Budget matters

Draining Houston’s rainy day fund before hurricane season deserves rigorous debate.

Mayor Sylvester Turner had already warned that Houston was looking at “the worst budget that the city will deal with in its history,” so the announcement Tuesday of his proposal to close a predicted $169 million shortfall was jarring mostly in the details it included:

Drawing down $98 million from the general fund balance and exhausting the $20 million Budget Stabilization Fund, better known as the rainy day fund

Furloughing 3,000 municipal employees for a maximum of 10 days, saving $7 million. (Fire, police and those who collect trash and recyclables will not be impacted.)

Deferring five police cadet classes, saving $13.9 million

The mayor’s announcement underscored just how sick the COVID-19 shutdown and the steep fall in oil prices have left the city’s finances, which Turner said face an expected loss of $100 million in sales tax revenue.

The county, Houston Metro, schools and other public entities in our area and across Texas are also facing tough budget choices because of the pandemic. In Houston, as elsewhere, the focus must be on keeping people safe and on keeping essential operations going to support the much-needed economic recovery as businesses reopen and residents return to work.

There also needs to be a deep debate on the wisdom of draining the rainy day fund less than three weeks before the start of what is predicted to be an active hurricane season on June 1. The city must have reserves to deal with the possibility of a damaging storm even if it means some deeper cuts or exploring other alternatives now.

The city is further hamstrung by the revenue cap that voters imposed on the city’s property tax collections in 2004, creating an annual structural deficit that leaves little wiggle room for dealing with sudden budget losses.

With Hurricane Harvey still fresh in our memories — and maybe our nightmares as well Turner has acknowledged the risk that emptying the reserves poses for Houston, but says he’s been left with little choice. He might be right, but the debate in the next couple of weeks must include options to forestall that necessity, even if it means debating the possibility of raising revenue in the city’s tax- and fee-supported general fund. Given the tenuous economic conditions of residents and businesses, that may remain off the table. But the council must consider all options for protecting the city’s future.

There is no guarantee that Houston’s money situation won’t get worse depending on how long the pandemic suppresses commerce.

The city is still awaiting word on whether Congress will allow local governments to spend recently allocated COVID-19 stimulus funds to make up for lost tax revenue. Houston got $404 million from the roughly $2 trillion stimulus package but for now is barred from spending it on previously budgeted expenses.

There also is a faint hope that Congress will approve a $3 trillion plan pushed by House Democrats that would direct funding to state and local governments scrambling to cover sudden and enormous budget shortfalls due to the pandemic.

The package includes about $1 trillion in aid for state and local governments with $500 billion targeted to states, $375 billion to localities, $20 billion to tribal governments and $20 billion to territories.

The proposal faces dim prospects in the Republican-controlled Senate, but that may change as cities and states across the nation face furloughs, cutbacks and even the possibility of bankruptcy.

The fate of the House proposal may not be clear before Houston must adopt a budget by June 3 for the fiscal year beginning July 1.

“The proposed budget is extra, extra lean but it balances,” Turner said in a news release. “It comes with some costs, sacrifices and reductions in services. It is a tough budget and the work is not done.”

Turner deserves credit for facing the harsh fiscal reality squarely. But the task of readying Houston for the fiscal storms to come is only just beginning.