A Budget Forged in Crisis Looks Toward Long-Term Opportunities

The Zilker Park playscape is one of many city facilities shut down by COVID-19 (Photo by Jana Birchum)

The community's firm pushback on the public safety status quo, fueled by protest and rage over police violence, is topic A as Council considers City Manager Spencer Cronk's proposed fiscal year 2021 budget. The events of early June could only have a small impact on a months-long budget development process that had already been shaped by the ravages of COVID-19 and the economic pain of public health shutdowns. But those realities have helped set the table for reimagining not just public safety but other things we need the city to do well.

How do we make Austin more resilient? Not just to emergency shocks like pandemics or other disasters, but to the everyday stresses and inequities that cascade into crises, like the ones we now ask police to resolve – or leave unresolved because we fear and distrust the police. And how can we consistently improve the city's performance? Not just to rise to the current challenging moment but to fill in the cracks in service delivery – particularly to the vulnerable and marginalized – that 2020 has laid bare.

Thinking Strategically

Considering how dramatic COVID-19's impact has been, Austin's FY 21 budget is quite stable, not a painful contraction. The "all funds" budget of $4.19 billion is only 2.5%, or $110 million, lower than the current (amended) FY 20 budget. The General Fund, where your taxes go, is basically flat – up 0.1%, or about $1.3 million, to $1.09 billion (see chart, below). The much larger group of city enterprise funds, those which generate their own revenues, account for $2.77 billion of the new budget, a 4.2% drop that reflects the massive COVID-19 hit taken by Austin-Bergstrom International Airport. Special revenue funds, which include the city's hotel occupancy tax revenue, see a 16% decrease.

Beginning in FY 19, after the adoption of the city's five-year strategic plan, Strategic Direction 2023 (or "SD 23"), Cronk and the budget team led by Deputy Chief Financial Officer Ed Van Eenoo have aimed to align the annual spending plan with SD 23's six "outcomes": Mobility; Economic Oppor­tun­i­ty and Affordability; Safety; Health and Environment; Culture and Lifelong Learn­ing; and Government That Works for All. (These categories also formed the basis for Cronk's reorganization of his executive team, with different members assigned to each.) To non-wonks, this may help make sense of how the entire budget works, as it allocates the spending of huge departments (the largest being Austin Energy) across different outcomes.

One thing the SD 23 outcome budget clearly shows is that we spend a lot on "safety" – $1.06 billion, an amount nearly equal to the entire General Fund (see chart above). The three public safety departments – police, fire, and EMS – form the lion's share of both the General Fund (68%) and the Safety outcome; the latter also includes spending on utility infrastructure, flood control, and technology. It doesn't include – yet – a lot of the city functions that advocates, experts, and Council would like to see considered "public safety," such as mental health services or housing for those experiencing homelessness.

This spending may look different going forward, but it's remained mostly intact now despite COVID-19 and everything. "We now have two months of sales tax data that reflect what happened during April and May, when businesses were largely closed," says Van Eenoo. "April was down 19%, May was down 10%, but we were planning for up to a 50% reduction. On the one hand, that's a positive story, but you look at what's happening on the public health side, with cases and fatalities increasing and the potential for a second shutdown."

Van Eenoo says he's "never seen a budget with as much uncertainty as this – the pandemic, the police budget, what the economic future holds, what the federal government does with another relief package. We don't know any of that yet, but we do know we have to get a budget in front of Council for approval by August 12."

Plotting a Recovery Mid-Pandemic

While most of the budget reflects in some way the changes wrought by the pandemic, much of the city's COVID-19 relief spending on health services, emergency preparedness, and economic recovery is fueled by the funds it's received from the feds, primarily through the CARES Act. As Van Eenoo notes, there may be more on the way, and obviously the city's and community's needs are still great and urgent. Until then, most of the relief spending will end on Dec. 31, three months into the new fiscal year. What happens then – not just to the sick and the needy who need direct support, but to the businesses and employers and artists and musicians who've basically lost a whole year of income and who the relief programs aim to help?

Veronica Briseño, a City Hall veteran who moved from Economic Development to leading the recovery effort, sees both a need and an opportunity for "more technical assistance, for capacity building" within the local business and creative communities that her department's programs aim to help all the time, but who have been hit extra hard by the effects of COVID-19. "We want to provide that assistance to build more financial resilience in those communities. When we get to the point of the new normal" – that is, a city forever changed, at some level, by COVID-19 – "we need to talk about how we prepare for the next event so our business and creative ecosystem is not so fragile."

That means retooling "some of the resources we provide and are providing," though as Briseño notes, "Back in March we thought we might be fully past this by now. It's hard to talk about recovery now when we're still in the pandemic and public health has to be the focus. But we are trying to learn as we go to support not just immediate but also long-term recovery as we move forward."

Within the spectrum of those damaged economically by COVID-19, perhaps the most troubled are the arts and culture groups whose city support comes from now-dormant HOT revenues. (This includes the nascent Live Music Fund created by the city just last year.) A 35% reduction in arts funding will mean extinction for some groups, and there's really no way to soften the blow.

"We did look at what happened the last time we saw a big drop in HOT revenue, and probably 9/11 is the best example – it took a long time to rebuild, but we did," says Briseño. "We're working with the Arts Commission [which recommends who receives funding] on what's the best way to move forward and be thoughtful about it. We want to work with the community on a fair way to approach it. It will go back to looking in non-crisis years about how we can be more resilient, because these cultural arts are so essential to this community."

In Crisis, Better Collaboration

For much of City Hall and for city departments, the COVID-19 crisis has been a learning experience – showing not just what the city needs to do better both every day and in future emergencies, but also how it can do those things better as an organization. The city is, after all, a collection of workplaces with nearly 15,000 employees between them. Its performance is affected by the same things that influence performance, productivity, and outcomes at all workplaces. Many of those things find their way into the budget.

