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What the American Rescue Plan means to Houston

First and foremost, no layoffs.

Mayor Sylvester Turner

Houston and Harris County are expected to receive more than $1.5 billion through the stimulus bill approved by Congress Wednesday, providing a massive cash injection that city officials say will help close a budget shortfall widened by the pandemic for the second year in a row.

The measure provides local governments with their most generous round of COVID-related funding yet, and it comes with fewer spending restrictions than last year’s aid. Houston will receive an estimated $615 million, putting the city at more than $1 billion in direct federal relief during the pandemic, while Harris County is projected to receive $914 million — more than double its allotment from the first round of local aid last March.

“I’m hopeful and optimistic that we will be able to use this money to, essentially, bail the city out of a very dire financial situation,” said City Controller Chris Brown, who monitors the spending of Houston’s more than $5 billion city budget.

[…]

Local governments will receive half their federal aid within 60 days of Friday, when President Joe Biden will sign the bill into law, according to White House press secretary Jen Psaki. They will receive the second half of the funds at least a year later.

That means Houston will receive more than $300 million to offset its revenue losses next fiscal year, along with any potential shortfall before the current fiscal year ends June 30. [COVID recovery czar Marvin] Odum said the city finance department is projecting a budget gap of between $160 and $200 million next year, while Brown — whose office generates its own estimates separate from Turner’s administration — said he expects the shortfall to be even higher.

Brown noted that while finance department projections assume the city will see a less-than-1 percent reduction in sales tax revenue this year, the actual decrease has been 7 percent.

“The (Turner) administration, I don’t think, has properly evaluated the reductions in sales and property tax,” Brown said. “There’s a $40 million variance between us and (the) finance (department) in sales tax alone.”

Brown estimated city officials will have to lay off about a dozen city employees for every $1 million trimmed from the budget, meaning Houston could have been looking at more than 2,000 layoffs without any federal aid.

Instead, Houston’s relief will far exceed its budget deficit. The city also is expected to devote a chunk of the aid to direct COVID relief, such as testing and vaccinations. Turner’s administration exhausted the previous round of aid, totaling $405 million, in December. Those funds covered contact tracing efforts, city workers whose jobs were consumed by COVID, and relief to renters and small businesses, among other areas.

As the story notes, the ARP aid comes with fewer restrictions on how the money can be used than the CARES Act did, though the city was able to plug its deficit last year with those funds as well. The need for more funding has been known for a long time, and it’s only happening now because of the Presidential election and those two Georgia Senate runoffs. Elections have consequences, y’all.

Here comes the casino push

Expect this to get louder and louder, though whether it’s successful or not remains to be seen.

Casino1

When a big political player comes waltzing into Texas spending big money from out of state, it’s usually a good sign that he wants something from lawmakers. So when Las Vegas casino magnate Sheldon Adelson and his wife, Miriam, spent $4.5 million to help Republicans keep control of the Texas House in 2020, heads turned.

While Adelson is known for cutting big checks—he’s one of the most powerful GOP mega-donors in the country—he doesn’t usually spend so lavishly on state-level politics. What did he want with Texas?

After the election, it became clear that Adelson was embarking on an all-out push to legalize casino gambling in Texas. In November, his corporation Las Vegas Sands started hiring some of the most powerful, well-connected lobbyists in Austin. The company declined to comment, though in early December, Andy Abboud, the company’s senior vice president for government relations, made the plans official. In an online panel at Texas Taxpayers and Research Association’s annual conference, he laid out the company’s hopes that Texas lawmakers would approve legislation lifting the casino ban, allowing for the establishment of a limited number of luxury destination casinos in the state’s major metro areas. “Texas is considered the biggest plum still waiting to be [picked],” Abboud said.

Gaming laws in Texas are among the most restrictive in the country, with bans on almost all gambling—including slots, table games, and sports betting—enshrined in the Texas Constitution since the Prohibition Era. Currently, gaming is restricted to wagers on dog and horse racing, charitable bingo, and the state lottery. The state’s three federally recognized Native American tribes are allowed to operate casinos with limited games, though the state has repeatedly contested their rights in the courts. Republican leaders like Governor Greg Abbott and U.S. Senator John Cornyn have aggressively resisted tribes’ attempts to expand gaming.

Abboud encouraged hesitant lawmakers to think “like you’re attracting Tesla or an Amazon facility or an entirely new industry to the state that’s going to create tens of thousands of jobs and hundreds of millions of dollars in tax revenue and ancillary benefits of hotels and tourism.”

[…]

Adelson’s casino push comes as lawmakers head into a session facing deep revenue shortfalls spurred by the pandemic and resulting economic crisis. In past sessions, casino proponents have argued that the state’s gaming prohibition has allowed billions of dollars to abscond into Oklahoma and Louisiana, where casinos are conveniently located just across the border. But opponents say that promises of revenue windfalls are overblown and would not provide a sustainable new revenue stream.

Abboud argued that Las Vegas Sands’ model for casinos in Texas would build another economic pillar in the state, helping to ease the state’s dependence on the oil and gas industry. “Will they solve all economic problems? No. Will it stabilize the economy? Yes,” he said.

So far, the only casino gambling legislation filed is from state Representative Joe Deshotel, a Beaumont Democrat, whose bill would legalize casinos to fund insurance programs for those living in hurricane-prone areas along the Gulf Coast.

Who ends up authoring the Adelson camp’s bill in the Texas House and Senate will have big implications for its success. If an ally of Lieutenant Governor Dan Patrick authors casino legislation in the Senate, that could be a sign that Patrick would allow it to get a vote on the floor, says Mark P. Jones, a political science professor at Rice University. “If Patrick is on board, it passes. If Patrick is not on board, it doesn’t. It’s about as simple as that,” Jones says. A signal of support from Patrick, a social conservative who has previously opposed gambling, could also sway House Republicans who would otherwise worry about primary challenges from the right, he adds.

This Chron story from early December is the reference for those Andy Abboud quotes. We go through something like this every two years, and the smart money has always been to bet against any expansion of gambling, including casinos. The financial arguments have some merit, though they are surely being overblown by the casino interests. The catch there is that Greg Abbott and Dan Patrick et al don’t see a lack of revenue as a problem but as an opportunity to cut costs. Maybe this time it’s different, I don’t know, though now that the revenue picture isn’t as bad as it once looked, whatever financial argument the casinos may have made has less heft.

The casino interests have certainly hired a bunch of expensive and well-connected Republican lobbyists, so I do expect they’ll be able to get some facetime and bend a few ears. Maybe this is a long-term play, as Jim Henson suggests, where the groundwork gets laid this session and ultimate success comes a few years down the road. Who knows?

I remain ambivalent on the whole thing – I don’t have a problem with gambling and generally think adults should be allowed to partake in it, but I don’t see casinos as a net positive, and I believe the economic benefits that get touted will be extremely limited to a small class of renters, and not much good to anyone else. If we do someday get to vote on it as a constitutional amendment, I’ll have to see what the specifics are before I decide. We’ll keep an eye on this because it’s likely a high tide year for gambling interests, but as always don’t expect much.

UPDATE: I drafted this over the weekend, and since then Sheldon Adelson has passed away. I don’t believe that changes the calculus in any way, but I’m sure someone would have noted that in the comments if I hadn’t, so here we are.

Here’s the official budget forecast

“Could be worse” remains the watchword.

Texas lawmakers will enter the legislative session this week with an estimated $112.5 billion available to allocate for general purpose spending in the next two-year state budget, a number that’s down slightly from the current budget but is significantly higher than what was estimated this summer when the coronavirus began to devastate the economy.

Texas Comptroller Glenn Hegar on Monday announced that number in his biennial revenue estimate, which sets the amount lawmakers can commit to spending when they write a new budget this year. But he acknowledged that Texas’ economic future remains “clouded in uncertainty” and that numbers could change in the coming months.

Hegar also announced a nearly $1 billion deficit for the current state budget that lawmakers must make up, a significantly smaller shortfall than Hegar expected over the summer. That number, however, doesn’t account for 5% cuts to state agencies’ budgets that Gov. Greg Abbott, House Speaker Dennis Bonnen and Lt. Gov. Dan Patrick ordered this summer or any supplemental changes to the budget lawmakers will have to make.

Hegar’s estimates portend a difficult budget-writing session for lawmakers. But Hegar acknowledged that things could have been a lot worse. The $112.5 billion available is down from $112.96 billion for the current budget.

See here for the previous update. I continue to hope that Congress will throw a boatload of state and local aid our way in the coming months, which will also help, but at least we’re not in truly dire territory. And bizarrely enough, there may be a silver lining in all this.

But advocates hope the pandemic, combined with the revenue crunch, could lead to an unlikely bipartisan agreement. Before the pandemic hit, Democrats saw a takeover of the Texas House as key for advancing the prospects of Medicaid expansion in the state. But as COVID-19 has ravaged the state economy and thrown even more Texans into the ranks of the uninsured, Democrats are guardedly optimistic this could persuade enough Republicans to put aside their political hangups and support expansion—even as Republican Attorney General Ken Paxton leads a national lawsuit to eliminate the entire Affordable Care Act.

Texas is one of 12 remaining states that have refused the federally subsidized Medicaid expansion, despite having the highest rate and largest population of uninsured residents in the country. Expanding Medicaid would cover 1 million uninsured Texans and bring in as much as $5.4 billion to the state, according to a September report by researchers at Texas A&M University.

State Representative Lyle Larson, a moderate Republican, voiced his support for expanding Medicaid soon after the election, pointing to six GOP-led states that have done so in the past three years. “It is a business decision,” Larson wrote on Twitter, noting that the move would help with the revenue shortfall and COVID-19 response, address rural hospital closures, and expand access to care. Dallas County Representatives Morgan Meyer and Angie Chen Button, both Republicans, pulled out razor-thin victories to keep their House seats after voicing support for some type of Medicaid expansion in their campaigns.

Even conservative state Senator Paul Bettencourt acknowledged that the fiscal crunch will force consideration of Medicaid expansion. “My back-of-the-napkin analysis shows that’s a $1.6 billion item, like that—boom!” he told the Dallas Morning News in September. “I’m pretty sure we don’t have that falling out of trees,” he said. “You can put Medicaid expansion up at the top of the list. There will be a debate.”

