Had the Statesman not thrown up all over Barton Springs last week, the hot City Hall story would be Austin’s continuing budget crisis — a topic that’s not exactly any happier for City Manager Toby Futrell. “Things are not turning around as quickly as we thought,” she told the City Council’s Jan. 15 work session, as staff predicted a groaning $77 million gap in next year’s General Fund budget. (The General Fund, where your taxes go, is what pays for public safety, parks and libraries, planning, and other city services that don’t pay for themselves.) This cheering news was delivered to the musical strains (a running joke — almost every city budget meeting now has a soundtrack) of “Things Are Tough All Over” — like at the Capitol and at Austin ISD headquarters.
But, Futrell hastened to note, things could have been a lot worse. The city has been in austerity mode for several years — beginning under her predecessor Jesus Garza — and Austin actually ended fiscal 2002 in September in better shape than it had expected. During last year’s budget drama, Futrell had planned to bring the city’s books into “structural balance” — meaning not relying on one-time tricks or funding windfalls — over two years. Though Futrell’s well-scrubbed 2003 budget made a number of cuts and froze salaries and hiring, she also dipped into the city’s cash reserves to close last year’s $72 million gap in the General Fund without layoffs or a property tax hike.
According to the forecast presented by city budget officer Rudy Garza, though, Futrell won’t have that option this year. Between declining tax revenues and rising city costs — not including the as-yet-unknown costs of the city’s response to the Statesman-inspired toxic crisis — projected fiscal 2004 spending on current services will consume all the General Fund’s cash on hand — some $19 million — and still leave the city $58.11 million in the hole. As Futrell told the council, $58 million is more than the combined budget of the Austin Public Library and the city Health and Human Services Dept.
Property taxes will almost inevitably go up next year. Because property values (especially for commercial property) are going down, the “effective rate” — what the city needs to levy to make the same revenue — will likely go up around 2 cents, to just under 48 cents per $100. Last year, the City Council was politically indisposed to a tax hike — since most other local governments, including Travis Co. and Austin ISD, raised their rates. This year, preliminary signals suggest the council’s resolve is dissolving. Council members have already asked Futrell and the budget office how far they could conceivably raise property taxes, under state law, before risking a voter rollback.
According to Garza, the value of Austin’s tax rolls has not declined like this since fiscal 1991; meanwhile, sales tax collections, which City Hall had anticipated to grow slightly over last year’s anemic levels, will likely instead slide a bit further thanks to the disappointing holiday sales season. “As we look at our local economy and how it impacts our budget,” said Garza, “we’re getting good indications of a bad picture.” (Not for nothing has Rudy Garza been dubbed “Dr. Gloom” by Futrell.) The sales tax decline means the city will finish the current fiscal year with slightly more red ink than expected; Futrell has reimplemented a citywide hiring freeze.
Again, the gloomy estimates only include some of the additional costs for fiscal 2004 — mostly related to public safety and health — that the city already knows about. Cleaning up toxins in the creeks is not included. Neither, Garza told the council, are possibly significant costs at the city’s Water and Wastewater Utility — not part of the General Fund, but which, like Austin Energy, helps support the General Fund with transfers — as the city grapples with its aging infrastructure. Estimates to fix Austin’s cracked, leaking, and inadequate water and sewer lines run upwards of $100 million, a cost that would over time have to be borne by ratepayers.
So far, Futrell — unlike AISD Superintendent Pat Forgione or leaders in the Lege — has not made any specific suggestions for bridging our $77 million gap, instead striving to start the annual budget dialogue earlier (like, right now) and get maximum input from council and community. You know, just like she did last year. “On Jan. 16 of last year, you may recall, we had a … very similar work session,” Garza told the council. “It does seem like déjà vu.”
This article appears in January 31 • 2003.