Olympia leaders weigh revenue options, services cuts amid budget challenges  

The Olympia City Council is exploring new revenue options and potential service reductions amid early signs of a challenging 2026 budget cycle.

At a city council study session held on Tuesday, June 24, City Manager Jay Burney said the city used $4 million in reserves to balance the 2025 budget. This puts Olympia “$4 million in the hole” at the start of the 2026 cycle, he said. 

The city’s current fund balance stands at $14.3 million.

“Our fund balance policy is to be between 10% and 25%, and we are sitting at a 12.5% right now,” said Burney in emphasizing the limited financial flexibility available.  

According to Burney, Olympia’s 2025 general fund totals $114.5 million, and about $30.5 million is tied to offsetting revenues. That would leave around $83 million available for potential reductions.  

Police and fire services account for nearly half of the $83 million, making it a major consideration in budget planning.  

In 2025, Olympia avoided cuts to frontline public safety — police, fire and homeless response — due to staffing shortages and high demand. Burney said those areas would again be difficult to reduce, but left them open for discussion.  

The Public Works Department had the largest reduction at $600,000, followed by the City Manager’s Office and Information Services, which each saw cuts of nearly $600,000.  

Burney asked the city council for guidance on how to approach possible reductions, including which services or priorities to protect or reconsider.  

No cuts to public safety 

Council members generally agreed on the need to protect public safety, preserve essential services, and avoid permanent harm to the workforce.  

Council member Kelly Green was direct.

“You could cut all you want, but it does not reduce the number of emergencies," Green said.

Council member Clark Gilman cautioned against cutting services or staff, noting reductions  during the Great Recession took nearly a decade to rebuild, especially in areas like multimodal transportation and public works.

He wants to maintain full staffing in public safety to reduce burnout and improve response quality. He also urged the city to explore alternative response models to ease 911 call volumes.  

Council member Jim Cooper encouraged exploring partnerships with outside organizations to help meet service demands while reducing costs. He also recommended rethinking transportation funding strategies and evaluating discretionary spending in the Capital Facilities Plan.  

Council member Dani Madrone said she could support some funding shifts, but strongly opposed using more of the city’s rainy day fund.   

“I don’t think it is raining yet, but we see clouds on the horizon,” said Madrone, emphasizing the city should prepare for potential state and Medicaid funding cuts.  

Mayor Dontae Payne voiced strong support for protecting core services like police, fire and public works. He said safety-related programs should not face cuts.

“So I'm not a big fan of the idea of reducing levels of service, especially around things that we're supposed to be doing, you know, for the community and as a resident of the city," Payne said.

"If I come into the city, I expect to get help for whatever it is that I need assistance with, and if there's a reduction in that service, then what am I paying taxes for?” 

Council member Robert Vanderpool expressed reluctance to make significant cuts without more information from the budgeting process. He wanted to preserve staff expertise, and encouraged partnerships and creative strategies to meet public expectations.  

 Mix cuts, new revenues 

The city’s executive team has identified potential strategies to help close the anticipated gap. Burney said the administration has developed a list of options totaling up to $11.7 million to consider during the 2026 budget process.

Some of the listed proposals are as follows:

• Potential operational savings from state-mandated decreases in retirement plan contribution rates for the Public Employees Retirement System (PERS)/Public School Employees Retirement System (PSERS), which could save the city approximately $1.6 million, with savings split between the current and upcoming fiscal years.  

• Temporary reductions in indirect charges and delays in street striping.  

• Business and Occupation tax modification.  

• Reallocation of capital funds, including the possible use of transportation capital dollars for operations, and invoking a parks “exigent financial circumstance,” which the city used once during the pandemic to shift capital to operations.  

• Utility tax adjustment, where a 0.5% increase could raise $500,000 for the general fund.  

• Redistributing climate program costs to utility funds, potentially saving $200,000 from the general fund.  

Burney also revisited a proposal to eliminate an assistant city manager position to save $300,000.