But there’s still plenty of staunch opposition. “For those that promote [expansion], I haven’t heard what they’re willing to cut,” state Senator Kelly Hancock, a Republican who chairs the Business and Commerce Committee, said in November. “It’s easy to talk about it until you have to pay for it, especially going into this budget cycle.”

As with casinos and marijuana, the smart money is always to bet against Medicaid expansion happening. But this is a bigger opening than I’ve seen in a long time, and while that’s still not saying much, it’s not nothing.

Can we please not screw the schools right now?

Really, we don’t have to do this.

Across the Houston region and Texas, school districts that lost enrollment during the COVID-19 pandemic are facing a drop in state funds starting in January if the Texas Education Agency or state lawmakers do not act.

Since the virus began sweeping across the state and nation last March, forcing schools to close, the TEA has given districts several grace periods in which it provided them the same funding they would have received in normal times. To date, that has provided a lifeline to districts that otherwise would have seen their state revenues plunge due to lower-than-expected student enrollments.

The current grace period, which the TEA calls a “hold harmless guarantee,” ends Dec. 31.

The Texas Legislature in 2019 allocated enough money to fund schools at their current levels until the end of the school year, but the TEA has remained mum on whether it will extend the hold harmless guarantee until then. Without another extension for the remainder of the 2020-21 school year, some local district finance officials worry they will be faced with two bad options: dip into and potentially deplete their reserve funds to keep their districts operating through spring, or lay off teachers and staff to make ends meet.

For Houston-area districts, which began the school year missing more than 20,000 students, the financial ramifications could run into the tens of millions of dollars. For example, Alief ISD could lose nearly $40 million after enrollment fell 3,500 short of initial estimates.

Cypress-Fairbanks ISD, which has 2,364 fewer students now than at the end of last year, estimates it could lose $29 million. Aldine ISD could “easily” miss out on $20 million after its enrollment fell 4,000 students shy of projections, and Pasadena ISD would face a shortfall of nearly $14 million due to a 2,261-student enrollment drop.

Houston ISD did not respond to a request for comment, but the district began the year with 13,000 fewer students than expected.

There is no one answer for why students have dropped off schools’ radars. Some may have moved with family in search of work. Parents of pre-kindergarten and kindergarten students may wait to enroll them until school operations are more normal. Others may have been kept at home by parents waiting for COVID infection levels to improve before sending their kids back to school.

Texas Education Commissioner Mike Morath told the Chronicle’s editorial board in November the agency “already provided unprecedented flexibility to offer remote learning, and with it, full funding.”

“However, we know that certain districts face challenges because of significant enrollment declines, and we are working to ensure that our schools and teachers receive the additional financial support we need,” Morath said.

The lack of a concrete assurance that districts statewide will continue to receive funding at current levels has many on edge, said Kevin Brown, executive director of the Texas Association of School Administrators.

“Everybody right now is holding their breath, hoping the state will come through with hold harmless,” Brown said. “But they’re also starting to look at what will happen if that doesn’t come through — are they going to have to do layoffs, and if so, how extensively?”

State Sen. Paul Bettencourt, R-Cypress, said while enrollments remain lower-than-predicted across the state, the situation is improving as the school year plays out and kids come back. He also said he expects more students to return as COVID-19 vaccines begin to be distributed.

Returning funding to the state’s attendance-based formula creates an incentive for districts to keep looking for students who have not shown up.

“You have to balance all these needs, because we have to keep the public school system making sure they make every effort to find students,” he said. “Otherwise children are left behind.”

I mean, look. Schools and school districts and teachers – and parents and students – are contending with a lot this year. They’re doing the best they can under extreme circumstances. While the state of Texas is also under financial constraints, this is exactly the sort of situation for which the Rainy Day Fund – also known as the Economic Stabilization Fund – was created, to smooth out unexpected downturns in revenue and tide things over till they rebound. And for the millionth time, I will note that our state Republican leadership could be loudly demanding that our two Republican Senators support a COVID relief package that gives financial support to state and local governments, including school boards, that are suffering through the effects of the pandemic. There are many things we could do that do not involve putting all the burden on the school districts. We just have to choose to do them.

State budget situation not quite as awful as feared

Still bad, but could be worse.

Despite “historic declines,” state lawmakers will have more money to work with in the upcoming legislative session than Comptroller Glenn Hegar expected over the summer, he said Monday. But Hegar did not outline specifics as state coffers continue to suffer from the economic recession spurred by the coronavirus pandemic.

Sales tax revenues, by far the largest part of the state budget, fell by 4.8% in the second half of the 2020 fiscal year compared with the same stretch last year, Hegar said. It was a much softer hit than he anticipated, thanks to Texans staying home and spending money on “staycations instead of vacations.”

Other revenue streams, such as taxes related to alcohol, hotel occupancy, and oil and gas, were down more than 40% in the same period this year compared with last, Hegar told lawmakers Monday during a Legislative Budget Board meeting at the Capitol.

“Revenues remain down significantly relative to a year ago, and well below what we expected to collect when the Legislature wrapped up work on the budget in 2019,” Hegar said.

Legislative budget writers decide how much money will be allocated for large state expenses like how much school districts get, how well health care programs are funded, which transportation projects get built and what amount state law enforcement gets based on how much the comptroller says will be available during the next two-year budget cycle, which runs from September 2021 through August 2023. Hegar will likely unveil that number as the session nears.

Hegar, whose office is in charge of collecting taxes owed to the state of Texas, last formally updated lawmakers in July, when he wrote a letter to Gov. Greg Abbott and lawmakers projecting the state’s current two-year budget to be roughly $11.5 billion less than originally estimated. That would put the state on track to end the biennium, which runs through August 2021, with a deficit of nearly $4.6 billion, Hegar wrote in July.

A few points:

– Let’s hope Hegar is a better revenue estimator than Susan Combs was. Her epic misfire in 2011 led to far more cuts being made than were needed.

– There are and will be plenty of stories written about how this is now the time that the Lege will consider marijuana legalization or casino gambling, because those things generate revenue that could be used to help stave off the deficit. The bit about gambling has been trotted out reliably every cycle since at least 2003, and it has never been true, in large part because the people who oppose expanded gambling still oppose it in deficit situations, and they remain with sufficient power to block it. I expect the same to be true for pot – it will happen when and if there is sufficient political support for it, and the budget situation will not be a factor.

– Also, too, people like Greg Abbott and especially Dan Patrick don’t want new revenue sources. They are perfectly happy to cut things out of the budget. Deficit situations are great opportunities for them.

– We could avoid all this if there is a federal COVID relief package targeted at cities and states. That’s only going to have a chance of happening if Dems win the two Georgia Senate runoffs, and even then it may be dicey. But it is a thing that Abbott et al could advocate for if they chose.

– Oh, yeah, the Rainy Day Fund. We didn’t use it in 2011 because Rick Perry decided that the fund, which was explicitly set up for the purpose of blunting the effect of economic downturns – hence the actual name “Economic Stabilization Fund” – was actually for natural disasters instead. I feel pretty confident that Greg Abbott will declare that COVID is no reason to tap the fund, and in the absence of a legislative majority to dip into it, it ain’t happening. (It’s possible some small amount may be used, if budget writers feel sufficiently desperate, and the nihilist caucus can be tamed or bought off. Don’t bet on it, that’s my advice.)

We’ll know more in January. Hope for the best. The Chron has more.

The cities still need COVID relief

Just a reminder, in case you’d forgotten.

Mayor Sylvester Turner

As Congress resumes work on a new coronavirus financial relief package, nearly 100 Texas mayors are pressing the state’s congressional delegation for more funding to address revenue losses incurred due to the economic downturn brought by COVID-19.

Texas received $11 billion in funds from the Coronavirus Aid, Relief and Economic Security Act, which were distributed among the state, counties and cities. Some Texas mayors said these have to be spent before the end of the year and for expenditures related to the pandemic response — and don’t address government entities’ losses in anticipated revenues related to decreased economic activity. Others said there’s been conflicting information about how the money can be spent.

Since March, the economic slowdown has directly hit cities’ revenues. According to the state comptroller, local sales tax allocations for cities in June dropped by 11.1% compared with the same month last year.

“The budget calamity looming over local governments is real and it requires extraordinary measures,” said a letter signed by 97 Texas mayors and directed to members of Congress. “We therefore fear that state and local revenue is going to take time to rebound. We also fear that if we do not stabilize our economy, we could see a drop in property tax revenue next year.”

In the letter, which included signatures of leaders from urban, suburban and rural areas, the mayors asked for “direct and flexible fiscal assistance to all cities.”

“What we’re asking [is] for direct assistance for state and local governments. Not for things like pension measures, none of that, but as a result of lost revenue as a result of coronavirus itself,” Houston Mayor Sylvester Turner said at a press conference Monday. “We are the infrastructure that supports the public and private sector, and at this point in time, we are needing direct assistance.”

We’ve known this for awhile, and the need is still there even if the city of Houston was able to kick the can down the road with this year’s budget and existing CARES funds. The simple fact is that cities – and counties, and the state, and to a lesser extend school districts – didn’t do anything to cause the problems they’re facing now. The analogy that some have made to a natural disaster is apt, and the effect will long outlive the original cause of the problem if it isn’t addressed. The US House passed a large bill a couple of months ago that would address these needs, but of course it has to get through the Senate, and you know what that means. If we had a functional state government, it would be advocating on behalf of the cities as well, because the loss of many thousands of municipal jobs will not do anything to help the state’s economic recovery. Our state leaders don’t see it that way, unfortunately, so the cities are on their own. It doesn’t have to be this way.

On a tangential note, the Slate podcast “What Next: TBD” did a segment on this very topic last Friday, and spoke to City Controller Chris Brown as part of their reporting. Check it out.

The state deficit is quantified

Honestly, it’s not as bad as it could be.

Texas Comptroller Glenn Hegar delivered bleak but unsurprising news Monday: Because of the economic fallout triggered by the coronavirus pandemic, the amount of general revenue available for the state’s current two-year budget is projected to be roughly $11.5 billion less than originally estimated. That puts the state on track to end the biennium, which runs through August 2021, with a deficit of nearly $4.6 billion, Hegar said.

Those figures are a significant downward revision from Hegar’s last revenue estimate in October 2019, when the comptroller said the state would have over $121 billion to spend on its current budget and end the biennium with a surplus of nearly $2.9 billion. The state, Hegar said, will now have roughly $110 billion to work with for the current budget.

