The Budget's Downhill Slide

City of Austin General Fund Financial Forecast
All figures in Millions of $
FY 2003FY 2004FY 2005FY 2006
Expenditures$459.39$499.20$494.87$517.23
Minus budget reduction($38.20)
Total expenditures$459.39$461.00$494.87$517.23
Revenues$445.96$461.00$465.75$482.98
Deficit($13.43)($0.00)($29.12)($34.25)
Beginning Balance$41.33$29.56$29.56$0.44
Ending Balance$29.56$29.56$0.44($33.81)
Assumed tax rate0.45970.49280.52690.5269
Nominal EffectiveEffectiveNominal
City Manager Toby Futrell proposes to balance this year's budget by cutting another $38.2 million in spending, and raising property taxes to the "effective" rate. But the deficits balloon the next two years, even with another property tax hike.


Even after cutting millions of dollars in city spending since 9/11, the city will end its current fiscal year September 30 with a $13.4 million deficit in the General Fund -- thanks to steadily declining sales tax revenue and, now, declining property values as well. There's enough cash on hand in the GF to cover that, but in her FY 2004 budget proposed July 31, City Manager Toby Futrell avoids dipping further into reserves. Instead, she proposes $38.2 million in further cuts -- including the first actual city layoffs of the budget crisis -- and proposes taking the property tax up to the "effective rate" of 49.3 cents per $100 assessed valuation. Should the council do as Mayor Will Wynn has suggested and stick with the current ("nominal") tax rate, Futrell would need at least $15 million -- probably more like $17 million, she says -- in further cuts to balance the FY 04 budget.

Unfortunately, raising the tax rate simply delays, rather than defers, further bloodletting at City Hall. Even if the council next summer agrees to again go up to the effective rate (which is expected to climb as property values continue to drop), Futrell will still have to cut another $29.1 million from current spending to balance the FY 05 budget. If she and the council instead break their resolve and cover that deficit out of cash reserves, then in FY 06 -- right before the next council election, with two term-limited seats up for grabs -- the city is looking at a $34.3 million deficit, and even a third straight hike to the effective rate is unlikely to be enough to cover that shortfall.

Actually, even this grim scenario might be too rosy, since the city's revenue projections assume that sales tax, which has been in the tank for 21 months, will in fact show positive, if extremely modest, growth in future years. If that turns out to be untrue, and if the economy does not turn around real quicklike, the Wynn Council will spend its entire first term in office as a budget peacekeeping force.

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