Spokane County releases 2026 preliminary budget to close $20M deficit

(The Center Square) - Facing a $20 million deficit, Spokane County released its preliminary budget on Tuesday that closes the shortfall ahead of next year by asking each department to pull back spending.

Jeff McMorris, senior director of Finance and Administration, said the Board of County Commissioners will decide over the coming weeks which departments will receive additional funding. The board must provide further means for some departments as required by the state, but most are budgeting flat.

McMorris told the officials on Tuesday that Spokane County Elections and a few other departments are the only areas they can’t pull back. He asked all the others to avoid budgeting beyond what the board approved for spending in 2025, with sales tax growth and vacancy cuts closing the rest of the deficit.

“They’ll come in and make the case why [all the departments] want that money back,” McMorris said.

His projections show the county’s general fund raising $266.27 million, 1.8% more than the budgeted amount for 2025, while spending $259.57 million in 2026, which is roughly 0.83% less than this year.

In total, the general fund preliminary budget could generate a roughly $6.7 million surplus across 2026.

The rollout coincided with a sales tax update highlighting stronger activity than the county anticipated through this time of year. Sales tax growth fell flat last year despite a historical growth rate of roughly 3.9% since 2000. The board estimated 0% sales tax growth in 2025, but may raise it to 2% for 2026.

McMorris said the county collected about 1.7% more in sales tax revenue from January to August than during the same period last year. Despite those prior challenges, he attributed much of this growth to sales tax hikes that the city of Spokane passed last fall with Spokane Valley recently following suit.

The Legislature also closed a deficit a few months ago by passing the largest tax hike in state history.

Lawmakers filled a significant part of the shortfall by raising sales taxes across several products and services, which is now flowing downstream to the county. The board hasn’t increased the local sales tax rate, but it could approve the 1% property tax hike as allowed by state law, just as it did last year.

“The 2026 budget does not include a 1% property tax increase,” Tessa Sheldon, budget and financial operations manager, told the officials on Tuesday. “All the options are on the table and outlined here.”

If the board approves another 1% property tax increase, it could generate an additional $641,000; the officials could also adjust the county levy rate to put more money behind veteran services. That would bring in another $1 million, with another tax program in Liberty Lake potentially providing $441,000.

The most significant option would be a levy road shift, which allows the board to temporarily divert tax revenue for infrastructure development to the general fund, posing as much as $7.46 million for 2026.

Those revenue options, paired with a projected $6.7 million surplus, could offer the departments some breathing room as the board decides which will see more funding. Many will reduce spending by cutting vacant positions, but McMorris said each had to fill out forms showing the board how it met the target.

“This is a jumping off [point],” McMorris said in closing the discussion.