Chris Hollins
Houston could face a $330 million deficit in the next fiscal year – up by approximately $100 million after the Texas Supreme Court denied the city’s motion to appeal a years-long court battle over street and drainage infrastructure costs.
The looming shortfall could force the city this summer to enact significant budget cuts, raise fees, boost its property tax rate or a combination of all three.
Projections for the city’s finances are somewhat in limbo as a number of factors are undecided: a potential federal freeze on municipal grants and aid, a timeline for when the $100 million for infrastructure must be allocated, the results of a series of third-party audits of city spending and a long-considered residential garbage fee.
Unless Houston leaders are able to secure new revenue or cut spending, Controller Chris Hollins on Wednesday said he may not be able to certify the 2026 budget.
“Despite our repeated message about kicking the can down the road, here we are,” Hollins told City Council during its weekly meeting. “We’re down the road. The can is at our feet.”
The swelling deficit projection follows a decision by the mayor and city council last year to not raise property tax rates or institute new fees despite awareness of the expected shortfall in the upcoming fiscal year.
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The city already was facing a $230 million deficit before the ruling that stemmed from the end of pandemic-era federal relief funds, storm damage and a $650 million settlement with the firefighters’ union. Mayor John Whitmire has yet to announce a plan to pay for the firefighter contract and settlement
Hollins on Wednesday proposed a joint task force between his office, the mayor and City Council budget committee chairs to find budget cuts. Neither council nor the mayor agreed to the idea.
Whitmire countered that none of the expenses have come as a surprise. Many city officials agree with the premise of the lawsuit because of the need for better city infrastructure, and he said he felt confident they would find solutions.
“It’s very easy to criticize or sound the alarm if you don’t have to offer up solutions,” he said.
The mayor repeatedly has leaned on the upcoming results of Ernst and Young financial audits of city departments and tax increment reinvestment zones to find excess dollars, as well as collaborations with Metro, Harris County and Texas Legislature.
Some of those collaborations have been realized, freeing up general funds for other projects: Metro has agreed to pay $50 million toward traffic enforcement and street lights, and the state agreed to fund some debris removal costs. Whitmire also has partnered with Harris County commissioners for park projects.
I’ve had plenty to say about this stuff, so I’m just going to do a little summing up.
– We are where we are today because of the stupid revenue cap. Any plan to move forward that doesn’t include repealing the stupid revenue cap is not serious.
– I’m sure those audits will identify some savings, but it won’t make a dent in the overall picture.
– More than half of the budget is cops and firefighters, but there’s no audit to review their spending and there’s no chance that we’ll spend any less on them. This is partly because Mayor Whitmire campaigned and won on a promise to spend more on the cops and the firefighters, and partly because the Lege made it illegal a couple of years ago to cut law enforcement budgets. Any cuts we do make will come from the rest of the budget, and that will mostly mean laying people off, as we did in 2010.
– I sincerely hope the Mayor is successful at getting some help from the state, and I hope he is able to work some collaboration deals with Harris County. Towards that end, I hope he’s been working on improving his relationship with Commissioners Court and the County Judge.
– When the Mayor puts forth his specific solutions to the city’s financial challenges, I promise to be more specific in my criticism. The Chron has more.