When the city of Puyallup’s chief number cruncher addressed city council members at their Sept. 15 study session, his initial plan was to give a quarterly budget update.

Finance Director Cliff Craig focused largely on a 2009 budget that is presently running about $1.7 million short on expected revenues. But his presentation also touched on some details about a state initiative that, if passed by voters this November, could have significant repercussions for the state and all counties and cities.

Initiative 1033, co-sponsored by high-profile lobbyist Tim Eyman, will be on the state’s Nov. 3 general election ballot. I-1033 seeks to cap tax revenues for all jurisdictions based on 2009’s final figures and funnel additional revenues toward the reduction of property taxes.

But Craig and other city officials believe the initiative goes deeper than the surface.

“It takes the revenues that we’re receiving at the end of the worst recession since the 1930s and says, ‘This is going to be the new baseline,” Craig said. “It has a much more enormous impact than what it appears.”

City Councilmember Mike Deal asked Craig if the passage of I-1033 might eventually put Washington in similar straits as California, which had a $26 billion deficit in July.

Craig said the bill “would have a pretty constricting effect” if voters passed it and legislators didn’t overturn it. Under the state’s constitution, legislators can’t amend voter initiatives for at least two years unless they have a two-thirds majority agreement.

The state’s Office of Financial Management recently analyzed the impacts of I-1033 for a six-year period beginning in 2010. The analysis estimated the state’s general fund would lose nearly $6 billion over that span, with cities dropping a cumulative total of $2.1 billion and counties $694 million.

“It penalizes the cities, the counties, the state to the extent that they have sought to minimize the impact on service by drawing into their rainy-day reserves,” Craig explained. “There is no way that they can rebuild that reserve, except by cutting even more deeply.”

City Manager Gary McLean said the state’s Department of Revenue issued a fiscal note speaking to impacts on various jurisdictions.

“The one that’s probably going to be hit the hardest is the state’s education fund,” McLean said.

I-1033 would cap revenues based on 2009 figures. If revenues continued to drop in future years, those figures would represent the new cap. The only revenue exceptions are for population increases, national inflation and voter-approved tax increases.

Colorado passed similar legislation in 1992 known as the Taxpayer Bill of Rights (TABOR). The state subsequently fell to No. 49 in the union in spending for K-12 schools, higher education spending fell by 31 percent and the number of low-income children without medical insurance doubled. The bill was scaled back in 2005.

The estimated $6 billion loss to Washington would equate to an entire two-year state budget for higher education, natural resources, public health, early learning, corrections and the Basic Health Plan, a report from the Washington Budget and Policy Center states.

Craig said he and financial staff are studying the possible impacts of I-1033 on Puyallup and could have a detailed report for the council as early as its Sept. 29 meeting.

Puyallup’s general fund budget, according to figures compiled through June 30, is running about $2.1 million short of what Craig had projected at the beginning of the year. Total revenues are down about $1.7 million. The city’s street fund dropped $2.7 million from last quarter because construction costs for the Shaw Road extension’s third phase were overestimated.

“When bids came in as low as they did, it skewed things,” Craig said. “That’s why I really don’t like to do projections in the first quarter because they are so very, very iffy. Small numbers can make very big differences in projections.”

Craig felt Puyallup’s sales tax figures would make up much of the projected deficit toward the end of the year. Sales tax revenues from the 2008 holiday shopping season were exceptionally low, he pointed out, and should improve this winter.

The city will also likely benefit in the next month as receipts from the federal Cash for Clunkers program roll in, Craig said. All reports he has seen and heard so far indicate the program was highly successful for local car dealerships.

In response to a question from Councilmember Rick Hansen, Craig made no bones about what he considers to be the largest issue facing Puyallup’s budget.

“My concern will largely be passage of I-1033,” he said. “If it passes, it will have significant impact on cities. Otherwise, I think we’re probably doing OK.”