Hegar’s latest estimate, he stressed in a letter to Gov. Greg Abbott and other state leaders, carries “an unprecedented amount of uncertainty” and could change drastically in the coming months, thanks to the pandemic and, to a lesser extent, a recent drop in oil prices.

“We have had to make assumptions about the economic impact of COVID-19, the duration and effects of which remain largely unknown,” Hegar wrote. “Our forecast assumes restrictions [on businesses and people] will be lifted before the end of this calendar year, but that economic activity will not return to pre-pandemic levels by the end of this biennium.”

Returning to pre-pandemic levels, Hegar said, would not happen until consumers and businesses are confident that the virus has been controlled.

“Even then,” he wrote, “it likely will take some time to recover from the economic damage done by the deep recession caused by the virus.”

I mean, it’s not great, but this much deficit could be easily covered by the Rainy Day Fund, and there is still the likelihood that Congress will send some more relief money to the states. A lot can happen between now and when the Lege has to actually write and pass a budget, and some of those things are good. Of course, pretty much all of those good things are predicated on getting the virus under control, and let’s just say that’s a jump ball at best. As you might expect, Dan Patrick gets this exactly backwards, so, you know. But look, it’s pretty basic. If we can get the virus under control, we can get the economy going in a safe and productive fashion. Otherwise, it’s more of what we’re getting now. Seems simple, right? I hope our leaders see it that way, because we’re at their mercy.

There won’t be furloughs after all

A slightly confusing bit of good news.

Mayor Sylvester Turner

Houston will not need to furlough roughly 3,000 city employees nor cancel its police cadet classes in the upcoming budget year, Mayor Pro Tem Dave Martin announced during a city council budget committee meeting Tuesday.

Instead, the city will use federal coronavirus relief funds to help bridge its projected $169 million shortfall in the fiscal year that begins July 1.

“No employee in the (City of Houston) will be furloughed,” Martin said.

The administration has updated Mayor Sylvester Turner’s initial budget proposal, eliminating many of the most dire consequences attributed to the revenue gap. The revised budget plan eliminates furloughs and adds back five cadet classes for police, Martin said.

It also adds another fire department cadet class, giving that department four classes. The new proposal also adds $15 million back into the city’s rainy day fund as hurricane season gets underway; Turner’s original spending plan would have exhausted that fund entirely.

The changes comes as the city has weighed how it can spend $404 million in federal funds it received through the CARES Act, part of a stimulus package approved by Congress.

The administration plans to use roughly $19 million of those funds to cover expenses for redeploying city employees from their normal duties to address the coronavirus pandemic, freeing some budgetary space. It is not clear if the city plans to use additional federal funds to cover the remaining costs of the budget revisions.

See here, here, and here for some background. I’ve said all along that the city could avoid all of the issues for this year if it could use that federal money for previously budgeted items. Apparently, they have decided that they can, or at least that there’s enough of the money available to fill other needs to make the math work. I can’t tell from this story what may have changed to go from apocalyptic warnings about layoffs and furloughs to this – maybe the city got clarity from the feds, maybe they came to this conclusion on their own, maybe there was enough wiggle room to allow for budget items to get moved around, who knows? This is the outcome that should have been from the beginning. Remember, a large part of budgeting is determined by the calendar – if these federal dollars had been allocated earlier, there wouldn’t have been so many “previously budgeted items” to worry about. I’m a little worried that someone is going to come along and try to stop the city from doing this, maybe by lawsuit or some other decree, but until then, I’m glad they worked this out. There are plenty of things to worry about going forward, like sales tax revenues, but buying a year’s time before that reckoning allows for another CARES Act or other positive development to occur. Sometimes kicking the can down the road is all you need to do.

What the next CARES act could mean for Texas cities and counties

Short answer, a lot.

Cities and counties across Texas would get more than $29 billion from the $3 trillion coronavirus relief package House Democrats want to pass as soon as Friday.

That includes more than $1.7 billion to Houston and nearly $1 billion to San Antonio as both cities stare down massive budget holes caused by the outbreak. Harris County’s funding could top $2.6 billion and Bexar could be on tap for more than $1 billion, as well. Texas, meanwhile, could get nearly $35.5 billion from a separate pool of funding to aid states.

That’s all according to estimates compiled by the Congressional Research Service, Congress’ public policy institute. The estimates, which cover the rest of 2020 and 2021, are based on some factors not yet known, such as unemployment and infection rates, so they’re not exact.

[…]

At the top of the Democrats’ list is sending $875 billion to states, cities and counties to help plug huge budget deficits. Cities can’t use the aid that Congress has offered so far to close those budget holes and cities across the country, including Houston and San Antonio, are starting to lay off employees and cut programs.

The bill would also for the first time offer coronavirus relief aide to smaller cities, as past relief packages have only directed funding to cities with 500,000 or more residents, meaning suburbs could get tens of millions. New Braunfels, for instance, could get nearly $30 million. Sugar Land could get more than $58.5 million.

There’s a list of cities and counties in Texas and the amounts they would get here. As noted, it’s broken out over two years, so Houston would get $1.18 billion this year and $580 million next year, while Harris County would get $1.76 billion this year and $881 million next year. That’s way more than the current Houston budget gap, so I presume a lot of that money is intended for other purposes as well, such as perhaps rental assistance and maybe rebuilding public health infrastructure. The main point here is that this is a demonstration that someone has learned the lesson from 2009, which is that massive cuts and layoffs in city and state budgets is a huge drag on any economic recovery effort. (That someone is the Democrats, though for at least a few minutes the Republicans have decided that they need to take whatever steps they have to in order to keep the economy from completely collapsing on Trump.) I don’t know what a final version of this might look like – there are certainly things the Dems could concede on – but if something like this passes and cities and counties and states can “balance” their budgets without taking a chainsaw to them, it would be a bug freaking deal. Daily Kos has more.

Here come the furloughs

We said this was gonna be bad, right?

Mayor Sylvester Turner

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 covers 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.

[…]

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.

See here and here for some background. The story mentions the $404 million Houston received in the first cornavirus stimulus package, which it can’t spend on previously budgeted expenses. Maybe the city will be allowed some leeway in that, and maybe the next relief package, which in its current form includes money for cities and states, will arrive in a timely fashion. Mayor Turner says he’d reinstate the police cadet class and un-furlough the other employees as his first priorities if the funding becomes available. In the meantime, this is our reality. All we can do is hang on and hope for the best.

Still trying to avoid total budget disaster

That federal money sure would help.

Mayor Sylvester Turner

As the prospect of mass furloughs and severe spending cuts looms over the city’s next budget, Houston officials are sitting on a pile of coronavirus stimulus money that amounts to more than double the shortfall projected by Mayor Sylvester Turner.

The rub, at least for now, is that the strings attached to the $404 million Houston received from the so-called Coronavirus Relief Fund — a $150 billion trove sent to states and local governments as part of the roughly $2 trillion Coronavirus Aid, Relief and Economic Security Act — bar officials from spending the aid on expenses they already had budgeted.

Mayors, governors from both parties, congressional Democrats and even some Senate Republicans have pushed for looser restrictions that would allow sales tax-deprived governments to use the money to plug budget holes, instead of limiting them to expenses tied directly to the pandemic.

Meanwhile, as Congress weighs a second stimulus package for local and state governments that may earmark funds for lost revenue after all, Turner is under pressure to squeeze as much money as possible out of the initial round of CARES Act aid.

Prompting the tension was the Treasury Department’s April 22 guidance that eligible spending includes payroll expenses for public safety, public health, health care and other employees “whose services are substantially dedicated to mitigating or responding” to the pandemic.

Last week, City Controller Chris Brown penned a letter to Finance Director Tantri Emo and Turner-appointed COVID-19 recovery czar Marvin Odum in which he urged the administration to craft a spending plan for the funds. He told city council members last week that officials in other Texas cities have begun determining how much of their public safety expenses are directly related to COVID-19.

“The potential exists for these costs to be offset by CARES Act funds, which could help alleviate added pressure placed on the General Fund,” Brown wrote, referring to the city’s $2.5 billion tax-supported fund that pays for most day-to-day core operations, including public safety, trash pickup, parks and libraries.

See here for some background. Let’s be clear, it’s more than just Houston facing this kind of problem. Every city, every county, every state has been affected. Federal funds, and a lot of them, are going to be needed. All this caterwauling you hear from haircut-freedom-fighters and grandma-sacrificers about getting the economy going again, none of it means anything if they aren’t willing to save local and state governments from making devastating cuts, which among other things will cause loads of people to lose their jobs and act as a huge drag on any economic recovery. If we could be sure we’d get this in the next round of stimulus then fine, use this money for whatever other purposes it’s intended for. But really, why wait? Let’s get a bit of certainty to bolster confidence.

The rough fiscal road for school districts

It’s gonna be bad. How bad remains the question.

Coronavirus already has wreaked havoc on school districts — closing campuses for the remainder of the school year, shifting learning online, and exposing a wide digital divide between students who have ready access to the internet and those who do not. And that is only this year.

Next year, even if the restrictions are lifted, the coronavirus still could spark a budget crisis for traditional and charter school districts across Texas.

School finance officials and state leaders already are warning that the economic disruption caused by the pandemic, coupled with the ongoing oil slump, could result in a plunge in state revenues as sales taxes drop and commercial property values slip. Texas Comptroller Glenn Hagar already has said the state is in a recession.

As districts work to finish their 2020-2021 budgets for approval this summer, Rep. Dan Huberty, R-Humble, said it would be prudent for them to squirrel away some money, even if it is too early to tell how much of an impact the pandemic will have on funding next year.

“Talking to superintendents, my message to everybody is, let’s get through this year, let’s get to summer time, and next session we’ll need to watch things very closely,” Huberty said.

[…]

[2019 school finance reform bill HB3] requires districts to base their upcoming budget on current year property values, instead of the previous year’s values. Districts receive a larger infusion of state money too, but the rate at which they can tax local property owners effectively will be capped by the state, said Catherine Knepp, an associate at the Moak, Casey & Associates school finance consulting group. How much local tax rates have to be lowered depends on the rate local property values rise and several other factors.

“Districts were still figuring out how to do that,” Knepp said, “Then enter coronavirus.”

