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Portland’s newly elected mayor and 12 city councilors start work this week with a daunting number in mind: $27 million. That’s the gap between revenues and expenses the city announced this winter for fiscal year 2025-26, citing a yearly increase in the cost of maintaining current service levels, rising personnel and materials costs, and slightly declining property tax revenues largely due to vacant offices downtown.
But that shortfall will almost certainly grow before Mayor-elect Keith Wilson and the incoming Portland City Council have to write and approve a new budget. In fact, the gap could very well balloon to over $70 million by the time Wilson proposes his budget in early May.
In an Oct. 22 budget briefing with the current City Council, the city’s interim administrator, Michael Jordan, warned that it would be a memorably difficult budget.
“The last time I remember a budget this challenging was in 1997,” Jordan said. “This is a historic and challenging budget cycle, if for no other reason because we hand this budget off to a new mayor and a new City Council.”
Here are four big-ticket items likely to increase the projected budget shortfall in the coming months.
LABOR CONTRACTS
Eight unions are currently negotiating new contracts with the city, one of which expired Dec. 31 and one that is entirely new. The two parties are stalled over—you guessed it—pay increases for some employees. The City Budget Office did factor in a 3% budget increase across all city services, including labor negotiations and contracts—an educated guess where the city would land with the unions in contract negotiations.
But it’s likely that, as early as February, the city will have to make additional concessions to stop the unions from striking—deals that some city officials believe will tack on another $5 million to $10 million to the projected budget shortfall when coupled with…
HEALTH CARE BENEFITS
Last spring, city employees’ health insurance plans spiked in cost. Projections showed the city would have to pay $16 million more for health insurance if it wanted to maintain existing benefits for employees.
The City Council and the unions punted the benefits issue to the following year by cutting a one-year deal to keep the cost increases at bay, meaning the city had to find only $6 million to maintain employees’ coverage.
But the new City Council will have to address the issue this upcoming year, and projections provided by the insurance companies are once again grim. The insurers project yet another increase in costs from a year ago.
The City Budget Office did allow for an 8% health care cost increase to the upcoming budget, but it did not account for a 13% to 15% hike—which is what the latest estimates show. That increase feeds into the $5 to $10 million estimate for additional labor costs described above.
CITY COUNCIL AND MAYOR STAFFING INCREASE
Both Mayor-elect Keith Wilson and the incoming 12-member City Council have signaled they want to increase staffing once they take office. That would likely tack on at least $2 million to next year’s budget.
Councilor-elect Loretta Smith had expressed a strong desire to “restore” the current City Council’s budget. The five council offices usually have a budget of over $1.5 million apiece (the mayor’s is higher), while the incoming council has a total budget of $3.6 million, or $306,000 for each of the 12 council offices. Should Smith get her druthers, the council would vote to increase its overall budget by just under $6 million, which is not included in the city’s projected budget shortfall for the upcoming year.
ONE-TIME PROGRAMS
Finally, there’s the issue of programs and projects that the city paid for this past year with one-time funding, including both one-time general fund dollars and the last of federal COVID-19 relief.
One-time programs not yet factored into next year’s budget add up to about $40 million—including partial funding of the city’s temporary alternative shelter sites for the homeless. Those costs are not included in the city’s projected budget shortfall.
They also include the city’s Impact Reduction Program, which performs sweeps of homeless camps; the city program that blocks off certain streets in economic centers to create walking and shopping hubs; and subsidies for firefighter overtime to maintain service levels.
Some of those programs are funded to an extent in the ongoing budget, but were beefed up in recent years by one-time funding that’s set to expire, like the city’s camp removal team.