# Navigating Budget Pressures and Fund Challenges — Whatcom County's Fiscal Reality Check The Whatcom County Finance and Administrative Services Committee gathered on Tuesday morning, June 10, 2025, for what would become a deeper examination of the county's financial stewardship than the routine agenda suggested. Committee Chair Todd Donovan presided over the hybrid meeting in Council Chambers, joined by committee members Tyler Byrd and Barry Buchanan. Several other council members attended as observers, including Ben Elenbaas, Kaylee Galloway, Jon Scanlon, and Mark Stremler. The meeting revealed tensions between expanding service demands and fiscal constraints, particularly in behavioral health funding — a dynamic playing out across local governments nationwide as they grapple with post-pandemic mental health needs while facing revenue pressures. ## Consent Agenda: Routine Business Moves Forward The committee efficiently approved ten consent agenda items totaling millions in contracts and agreements. These included developmental disability service contracts with providers like Cascade Connections ($1.66 million) and Kulshan Supported Employment ($1.59 million), substance abuse prevention work with Northwest ESD 189 ($121,000), and various operational agreements. The consent items also included a $300,000 contract amendment with Cascadia Law Group for water rights legal defense — a reminder of the ongoing complexities around water allocation in the region. A $910,503 contract amendment with YWCA Bellingham for housing services underscored the county's continued investment in addressing homelessness. Council member Byrd thanked staff member Anne for quickly responding to questions he'd raised the night before, a small moment that highlighted the collaborative relationship between elected officials and county employees in preparing for these meetings. ## The $18.2 Million Budget Amendment: A Tale of Two Challenges The centerpiece discussion focused on ordinance AB2025-441, an $18.2 million budget amendment that, despite its substantial size, represented only a $7 million net impact on county finances. Randy Rydel, the Administrative Services Department Finance Director, explained that $10.5 million involved pass-through funding for the Consolidated Housing Grant — "money in and money out" that wouldn't affect the county's bottom line. Another $2.7 million from the Healthy Children's Fund covered contracts that had been executed in 2024 but not carried forward in continuing appropriations — essentially administrative housekeeping that typically would have happened automatically. But it was the $1.5 million request from the Behavioral Health Fund that sparked the most intense discussion and revealed deeper structural challenges in county finances. ## Behavioral Health Fund: A Case Study in Fiscal Strain Council member Byrd immediately focused on what the staff packet marked as "new funding" — the $1.5 million for substance use disorder contracts. His question was pointed: Why add unplanned expenses to a fund already experiencing cash flow concerns? Deputy Executive Kayla Schott-Bresler provided the backstory: During the 2025 budget process, the executive's office had identified that the behavioral health fund was over-obligated in planned expenditures. They had rejected some departmental requests and held future budgeting until they could get a clearer picture of the fund's health. "We engaged an independent consultant, Doug Merryman, to prepare an analysis of what's happening with the behavioral health fund," Schott-Bresler explained. The consultant's May report revealed approximately $3.5 million in planned school expenses not reflected in the adopted budget. The challenge stemmed from three-year contracts executed with school districts in summer 2023 for mental health expansion — contracts that committed the county to ongoing expenses without corresponding budget authority in subsequent years. ## The Contract Conundrum: When Commitments Outpace Planning Council member Byrd pressed on a fundamental question: How did the county end up in contracts without budget authority? The answer revealed the complexities of multi-year commitments in a system designed for annual budgeting. Deputy Executive Aly Pennucci explained that while they could budget for two years of a three-year contract, the third year required coming back to council for additional appropriations. But the school mental health expansion contracts had been signed based on projections that suggested adequate funding was available. Rydel added another wrinkle: "Those three-year contracts are challenging for us, because we are allowed to budget the first year. We can budget for two years worth, but once we get to that second year, that's on a continuing budget appropriation, and we can no longer carry that budget forward into the new year." The situation illustrated a broader challenge in public finance: balancing the need for multi-year program stability with the legal requirements of annual budget adoption. ## Following the Money: Fund Balance Reality The discussion revealed that the behavioral health fund had started the year with approximately $7 million in fund balance and was projected to end 2025 with about $4 million — meaning they were drawing down $3 million in reserves this year alone. Schott-Bresler emphasized that they wouldn't have brought the request forward if they weren't comfortable with the fund's short-term ability to handle the spending. The fund had a current cash balance of $6.1 million, she noted, and even with the $1.5 million expenditure, would end the year with over $4 million. But the longer-term picture was more