Salem is preparing to adopt a new budget for 2025 fiscal year, which starts July 1, 2024. Public hearings are set June 10 at 6 p.m. at the Salem City Council Meeting in Council Chambers at 555 Liberty Way SE, for both the City of Salem budget and the Salem Urban Renewal Area budget. Here are a few things you should know:

1. Salem faced an over $10 million General Fund shortfall. 
The City’s General Fund pays the bulk of costs for some of our most valued services including fire, police, library, parks and recreation, and the city administration that supports those services. It is funded primarily through property taxes, which are not keeping up with the cost of services.

It also pays for some programs helping Salem’s most vulnerable populations, including youth, elders and unsheltered people. The shortfall meant the possibility of cuts to these important programs.

2. Cuts are necessary this year, a new ongoing revenue source is needed for the future.
The $190 million recommended General Fund budget restores spending for community-identified priorities including library services, family activities, and park operations. 

The budget committee’s work recognized that:

• To recommend a budget that adheres to the Council Fund Balance Policy, reductions are necessary this year, and
• To ensure ongoing delivery of programs and services a new, continuing revenue source is needed.

3. Some services proposed for cuts have been retained in the recommended 2025 budget by using one-time funding.
After lengthy deliberations, the Budget Committee used one-time funds (General Fund working capital and Cultural and Tourism Funds) to restore some services identified for reduction. The recommended FY 2025 budget restores: 

• 7.25 positions at the Library, maintaining current service levels
• Movies in the Park, concerts in the park, and the 2025 Kids Relay
• Irrigation, water fountains, splash pads, and restrooms at neighborhood and community parks
• One graffiti abatement position for the Police Department, which maintains the current staffing level at two positions

Reductions in the recommended budget include:

• All Salem micro-shelter funding (some alternate funding has been identified)
• Center 50+ - $230,000
• Unrestored Park Operations cuts - $287,000
• Unrestored Recreation cuts - $80,700
• Social service grants - $400,000
• Special Program Outreach Team (formerly HRAP) Grant - $625,000

4. Opioid settlement funds will shift focus instead of cutting some positions.
Salem will receive a portion of funds generated from national settlements with opioid vendors. These are one-time funds that will not replace General Fund revenue in the long-term. The Salem City Council agreed to use $647,340 of that money in FY 2025 to enhance services related to opioid use prevention including:

• Pivoting the existing Youth Services Program to substance prevention focused on the community’s most vulnerable young people and building awareness with parents, schools, and the community
• Providing a grant to the Salem Housing Authority to hire two new special projects outreach coordinators for a year to help substance-impacted people experiencing homelessness
• Providing first responder wellness support such as equipment and training
• Providing Naloxone at various City locations to help prevent overdoses

The plan also recommends using additional settlement funds in future years to continue two Homeless Services Team police officer positions through Fiscal Year 2030.

5. Increases to 2025 fees and charges for City services will also help balance the budget.
A new consolidated fee schedule is adopted annually in June prior to the start of the new fiscal year. Some fee increases have been identified to help balance the budget. They will be considered at the June 10 City Council meeting.

6. Shortfall is caused by a long-term structural imbalance in Oregon’s broken property tax system.
The budget shortfalls experienced by Salem and many other Oregon cities are caused by a structural imbalance in Oregon’s property tax system. Property tax measures of the 1990s capped the amount governments could levy in property taxes and limited growth in assessed values of property. As a result, the amount Salem receives from property taxes is disconnected from the economy and does not keep pace with inflation or population and development growth. 

The difference between revenues and spending for existing services continues to widen over time and, at this point, deeper cuts will have a more noticeable effect on services valued by the community. Without a revenue source that keeps pace with increasing costs, the imbalance will lead to more critical cuts to service levels in the coming years.

7. Budget problems have been ongoing for decades. 
Salem has been adjusting the budget for the past two decades to address increasing shortfalls. In the early 2010s, Salem closed two fire stations and eliminated several other programs. Overall, the City has been doing more with less, which does not allow services to keep up with the needs of the increasing population.

In 2018, staff and City Council began working to address the growing revenue shortfall by launching the Sustainable Services Revenue Task force. The task force recommended implementing a City Operations Fee, which covered a portion of the gap, and a ballot measure for an employee-paid payroll tax to address the remaining shortfall.

The city implemented the Operations Fee in 2019, but when COVID and its related economic downturn struck in 2020, the City Council removed the payroll tax from the ballot. 

8. COVID-related federal aid helped stave off increasing shortfalls for a few years.
The influx of more than $34 million in federal aid (ARPA, Coronavirus Aid, Relief and Economic Security Act) in 2021 and 2022 provided a stopgap for looming General Fund revenue shortages.

9. Funding uses are not interchangeable. 
People often ask why the City doesn’t cut programs in other funds to backfill the General Fund. The City has 24 separate funds that pay for everything from street paving to parks maintenance to water and wastewater treatment. Most of those funding sources have restrictions that limit how and for what they can be spent. 

Capital funds like those from the $300 million Safety and Livability Bond Measure (the money used to build parks, roads, buildings, etc.) cannot be used to fund staff operations and maintenance activities.