For local revenues, Knepp said districts most likely to be impacted by the coronavirus closures will be those in which a larger share of their tax bases are commercial or industrial property rather than residential. About 60 percent of Deer Park ISD’s tax base, for example, comes from industrial properties that could suffer if the oil slump continues or if businesses there shut down entirely.

[…]

Huberty said the Legislature plans to save $1 billion of federal stimulus money for the next session to help fund schools and other parts of the state’s budget. Although it is too early to tell how much damage could be done as businesses and much of public life remains closed, he said money could be tight next session and said superintendents should begin looking where they could trim their budgets.

“The bones of what we put together with HB 3 remain intact, and we got some stimulus money from the feds to help us out with next year,” Huberty said. “But we’re going to have to look at everything.”

It’s a whammy from multiple fronts, as state revenue as well as local property tax revenues will be down, and the deep drop in oil prices will mean the Rainy Day Fund isn’t as topped up as it has been lately. On top of all that, when local revenues do start to recover, they will have to deal with the cap imposed by HB3. Which, as I understand it, does have an exception for things like epidemics, though who knows how that will play out. Even if everyone agrees to waive the restricting revenue cap, even the previously existing one could force tax cuts at a time when the districts are starved for funds. This will be an issue for multiple Legislatures, not just the 2021 Lege. It’ll also be a fine how-do-you-do for the TEA-appointed Board of Managers in HISD, whose first task (assuming they eventually get seated) will be dealing with the expected ginormous budget hole. Bet all those people who applied for the position a couple of months ago are having second thoughts now.

Turner to ask feds for some relief

Can’t hurt to ask.

Mayor Sylvester Turner

Mayor Sylvester Turner is asking the federal government to let Houston use an estimated $400 million in aid to help close its ballooning budget gap and reduce the number of expected furloughs in the fiscal year that begins in July.

Turner said the CARES Act, part of the $2 trillion stimulus passed by Congress last month, will give the city much-needed resources, but the rules accompanying those funds prevent the city from using the dollars where they are most needed: the budget.

“You don’t have to appropriate us more dollars, just allow us to have flexibility with regard to those dollars that have already been awarded,” Turner said he told lawmakers. The mayor said the request was made in a letter to Congress signed by 110 other Texas mayors.

There are three rules for the federal aid, according to Turner: expenditures must be directly related to COVID-19, it cannot previously have been budgeted, and it must be spent by the end of this year.

That helps, Turner said, but it would help more to use the funds as a budget stopgap. Southwestern cities like Houston have incurred fewer direct pandemic expenses than northeast cities because they took earlier social distancing actions, Turner said. The real brunt for governments here is the projected drop in sales taxes, which is expected to punch a massive hole in the Houston’s already cash-strapped budget. Sales taxes are the city’s second largest revenue stream, after property taxes.

It’s that or budget catastrophe, and there’s no good reason why we should have to have the latter. Which doesn’t actually matter, since I’m sure the Trump administration will say No, and even if somehow they say Yes or the Turner administration tries to find some clever way around the obstacles in their path, state Republicans will turn fire and fury our way. Because, obviously, being able to stave off massive cuts from a budget shortfall that was unforeseen and no one’s fault is totally irresponsible. That’s just math. Anyway, this is the process before us. May as well see where it leads.

Did we mention that the next city budget is gonna suck?

Because it is, in case we hadn’t mentioned it before.

Mayor Sylvester Turner

Houston Mayor Sylvester Turner said Monday that the coronavirus crisis will impact “every facet of city governance” and require furloughs of city workers, though he declined to say how many employees would be forced to take unpaid leave.

Even before U.S. oil reached a lowpoint of minus-$40 a barrel Monday, city officials were preparing for Houston’s tightest budget ever, thanks to a precipitous drop in sales tax revenue and an already sharp plummet in oil prices.

The fresh collapse of the oil market prompted Turner for the first time to acknowledge that city employees would be furloughed, and the city would defer a number of payments, for the fiscal year that begins in July.

“It’s not any more unique than what other cities are facing across the country. But it’s real in the city of Houston,” Turner said. “I’m not trying to hide it. These are the realities. This will be the worst budget that the city will deal with in its history.”

Turner declined to provide further details about the scale of the furloughs or what level of budget cuts he expects city departments to undergo. He did say cadet classes would be deferred due to the economic crisis but did not specify whether he was referring to fire cadets, police cadets or both.

Houston Controller Chris Brown said the city’s budget situation likely will prove “equal to or worse than” the Great Recession in the late 2000s. In the fiscal year that began in July 2011, then-mayor Annise Parker laid off 764 city employees to close a $100 million budget gap.

We’ve known this is coming. We won’t have a starting point for exactly how bad it is until the Comptroller releases the March sales tax data, but I think we can all agree that it will be Very Bad. We need sufficient testing so we can begin to reopen things in a safe manner, but the only way out of the hole we’re in is going to be help from the federal government. Which, if we learned anything from the 2009 recession, should be obvious, in that the resulting deep cuts to state and local governments in the years following the initial downturn acted as a huge drag on the economic recovery, offsetting stimulus efforts to a large degree. There’s still hope for that to happen in another round of coronavirus response money, if only because keeping the economy from completely capsizing is in the Republicans’ interests in a way it wasn’t in 2009-2010. But until then, expect there to be a whole lot of doom and gloom.

Cities and counties are going to need their own bailout

This story is about the rough financial future that the city of Houston faces as we go through the coronavirus shutdown, but it’s not just Houston that is in this position.

Mayor Sylvester Turner

As Mayor Sylvester Turner’s administration continues efforts to slow the spread of COVID-19 in Houston, another dire challenge looms for City Hall: its budget.

The economic downturn caused by the pandemic and plummeting oil prices has thrown an already cash-strapped spending plan into more arduous territory, raising the specter of the first furloughs or layoffs of city employees since 2011.

Controller Chris Brown, who recently finished a recession stress test for the city’s coffers, has said he thinks the situation is likely to rival the recession that began in 2008, approaching the test’s worst-case scenario: a budget deficit in excess of $300 million.

He told council members Tuesday they should begin dusting off the recession playbook.

“Unfortunately, they had to do some furloughs and cut some expenses and things like that, because you can’t control the revenue right now,” said Brown, the city’s independently-elected financial watchdog. “These are tough decisions that are going to have to be made, I think.”

Turner said budgeting is always difficult under a revenue cap, but the city in the past has forged its way through challenging deficits and will do so again.

The mayor would not say whether he thinks layoffs will be necessary, but he sees other actions that can help cut the deficit. Turner plans to use some of the city’s current fund balance, which is projected between $187 and $203 million. The rainy day fund, he pointed out, will also have $15 million when it comes time to adopt the budget.

Some job vacancies have already gone unfilled, he said.

“We always assume there is going to be a budget shortfall with the revenue cap,” Turner said, referring to Houston’s voter-imposed ceiling on increased property tax revenue. “There’s always some elephant in the room. The elephant here now is the coronavirus and the impact on your sales taxes.”

The city’s two largest streams of money are property and sales taxes. All eyes are on the latter, which are expected to take an unprecedented hit as most businesses have been ordered to close and the region’s residents have been told to stay home in a bid to slow the virus’ spread.

It’s not just sales tax revenue, which will hammer the state budget as well. No one’s flying into or out of the airports, no one is staying in hotels or renting cars or booking conventions. All of those things affect the enterprise fund, which is a part of the city’s budget that is largely not subject to the revenue cap. And as noted, it’s not just Houston. Every city, in Texas and elsewhere, will be facing this. Part of the solution here, very simply, needs to be a federal relief package for local and state governments, all of which would otherwise have to lay people off and drastically cut back on services, all of which would just further exacerbate the recessionary effects we are now feeling. Just as we expect business activity to more or less return to normal once everyone can leave their homes again, we should expect local tax revenues to more or less return to normal. All of that assumes that the business are still there to return to, which is why we needed the first stimulus bill, to prevent them all from suffocating in the meantime. We all want to return to normal, but we have to do everything we can to preserve what was normal until we can get back to it. That’s what the federal government can do, and what it needs to do.

But we should also recognize that forcing cities and counties and states to observe “balanced budget” requirements at a time like this is not only ridiculous, it’s self-mutilating. Mandating an artificial deadline for when one number must be shown to equal or exceed another is beyond stupid and pointless, and that’s even more so if we not-unreasonably assume that the feds will eventually come in with a check to make up for the sales taxes that did not happen. The single best thing Greg Abbott could do with his emergency powers once we’re at or near a point where we can begin to think about easing up on the stay-at-home rules is to declare that all “balanced budget” requirements are suspended for the next two budget cycles, along with the revenue cap that was passed in the last Lege. That won’t be carte blanche for cities and counties to start spending like crazy – they’ll still have to get their budgets to “balance” later on – it will just be a recognition that this was something entirely beyond their control, and they deserve a chance to recover from it. It won’t happen, of course – I’m sure Greg Abbott and the entire army of financial ghouls he has behind him are salivating at the prospect of forcing their local nemeses to slash their budgets – but it should. I will never stop beating this drum.

Coronavirus and the state budget

Ain’t gonna be great. How bad, we don’t yet know.

Comptroller Glenn Hegar briefed Texas House members on the state’s economy and budget Sunday night, saying that while it was too soon for specific forecasts, both are expected to take potentially massive hits in the wake of the new coronavirus pandemic, according to multiple people who were on the conference call.

The members-only call, led by House Speaker Dennis Bonnen, R-Angleton, was one of state lawmakers’ first glimpses of the impact the virus is expected to have on multiple industries, state finances and Texas’ largely oil-fed savings account, known as the Economic Stabilization Fund or the rainy day fund.

Hegar, who referred to the state of the economy as “the current recession,” according to multiple people on the roughly hourlong call, predicted both the general revenue for the state budget and the savings account balance will be drastically lower — possibly by billions of dollars — when he makes a revised fiscal forecast. He said that update could happen in July.

Later Sunday, the comptroller’s office said that unless the Legislature spent money out of the savings account before July, the balance for the fund would be revised down, but not by more than $1 billion.

In October 2019, Hegar estimated that the state budget would have a nearly $3 billion balance for the fiscal 2020-21 biennium. The balance of the Economic Stabilization Fund, Hegar announced at the time, would be around $9.3 billion by the end of the 2021 fiscal year in August of that year.

