When Pierre Berastaín heard the City of Austin was cutting social services contracts, he didn’t hear “tight budget.” He heard alarm bells, not just for The SAFE Alliance, but for the city’s entire nonprofit safety net. Two months after voters rejected Prop Q, Austin leaders are reshaping how the city funds human services. For years, Austin has relied on nonprofit organizations to help tackle some of the city’s hardest social issues, from domestic violence and child abuse to food access, legal aid and employment services.
Now, the city has pulled more than $5 million from nonprofit contracts and redirected it toward its own priorities. This year’s focus is on initiatives to combat homelessness.
The shift has left nonprofit leaders scrambling to understand the sudden funding losses and what they signal about the city’s future role. While supporters say the city must live within its means, critics warn the cuts ultimately will cost taxpayers more, as reduced services among nonprofits push vulnerable residents into more expensive systems of care.
“We see ourselves as economic engines of the system and economic protectors for the taxpayer,” said Berastaín, chief executive officer of The SAFE Alliance, a nonprofit that helps victims of domestic violence. “That is the narrative that gets missed. Our organizations save real money, millions of dollars, because of the services that we provide.”
The city’s move to shift its money into homelessness programs didn’t protect nonprofits whose services directly relate to such work. For example, city leaders clawed back:
- $141,000 from The SAFE Alliance for victim services and related programs.
- $62,000 from Texas RioGrande Legal Aid for housing and eviction prevention programs.
- $52,000 from Foundation Communities mental health services, food benefits, transportation and tax refund programs.
For The SAFE Alliance, that cut means serving 345 fewer clients.
Another $16.8 million in cuts to social services contracts are slated for later this year. Right now, many nonprofits leaders are still confused by the current changes, trying to figure out when they kick in and how to plug the new budget holes.
The city still sees nonprofits as partners in community problems, said David Gray, the city’s homeless strategy officer. But the city’s relationship with charities is in the middle of a culture shift where nonprofits will have to depend more on other funders, he said.
“The city cannot continue to be everybody’s everything,” he said.
‘A Christmas kid’s wishlist’
Austin has been trying to spend its way out of its homelessness problem for years.
Between 2006 and 2022, voters approved $720 million in affordable housing bonds tied to homelessness, including money for affordable housing units, rental assistance, home repair programs and other support services.
City leaders say they’re seeing the results of that ongoing commitment. The number of shelter beds and housing units available to people who are homeless increased by 85% between 2019 and 2024. Emergency shelter capacity alone grew 62%.
Mayor Kirk Watson says Prop Q forced the city to rethink the way it supports services for people who are homeless.
“We asked the voters for some additional funding and that money is not available,” Watson said. “So we have had to restructure.”
The city has put new money into programs, including $2.9 million for the Esperanza Community for temporary shelter, $500,000 for rapid rehousing and $500,000 for “navigation centers” that connect people who are homeless to services.
Matt Mackowiak of Save Austin Now, a grassroots group that opposed Prop Q, said he doesn’t celebrate the loss of funding for any nonprofit. But he argued the city must make hard choices, and nonprofits should not depend so heavily on city funding.
Mackowiak also criticized the city for putting together a budget that assumed Prop Q would pass, which gave nonprofits false hope of increased funding.
“It was like a Christmas kid’s wishlist,” he said. “It was never real.”
Caught off guard
The timing of the cuts, which were announced the week before Christmas, blindsided nonprofits. People went into the holidays worrying about when the budget reductions would kick in, how the cuts were decided and how to prepare for the worst, said Lisa Barden, immediate past chair of One Voice Central Texas, a coalition of local health and human services nonprofits.
“You had people going into the holidays knowing that the budget’s going to be cut and they don’t know if their position is going to still be there,” she said. “So it was just bad timing all around.”
Berastaín from SAFE Alliance received conflicting information about the state of his shelter’s money. In early December, he said, the nonprofit received a notice from Austin Public Health that its shelter funding was intact. A week later, the city manager’s office released a list of cuts that included a $200,000 cut for the shelter. Ultimately, he found out the shelter money was safe.
Walter Moreau said the $52,000 in cuts slated for Foundation Communities keep people off the streets.
Moreau, executive director of the affordable housing nonprofit, said the organization will likely be able to absorb the cuts by reducing services. A loss from the city, however, can hit harder than it looks, he said, as nonprofits often use that money to secure matching grants or fill in gaps if other funders drop off.
The budget cuts were poorly thought out, Moreau said, and the city benefits financially from nonprofit work.
“If (nonprofits) didn’t exist, the city would have to pay 100% of the cost,” he said. “It’s wrong.”
The social services contracts will be discussed at the city’s Public Health Committee meeting on Feb. 4 at City Hall.
Meanwhile, nonprofits are worried about the $16.8 million in cuts planned for the 2026-27 budget. How those reductions will play out has not been publicly discussed. In a Dec. 17 memo to the council, City Manager T.C. Broadnax said staffers will conduct an inventory of all social services contracts to determine future funding.
The bottom line is someone is going to have to help people in need, Berastaín said. It’s just a matter of who foots the bill.
“The system always collects its debt,” he said. “Always. The question is who pays and how much harm happens first.”
Homelessness in Austin: What to know
The City of Austin has spent decades trying to decrease homelessness. While shelter and housing capacity has grown substantially, the problem persists. Here’s what to know about the state of homelessness in Austin.
- How many people in Austin are homeless? A June 2025 update from the Endless Community Homeless Coalition estimated about 5,000 people were in shelters or living on the streets. Almost 17,000 people had used local homeless services in the previous 12 months.
- What is the city doing to help? Over the last few years, the Homeless Strategy and Operations department has paired up with nonprofits to create more housing options for people experiencing homelessness. The number of shelter beds and housing units available increased 85% between 2019 and 2024. Emergency shelter capacity alone grew 62%.
- What’s happening now? City leaders recently cut $5.3 million from its contracts with social services agencies and are putting that money into homelessness programs. Another $16.8 million is expected to be clawed back from those contracts in the next budget cycle, but it’s unclear how that money will be spent.
The City of Austin has spent decades trying to decrease homelessness. While shelter and housing capacity has grown substantially, the problem persists. Here’s what to know about the state of homelessness in Austin.Homelessness in Austin: What to Know
The City of Austin has spent decades trying to decrease homelessness. While shelter and housing capacity has grown substantially, the problem persists. Here’s what to know about the state of homelessness in Austin.Homelessness in Austin: What to Know