concerning. The fund faced structural deficits driven by growing labor costs that were outpacing revenue growth. Looking ahead to 2026, they anticipated needing to budget as much as another $1 million in school obligations, potentially leaving the fund with only about $1 million in reserves by the end of 2026. ## Schools as Service Providers: An Unusual Partnership Council member Donovan raised questions about the fundamental structure of these contracts, expressing concern about the county subsidizing services that school districts might otherwise fund themselves. His point touched on a broader policy question about the appropriate division of fiscal responsibilities between local government entities. Joe Fuller, a program specialist with Health and Community Services, explained that the county had approached the districts as contractors to provide what the county viewed as public health services, not core educational functions. He noted that the contracts typically didn't fully fund positions, requiring school districts to "braid" funding from multiple sources. Ann Beck, Community Health and Human Services Manager, clarified that there were two distinct sets of contracts: long-standing behavioral health contracts dating back to 2014 that had shown significant community impact, and the newer three-year expansion contracts that were set to end. The expansion contracts, she emphasized, had been entered with the understanding that districts would need to find other funding sources after the three-year period. "We went into them saying, You need to figure out other sources. We're not going to continue these past this point." ## The Human Cost of Budget Decisions Beck's testimony included a sobering reminder of what was at stake beyond the numbers. "We've had three youth who have passed away in the past 60 days or so due to mental health concerns or overdose," she told the committee. "We are really mindful of — we don't want last in to be the ones that are cut without really being thoughtful." This statement encapsulated the challenge facing local government officials: balancing fiscal responsibility with the very real human consequences of service reductions. The behavioral health services weren't abstract line items but programs serving vulnerable youth during a post-pandemic mental health crisis. ## Creative Solutions: The Mental Health Millage Option As the committee probed for solutions, Schott-Bresler outlined their strategy for addressing the structural deficit. Part of the plan involved moving some behavioral health school expenses to the Mental Health Millage Fund, which had been building reserves and had a projected fund balance of $3.9 million at the end of 2025. This represented the kind of creative fund management that characterizes effective local government finance — identifying alternative revenue sources that could support similar services while protecting the long-term health of challenged funds. The executive's office also planned to ask the Health Department to renegotiate contracts with school superintendents to see if any reductions could be made "without radical impacts to services." ## Procedural Questions: Flexibility After Introduction Council member Scanlon raised an important procedural question about the county's ability to modify the budget amendment after introduction, given that they would receive additional information in two weeks. This led to a discussion with County Attorney Kimberly Thulin about what constitutes a "material change" to legislation after introduction. Thulin explained that changes would be acceptable if they weren't material, noting that in a recent case, a 15% reduction had been deemed acceptable. However, she cautioned against making definitive rulings based on speculation about future amendments. This exchange highlighted the balance between legislative procedure and practical governance — ensuring that elected officials have the flexibility to incorporate new information while maintaining the integrity of the public process. ## Housing Funds: Another Challenge on the Horizon While the behavioral health fund discussion consumed most of the meeting's attention, Beck also provided a brief overview of the Consolidated Housing Grant allocation, revealing another area of fiscal pressure. The current two-year award of $18.9 million represented a decrease from the previous award of $20.3 million, partly due to the end of pandemic-era emergency housing funding. "The funding that was available, they tried to help get us over that hump," Beck explained. But with decreasing funding and increasing costs for labor, rent, and other expenses, the county would likely serve fewer people with these funds — another example of the squeeze facing local governments. ## Flood Control and Risk Pool: Routine but Important The committee also approved a $445,550 flood control zone budget amendment, with $300,000 representing the county's front-loading of water rights legal expenses that would eventually be allocated to appropriate funds once the source of various water rights was determined. The final item involved updating position titles for the Washington Counties Risk Pool Board — a housekeeping measure that nonetheless sparked discussion about broader tort claim code revisions that council members were working on. This highlighted how even routine administrative changes could connect to larger policy initiatives. ## Looking Ahead: Presentations and Decisions The committee agreed to split the $18.2 million budget amendment into two ordinances for introduction at the evening council meeting — one including the controversial $1.5 million behavioral health allocation and one