[…]

Abbott, for his part, noted last week that he and the Legislature can tap into the state’s disaster relief fund immediately to help respond to the virus. He also said that the Economic Stabilization Fund could be used “at the appropriate time,” which he said would happen when state leaders “know the full extent of the challenge we’re dealing with.”

Before the stabilization fund could be used, Abbott would need to summon state lawmakers back to Austin for a special session before the Legislature reconvenes in January 2021. When asked at a town hall about the possibility for calling such a session, Abbott said “every option remains on the table,” while noting that there would not be any need for such an action if every Texan followed guidance to help curb the virus.

Obviously, the crash in oil prices doesn’t help the state’s financial picture, either. It’s sales tax collection that will really suffer, and that pain will be spread to the cities and counties as well. As always, the big picture here is “how long will this take” and “how many businesses and jobs will be lost in the interim”, and right now we don’t know.

I will say, situations like this are among the reasons why balanced budget requirements are such a bad idea. Let the state – and the cities – run a deficit for a year or two, rather than cut a bunch of programs and lay off a bunch of employees, both of which will exacerbate the effect of the overall downturn. I assure you, society will not crumble around us if we do that. We will see plenty of shenanigans pulled by legislators to worm their way around the balanced budget requirement, as we have always done. So why not be honest about it and just admit that the whole thing is a sham and we should just not worry about it, at least for this cycle? We can always get back to it next time. Much easier said than done of course – constitutions and charters can’t be so easily cast aside, which again goes to my point about why these things are stupid – but in a world where everything has been thrown into chaos, this just makes sense. Same for revenue caps as well – if the revenue for the state, or the city of Houston, falls ten percent this year, it will take three years under the existing 3.5% revenue cap just to get revenue back to existing levels, while forcing needless cuts in the meantime. It’s all a sham, we should seize the moment to recognize it for the sham that it is, and free ourselves once and for all from its ridiculous shackles. Won’t happen happen, but I’ll never stop pointing it out.

Do you believe in magical thinking?

I did not read this long profile of Tony Buzbee, because life is short and we all have better things to do. I did briefly scan the print version a bit, and in doing so I noticed the following paragraph, which tells you everything you need to know about Tony Buzbee, Loudmouth Rich Guy Who Wants To Be Mayor:

Buzbee opposes the idea of lifting Houston’s property tax revenue cap. Instead, he wants to enact budget cuts he says will fund his proposals, such as hiring 2,000 police officers in eight years — which would spike the department’s budget by almost 40 percent — and granting firefighters pay parity with police.

This is impossible. It literally cannot be done. Do you remember when Mayor Annise Parker was faced with a big deficit in 2010 following the economic crash, which caused property tax revenues to plummet? She ran on a promise of balancing the budget without making any cuts to the police or fire departments, and she achieved that in large part by laying off over 700 municipal employees. Someone with a more detailed knowledge of the current budget would have to run the numbers to check this, but to hire that many new police officers and give the firefighters a raise of that magnitude, I would question whether there are enough municipal employees left to lay off to pay for it. I mean, if we don’t want trash collection or a permitting department or building inspectors or anyone working in the parks and libraries – and maybe if we also defaulted on our bonds – you could make it work. I guarantee you, Tony Buzbee has not done the math to show how he could make it work.

On a side note, let me refer you to this:

Houston Police Officers’ Union President Joe Gamaldi questioned whether the department would even have enough cars, uniforms and equipment to handle the increased headcount.

“We would love to see that type of growth,” Gamaldi said. “But realistically, we’ve never hired more than 375 people in a fiscal year, so we would really need to look to see if HPD’s infrastructure can even handle that.”

Note that this story has Buzbee hiring those two thousand cops over his first four years. I mean, when the president of the police officers’ union says that your plan to hire 500 cops a year every year for four years is a bit much…

Here’s the Mayor’s budget

A lot of people won’t like it, but this is what happens when you heap a big expense on top of an already tight fiscal situation.

Mayor Sylvester Turner

Mayor Sylvester Turner on Tuesday proposed to close Houston’s $179 million budget gap for the upcoming fiscal year by tapping into the city’s reserves, eliminating more than 60 vacant positions and laying off more than 300 city employees.

Turner’s proposal would reduce the overall budget of city departments by about $36 million, a figure that includes layoffs of firefighters, fire cadets and municipal workers, all of whom have received pink slips.

The mayor’s budget also would draw $116 million from the city’s reserves, which Turner said the city can afford because it will end the 2019 fiscal year with a higher-than expected general fund balance. The next fiscal year begins July 1.

Laying out the final budget proposal of his first term, Turner framed the financial plan as conservative and said his administration “scrubbed every department” in search of places to trim costs. The budget also uses a conservative projection for the amount of new property tax revenue Houston may take in, Turner said.

[…]

Turner said a large chunk of the 2.2 percent increase in general fund spending is driven by the cost of Proposition B, the voter-approved charter amendment that grants firefighters the same pay as police of corresponding rank and seniority. The raises will cost $79 million during the next budget year, Turner said.

District E Councilman Dave Martin agreed with Turner’s fiscal assessment of the budget, contending that the city has faced a challenging situation with small revenue growth projections — about 2 percent in property taxes and 1 percent across all sources — amid large added costs such as Prop B.

“We’ve been working on this for nine months, accumulating a healthy fund balance, not filling slots that were available for employment,” said Martin, who chairs the council’s Budget and Fiscal Affairs Committee.

Under Turner’s proposal, public safety — which includes the fire and police departments, the municipal courts and emergency operations — would make up about 58 percent of the general fund budget, at a cost of $1.5 billion. The fire department’s budget would increase to $558 million, a 4.5 percent boost over how much the city estimates it will spend on the department this year.

The fire department was allocated $503 million in the current budget. Total projected spending, however, has grown to about $534 million with the city covering Prop B raises retroactive to Jan. 1. Turner said the adjusted paychecks would go out Friday.

[…]

Controller Chris Brown, the city’s elected budget watchdog, said he does not feel confident that Turner has accurately projected Prop B’s cost because the mayor has yet to supply his office with financial data backing up the $79 million estimate. Brown also wants to generate his own independent figure, which he said he cannot do without certain incentive pay data.

Turner told reporters Tuesday that the city attorney, Ron Lewis, had determined the city’s interpretation of Prop B would withstand legal challenges.

Still, Brown said the city has little breathing room if a judge rules the firefighters are owed more. He noted that the budget would dip the city’s target fund balance within striking distance of the minimum level allowed by city policy. The city’s reserves must make up at least 7.5 percent of the city’s general fund budget, and the 2020 budget target would leave the balance at $171 million — 7.9 percent, $9 million above the threshold.

“What if a judge says, ‘You know what, we think that this is $100 million,’ and we need to pay immediately this additional money?” Brown said. “Where is that money coming from?”

I see on Twitter that some firefighters have highlighted the above quote from Controller Brown, while in this article Marty Lancton again complains that Mayor Turner isn’t implementing Prop B exactly the way he wants it to be implemented. Well, someone has to talk about the cost of Prop B. As for Brown, he’s just doing his job. And the possibility that the cost of Prop B could go up on a judge’s order is a good point and more than a little disturbing.

From here, the budget goes through Council, where they can propose amendments and do whatever they’re going to do with it. I’ll be very interested to see if any of the ones that voted against the layoffs have anything constructive to suggest for how to avoid, or at least reduce them. The budget vote is scheduled for June 5, so mark your calendar.

Firefighter layoffs

Hoo boy.

Mayor Sylvester Turner plans to lay off up to 400 firefighters as he prepares to award pay raises required by Proposition B, the voter-approved charter amendment that grants firefighters the same pay as police of corresponding rank, according to five Houston City Council members who were briefed on the plan Thursday.

The apparent move to fully implement the pay parity measure comes after talks between the city and fire union about phasing in the raises over five or more years became strained last week. Meanwhile, city officials are preparing council members for the difficult task of closing a $197 million deficit in the annual budget that must be adopted for the upcoming July 1 fiscal year. About $80 million of that budget gap comes from the firefighters’ raises, council members were told.

In addition to the firefighter layoffs, Turner will seek to close the deficit by asking all city departments to cut their budgets by at least 3 percent, a move that is likely to require layoffs of, perhaps, 100 municipal workers, the council members said. Councilwoman Brenda Stardig said she was told no police officers will be laid off.

On May 9, Turner’s administration plans to issue back pay to firefighters retroactive to Jan. 1, which will total about $30 million, multiple council members said.

“So, basically, on May 9 you want to be hanging out near a firefighter because he’s going to be buying,” said Councilman Greg Travis. “He’s going to have a lot of money on that day.”

The city plans to mail layoff notices to firefighters within weeks, Travis said. Among the layoffs are 68 fire cadets who Turner has declined to promote amid a citywide hiring freeze than has spanned more than five months. The mayor nonetheless promoted more than 60 police cadets Monday.

The fire cadets filed grievances against Turner Thursday alleging that the mayor was discriminating and retaliating against them.

[…]

Turner, who repeatedly has warned of potential layoffs, told reporters his hands were tied because the charter amendment did not come with a funding mechanism. He also said the fire union rejected a city proposal to phase in pay raises. That offer did not appear to fully implement the charter amendment over the city’s proposed five-year window, falling short of increases in incentive pay that the finance department projects would be necessary to reach full parity.

“People want to put the administration in a box,” Turner said. “If you don’t implement Prop. B, people criticize you for not implementing Proposition B. When we move to implement Prop. B, people say, ‘We don’t want the layoffs.’ Well, you can’t have it both ways.”

During negotiations, the firefighters proposed to phase in Prop. B raises over three years, retroactive to July 1, 2018. The raises then would be distributed based on firefighters’ length of service, with all members reaching full parity by July 1, 2020.

No one can say they didn’t see this coming. One of the main arguments against Prop B was the cost, which would inevitably lead to layoffs because the vast majority of the city’s expenditures are personnel costs. It seems a little crazy that there wasn’t a way to agree to a phase in to avoid any drastic actions, but here we are. Note that the city has very limited capacity to raise revenues thanks to the stupid and harmful revenue cap, and the city is not allowed to run a deficit. That severely restricts options, and that’s the place we are in now. We’ve been through this before, back in 2010 when then-Mayor Parker faced a huge deficit caused by the downturn in the economy. She wound up laying off hundred of municipal employees. Police and firefighters were exempted from that, but this time it’s the firefighter pay parity referendum that is driving a big part of the deficit. Where should the cuts come from this time? You tell me.

