Less than a year after Austin voters rejected the Proposition Q property tax increase, city leaders are again confronting difficult spending decisions.

City Manager T.C. Broadnax on Friday night proposed a $6.6 billion budget for the upcoming fiscal year that calls for cuts to social service contracts, parks and public health programs, eliminates vacant positions across several departments and preserves funding for other priorities as the city continues to balance the budget.

Broadnax said the proposal is designed to focus on core services and quality of life investments, while meeting community needs without placing additional strain on taxpayers, even as the spending plan calls for higher property taxes for the average homeowner.

“Like the community members we serve, we must live within our means,” Broadnax said.

The proposal now heads to City Council, setting up weeks of debate over which city services to preserve, where to make additional cuts and how to balance demands for fiscal restraint with growing needs of residents and nonprofits already stretched by previous budget cuts.

“You will see reductions in this budget, but you will also see investments in critically needed service expansions,” Broadnax said. “We are reshaping how departments operate to protect what people rely on every day, while still investing in service expansions that matter most to the community.”

Why Austin is facing cuts

Austin has faced mounting financial pressure for the last few years. City staff has pointed to property tax caps, slowed sales tax revenue and an end to COVID-era federal funding as the primary reasons for the city’s increasingly tight budgets.

After voters rejected Prop Q, the City Council cut $95 million from the budget, reducing funds for parks, homelessness services and emergency rental assistance. Many social service providers contracted with the city were hit with a 10% cut in city funding.

As staff began preparing this year’s budget, city officials warned they would likely need to cut an additional $16.8 million from Austin’s roughly $75 million social services portfolio. In February, the City Council approved a framework for evaluating social service contracts. The plan prioritizes legally obligated services before identifying overlapping funding, opportunities to consolidate programs, contract performance and equity considerations.

In the proposed budget, the cuts are less severe than initially anticipated, as the City Manager suggested a $5.1 million reduction in funding for social service contracts in accordance with that City Council-approved framework. Additionally, Travis County’s Sobering Center stands to lose about $3 million in ongoing funding.

The prospect of another round of reductions alarmed nonprofits already struggling with federal funding cuts and increased competition for philanthropic support from foundations and individual donors navigating their own economic uncertainty.

Ahead of Friday’s budget proposal, city financial leaders met with community members and a coalition of nonprofits urging the city to reconsider the nearly $17 million in planned cuts. Officials ultimately said they would spread the reductions over the next two budget cycles rather than make them all at once.

The July 2 memo from Austin’s Office of Budget and Organizational Excellence also laid out which nonprofits were likely to see the smallest reductions and which could see the deepest cuts.

While the proposed budget did not explicitly state which providers could lose funding, city financial staff previously said nonprofits providing behavioral health, homelessness and clinical services should prepare for city funding reductions of 10% or less. Nonprofits providing family services, legal services, workforce development, transportation and HIV services were told to expect cuts of roughly one-third of their city funding.

After Prop Q’s failure, the city announced it would initiate a citywide audit. Broadnax said the budget also includes $1.5 million to support that audit program.

Breaking down the budget

The proposal preserves funding for some priorities. Among the most significant changes:

• $3 million in new funding to keep the Marshalling Yard emergency shelter open
• $6 million in new funding for permanent supportive housing services
• $6 million in overtime funding for the Austin Fire Department to maintain four-person staffing
• $504,000 to expand Austin Police recruiting
• $500,000 increase to support EMS overtime to maintain full staffing
• An additional $1.2 million for city pools and parkland maintenance
• $449,000 for five new positions to operate the new Austin History Center Campus

While some programs are seeing expansions, others are seeing reductions:

• $5.1 million in reductions in grants to social services providers
• $2.9 million in ongoing funding to Travis County’s Sobering Center
• $652,000 for the Summer Youth Employment Program
• $500,000 reduction in Rally Austin contract funding
• $400,000 from a convenient healthy food program through the Public Health Department
• About $170,000 from Parks and Recreation programs for seniors and children

Despite eliminating some vacant positions, the new budget adds funding for staff in high-priority departments, which could lead to a net increase of 225 new positions.

Tough decisions ahead

The proposal now heads to City Council, where members will spend coming weeks deciding which programs to protect, where to make additional cuts and whether residents can afford to pay more in taxes.

For Council Member Ryan Alter, the conversation begins with finding additional efficiencies throughout city government, including public safety, before considering deeper reductions elsewhere.

“There are no easy answers when you get to this point,” Alter said. “We’ve long since cut all the easy stuff. We’re down to any cut will have an impact on somebody’s life and we just have to balance what’s the most appropriate cut to make.”

Council Member Marc Duchen said residents’ ability to absorb higher costs will guide how he approaches the budget, particularly any discussion about raising taxes.

“What I’m hearing from people is reconfigure how you spend or figure out how to spend less,” Duchen said. People are saying “do better with what you have,” he added.

An office survey that yielded hundreds of responses reinforced that message, Duchen said.

It is clear many “residents, small businesses and families are struggling to just stay here and make it here in Austin,” he said. “Affordability continues to be my top priority, and I want to make sure the budget that we produce reflects that.”

What’s ahead

As proposed, the homeowner of an average-value home of $487,907 would pay an additional $173 on their tax bill next year. The city is also proposing an increase to fees for things like trash, water and electricity. In total, the average homeowner could expect to pay nearly $350 more in property taxes and fees next fiscal year.

Over the next several weeks, the city council will publicly discuss the budget, and decide what programs and services will get funded. Residents will have a chance to weigh in on the budget throughout the month-long process starting at 10 a.m. July 22.. The tax rate public hearing is set for 3 p.m. July 30. Public comment is also set for 10 a.m. Aug. 6 as the council considers calling for a bond in November. The budget is set to be adopted in August.