Seattle Mayor Katie Wilson’s budget deficit nears half-billion dollars, raising threat of taxes and layoffs

Seattle is facing a near half-billion dollar budget deficit over the next three years, according to new city projections that exceed former Mayor Bruce Harrell’s estimates by more than $100 million.

The growing shortfall comes as Seattle Mayor Katie Wilson signals her administration is preparing a mix of new taxes and spending cuts to close the gap.

In a recent interview on the Seattle Channel, Wilson said her team is exploring additional revenue options alongside cuts as the city grapples with rising costs and slowing revenue growth. The updated forecast marks one of the largest projected budget deficits Seattle has faced in years and sets up what could become a contentious debate over taxes, city services, and spending priorities at City Hall.

“Capital gains tax is absolutely on the table,” Wilson explained during the Seattle Channel interview. “But realistically, the revenue that we would be raising through that is not huge, right, it’s probably in the lower double digits.”

At a recent public Q&A at Seattle University, Wilson said she would be very interested in exploring an income tax on Seattle residents if she could. According to state law, it is illegal for local municipalities to create income taxes. King County Executive Girmay Zahilay said as much at the same Seattle University event where he appeared alongside Wilson.

Are layoffs for city workers approaching?

Another likely unavoidable option, Wilson said during the Seattle Channel interview, was budget cuts, which could include layoffs of city workers, who make up one of the city’s largest capital expenditures.

“I don’t see any scenario where we’re able to come up with $175 million of new revenue this year,” Wilson explained. “So, I think we are also looking at some scale of cuts.”

During the interview, Seattle Budget Director Aly Panucci shared two slides that showed the city’s adopted general fund budget projections and the Wilson administration’s revised and updated projected deficits, year to year.

Adopted deficits included $148 million in 2027, $129 million in 2028, and $98 million in 2029. Panucci’s new projections showed deficits of $175 million for next year, $164 million for 2028, and $149 million for 2029. The total difference between the adopted and newly projected budget is $113 million through 2029.

During the interview, Seattle Channel moderator Brian Callahan asked Panucci if the city was spending beyond its means.

“I don’t think it’s spending beyond the means,” Panucci replied. “We’re delivering services that people need, and the costs of those services are more than our property taxes, our sales taxes, all the fees that support the city.”

Panucci acknowledged that the city’s budget has increased by approximately $2 billion since 2016, particularly during the COVID-19 pandemic.

Wilson and Panucci pointed to a combination of rising costs for the projected budget woes, including higher expenses for public safety and city salaries. They also pointed to a general lack of federal funding from the Trump Administration and to rising inflation and other expenses across the board.

Wilson also said the cost of programs to create emergency and more permanent housing for the homeless is rising. Callahan then asked Wilson if she could cut spending by $175 million – the exact amount to balance next year’s budget.

“That is a terrifying prospect,” Wilson said on the Seattle Channel. “That $2 billion General Fund… about half of it is our public safety departments. That is also our funding for homelessness services, and I am the first to say, like, we need to do better at how we are spending the funding that we spend on homelessness, but there is no world in which we need less funding for homelessness.”

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