For example, the response to COVID-19 has led to regular collaboration between departments that had formerly been more siloed, which everyone we talked to has cited as a bonus. "Even having the weekly meetings between department heads with different roles in recovery, we've seen the effects of having ongoing cross-communication when we're not in our silos," says Briseño. "That's a benefit for our community."

Some of these departments have to work together regularly anyway, but across the organization's internal boundary lines. Two such natural teammates – the city's Plan­ning and Zoning, and Neighborhood Hous­ing and Community Development departments – are being merged into one: Housing and Planning. Both NHCD Director Rosie Truelove and Planning and Zoning Assist­ant Director Jerry Rusthoven (its de facto leader since the retirement last year of former Planning Director Greg Guernsey) are both very supportive of this change. (For Rusthoven, who's been with the city for 26 years, this will be the fifth different incarnation of the city's planning department. "It's a five-year cycle," he says. "It's like sunspots.")

As described by Cronk in his transmittal message upon presenting the budget, the new H&P is "replacing and improving upon" the services provided by its predecessors, and "beyond efficiency, this change reflects our recognition of the connection between affordable housing and land use across the city." This was brought squarely to the fore by the lengthy effort to rewrite the city's Land Development Code, which established as a primary goal of LDC Revision (the job of P&Z) the production of the amount of housing called for by the city's Strategic Housing Blueprint (the job of NHCD).

"Our jobs have always been aligned," says Rusthoven. "Bringing us together makes it a little bit easier. The mission and culture line up and have been for a long time, but it's not a drastic shift in our priorities and goals."

Truelove concurs: "Strategically, we've been at the same table and sharing the same space for a long time; I'm hoping we'll have that extra amount of collaboration and will move forward with decision-making in a unified way. The teams are really excited about it."

Changing Buildings and Building Resilience

Eventually, most of Planning and Zoning will move in with Housing at its current offices on East 11th Street, though some planning staffers are assigned to the new one-stop shop at Development Services' new digs at Highland. Truelove adds that the merger won't impact her department's current and ongoing partnership with Austin Public Health to implement the city's strategies to end homelessness and that it "allows us to create a space that's a little more formal and organized to address displacement prevention ... a robust division that can look at land use policies with a mindset toward creating ways to avoid displacement."

Rusthoven and Truelove's boss, Assistant City Manager Rodney Gonzales, sees the H&P merger as just one of the several ways the city is trying to be both more effective for customers and more resilient as an organization. Along with the long-awaited one-stop shop, the Development Services Depart­ment is now set to take over the full range of city permitting – including the Austin Center for Events, which is being moved from APD as part of that department's budget reductions; music and sound permits; and license agreements to use city property from Real Estate Services. The department was converted last year into an enterprise fund, meaning all the permitting and development fees stay within the department – allowing it to build financial reserves and have the funds to address the performance improvements called for by scathing audits in years past.

Building financial resilience for the city is a big part of Van Eenoo's job, though he sees the mission more broadly. "We're increasingly seeing that concept being brought into government and community thought processes – not only how we [in] government respond to something like COVID, but also how to best help out the community, including those disproportionately affected by the pandemic." One of the new programs being added in this year's budget is a position dedicated to community resilience, to be located within the city's Equity Office.

On the city side, Van Eenoo is seeking to create resilience by increasing the city's reserves from the current 12% (which is maintained in this budget) to 14% once revenues are back on the uptick. He notes that the state-imposed property tax revenue cap of a 3.5% increase – which the proposed budget falls within, even though the city could go up to the former 8% cap due to the pandemic – will remove a tool from the city's crisis management toolbox. "An 8% cap gives you much more flexibility to manage through an economic crisis when other sources of revenue are falling off," he says. "Another tool is our reserves, so now we'll need to have more; not immediately, because there are too many pressures on this budget, but take it up to 14% with clear parameters [to not go lower] but for an economic downturn."

Last year, before COVID-19 but as the city was anticipating the 3.5% cap, Cronk and Van Eenoo put a spotlight on the ways in which the city was looking to tighten up its ship to sail the new low-tax seas. Those efforts got blown sideways by this year's events, but they will eventually need to stay on course. "One thing is to make sure we're doing the right things, and the other is to do them as efficiently as we can. With 3.5% the ability to do more things is going to be constrained, so how are the things we've been doing for a long time lining up with Council priorities, and from there, see how we can do as much as we can with those dollars."

Van Eenoo points to homelessness as an example of such rethinking, along with ongoing efficiency reviews to the public safety departments (including whether to merge fire and EMS), which the current focus on de-policing scales up to a whole new level. "What kind of scope creep has happened over the years [to APD], and how can we take this opportunity to reset that? We're looking at all of that; it's what we have to do, but the need is really heightened with our fiscal situation now."

The Whole Budget: All Funds by Outcome

The six "outcomes" that form the structure of the city's Strategic Directions 2023 plan also define the responsibilities of Spencer Cronk's management team and provide a way of looking at the entire city budget - both the General Fund and the self-supporting enterprises lile Austin Energy. The "safety" outcome includes not just APD, fire, and EMS but also water and electric infrastructure, flood control and water quality, and communications technology.

The General Fund Chart

Despite the pandemic and recession, the General Fund budget is slated to increase slightly in FY 21 from the previous year; as usual, APD takes up the largest share, even as its proposed funding decreases for the first time in a decade. All told, the three public safety agencies - police, fire and EMS - account for 68% of the GF, which is fed by property and sales tax collections, transfers from the city's utilities, and other revenue from city services.