Settling the FY 2019 Budget
Council sorts out tax rate, final spending
By Michael King, Fri., Sept. 14, 2018
City Council arrived at annual "budget readings" Tuesday morning (with fallback meetings Wednesday and Thursday) with a sense of general consensus about the overall budget: a $4.1 billion "All Funds" budget (including self-funding enterprise departments) and a roughly $1 billion "General Fund" budget – the expense budget, where most of the annual spending decisions are made. Having already adopted a potential "maximum" property tax rate increase of 6% (2% below the 8% "rollback rate" that would require a public vote), Council's major decision remained whether to meet that 6% limit or stay closer to the 4.9% increase earmarked in City Manager Spencer Cronk's proposed budget.
It's both a financial and political decision. Going to 6% would mean an additional $5.2 million for various public needs that remain outstanding, and there was already a list of those circulating on the dais – e.g., emergency mental health care, homelessness programs, deferred facility maintenance – that appeared to have tentative majority support in last week's budget work session. Keeping the tax rate as low as possible promises political dividends – on the other hand, the looming legislative threat to lower the rollback rate to 4% or even 2.5% (proposed by Gov. Greg Abbott) creates pressure to set this year's rate as high as possible, as a cushion against future cutbacks. Annual cost drivers alone – employee raises, health insurance, purchasing costs – continue to rise, and the money has to come from somewhere.
Last week, Deputy Chief Financial Officer Ed Van Eenoo repeated his warning that a lower cap on tax hikes would mean much more difficult budget years, and perhaps cutbacks for various city programs. "I've been telling you this for a while," he said, answering a question from Council Member Pio Renteria. "At a 4% cap, I don't see our budget structurally working. It will have to fundamentally change," a predicament that will not be unique to Austin. Whether city officials statewide can again persuade legislators against a lowered cap is a question for 2019.
As for this week, Council entered Tuesday with what appeared to be rough consensus to try to stay close to a 4.9% rate increase, but also to find ways to fund a few additional programs – either with reallocated dollars within the draft budget, or by incrementally raising the tax rate to accommodate some of those expenses.
In a full day's work on Tuesday, they did a little of both. After an early but clearly tentative vote to go to 5.9%, and to allocate the additional funding (about $5 million) to reserves – they returned from lunch and began chipping away at that potential rainy day fund.
In a series of afternoon votes, they approved spending about $2.2 million of that additional presumed $5 million for various initiatives: raising the senior/disabled homestead exemption from $85,500 to $88,000; homelessness programs ($1 million); Extended Mobile Crisis Outreach Team (mental health, $1.1 million); and funding for parent support specialists in schools, victim services, and relationship violence programs.
The indirect effect was to raise the proposed rate from 4.9% to 5.45% – and they decided, 6-5, to draw the line there, with a lower rate but no additional funding for reserves. In its effect on the "typical" residential taxpayer – owning a $332,000 "median value" home – the combined tax/fee increases total $77.31/year, $6.44/month (2% higher than FY 2018).
The final budget approval vote was 10-1, with Council Member Ellen Troxclair the sole dissenter.
