The last time the city faced major budget deficits, in 2004, things were different in a few pretty-significant ways. First, the city didn't have a rainy-day reserve fund, forcing the city council to make deep cuts in direct services ["What You Don't Know...," Erica C. Barnett, April 1, 2004]. Second, the mayor wasn't up for reelection (making it easier for him, politically, to justify deep cuts). And third, the national economic situation wasn't as dire.

Those are all factors to keep in mind when considering the city's current budget conundrum: a $43 million hole this year ($30 million this year, plus $13 million left over from 2008), plus an estimated $41 million in 2010.

Sitting at the head of a broad wooden conference table in City Hall's Norm Rice conference room, sipping from a mug emblazoned with the image of a $100 bill, city finance director Dwight Dively outlined the situation. Nationally, he said, the economy is doing worse than anybody predicted: "It's the worst recession since the Great Depression."

That means deep cuts in Seattle city government—if not now, then next year. Although the city may be able to fill its 2009 gap with a combination of departmental budget cuts (between 1.5 and 3 percent) and money from the city's rainy-day reserve fund, which contains about $30 million, 2010 is another story. Dively said, "In 2010, we will see much more significant cuts," especially if the shortfall turns out to be bigger than anticipated. Left unspoken was the fact that Mayor Greg Nickels would undoubtedly prefer to postpone deeper, more painful cuts until he's safely reelected; the mayor, who faces three challengers, is up for a third term in November.

Mayoral priorities can also be seen in the way the real-estate excise tax (REET) is being allocated. REET—the tax collected every time a piece of real estate changes hands—pays for major capital projects; it's expected to drop by about a third. But because the city has already started construction or put bids out on things like fire-station upgrades (a major Nickels priority), the most likely targets for cuts will be maintenance and improvements at city parks, which Dively said could be cut "by about half."

The temptation to play Monday-morning quarterback—speculating that the city should have anticipated the shortfall and beefed up its reserves in advance—is understandable; recessions are cyclical, so why couldn't the city see this one coming? "Forecasts," Dively said, "assume that financial markets work. In this case, the financial markets broke down.

"If you could have told us what was going to happen to the national economy [two years ago], then we could've done a better job with our forecasts." recommended