Spokane eyes $1.5M in reserves amid uptick in lawsuits, unemployment claims

(The Center Square) – Facing multiple lawsuits, workers’ compensation, and unemployment claims, the Spokane City Council is considering pulling $1.55 million from its reserves to settle before it’s too late.

Chief Financial Officer Matt Boston told the council on Monday that the risk management, workers’ and unemployment compensation funds are all experiencing higher activity than anticipated. The city must pay out the claims within a specific time, but each of the three funds has already exhausted its budget.

To get through the end of the year, the city may need to draw on its reserves to make ends meet. Late payments could mean additional penalties or litigation against the city, according to Monday’s agenda.

“This isn’t coming from a general fund reserve,” Boston responded to Councilmember Michael Cathcart amid concerns over Spokane’s bond rating. “This is coming from those specific, self-insured reserves.”

The city is facing a general fund deficit ahead of next year that Boston and Mayor Lisa Brown placed at $13.4 million during the council’s latest budget meeting in July. Brown took over in 2024 after the previous administration relied on one-time funds and reserves to navigate challenges during the pandemic.

From 2019 to 2024, the city’s general fund shrank by more than $20 million while also accumulating a roughly $25 million deficit by the time Brown assumed office. After balancing that last winter, she now faces another hole, but tapping reserves this time could result in the city paying higher interest rates.

The general fund doesn’t have much to spare, as Boston also requested on Monday that the council transfer $2 million from that account to another responsible for the city’s monthly jail costs. Brown and the last mayor already left that one insolvent, so it doesn’t have the reserves that these three other funds do.

Monday’s committee agenda included a plan to pull $500,000 from reserves in the Risk Management Fund, $800,000 from that in the Workers’ Compensation Fund and $250,000 from the Unemployment Compensation Fund. Each can afford the hit, but the latter will experience the most significant impact.

According to the 2025-26 adopted budget, city staff expected to end 2025 with $13.8 million in the Risk Management Fund, $10.2 million in the Worker’s Compensation Fund and roughly $1.3 million in the Unemployment Compensation Fund; however, each could now take the hits as outlined above.

“Workers’ compensation has to be a separation from employment that is employer-initiated,” Boston responded when Cathcart asked whether last year’s voluntary police retirement was impacting this. “They’re pulling from retirement benefits. They don’t have eligibility for workers’ compensation.”

He said the rise in unemployment claims is mainly due to six employees that the city laid off last year.

Hits to the Risk Management Fund are evidenced by recent settlements that the council approved after residents had sued the Spokane Police Department over alleged wrongful deaths. Spokane also faces a lawsuit from former state lawmaker Matt Shea and a tort claim over the impact of homelessness.

The council is anticipated to vote on three one-time reserve transfers before the end of September.

By: Tim Clouser | The Center Squar