City staring down $169M budget gap
Turner calls for furloughing 3,000 employees, draining $20M rainy day fund
Houston Mayor Sylvester Turner, facing an economy hammered by the coronavirus pandemic and collapsing oil prices, on Tuesday proposed to close an upcoming budget gap by furloughing about 3,000 municipal workers, deferring all police cadet classes and exhausting the city’s entire $20 million “rainy day” fund.
The proposals are in response to an estimated $169 million revenue shortfall for the fiscal year that begins July 1.
Emptying the rainy day fund “leaves the city in a precarious state for the upcoming hurricane season,” the mayor acknowledged in a message to city council members that accompanied his budget plan. The account holds money in reserve for emergency situations, such as cash flow shortages and major disasters.
The city had just recently replenished the fund after using all $20 million in the wake of Hurricane Harvey. It will not have that option if a storm hits Houston this year.
“The dollars from the economic stabilization fund are gone,” Turner said. “There is no rainy day fund.”
Under Turner’s plan, the city also would draw $83 million from its cash reserves to balance the budget.
The city’s tax- and fee-supported general fund, which cov
ers most basic city operations, would spend $2.53 billion under Turner’s plan, a decrease of about 1 percent from the current budget. Despite the narrow spending cut, the city would be left with a general fund balance that dips below the amount required by city ordinance.
Turner said the rule makes an exception “in the event of economic instability beyond the city’s control.”
Houston is expected to lose nearly $100 million in sales tax revenue during the current fiscal year and the one beginning in July, due in part to a precipitous drop in oil prices, along with the closure of bars, restaurants and other businesses during the pandemic.
The overall city budget, including services that are funded by dedicated fees and utility charges, is $5.1 billion, a slight increase from the current budget.
The proposed spending plan, which is subject to approval by city council, only says that the city would furlough “thousands of municipal employees.” At a news conference Tuesday, Turner said the number would be around 3,000 of the city’s nearly 21,000 employees. The workers would forego 10 days of pay, saving the city roughly $7 million.
Turner did not specify which departments would be required to send workers home without pay, though he said the city would not place anyone on furlough from the police, fire and solid waste management departments.
The city will not implement any cuts until the new fiscal year begins July 1, Turner said.
The bulk of the city’s operating budget is devoted to paying roughly 5,200 police officers and nearly 3,800 firefighters. Public safety would account for 59 percent of the general fund under the proposal, and usually about 90 percent of the police and fire departments’ costs are devoted to personnel. Both departments would see modest increases of about 2 percent in spending under Turner’s plan, with police climbing to $930.6 million and the fire department to $516.9 million.
The departments seeing the biggest cuts in their operating budgets include Public Works ($4.5 million, or 14.3 percent of its budget); Parks and Recreation ($10.4 million, 13 percent); and Solid Waste ($4.5 million, 4.8 percent).
Turner’s budget plan could undergo significant changes, the mayor said Tuesday, if Congress allows local governments to spend COVID-19 stimulus funds to make up for lost tax revenue. Houston received $404 million from the roughly $2 trillion coronavirus stimulus package and for now is barred from spending it on previously budgeted expenses, though city officials may identify some public safety expenses related to the pandemic that can be covered with federal aid, Turner said.
“More than likely you will see additional dollars flowing into this budget in the next couple of weeks,” Turner said.
The mayor already is proposing to use federal COVID-19 funds to cover the city’s roughly $10 million annual contract with the Houston Zoo, which is paid out of the general fund. Turner said he also has directed the fire and police chiefs to determine which of their recent operations were devoted to COVID-19 — spending that could be eligible for federal aid.
Democratic lawmakers in Washington, D.C., also have sought more money for state and local governments in Congress’ next stimulus package, though such plans have met skepticism in GOP ranks.
Even if Congress gives Houston officials more flexibility to spend the funds, Turner said the $404 million will not cover all the city’s COVID-19 expenses and lost revenue. The city already is projected to spend about $200 million on testing, contact tracing and other health expenses, Turner said, while putting additional funds toward rental assistance and programs to help homeless Houstonians.
“The $404 (million), though it seems like a big number, it’s not big at all considering the needs that exist,” Turner said. “Just because we may be able to pull dollars from what we have received, it doesn’t mean that there will be sufficient dollars to do it.”
If the federal government does provide more money, Turner said his first priority would be to reinstate the police cadet classes, which would cost $14 million. Next on the list would be eliminating furloughs and refilling the city’s reserves.
Cities across the country already have slashed large chunks of their payrolls, placing workers on furlough, laying off employees and implementing hiring freezes. As many as 1 million municipal workers may be laid off or placed on furlough, according to the National League of Cities.