without it. This would give council members more flexibility in their decision-making process. Schott-Bresler committed to providing a comprehensive presentation on June 24 about the behavioral health fund's status and their plan for achieving structural balance by the 2027 budget submission. Beck scheduled a July 8 working session to discuss the county's housing and homeless services funding more broadly. ## The Broader Context: Local Government Under Pressure This meeting illustrated the pressures facing local governments across the country: growing demands for mental health services, housing assistance, and other social supports, combined with revenue constraints and complex inter-governmental relationships. The school district contracts represented an innovative approach to service delivery, but also highlighted the risks of multi-year commitments in an environment of fiscal uncertainty. The committee's thoughtful questioning demonstrated the proper role of legislative oversight — not micromanaging administrative decisions, but ensuring that fiscal commitments align with community priorities and long-term sustainability. Council member Byrd's persistence in understanding how the county had committed to expenses without corresponding budget authority reflected legitimate concerns about fiscal governance. At the same time, the staff's detailed responses and their proactive engagement of outside consultants showed the executive branch taking responsibility for complex financial management and planning for sustainable solutions. As Committee Chair Donovan noted at the meeting's conclusion, they had finished "on time and on budget" — a fitting metaphor for the broader challenges facing Whatcom County as it works to balance competing demands within fiscal constraints. The real test would come in the following weeks as the council weighed the full picture of the county's fiscal health against the very real community needs these funds were designed to address. The June 10 meeting served as a case study in the complex realities of modern local government finance, where technical budget discussions carry profound implications for community wellbeing, and where elected officials must balance fiscal prudence with responsive governance in an era of growing social needs and constrained resources.

### Meeting Overview The Whatcom County Finance and Administrative Services Committee met on June 10, 2025, to discuss a major budget supplemental request and approve multiple contracts. The meeting's main focus was a controversial $18.2 million budget amendment, with particular debate over $1.5 million for behavioral health contracts with local school districts that weren't included in the original 2025 budget. ### Key Terms and Concepts **Budget Supplemental:** A mid-year amendment to the county's adopted budget to authorize additional spending or revenue that wasn't anticipated when the budget was originally approved. **Behavioral Health Fund:** A county fund that pays for mental health and substance abuse services, including contracts with school districts to provide counseling and prevention services to students. **Consent Agenda:** A group of routine agenda items that are voted on together without individual discussion unless a council member specifically requests to pull an item for separate consideration. **Fund Balance:** The amount of money remaining in a fund after all revenues and expenditures are accounted for—essentially the fund's savings account. **Consolidated Housing Grant:** A major state grant that provides funding for homeless services and housing programs in Whatcom County, allocated by the Washington State Department of Commerce. **Mental Health Millage:** A voter-approved property tax that generates revenue specifically for mental health services, with funds going to the Mental Health and Developmental Disabilities Fund. **Economic Development Investment (EDI) Fund:** Also called the Public Utilities Improvement Fund, this fund supports economic development projects including the agricultural research station. **Continuing Appropriations:** Budget authority that automatically carries forward from one year to the next for ongoing contracts and programs. ### Key People at This Meeting | Name | Role / Affiliation | |---|---| | Todd Donovan | Committee Chair | | Tyler Byrd | Council Member | | Barry Buchanan | Council Member | | Randy Rydell | County Finance Director | | Kayla Schott-Bresler | Deputy Executive | | Aly Pennucci | Deputy Executive | | Joe Fuller | Health Department Program Specialist | | Ann Beck | Health and Community Services Manager | | Kimberly Thulin | Attorney for Council | | Gary Stoyka | Natural Resources Manager | | Melissa Keeley | Human Resources Director | ### Background Context This meeting highlighted a recurring challenge in Whatcom County's budgeting: managing the Behavioral Health Fund, which has been experiencing structural deficits as expenses grow faster than revenues. The fund supports critical services including school-based mental health programs, but county executives had to reject some spending requests during the 2025 budget process due to concerns about the fund's stability. The school contracts at the center of debate were three-year commitments made in 2023 when the fund had significant reserves and youth mental health needs were acute following the COVID pandemic. However, these multi-year obligations created budget complications because state law limits how far ahead local governments can budget for contractual commitments. The housing grant discussion reflects broader challenges in homeless services, with state funding declining slightly while costs