The city of Austin has fared well, relatively speaking, through much of the nation’s economic turbulence of the last two decades. But as City Council prepares to work out the city budget for Fiscal Year 2025-2026, it appears the good times are coming to an end.
Over the past decade, as housing prices throughout the city mostly skyrocketed before leveling off in the past two years, job growth stayed relatively constant at around 4%, while sales tax growth mostly stayed apace. Over that time, the city’s population boomed as it had for the prior century (though, that too has begun to change).
But a bevy of factors are coalescing to produce an economic outlook that, at least for the upcoming budget, are motivating talk within City Hall of belt-tightening among city departments, with the specter of job cuts looming in the coming years.
Case in point: A directive from City Manager T.C. Broadnax requiring all city departments (including the big dogs like Austin Energy and the Austin Police Department) to engage in a “service prioritization exercise,” which is bureaucratic-speak for “find money in the budget that we can cut, if needed.”
A Feb. 18 email sent to department directors from one of the city’s financial managers asks that directors “identify 5% of [their department’s] operating budget … that is farthest from its core mission and/or supports services that are redundant to those provided by another City department or another organization.” The email included examples of programs to look for (“department was asked many years ago to provide [x service], no one remembers why…” and “department offers [X legacy service]” but “community demand is relatively non-existent”) and spreadsheet templates to document findings.
The “service prioritization exercise” is not new to the city (departments did the same thing last year), but AFSCME Local 1624 – the union that represents the city’s civilian workforce – is concerned that, unlike in the previous budget, this exercise could actually lead to budget cuts. Department operating budgets include personnel, but the sources we talked to doubt that people will be fired in this budget (vacant jobs could be eliminated, however); it’s more likely that Broadnax is looking to scale back on other expenses like department travel, office supplies, and perhaps some equipment.
But surface-level budget cuts are likely to only produce minimal savings, which is why some at City Hall are concerned about actual layoffs in the next fiscal year or two – especially if current economic uncertainties continue or worsen. That’s even accounting for a tax rate election, which is a near-certainty for this fall, in which the city would ask Austin voters for permission to increase taxes to continue funding service at current levels.
“I want us to have all the information we can have before we start to solve the funding puzzle.” – Mayor Kirk Watson
Pick from any of the following economic uncertainties and you’ll understand why city leaders want a big change: a federal government that seems hellbent on burning funding for programs that help local governments; the dwindling of American Rescue Plan stimulus dollars that funded services that will need to be funded by local tax dollars or eliminated; a nebulous future for Austin’s largest and most reliable job sectors – tech, state government, and the University of Texas. (For the latter two, increasingly right-wing governance could limit the talent pool interested in working at either institution. Consider an August survey that found that roughly a quarter of UT faculty are looking to leave within a year, and that the top reason they cited was the political climate at the university.) Meanwhile, soft sales-tax projections for Austin appear to be holding and the long-dreaded effect of state law limiting how much revenue cities can generate from property taxes will finally hit Austin. The list could go on.
Amid all of the uncertainty, AFSCME Local 1624 President Pedro Villalobos is encouraging city leaders to stand behind its workers. “In tough times, our priority must be protecting the people who provide the services that Austinites rely on every single day,” Villalobos told the Chronicle. “City Council must reassure workers that any budget reductions will not come at the expense of a living wage, job security, or the well-being of the people who serve this community.”
While Mayor Kirk Watson is busy at the Texas Capitol battling against anti-Austin legislation, he urges the public to avoid jumping to conclusions around a TRE or budget cuts. “I don’t want to fear the unknown,” Watson said of the numerous economic pressures facing Austin, including legislation and federal action that could make city governance much harder (like a bill requiring a two-thirds vote, rather than a simple majority, to approve municipal bonds and tax increases, or a rule change that would revoke the tax exempt status of municipal bonds).
“We have to look at all aspects of the budget and we have to do it early,” Watson said. “That’s why we’re working to gather more information now rather than waiting until after the budget is presented [in July]. I want us to have all the information we can have before we start to solve the funding puzzle.”
The public will learn more about the city’s current, and future, economic condition when staff present a five-year financial forecast to Council on April 8. The next week, April 16, staff will share a detailed look at a potential tax increase election during Council’s Audit and Finance Committee meeting. Broadnax is expected to unveil his budget – the first one he will have worked on from beginning to end – on July 15. Council is expected to adopt it in August.
This article appears in March 21 • 2025.