenditures for a five-year period for current City services provided by employees to improve our residents’ quality of life.
Key Findings:
Results of the forecast show an estimated $17.7 million budget shortfall expected for the upcoming Fiscal Year 2026 budget that increases in each of the next four years. This increase is largely due to inflationary pressures reflecting cost increases across our economy, including employee salaries, retirement, benefits, and other ongoing expenses.
“The forecast shows a difficult financial path ahead for Salem’s General Fund. We have a lot of work to do to build understanding and regain the trust of our community,” says Keith Stahley, Salem City Manager, “While we work to set the priorities of the budget, all city employees must continue to be ’at your service‘ to the residents of Salem.”
Next Steps:
- By January 2025, the City’s Finance Department will work with an outside firm to validate the assumptions and methods used to estimate the $17.7 million shortfall. On January 15, the Budget Committee will consider the results of this work next year.
- In November, while this effort is ongoing, the City’s Budget Committee will begin to focus on budget priorities and principles moving forward. The Budget Committee is made up of the Mayor, City Councilors, and 9 community members.
- By April 2025, the City Manager will develop a budget with the Budget Committee’s principles and priorities in mind. The FY 2026 Budget will be presented to the Committee for their review and input at meetings in April and May.
- The Budget Committee will continue to refine the budget and recommend a budget to the Council for their consideration and adoption in late June.
- City Council may choose to place a levy on the ballot to ask our community to help support service delivery.
All City of Salem Budget Committee Meetings are public and take place at the City’s Council Chambers, 555 Liberty Street SE, Salem, OR 97301. See our website for scheduled meeting dates.
You can also watch on YouTube at https://www.youtube.com/@CCMediaSalem
Why do we forecast?
A forecast is an educated, good faith estimate of what our financial conditions may be in the future. It captures a point in time and is a useful tool for revenue and expenditure planning.
Looking ahead five years and estimating our revenues and expenses is an important financial best practice for our credit rating. The City’s credit rating helps keep borrowing costs low when voters approve bonds for larger expenses like the 2022 Community Safety and Livability Bond.
About the General Fund:
The General Fund is the principal operating fund of the City. Approximately 80% of the General Fund’s expenses are for employees who provide services to the community.
Services in the City’s General Fund include:
- Police (emergency police response, criminal investigations, graffiti removal, traffic safety and enforcement)
- Fire (fire protection and medical response)
- Community Services (library, Center 50+, parks and recreation, neighborhood association support, health and safety in public spaces)
- Community Planning and Development (City code and parking enforcement, land use and planning review, downtown and economic support)
- Finance (accounting, billing, budgeting and financial reporting, and Municipal Court)
- City Manager’s Office (develop and execute City goals, communications, City Council support)
- Legal (general counsel, litigation, prosecution)
- Enterprise Services (information technology support, talent acquisition, people management, payroll, building maintenance and services)
How did we get here?
Since Oregon instituted Measures 5 and 50 to set a permanent tax rate and limit the annual growth of property taxes, revenue in the City’s General Fund has increased at a slower pace than expenses. The City has not been able to increase revenue sufficiently to support the current level of services provided to the residents of Salem.
What is the City doing?
During FY 2024, the City Council reduced 6.35 positions and operating hours at the Library as well as 4 positions in the Police Department.
Last year, the Salem City Council approved service reductions in the FY 2025 General Fund budget totaling more than $3.8 million and included:
- $278,000 Parks Operations
- $400,000 Grants for Social Services
- $625,000 Grant to Salem Housing Authority (SHA)
- $257,000 Center 50+ and Recreation Services
- $850,000 Deferred equipment replacement
- $430,000 Reduction in Materials and Services
- $112,790 Department Directors – No Cost of Living Adjustment (COLA)
- $410,000 Unsheltered Support Funding (alternative funding source)
- $224,000 Youth Development Program (transitioned to Substance Use Prevention program with alternative funding)
The City of Salem is continuing to be proactive in finding a solution to this issue by:
- Engaging in auditing and oversight to ensure cost savings and accountability.
- Looking for further budget cuts to programs, operations, or positions when possible.
- Examining potential increases in user fees for select programs to fund operations.
- Listening to the community for their insight and feedback.
Over the next several months, Salem will continue to share information on the budget process and provide full transparency about the preferences and priorities established by the City Council and Budget Committee on behalf of the City. If changes to Salem’s budget are not made, the forecast shows that a budget cannot be adopted for FY 2027 and the funding gap will increase to $29 million by 2030.
The community is invited to learn more about this issue by visiting The City of Salem’s Website (www.cityofsalem.net/servingsalem) and taking an online survey to help us better understand how to share information with our residents about our shared budget priorities.
