Austin bracing for deficit after property tax revenue cap passes

Texas Politics

AUSTIN (KXAN) — The City of Austin is going to take a hard look at its budget and consider making some cuts. It’s anticipating a $58 million deficit in about five years.

City officials said that’s because of the Texas Legislature. Lawmakers passed a bill that limits cities’ revenue from property taxes. If it goes up by more than three and a half percent in a year, the city will have to get voters’ approval.

“I am really concerned,” said Austin Mayor Steve Adler. 

According to Adler, Austin’s revenue from property taxes went up by more than five percent last year compared to the previous year. Under the new bill, that kind of increase would require a citywide vote. 

According to the city’s analysis, if the revenue increase is capped at three and a half percent, the city will have about a $18 million deficit in the 2021 fiscal year and a $58 million deficit in 2024 fiscal year. 

The bill, if signed into law by Governor Greg Abbott, will go into effect next year, but Adler said the city is already thinking about the impact of the revenue cap. 

“I would anticipate that in this year’s budget, we’re already going to start not doing things that our community wants us to do,” he said.

Possible impacts

Adler explained, property tax revenues go into Austin’s general fund, which is about $1 billion. The city’s total budget is about $4 billion.

About 70 percent of the general fund goes to public safety, and the rest is used for several programs and departments, including libraries and parks. 

Before the bill passed, Adler said the city planned on adding various new services and programs, such as:

  • Hiring 30 new police officers each year
  • Building five new fire stations over the next five years
  • Homelessness intervention and prevention programs

However, Adler said, “It might be hard to be able to do that to the full extent we originally intended.” 

Last year, the Austin City Council approved a new contract for its police officers. After months of negotiations, they agreed on two percent annual raises during the duration of the contract, but it also said the city could lower the amount of the raise if the state imposed a property tax revenue cap. 

“It’s more of a problem for next year and the years after,” said Ken Casaday, Austin Police Association’s President.

“San Antonio, I believe is getting two and a half, three percent pay raises every year. I believe Houston’s getting three percent pay raises. Fort Worth has received three percent pay raises over the last three years,” Casaday said.

He also added lowering the officers’ pay raise would save the city about $200,000. 

Adler said the City Council doesn’t know yet what kind of funding cuts will have to be made.

“That can take many different forms, and we don’t know what form it’s going to take until we start sitting down with the budget in August,” he said. “It’s going to involve difficult choices, and people are going to feel and notice the difficult choices that we have to make.”

Lawmakers say the bill’s passing, along with House Bill 3 which lowered school district taxes, means when these bills go into effect, Texas homeowners will save money.

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