Community Government

Near-term financial outlook for cities ‘rough’ and comparable to Great Recession

Like other jurisdictions, the city of Gig Harbor is bracing for a rocky couple of years after Gov. Bob Ferguson announced that the state faces a massive budget shortfall for the third consecutive year.

City lobbyist Briahna Murray told the Gig Harbor City Council last week that the fiscal impact on cities will be “rough, and on comparison with the Great Recession.”

“I’m one of the few (lobbyists) that experienced all the cuts that cities received through the Great Recession,” Murray said. “And I think the sales and use tax exemptions and the Millionaires Tax (last session) were, in my mind, a huge red flag that we’re headed into some really challenging fiscal times for cities.”

Murray — who worked as the city’s lobbyist in the past and returns to replace outgoing lobbyist Shelley Helder — presented information at the council’s June 18 meeting, as the city prepares to set its 2027 legislative priorities. 

The city might not get to ask for much, given the financial challenges the state faces in its operating and transportation budgets.

Tightening the purse strings

The state likely cannot afford even maintenance-level funding for many programs, much less fund new ones. Murray said that the state’s Office of Financial Management (OFM) attributed this year’s budget challenges to a variety of factors, including inflation, population growth, federal funding cuts and overall economic uncertainty. OFM also cited the many tort claims the state paid out over the last several years.

The transportation budget is in a particular jam, Murray explained, because it’s funded through taxes on gas and vehicles, other vehicle fees, and tolls. 

While gas prices and the state gas tax have both increased, consumers are buying less gas and driving more fuel-efficient cars. Because of this, the gas tax “doesn’t buy as much,” she said.

“Because the gas tax is the primary source of funding in the transportation budget, and it is a steadily declining source of revenue, there’s a structural imbalance in the way that the state pays for its transportation obligations,” she said. 

She said the Legislature will examine alternatives to a gas tax, such as road-use charges and highway fees. But such fees are costly to administer. Rep. Jake Fey, D-Tacoma, introduced road-use charge legislation in 2025 and 2026, but it failed to pass the House both times.

A highway fee could consist of a flat fee on vehicles based on fuel efficiency.

Make the request

Despite the gloomy outlook, Murray said city leaders should still make budget requests. She cautioned that the Legislature may delay acting on the requests until the next budget cycle, or might fund them at a lower level than the city wants.

But by making the request, the city ensures its projects “still get visibility with legislators.”

Among other things, Gig Harbor had hoped to get funding for a new police boat. City Administrator Katrina Knutson said the city’s current boat is “nearing its end of life. It’s also very, very small compared to what we need and what we use it for.”

So small, she said, that it’s difficult for two officers to squeeze on board with their gear, or to respond to “the numerous calls that they go to under the bridge on a monthly basis to assist and pull human remains out of the water.” 

“In order for us to be able to provide the service that we do regularly provide in those situations, we need to look at a new police boat very soon,” Knutson said.

Murray suggested pursuing regional support on a funding request like that. She noted that the state funded a similar request from Mercer Island because that city’s neighbors supported the ask.

Some capital budget relief

Murray also said some light is visible at the end of the tunnel.

She recommended focusing on requesting funding from the state capital budget, which is the most stable of the state’s budget buckets.

Bonds, federal funds and dedicated accounts support the capital budget. Jurisdictions can seek funding from it for things like affordable housing, behavioral health and higher education facilities, and building schools. This means that the capital budget could include funding for a Gig Harbor Community Center or parks-related projects.

However, she noted, the capital budget does not include transportation-related costs.

“And if it looks like a transportation project, sounds like a transportation project, we can try some messaging with all our might to turn it into a capital budget request, but it often does not work,” she emphasized. She “highly encouraged” city leaders to find a community-focused project that would fit the parameters of a capital budget request.

She noted that jurisdictions reliably receive an average of between $800,000 and $1.5 million from the state every year, and encouraged city leaders to “look within those dollar amounts.”