Austin Could See Budget Deficit as Sales Tax Revenue Falls Short

City of Austin Facing Budget Challenges

The city of Austin is currently experiencing a shortfall in its projected tax revenue, leading to concerns about a potential budget deficit. Sales and property taxes play a significant role in funding essential city departments like fire, police, and parks, among others. According to Austin Mayor Kirk Watson, the fiscal 2024 budget was built with an assumption of 4% sales tax growth, but actual revenues have not met expectations.

Current Revenue Shortfall

Ed Van Eenoo, the city’s chief financial officer, revealed that the city is currently $8.5 million behind in sales tax revenue, with projections indicating a potential $15.4 million gap by the end of the fiscal year. If sales tax revenues continue to remain flat, the city will face a budget deficit that needs to be addressed before the fiscal year concludes.

Property Taxes and Legislative Challenges

Property taxes, which make up a significant portion of the city’s annual budget revenue, have also been a source of contention due to state legislative mandates. Governor Greg Abbott signed a law in 2019 requiring voter approval for property tax rate increases above 3.5%, limiting the city’s flexibility in generating additional revenue through property taxes. This has added to the city’s financial challenges, particularly as sales tax growth slows.

American Rescue Plan Act Funding

During the COVID-19 pandemic, the city received $188 million in federal funds under the American Rescue Plan Act (ARPA) to address various needs, including homelessness services. However, as this funding is set to decrease over the next three years, city officials are bracing for a “fiscal cliff” that could impact budget planning and service provision.

Tenant Stabilization Program Under Pressure

One key program at risk due to funding constraints is the tenant stabilization program, which serves approximately 1,500 households in Austin. With $9.6 million in local funds projected to run out by May, there are concerns about the program’s sustainability and the impact on vulnerable residents who rely on rental assistance.

Planning for Financial Sustainability

The City Council and financial office are actively addressing the impending budget challenges and working on a detailed five-year financial forecast presentation scheduled for April. As the city navigates the evolving fiscal landscape, there is a growing emphasis on creating sustainable funding mechanisms to support essential services and address community needs.