BG Blog: Austin city budgets are looking tighter for 2025 and beyond
There were some grim warnings for those reliant on city funding during a recent mid-year budget update delivered to City Council by staff from the Financial Services Department.
The message from city CFO Ed Van Eenoo was stark. Between flattening sales tax receipts and a falloff in federal funds from the American Rescue Plan, this year’s city budget will likely have an end-of-year deficit. Next, year’s budget will likely mark a return to the more austere times prior to the COVID-19 pandemic.
“We are headed toward a cliff with our ARPA spending,” he said.
The city has to spend the remainder of its federal money by the end of 2026, most of which has already been dedicated as part of the $266 million in recovery spending Council approved while managing the impacts of the pandemic. That means that very soon, there are going to be more empty hands than usual when it comes to local groups who have, in recent years, received funding from the city.
There could even be some cutting in store for programs already underway in the current budget since the year-end deficit due to lower-than-expected sales tax collections could reach $15 million. Council members didn’t indicate how they’d cover that deficit if collections don’t improve. Still, with this year’s budget built on the assumption of a modest 4 percent growth in sales tax, the flat numbers we’re seeing should be cause for concern for anyone doing business with city money.
The news comes as many city commissions are preparing their budget requests for next year. In April, city staff will deliver a more comprehensive budget review and a five-year projection of revenues and spending for all departments.
Just like city staff is forced to think two and three years ahead, so should organizations that are looking at the city as a consistent source of funding for operations, capital projects, programming, or other needs. It will help to have staff and outside experts who know how to navigate the budget process and make the arguments that can be key for finding scarce dollars when it looks like there’s none to be had.
Another important note for the current city budget process is that the timing of the budget process has changed dramatically since the departure of former city manager Spencer Cronk, who routinely released the draft budget in June. That early release gave those inside or connected to city hall about six weeks to try to make adjustments up or down before the formal adoption in August.
Under interim city manager Jesús Garza, who has shaped the budget process since taking the job last year, the current budget was released in July. It didn’t offer much time for renegotiating by departments and outside groups ahead of passage. We should probably all prepare for another tight window from the release of the draft until adoption this year. That could mean lots of late nights and phone calls this summer for anyone who’s seen their funding request slashed or left out altogether.
Garza, in his comments to Council, offered a sober picture of the new normal the city and its many connected entities will have to adjust to in the coming years.
“ARPA has provided a distortion of what we can afford in terms of a run rate,” he said.
“If we have an ability to spend $20 million on a program because that's in our run rate in our base budget, but ARPA came in and we added $40 million to that, when that $40 million goes away, all you can afford is $20 million. That is $40 million of benefit that you gave to the community for whatever program that was and that money has now lapsed and you don't have the ability to spend $60 million.”
Those words were offered as an example of the adjustments that could be ahead for anyone working on their budget for 2025.
//A.J. Bingham
Contact A.J. at: aj@binghamgp.com