Facing hundreds of millions of dollars in deficit over the next two years, Denver plans to tighten its belt — beginning today — with Denver Mayor Mike Johnston telling residents and city staffers to brace for budget cuts, furloughs, layoffs and hiring freezes.

The city faces a $50 million gap in this year’s budget, while the projected deficit is $200 million next year, Johnston told reporters on Thursday, adding a big source of the deficit is the growth of the city government, notably the number of staffers. 

Johnston also blamed an economic downturn, flat revenues and “growing government costs” as reasons for the deficit.

“What we know right now is we are seeing structural financial challenges in the city that are true around the state and around the country,” Johnston said. “That looks like both economic downturn and flattening revenue and, in addition to that, we also see steady and unsustainable growth in government costs.”

Despite the financial woes, Johnston maintained that, while the city faces flat revenue growth, investments in projects that create and drive new money are needed, as well as immediate steps to “restructure city government to live within its means.”

Such spending, he argued, must continue.

“That means, when we talk about downtown reinvestment, National Western Center, Women’s Soccer League, Vibrant Denver — not a single dollar that comes from the general (fund),” Johnston said. “It does not displace an employee. It does not cut a program — those are capital dollars for capital investments, and they drive long term revenue that do become the general fund.”

He said that Denver’s capital funds — the source for plans like the National Women’s Soccer League stadium site, the National Western Center expansion and downtown revitalization — remain strong, despite the economic downturn.

Unlike the general fund, which covers salaries and services and is affected by sales tax declines, the capital funds are backed by more stable revenue sources, such as property taxes, officials said.  

Size of city workforce ballooned, contracts grew

To deal with the shortfall, Johnston said the city will institute a tiered two- to seven-day furlough system, beginning June 1, with higher-paid employees given longer furloughs than lesser-paid employees.

Employees earning less than $61,000 per year would be furloughed for two days, while mayoral appointees earning $150,000 or more face seven days.

The two citywide fixed furlough days are Aug. 29, which is the Friday before Labor Day, and Nov. 28, the Friday after Thanksgiving. The city will be closed for business on those days.

Starting today, the city is also implementing a hiring freeze for future job openings, excluding uniform, 911, or airport personnel. The hiring freeze is expected to last through at least Sept. 15, which is the deadline for the mayor to submit his proposed 2026 budget to City Council.

Current job postings and recruitment may continue at the discretion of agency leaders, according to at statement from Johnston’s office.  

In addition, the city will limit discretionary spending and “reduce and restructure” contracts. It’s not immediately clear which contracts would be affected. 

The furloughs will save the city $10 million this year, according to estimates. 

Johnston added that the cost and growth of government over the years has contributed to the city’s financial predicament, noting that about 70% of the city’s total expenditures are “people.”

“About 25% are contracts and services and some other internal services as a general part of high importance going forward,” he said. “If you look at the growth of government over the last 14 years in city, we have increased our total employee count by about 40%, from 10,000 employees to now 15,000 employees over the last couple of years.”

The city has also seen a 70% growth in contracts and services over the same time period, resulting in an 83% increase in expenditures.

Johnston said the city will also “modernize” more services, bringing them online to speed up service and efficiency. 

Some city employees remained skeptical the city can reign in discretionary spending, citing several examples, such as Denver International Airport CEO Phil Washington’s recent $12,000 airline ticket to Madrid.

Last week, Johnston reversed his decision to give a dozen of his executives pay raises totaling almost $500,000, most of which would have been absorbed by the city’s general fund.

“Our goal is to minimize any impact (of budget cuts) on public facing services at every step,” Johnston said. “And so the top challenge all of our executive directors and I have and our city employees have over the next four months is to figure out how we can right size this budget while minimizing any impact on services.” 

Denver Gazette reporter Michael Braithwaite contributed to this story.