One uncertainty appeared to stem from differences in educational requirements between the departments. For example, police officers must have a master’s degree to be promoted to assistant police chief, a stipulation that does not exist for assistant fire chiefs and fire marshals. Some firefighters may receive reduced raises due to the differing requirements, multiple council members said, explaining why the latest cost estimate of $80 million falls more than $30 million below Turner’s previous estimate.

There is speculation this will lead to a lawsuit. I’ve expected that from the beginning. And I fully expect it will still be litigated the next time the Mayor is on the ballot in 2023.

HISD Board will need a budget do-over

It’s never boring over there.

Houston ISD trustees narrowly rejected the district’s proposed $2 billion budget, did not move forward with making Interim Superintendent Grenita Lathan the district’s permanent leader and voted to end the employment of acclaimed Furr High School Principal Bertie Simmons during an eventful meeting Thursday.

In a surprising split, board members voted 5-4 to reject the budget proposal after several trustees expressed concern about using $19 million from HISD’s rainy-day fund to cover a shortfall. Trustees had voiced little public opposition to the budget until Thursday’s meeting.

Trustees now have until June 30 to comply with state law and pass a budget for 2018-19. HISD administrators are expected to present a revised budget proposal in the coming days. A date has not been set for the next board meeting.

HISD’s budget has been subject to intense scrutiny since January, when district administrators forecasted a deficit of about $200 million. Administrators revised their projections after receiving a sunnier revenue outlook in recent months, cutting the expected deficit in half. They proposed slashing about $83 million in spending — which would result in hundreds of layoffs — and using $19 million from the rainy-day fund to cover the remaining shortfall.

Until Thursday, much of the discussion surrounding HISD’s proposed budget had centered on the distribution of cuts. At several public budget meetings in recent months, trustees gave no indication that they would reject the proposed budget because it used rainy-day funds.

But several trustees on Thursday said HISD needs to stop using reserves to balance its budget. Last year, board members voted 8-1 to take $106 million from the district’s rainy-day fund to cover its deficit.

The proposed budget already contained a lot of cuts, as this earlier Chron story details. If the concern is about using $19 million from the reserve fund, then either they’ll have to find money elsewhere or cut some more. That doesn’t sound great, but I’m not sure how they can accomplish the former, so options – and time – are limited. The Press has more.

House considers a bigger ask from the Rainy Day Fund

Needs must, as they say.

The proposal from state Rep. John Zerwas, a Richmond Republican and the House’s chief budget writer, would withdraw about $2.4 billion from the Rainy Day Fund as part of a supplemental budget to pay bills coming due for programs like Medicaid, the federal-state insurance program for the poor and disabled, and to pay for repairs to state-run institutions including mental hospitals and the School for the Deaf.

Previously, Zerwas advocated spending about $1.4 billion from the fund, which holds about $10 billion currently. He updated his proposal at Thursday’s meeting of the House Appropriations Committee, saying that without making a “modest withdrawal” from the savings fund, budget writers would be forced to make draconian cuts to public programs.

Entities that face budget cuts absent a cash infusion include the state’s public education system, pensions for retired teachers, and the Texas child welfare and foster care system charged with protecting vulnerable children from abuse and neglect, Zerwas said.

“Some members of our body have said publicly that our situation isn’t really that bad,” he said. “I can’t disagree more with that.”

Most legislative sessions, the Texas Legislature does not fully fund the cost of state programs, so lawmakers must typically pass a supplemental bill to cover the rest. Zerwas’ proposal would net some matching federal dollars, bringing the total value of the bill to $5.2 billion, officials said. About $3 billion would plug funding holes left by lawmakers in 2015, mostly in Medicaid and in a health care program for the state prison system.

The rest would go toward current needs, such as “deferred maintenance” costs at state-run institutions including mental hospitals, many of which are in disrepair.

See here for the background. I approve of Zerwas’ approach and appreciate what he is saying, but I would be remiss if I didn’t point out that a big part of the problem he is trying to solve is self-inflicted. As the story notes, tax cuts passed in the last session, at a time when oil and gas prices were low and the state’s economy wasn’t doing so well, cost $4 billion this biennium, while the referendum to dedicate a portion of sales tax revenue to the state highway fund has taken $5 billion out of the general fund. Zerwas had to file a separate bill to claw some of that money back. These were choices made by the leadership and the Legislature, the former because tax cuts are Republican crack, and the latter because we absolutely, positively refuse to consider raising the gas tax to meet our road needs. Budget gimmicks are just that, and whatever they purport to do, there’s always another gimmick to undo it. As a certain former President once said, reality has a way of asserting itself.

Bill to restore some budget flexibility filed

Call it the Law of Unintended Consequences Act of 2017.

The Texas House’s chief budget writer filed legislation Friday that would allow lawmakers to claw back billions of dollars that voters approved for state highways, freeing them up for other budget needs.

Texans overwhelmingly voted in 2015 to boost funding for the state’s public roadways and bridges, which have strained under a growing population. Proposition 7 amended the Texas Constitution to route some taxes collected on car sales to the State Highway Fund.

But House Appropriations Chairman John Zerwas, R-Richmond, filed a resolution Friday that would cut that initial cash infusion, aiming to free up money at a time when cash is tight.

House Concurrent Resolution 108 could cut the first transfer under Proposition 7 of nearly $5 billion in half, but only if two-thirds of lawmakers in both the House and Senate support such a move.

It’s a prospect made possible by what some lawmakers have called a “safety valve” in Senate Joint Resolution 5, the legislation that the Legislature approved in 2015 to send Proposition 7 to voters later that year.

See here for the background. I don’t expect this to pass – I really don’t think two thirds of the Senate will go for it – but I will be very amused if it does. Whether this is more or less likely to happen than tapping the Rainy Day Fund is now something we can test empirically. If nothing else, that’s a victory for science.

Zerwas proposes using Rainy Day Fund

We’ll see if this goes anywhere.

Rep. John Zerwas

The chief budget writer in the Texas House on Friday proposed using $1.4 billion from the state’s savings account to pay bills coming due for a wide array of the state’s health and human services programs.

The proposal from state Rep. John Zerwas, R-Richmond, would continue pay raises for Child Protective Services workers that state leaders ordered last year. It would also pay for renovations at the state’s aging mental health hospitals and state-supported living centers for people with disabilities.

And it would partially reverse a sweeping $350 million budget cut to a therapy program for children with disabilities ordered by the Texas Legislature in 2015.

The funding would come from the state’s Economic Stabilization Fund, also known as the Rainy Day Fund, a savings account lawmakers may use in tight budget years. That fund currently has about $10 billion.

“Using a small portion of the Economic Stabilization Fund, combined with spending reductions, is the responsible way for us to close out the current budget cycle and respond to the slowdown in our economy,” Zerwas said in a prepared statement.

This is for the supplemental budget, which is to say the budget passed by the 2015 Legislature, not for the one this Lege is working on. It will free up some money for the current budget if Zerwas’ proposal is adopted, in the sense that current revenues would not have to be used to close out the previous budget. Given the emergency that everyone agrees CPS is and the outcry that followed the cuts to the therapy program for children with disabilities, you would think this would be a relative no-brainer, but don’t count on it. The Rainy Day Fund morphed from being a tool to use to smooth out economic bumps to a lump of gold buried in the backyard that is never to be touched unless there’s a natural disaster, with the 2011 session in which cutting $5 billion from public education was seen as the better choice as the turning point. A supermajority is needed to tap the Rainy Day Fund, and I have a hard time believing Dan Patrick and his Senate sycophants will go for that. But at least someone had the guts to bring it up, so kudos to Rep. Zerwas for that. Keep an eye on this, because it may be a precursor of the larger budget fight between the chambers. If Zerwas gets his way, that bodes well. If not, things could get ugly.

Turns out a little budget flexibility is a good thing

Some lessons have to be learned the hard way.

More than a year after Texas voters approved routing billions in state sales taxes to roads and bridges, some lawmakers are questioning whether the first payment of $5 billion should move forward as planned.

Texans voted in 2015 to boost funding for state’s public roadways and bridges, which have strained under the state’s growing population. Proposition 7 — loudly cheered by top Texas leaders and supported by 83 percent of voters — changed the constitution to route some taxes collected on car sales to the State Highway Fund.

But in an unusually tightfisted legislative session, some Texas lawmakers are raising the prospect of reducing that initial cash infusion to the State Highway Fund scheduled for this year to free up money for other state programs.

No one has publicly backed such a move, but key budget writers have privately discussed the option. And at a Senate Finance Committee hearing Monday, Sens. Kirk Watson of Austin and Charles Schwertner of Georgetown asked Legislative Budget Board staffers about how it might work.

It turns out that the enabling legislation for that referendum included an escape hatch, in which a two-thirds vote can be used to divert some of that $5 billion for other purposes. That probably won’t happen, though I presume it’s no less likely than a vote to tap the Rainy Day Fund to get through this session and hope that things will be better in 2019. We can certainly debate whether it should happen or not, but my reason for highlighting this is that it’s yet another example of why artificial budget constraints are so often a bad idea, whose main effect is to force budget writers to come up with creative ways around said constraints. I say it’s more honest to just let them have the flexibility to figure it out rather than be forced into certain choices, but that’s not how we do things.

Here’s your 2018-19 revenue estimate

It’s pretty mediocre.

Facing sluggish economic forecasts amid low oil prices along with billions in tax revenue already dedicated to the state highway fund, Comptroller Glenn Hegarannounced Monday that lawmakers will have $104.87 billion in state funds at their disposal in crafting the next two-year budget, a 2.7 percent decrease from his estimate ahead of the legislative session two years ago.

Hegar told state lawmakers he expected a “slow to moderate” expansion of the Texas economy. Still, he said, the amount of revenue they will be able to negotiate over has fallen. That’s largely because lawmakers in 2015 moved to dedicate up to $5 billion in sales tax revenue every two years to the state’s highway fund, rather than being spent on other priorities such as schools, health care or reforms to the embattled Texas foster care system.

“We are projecting overall revenue growth,” Hegar said. “Such growth, however, is more than offset” by the demands of the state highway fund and other dedicated funds.

The revenue estimate does not determine the scope of the entire Texas budget. Rather, it sets a limit on the state’s general fund, the portion of the budget that lawmakers have the most control over. The general fund typically makes up about half of the state’s total budget.