continue to rise, meaning fewer people can be served with available resources. ### What Happened — The Short Version The committee approved 10 consent agenda items totaling over $6 million in various contracts for developmental disabilities services, environmental cleanup, domestic violence shelters, and housing support. The major debate centered on an $18.2 million budget supplemental request. While the gross amount seems large, the net impact is only $7 million because $10.5 million represents federal housing grant money flowing through the county budget. The contentious portion was $1.5 million for behavioral health school contracts that weren't included in the original budget. Council members, particularly Tyler Byrd, questioned why the county was adding unplanned expenses to a fund already facing structural problems. Staff explained they're using consultant recommendations and fund reserves to cover immediate needs while developing a long-term solution, including potentially moving some costs to the Mental Health Millage Fund, which has healthier reserves. The committee voted to recommend two separate versions of the supplemental ordinance for full council consideration—one including the behavioral health funding and one without it. ### What to Watch Next - June 24: Executive staff will present a comprehensive analysis of the Behavioral Health Fund's status and long-term sustainability plan - July 8: Working session on the county's overall homeless and housing funding strategy - July 10: Behavioral Health Advisory Committee will prioritize programs, potentially informing future funding decisions - August 7: Deadline for council approval if the county wants to renew annual substance use prevention contracts with schools starting September 1 ---

**Q:** What was the total dollar amount of the budget supplemental request? **A:** $18.2 million, though the net impact to the county was only $7 million because $10.5 million was federal housing grant money flowing through the budget. **Q:** Who chairs the Finance and Administrative Services Committee? **A:** Todd Donovan serves as committee chair, with members Tyler Byrd and Barry Buchanan. **Q:** What is the Behavioral Health Fund used for? **A:** It pays for mental health and substance abuse services, including contracts with school districts to provide counseling and prevention services to students. **Q:** How much money was requested for behavioral health school contracts? **A:** $1.5 million to cover invoices from schools and expected expenses through the end of 2025. **Q:** When did the county sign the controversial three-year school contracts? **A:** Summer 2023, when the Behavioral Health Fund had significant reserves and youth mental health needs were high post-COVID. **Q:** What is the Mental Health Millage Fund? **A:** A fund supported by voter-approved property taxes specifically for mental health services, which has built up a $3.9 million fund balance. **Q:** How many consent agenda items were approved? **A:** Ten items totaling over $6 million for various contracts including developmental disabilities services and housing support. **Q:** What is the Economic Development Investment (EDI) Fund also called? **A:** The Public Utilities Improvement Fund, which is funding an agricultural research station project. **Q:** When will staff present their full analysis of the Behavioral Health Fund? **A:** June 24, 2025, in the finance committee meeting prior to final budget adoption. **Q:** Who conducted the independent analysis of the Behavioral Health Fund? **A:** Doug Merryman, an independent consultant engaged by the county executive. **Q:** How much did the county dip into Behavioral Health Fund reserves this year? **A:** $3 million, reducing the fund balance from $7 million to $4 million. **Q:** What was the previous Consolidated Housing Grant amount compared to current? **A:** The previous two-year award was $20.3 million; the current award is $18.9 million, a decrease partly due to end of emergency pandemic funding. **Q:** Which council member questioned why unplanned expenses were being added to a troubled fund? **A:** Tyler Byrd raised concerns about adding $1.5 million in unplanned expenses to the Behavioral Health Fund. **Q:** What percentage change would be considered "material" for budget amendments after introduction? **A:** Approximately 15%, though attorney Kimberly Thulin said context matters and she couldn't give a definitive answer without specifics. **Q:** When do the annual substance use prevention contracts with schools need council approval? **A:** By the August 7 council meeting to allow implementation by September 1, 2025. **Q:** What flood control budget amendments were approved? **A:** $445,550 in amendments, including $300,000 for water rights legal services that will later be allocated to appropriate funds. **Q:** How much is the county spending annually on developmental disabilities services based on the consent agenda? **A:** Over $4.6 million across four contracts with organizations like Cascade Connections and Kulshan Supported Employment. **Q:** What prompted the three-year school mental health expansion in 2023? **A:** Post-COVID youth mental health crisis and recommendations from the "all hands Summit" calling for more services for teenagers. **Q:** When was the HR Manager position reclassified to HR Director? **A:** January 2025, with the Associate HR Manager position becoming HR Manager in April 2025. **Q:** What is the timeline for work sessions on housing and behavioral health funding? **A:** July 8 for comprehensive housing funding discussion; June 24 for behavioral health fund analysis presentation. ---