Did you know that Anacortes went from strong reserves and a stellar AA credit rating to a brutal budget squeeze in record time?
Editor’s Note: This article is the second in a two-part series exploring the city’s sudden budget shifts. If you haven’t yet, we highly recommend reading [Part 1: From Balanced Budget to $2.7M Ask] to see exactly where this money is going and why the timing is raising red flags.
Just months after adopting the 2026 budget, the City Council faces Ordinance 5033: a $2.7 million mid-year amendment. As we uncovered in Part 1, much of this money would come straight from reserves rather than new spending cuts or revenues.
This ask is even more alarming when you look at the backdrop: a brutal 2026 budgeting process where the city had to close a massive ~$9 million general fund gap through employee layoffs (roughly 9 FTEs), program reductions, project deferrals, and modest tax increases.
The Shrinking Deficit Myth
A look at the Finance Department’s website reveals just how heavily this new amendment changes the town’s financial narrative. Currently, the posted city budget numbers show:
- 2025 Overall Budget: $125,584,921
- 2026 Overall Budget: $115,485,921 (A spending reduction of 8.0%)
On paper, it looked like leadership successfully tightened the city’s belt by 8%. However, if the Council approves this new $2,718,453 adjustment, the actual difference between 2025 and 2026 spending shrinks to just -5.9%.
Interestingly, the website headings still label these files as a “draft budget”, leaving taxpayers to wonder if the Finance Department simply hasn’t gotten around to updating the site with the final approved numbers, or if “draft” anticipates the possibility of quarterly budget adjustments.
Either way, the math proves that the “savings” proudly touted months ago are already being eroded by mid-year asks. It makes watching for further adjustments in Q3 and Q4 incredibly vital.
Shifting Patterns
Mayor Matt Miller was blunt in the 2026 budget message: wages and benefits had risen over 20% in four years and construction costs had jumped nearly 50%, while sales tax revenue stayed flat or declined. Reserves were labeled “stable” but cash balances could no longer paper over these structural shortfalls.
The current $2.7M ask highlights a dangerous pattern: using one-time reserves for recurring or foreseeable costs (including water projects already underway before 2026). While the city’s AA rating praised its stable reserves in 2024, repeated mid-year draws risk eroding that foundational financial strength. Rating agencies watch unrestricted fund balances and liquidity very closely. They want to see if management is addressing root structural causes or just kicking the financial can down the road.
Sustainable solutions likely include multi-year forecasting with realistic assumptions, prioritizing core services, economic development that actually grows the tax base, and clear reserve policies with minimum targets and mandatory replenishment rules.
Anacortes built a strong reputation for fiscal prudence. Maintaining it will require honest conversations about what the community can truly afford in 2026 and beyond. Residents deserve budgets that reflect reality, not hope. The current amendment is a test of whether city leadership is learning from the $9M wake-up call or just delaying the next one.
Anthony Lee
Anacortes, WA