Two years ago, Hegar estimated that the Legislature would have $113 billion in state funds, also known as general revenue. Adding in federal funds and other revenue sources, lawmakers would have $221 billion in total for its budget, as well as $11.1 billion in the state’s Rainy Day Fund, he said at the time. Lawmakers ultimately passed a $209.4 billion budget, which included billions in tax cuts.

On Monday, Hegar estimated lawmakers would have $104.87 billion in general revenue, and $224.8 billion in total revenue to write a budget for the 2018-19 biennium which begins in September.

See here for more on Hegar’s 2015 estimate, which would up being a tad bit optimistic, but not too far off. It won’t be surprising if this one is off a bit one way or the other – this is why 2014 Comptroller candidate Mike Collier called for more frequent revenue estimates during his campaign, so the course can be corrected as needed more often – but again I expect this to at least be in the ballpark. Assuming the economy doesn’t crash and burn and/or we don’t have ten percent annual growth under Dear Leader Trump, of course.

There are a lot of ingredients that go into making the budget sausage, and there are various things that can and will be done to avoid doing anything too painful. We could of course just assume this was a temporary dip and take a few bucks out of the Rainy Day Fund to smooth out the curve – that was its original purpose, after all; now it serves as a hole in the back yard into which we bury sacks of cash for no clear reason – but that isn’t going to happen. We do have your local property taxes bolstering the state’s bottom line, so be sure to send a thank you note to the State Supreme Court for that. And as always, remember that the biggest boost to spending in 2015 was tax cuts, but that’s never what the leadership has in mind when it says we need to “cut back” on expenses. We do things one way in this state, and will continue to do them that way until there are different people running the state. The Chron and BurkaBlog have more.

No bonds this year

Maybe next year.

Mayor Sylvester Turner

Mayor Sylvester Turner

Mayor Sylvester Turner likely will not ask voters to approve bonds this November to replace the nearly depleted debt residents approved in 2012, a move that may delay several projects.

[…]

Having addressed a $160 million shortfall with the unanimous passage of his first budget last month, Turner said he now is focusing on negotiating reforms that will decrease the city’s $5.6 billion pension underfunding and lower the city’s bill for retiree benefits.

Until both cost-cutting measures succeed and are checked off his list, Turner said, he would rather not ask voters to spend more. That likely will delay a bond vote, he said, until November 2017.

“I certainly am not inclined to ask people to approve any bonds or any borrowing until the city’s finances have been handled,” Turner said. “On the budget, we’ve done that. The pension issue, I want that resolved. When we go and ask for something, I simply want to let voters know that we’re doing everything we can to be fiscally sound and prudent.”

November 2017 also is when Turner has proposed asking voters to lift a 12-year-old rule that limits what the city collects in property taxes, again presuming pension reform passes during next year’s legislative session.

Of his vision for the 2017 ballot, Turner said, “I want to be able to say, ‘If you vote for this, this will take the city to the next level,’ that it will be transformative in nature.”

I agree with the Mayor’s assessment of this. He’s made clear the need to revise the stupid revenue cap we live under, but he’s packaged that as a part of an overall financial fix that includes dealing with the immediate budget issues and putting the pension funds on firmer footing. He can claim progress on the first item, but he needs to have tangible results on pensions to complete the sale. By the same token, more bond money would be a much easier ask next year, when these items can be crossed off the to-do list, and pairing a bond issue with a referendum to change the revenue cap ought to make for a compelling pitch. There are some items from the 2012 bond referendum that are still not started, and the city needs to do all it can to keep the promises that were made in that issuance. Beyond that, I think this is the right decision.

Council unanimously passes Turner’s first budget

Good job.

Mayor Sylvester Turner

Mayor Sylvester Turner

Mayor Sylvester Turner achieved his goal of securing unanimous passage of his first general fund budget Wednesday morning, a month ahead of the typical schedule and after an unusually brief and uncontentious discussion of council members’ proposed changes.

The $2.3 billion general fund budget, which pays for most basic city services with revenues from taxes and fees, represents only the second budget cut for Houston in two decades. The first came after the 2008 nationwide financial crisis.

“It’s not my budget, it’s our budget,” Turner told City Council. “There are fewer than 20 amendments today, which I think speaks to the collaborative nature of the partnership we have. I want to thank you for the trust you’ve placed in me.”

[…]

Turner’s budget proposal in general , which spends $82 million less than was budgeted in the current fiscal year, despite an additional $27 million for employee raises and an increase of $29 million in pension payments, cuts 54 vacant positions and includes roughly 40 layoffs.

The document pulls $10 million from reserves, makes $56 million in permanent changes, mainly cuts within departments, and relies on $94 million in one-time fixes to bridge the $160 million gap the city had faced between its revenues and expenses.

The Mayor’s press release is here, and a longer version of the Chron story is here. This is the “easy” budget, in the sense that it doesn’t yet do anything related to pensions, and was able to use a number of one-time items to help boost revenue and mitigate the need for deeper cuts. Next year will be harder, especially if sales tax revenue continue to sag. The relative ease and widespread harmony with which this budget was passed gives Turner some momentum and a fair amount of political capital to deal with that budget as it comes. The Press has more.

Trash subsidy will not be trashed

From the inbox:

Mayor Sylvester Turner

Mayor Sylvester Turner

After weighing the budgetary impact and obtaining input from City Council, Mayor Sylvester Turner has decided not to pursue elimination of subsidies to homeowners associations that opt out of City trash collection services.

Under the program, which began in the 1970s, the City pays a monthly $6 per household subsidy to homeowners associations that contract for more expensive trash collection service from private haulers. Elimination of the subsidy was predicted to save the City $3.5 million annually, but only if the homeowners groups stuck with their private haulers.

“Many of the neighborhood associations have indicated they will request City collection if the subsidy is abandoned,” said Mayor Turner. “As a result, we are now looking at increased costs as opposed to the savings that had originally been anticipated. Therefore, it no longer makes sense to pursue this at this time. We can balance the budget without it.”

Elimination of the trash subsidy was one of several options put forth to help close a projected $160 million budget shortfall in Fiscal Year 2017, which begins July 1. City Council will consider the budget on May 25, a full month earlier than normal. Mayor Turner has requested early approval to send a strong message to the credit rating agencies about the attention the City’s fiscal challenges are getting from City Hall.

See here for the background. I was rooting for this to be killed, but if the numbers say it will cost more than it will save, then so be it. That doesn’t mean we can’t plan to phase it out over the next few years, however. I’d like to see that on the table going forward. The Chron story has more.

So far, so good for Mayor Turner

That’s the general consensus of his first four-plus months in office.

Mayor Sylvester Turner

Mayor Sylvester Turner

Faced with a $160 million budget shortfall that would leave some wringing their hands until deadline day, Mayor Sylvester Turner presented his plan a month ahead of schedule. The proposal being reviewed by City Council includes a few one-off gimmicks, by Turner’s own admission, but would close Houston’s budget gap without huge layoffs or service cuts.

Four months into the job he dreamed of for a quarter century, the former lawmaker has eschewed the traditional pressure to sprint into office with a laundry list of policy objectives. Instead, Turner has concentrated primarily on formulating next year’s budget, the first of several fiscal hurdles.

Turner’s bet? Hitting targets such as next-day pothole repair and balancing the budget early will earn him the political capital to take on Houston’s longer-term problems, namely rising pension and debt costs.

Eager for unity in that process, Turner has kept his goals broad – for which he has drawn some criticism – and invested in bettering mayor-City Council relations, laying the groundwork for a first term built on corralling Houstonians around the painful task of shoring up city finances.

“We resolve the pension issue, we get the revenue cap removed, we satisfy Moody, S&P and Fitch, the credit rating agencies, oil prices start to go back up, this city will take off,” Turner said during a recent interview, laughing at the apparent simplicity of his plan.

[…]

A creature of the state Legislature, which starts slowly and builds toward the end, Turner has approached the mayor’s office with a similar rhythm, Houston lobbyist Robert Miller said.

“Those who are saying he’s not moving quickly enough or are not satisfied with the progress are missing that he knows exactly what he wants to do, and he knows exactly the timing in which he wants to do it,” Miller said. “The most important issue he had to deal with was the budget, and he’s doing that. … Then you will see him begin rolling out the other initiatives and personnel changes that he thinks need to occur.”

There’s not a whole lot in the story that will come as a surprise. As I said when writing about Mayor Turner’s State of the City address, he has stuck very closely to the things he spoke about on the campaign trail. A big part of his strategy to achieve some of the goals he has laid out is to build trust by getting certain things done first so that the tougher items can be done later, when everyone feels comfortable that he’s doing what he said he would do. One of the metrics to watch for is the amount of dissent and pushback he gets from Council members. On that score, there’s so far been very little – no public criticism of his budget proposals, no challenge to his standing firm against Uber’s ultimatum, no complaints about how his office handled flooding issues. Those things will come because they always do, but until then the harmony we’ve had so far is at least an indicator that everyone feels like they’ve been listened to. Whatever else you think, that’s a big accomplishment.

Mayor Turner delivers State of the City 2016

Here’s the press release.

Mayor Sylvester Turner

Mayor Sylvester Turner

Flooding, pensions, City finances and public safety were front and center as Mayor Sylvester Turner delivered his first State of the City before the Greater Houston Partnership. In a major move designed to produce tangible results and instill confidence among residents, the mayor announced the selection of Stephen Costello to fill the new position of Chief Resilience Officer, or Flood Czar. Costello, who is a civil engineer who has worked on numerous drainage projects, will report directly to the mayor and will have the sole responsibility of developing and implementing strategies that will improve drainage and reduce the risk of flooding.

“The April 18 floods had a dramatic impact on our entire region,” said Mayor Turner. “Hundreds of people sought rescue in hastily opened shelters, hundreds more elected to stay in their flooded apartments and homes. Nearly 2,000 homes in Houston flooded and some flooded for the second, third or fourth times. Property owners throughout our area have become weary of flooding in the Bayou City, impatient with elected officials who offer explanations with no practical solutions, and some have and others are close to packing up and leaving our city unless we can convince them that we are going to do exponentially more than what they currently see.”

