Local governments in Whatcom, San Juan and Skagit counties are bracing for 2026 budget cuts.
Due to the state property tax code, high inflation and other economic factors, cities and counties across Washington are experiencing budget deficits. Municipalities in Northwest Washington are finding new solutions to tackle next year’s budget hurdles.
“Most important is just on the revenue side,” said Forrest Longman, Bellingham deputy city administrator. “The way our property tax specifically is structured, it can only raise by 1% a year, and we all know that inflation is more than 1% a year.”
The most recent Consumer Price Index for the broader Seattle region shows a 2.8% inflation rate, about on par with the national rate, and — according to Longman — one that local municipalities can’t keep up with.
“In times like we have now, where we’re seeing lower or negative economic growth regionally, they can’t overcome that,” he said. “That’s really the crux of it.” (View Forrest Longman’s Oct. 14 presentation on municipal budgets [56:17].)
In a budget letter, Anacortes mayor Matt Miller said that wages and benefits costs have risen by more than 20% in the last four years, and construction costs have increased by almost 50% in that same period.
“While our reserves are stable, our cash balances are no longer sufficient to ‘buy us out’ of this shortfall,” he wrote. Anacortes’ revenues would need to grow by about 8% each year to maintain current service levels.
According to Erin Andrews, San Juan County’s communications coordinator, Washington’s reduced local public health funding ended the Regional Medical Officer program which provided local health officer support. Funding for Foundational Public Health Services in the health department was cut by $37,000. Additionally, federal funding cuts and the government shutdown have “handicapped local programs and services” like Washington’s Women, Infants and Children program.
Balancing budgets
At the start of Bellingham’s budget process, the city faced a $10 million deficit. To balance, the council implemented a new .1% sales tax in October, which will begin at the start of 2026 and raise about $4 million a year. In addition, the city also cut the equivalent of 30 full-time employees, only 12 of which were currently filled positions that must be laid off. The department heads also declined to take their 3% cost of living adjustments for 2026.
“Some of that is due to economic shutdowns partnered with inflation,” Longman said, “and the need to pay our employees to keep up with those cost-of-living adjustments that we’re contractually obligated to.”
The impact to the community — other than the additional sales tax — will mostly be in reduced service hours, he said.
The mayor’s office will have some reduced hours. Beginning Dec. 14, the Bellingham Public Library branches will be closed on Sundays.
Similarly, Whatcom County is facing a $10.1 million budget deficit.
To balance, state allocations and licensing fee increases will bring in $610,000. County property taxes will increase by 1%. The county will vote on the final budget on Dec. 2.
For Skagit County, “The development of the next (budget) has been a particularly difficult and challenging process for 2026,” the board of commissioners wrote in a recent press release.
Skagit County faces a $19 million general fund deficit for 2026, which has resulted in a 90-day hiring freeze that has become one “until further notice.”
The county is unique in its 84,000 acres of Department of Natural Resources forests — compared to Whatcom’s 30,200 — which are excluded from the county’s tax base. While Skagit has historically been one of the top three largest recipients of timber land revenue, timber sales have dropped significantly over the past eight years.
Like Bellingham, Skagit has brought on an additional .1% sales tax.
To combat the hardship, the county will transition its Senior Nutrition Program to a new nongovernmental provider by next July. The Public Health Department, which used to house the program, will also reduce its staff by nine positions. Across the county, 51 will be eliminated. The county will also close its offices for 10 additional business days next year.
According to Doug Volesky, Mount Vernon’s finance director, the city has been anticipating and working against the budget shortfall of $6 million since January 2025. Since then, each department has decreased its spending “to the bare bones” by cutting travel and training budgets for non-public safety positions, supplies, maintenance and more.
Vacant positions
Mount Vernon also chose to not fill new positions and any vacant non-public safety positions, which came out to over $3 million in savings. The city was able to reduce costs without having to eliminate or lay off any general fund employees, he said.
One cost of this, he admitted, was lower maintenance to city properties and parks.
Anacortes faces a $9 million general fund deficit for 2026. To balance, the city has proposed 13 staff layoffs. The deficit would also be filled with the usual 1% annual property tax increase, a 2% utility tax increase and rate hikes for sewer and stormwater utilities. Other adjustments include transfers from Emergency Medical Services levy revenue, the library’s reserve fund and the parks and recreation department, deferred spending and elimination of equipment repair and replacement charges.
A recent San Juan County workshop tentatively brought the county’s $6.2 million deficit to about $2 million by proposing a 10% reduction of operating costs, a hiring freeze and increasing revenue or decreasing expenses department by department. The Department of Retirement Contributions brought retirement contributions down from 9% to 5.5%, budget analyst Molly Foote said.
Andrews said the county has not requested a levy lid lift since 2020, which has also contributed to the deficit.
“It remains to be seen how county services or the community may be impacted by these cuts, but we do know that the services these positions provide, and the people who make them possible, are important to our community,” she said.
By Nov. 25, the county needs to figure out how to eliminate that remaining $2 million in time for its first public hearing on Dec. 1. Council member Kari McVeigh acknowledged the short turnaround — “especially given Thanksgiving, which feels less thankful this year for some reasons here,” she said.
Despite having “greater cost pressures than many mainland locations,” according to town administrator Denise Kulseth, Friday Harbor is not experiencing a budget deficit like its neighboring counties and cities.
Being on a ferry served island with no bridge means Friday Harbor is hit with greater shipping and construction costs. Friday Harbor competes for the same workers with all other island employers since commuting is difficult, Kulseth wrote in an email.
Despite this, Friday Harbor has more stores and restaurants than San Juan County and cheaper construction costs by comparison. The town uses property taxes not just for general services but street services as well. Friday Harbor gets the major share of tourism revenue. Despite the COVID-era dip and political tension with Canada, finance director Bethany Berry said these are some reasons why the town is not in a similar deficit.
Looking ahead
According to budget officials, overall, this will likely be an issue on the macro scale for years to come.
“The reductions contemplated in these (adjustments) do not address anticipated future cost escalations,” Whatcom County Executive Satpal Singh Sidhu wrote in a letter of transmittal. “They represent some of the last pieces of ‘low-hanging fruit’ in the county’s base budget, and we are alerting the council and our constituents that further impactful reductions will be necessary in the 2027-2028 budget process.”
Put more simply, Longman said about Bellingham, “This gets us on a much better path going forward, but it doesn’t solve the problem.”
The solution comes from a returning economy, he said.
“We need to see actual growth. We need to see inflation stabilize. We’d love to see the state provide some remedy for the 1% property tax limit. A lot of cities, including ourselves, have lobbied for that for years to no avail at the state level.”
— By Sam Fletcher
Also read in Salish Current:
• “Skagit seniors push for greater services,” Oct. 24, 2025
• “Lummi Island ferry fare hikes irk residents; appeal decision pending,” Sept. 15, 2025
• “Lopez Library seeks to lift levy lid in Aug. 5 election,” July 22, 2025
• “New Whatcom County jail could face decreased funding,” May 27, 2025
• “Reproductive health in the balance as state weighs budget priorities,” May 12, 2025