Clallam County’s preliminary 2025 budget indicates that next year’s expenditures could exceed revenues by about $4.187 million unless adjustments are made.

The number assumes that the county is fully staffed the whole year, which county chief financial officer Mark Lane said is never the case.

When the budget is adjusted for expected payroll under-spend based on open positions, the deficit drops to about $2.554 million.

“Obviously, from our perspective, this is not where we need to be from a budgetary standpoint,” Lane said.

If the deficit cannot be reconciled, Lane said the county likely will have to dip into general fund reserves.

To avoid that path, Lane said he asked every department that receives general funds to try to reduce projected expenditures by 7%.

“We wanted to send the strong signal that we do not view the utilization of $2.5 million of reserves, much less a $4.2 million utilization of reserves based on a fully staffed budget, as being a place that our county needs to be in,” Lane said. “We cannot continue to rely on reserves to balance the equation.”

If each department can reduce its expenditures by 7%, county administrator Todd Mielke said, “that would align revenues and expenditures for this budget.”

The current preliminary budget is predicting about $54.285 million in revenue for the county’s general fund.

When factoring in transfers from other budget sources, that number represents a 0.66% increase in total revenue compared with 2024.

About 49% of the revenue will come from various taxes: 21% will come from intergovernmental revenue such as grants, timber sales and more; 18% will be from goods and services charges; and the remaining funds will be generated from miscellaneous sources.

The county is predicting general fund expenses will total about $58.5 million, assuming the county is fully staffed the whole year. If the $1.6 million of expected payroll under-spend is removed, the total projected expenses go down to a about $57 million.

Those expense projections represent an 8.34% or 5.31% increase, respectively, in total general fund expenditures when compared with 2024.

“The lion’s share of the increase is in payroll [and] benefits,” Lane said.

Payroll expenditures are predicted to increase by a little more than 9%, while benefit expenditures are expected to increase by about 12.5%.

The largest general fund expense category is personnel costs for the county’s budgeted 344 full-time employees, which will make up 69% of the budget. Services expenditures will make up about 18% of the budget; payment to risk management and workers compensation funds and capital expenditures each will make up about 4% of the budget; and the remaining expenditures will be from other categories.

These expenditure projections do not include additional department requests, capital requests or the impact of certain pending labor union contract negotiations.

“It’s our best attempt at looking at our crystal ball,” Mielke said. “There’s a lot of assumptions that go into these forecasts.”

If the county cannot even out its expenses and revenue, Lane said the county will use general fund reserves. That will result in a 2025 ending fund balance of about $9.128 million, assuming the county is fully staffed.

That would follow the trend the county has been seeing regarding its reserves, which have declined 7.7% over the last four years and are projected to decrease another 19% in 2025.

The county’s general fund reserves are made up of 57% committed budgetary reserves, which can only be used for specific budgets; 25% restricted reserves that are in some degree limited to how they can be used; and 18% unrestricted reserves.

The deficit would represent an especially hard blow to the county’s unrestricted reserves, which are projected to decrease by 46% next year.

“Our unrestricted reserves have been showing a pretty substantial decrease over the last few years,” Lane said. “Certainly, this level of trajectory of compression of our unrestricted reserves really is not sustainable and is going to require some corrective action.”

The next steps in the budgetary process include Mielke and the finance team meeting with each department to determine cost savings, looking at department and capital requests and holding a series of public presentations regarding the budget.