City Budget Preview Remains Strong, With Notes of Caution

More income, more costs.

That's the extreme thumbnail version of the city budget forecast presentation delivered Wednesday morning by the city of Austin's financial services staff. It's also the pattern established over the last few years, since the 2011 end of the nationwide recession. It's traditional for the budget staff to present "conservative" income projections – that is, the lowest estimate of increased funding for city spending priorities that seems reasonable.

So it was on Wednesday, although overall economic projections, as delivered by consultant Jon Hockenyos, remain rosy. Hockenyos noted that the Austin region remains the national "economic star," with continued growth and persistent overall prosperity. His undertone of caution amounted to "what goes up, must come down" – despite low to no inflation (especially in underlying energy costs), there are some signs of retraction in the national economy.

Before Hockenyos began, City Manager Marc Ott briefly noted an overall change in approach to budget preparation, attempting to highlight structural "cost drivers" and potential council policy decisions that will be heavily influenced by those cost drivers. His cover memo to the financial forecast emphasized that the drivers (staffing, wages, insurance) are in part based on decisions made by Council in 2015 and 2016, and more will hit this year. "I want to close with a note of caution," Ott wrote, emphasizing that these previous decisions are likely to constrain budgetary flexibility in FY 2017 and beyond.

That said, only a budget staff could describe Wednesday's presentation as more policy-focused than numbers-focused. Once Deputy Chief Financial Officer Ed Van Eenoo got rolling with his forecast, the (admittedly somewhat speculative) numbers were flying fast and furious. Overall, the projected income numbers (from rising property values and new construction, and sales taxes) are positive – but staff reiterated that decisions already made (Austin Fire Depart­ment cadet hiring, wage increases, and a projected 12% jump in insurance) will definitely affect the funds available for spending.

The numbers daunted at least a couple of council members, most notably Don Zim­mer­man, whose persistent suspicion of staff and their procedures surfaced in hostile questions implying that they were trying to hide the ball on necessary vs. discretionary spending. He indirectly accused Hockenyos of misleadingly mixing regional vs. municipal numbers – implying that regional prosperity was disguising Austin profligacy – and was not mollified by the consultant's explanation that the forecast was compiled from the best available statistics. It was a curious claim, since when Zimmerman is relentlessly opposing raises for city employees, he invariably uses regional wage averages to insist that those city employee increases should be limited to regional averages.

The peppering of questions from Zimmer­man and other CMs did mean that the presentation slowed beyond the three-hour limit, and staff was unlikely to complete all its Wednesday goals, including most notably a request that Council review, edit, and approve a list of policy discussions that should proceed over the next couple of months. That plan is intended to replace, to some degree, the annual departmental budget presentations that are also numbers-heavy but can obstruct the larger policy discussions that in fact determine the overall shape of the budget. Whether that policy discussion can effectively proceed amidst an ideologically divided council, we’ll begin to see over the next few weeks.