The mayor also announced that he will soon unveil a plan to put 175 more police officers on the street, called for repeal of the revenue cap self-imposed on the City by voters in 2004 and detailed his plan to address the City’s unfunded employee pension liabilities, a growing obligation that is stressing the City’s overall financial stability.

“There are certain realities that cannot be ignored: the increasing costs to the City simply cannot be sustained,” said Turner. “As we look to 2018, City services will be adversely affected, hundreds of employees will be laid off, and our credit rating will most likely be damaged. But this is a course we need not travel. My mom said, ‘Tomorrow will be better than today,’ and as mayor of this City, I still believe what she said.”

The mayor is already in productive discussions with the employee pension groups about reigning in costs in a way that is least burdensome to employees, reduces the City’s escalating costs and avoids unintended consequences. He has laid out three objectives for those discussions:

  • Lower unfunded pension obligations now and in the future;
  • Lower annual costs for the city now and in the future; and
  • An agreement by the end of the year to present to the legislature for consideration in the 2017 session.

The mayor noted that the revenue cap, which was cited as one of the reasons for a downgrade of the City’s credit rating, puts Houston at an unfair advantage and hinders the City’s ability to meet the needs of its growing population. No other governmental entity in Texas is under similar constraints.

“The revenue cap works against creating one Houston with opportunity for all and the ability to address pressing needs like flooding, transportation and mobility, parks and added green space, affordable/workforce housing and homelessness,” said Turner. “We are competing not just against Dallas, San Antonio and Austin; not just against New York, Los Angeles or Chicago, but against Vancouver, Berlin and Singapore. We are an international city speaking 142 languages, with 92 consulates and two international airports within our city boundaries.”

The mayor concluded his speech with a commitment to leading the nation in addressing homelessness and a personal appeal for Houston businesses to join his Hire Houston Youth summer jobs program. Information on the program is available at www.hirehoustonyouth.org.

The full text of the speech is here, and a Chron story about the additional patrol officers is here. It’s a concise reiteration of things Mayor Turner has spoken about often, with no new directions or surprises. You know what he wants to do, it’s a matter of doing it. If you’re wondering how Mayor Turner might be successful at getting the Lege to pass a pension-related bill – as you may recall, I was deeply skeptical of some other candidates’ approaches last year – the answer is that he intends to have an agreement on what changes should be made with all the relevant stakeholders. The Lege may not be interested in solving Houston’s problems, but they will ratify a solution that Houston itself comes up with. That’s the plan, anyway. As I said, the important part is doing it. If nothing else, we’ll have a pretty good idea of how it’s gone by the time of the 2017 State of the City address. The Chron and the Press have more.

Kill that trash subsidy

Works for me.

Mayor Sylvester Turner

Mayor Sylvester Turner

Mayor Sylvester Turner, working to close a $160 million budget deficit, has proposed scrapping payments that scores of Houston neighborhoods served by private trash haulers receive to help offset the cost of their waste contracts.

The idea when the program started in the 1970s was that residents should not have to pay property taxes for city trash services they were not receiving – particularly because they were already paying for waste pickup in their homeowner association dues. The city also came out ahead because the $6 monthly per-house subsidy was cheaper than the cost of the city serving each home itself, now estimated at $18 per home per month.

In scraping together a balanced budget for the fiscal year that starts in July, however, Turner felt the program was expendable. In many cases, the subsidies go to residents who have chosen to pay for more extensive services than those the city provides, such as having the trash picked up more frequently than once a week, or having workers walk up a resident’s driveway to retrieve the trash rather than the homeowner rolling a bin to the curb.

Cutting these “sponsorship” payments to the 48,000 homes participating would save the city $3.5 million.

“When I drilled down in every department and every line item and I saw that line item sticking out, my question was, ‘Is this one that people can give up without hurting them and the core services, things that are essential to the city?'” Turner said. “I decided this was something the city at this particular point in time was not in a position to continue to sponsor.”

City Council will begin hearings on Turner’s proposed budget on Monday, leading up to a final vote that could come as early as May 25.

[…]

“If they end up saying it’s that big of a difference, that they will give up their contracts and will turn to the city, then yeah, OK, more than likely I’ll remove it,” Turner said. “I’m not trying to make their situation bad, I’m simply trying to balance a budget that’s $160 million short, and I’ve asked people to engage in shared sacrifice.”

The mayor also suggested, wearing a slight grin, that reporters examine the subdivisions now receiving trash subsidies.

The three City Council districts home to 83 percent of the city’s sponsorship agreements, records show, also are the three districts with the highest median household incomes in the city: District G on the west side, District E in Kingwood and Clear Lake, and District C, which covers much of the western half of the Inner Loop.

[CM Dave] Martin acknowledged that he and many of his neighbors receiving private trash service in District E can cover a $6-per-month increase in their civic association dues.

“If you’re used to getting your trash picked up twice a week and you’re used to backdoor service, most people are probably going to say, ‘Keep my six bucks,'” Martin said. “They’re mostly the people that have the means to pay an extra $6 a month.”

Yes indeed. And now is the time for the city to say to these folks that we can no longer afford to subsidize their premium trash collection service. We all have to make sacrifices in these lean times, don’t you know. The irony is that if enough people decide that the sacrifice they’d prefer to make is the higher level of service, in return for saving a few bucks a month, then it won’t be worth the city’s effort to make them make that sacrifice. I suspect that the vast majority of them will take the original deal, of keeping the service but paying full price for it. If nothing else, it will allow those who are so inclined to piss and moan about how hard they have it now. Surely that’s worth the six bucks a month to them. KUHF has more.

First look at how HISD will balance its budget

Seems to be fairly well-received.

Ken Huewitt

The Houston school district’s interim superintendent on Thursday rescinded his proposal to reduce funding for gifted students amid concerns from parents and board members.

At the same time, Ken Huewitt proposed bolstering the budgets of schools with significant concentrations of low-income students, using $21 million from federal funds. Schools with the highest percentage of poor children would get the most extra money – an attempt to address the academic challenges at what Huewitt called “hyper-poverty” campuses.

Huewitt’s plan calls for revamping how campuses are funded at the same time as the Houston Independent School District faces an estimated $107 million budget shortfall in the coming year. The financial woes stem from the district expecting, for the first time, to have to send tens of millions of dollars back to the state because it is considered too property wealthy.

“This is about funding the needs of our kids,” Glenn Reed, general manager of budgeting for the school district, said after the board’s budget workshop Thursday.

To balance the budget, Huewitt has proposed several cuts, including ending the $10 million bonus program for teachers and other school staff, and cutting $11 million in contracts with outside vendors.

He also would eliminate the $19 million that went to help a few dozen low-performing schools, as part of former Superintendent Terry Grier’s “Apollo” reform program.

See here and here for some background, and remember again that this is not HISD’s fault, it’s the Legislature’s fault. I don’t know how the search for the next Super is going, but if the search firm/screening committee isn’t asking every candidate detailed questions about how they would have handled this situation, they are not doing an adequate job. I hate that HISD is having to go through this, but from what we have seen so far, Interim Superintendent Huewitt seems to have done a pretty good job of it. We’ll see what comes out when the Board votes on the budget.

Turner announces his budget

From the inbox:

Mayor Sylvester Turner

Mayor Sylvester Turner

Utilizing a shared sacrifice approach, Mayor Sylvester Turner today unveiled a proposed Fiscal Year 2017 General Fund budget that eliminates a projected $160 million shortfall that was the result of cost increases, voter imposed revenue limitations, a broken appraisal system and the economic downturn. The budget totals $2.3 billion, which is about $82 million less in spending than the current FY2016 appropriation. The decrease was accomplished while still meeting $60 million of contractual and mandated cost increases the City is forced to cover in FY2017. The mayor is unveiling his preliminary budget plan more than a month ahead of the normal schedule and has requested accelerated City Council approval in an effort to send a positive message regarding City budget management.

“This was the largest fiscal challenge the City has faced since before the Great Recession,” said Mayor Turner. “By bringing all parties to the table to engage in shared sacrifice, we have closed the budget gap and started addressing the long-standing structural imbalance between available revenues and spending. Each City department, the employee unions, the Tax Increment Reinvestment Zones, City Council and various other parties have worked together to identify cost savings and efficiencies while preserving a healthy fund balance, minimizing employee layoffs and maintaining the City services our residents rely on and deserve.”

Due to an arrangement negotiated by the mayor, the City’s tax increment reinvestment zones will send $19.6 million back to the City to help cover increased operating costs citywide. The rest of the budget gap was closed utilizing a combination of savings from debt restructuring, spending reductions, revenue from anticipated land sales and a small contribution from the City’s fund balance. Even with this fund balance contribution, the City’s savings account will remain well above the threshold necessary to satisfy the credit rating agencies.

The budget includes the elimination of 54 vacant positions and 30 to 40 layoffs, most of which the mayor hopes to accomplish through attrition. There are no significant reductions to park and library operations, which have been hit hard in the past and there will be no layoffs of police officers or fire fighters. There is funding included for an additional police cadet class, for a total of five classes and the mayor continues to look for ways to streamline operations to get more officers back on the street.

The budget was balanced using both recurring and non-recurring initiatives. If non-recurring items had been taken off the table, there would have been drastic cuts in City services and another 1,235 City employees would have lost their jobs.

The recurring initiatives mark the start of institutionalizing a new way of running City government. The elimination of redundancies and increased efficiency in operations has generated $36.2 million in recurring annual savings. In addition, the TIRZs will continue to contribute at least $19.6 million in subsequent years. Yet to come is a new approach for the City’s pension liabilities. Productive discussions are underway with stakeholders and I am committed to having an agreement ready to take to the legislature by the end of this year.

“I strongly urge City Council to resist the urge to tinker with this budget,” said Turner. “Even one small change will upset the delicate balance we’ve achieved as a result of shared sacrifice and put the City at risk for a credit rating downgrade. This plan prepares us for the additional fiscal challenges anticipated in FY18 while also improving public safety, increasing employment opportunities and meeting the critical needs of the less fortunate in our city.”

City Council is scheduled to vote on the budget May 25, 2016, nearly a month ahead of last year. The new fiscal year begins July 1, 2016.

Details are here, and the Chron story on the budget is here. I confess, I’ve only scanned the details so far – sorry, but it was a long week, and it’s been a busy weekend. I am sure there will be plenty of opportunity to discuss the details between now and May 25. Have a look for yourself and feel free to tell us what you think.

Have I mentioned lately that the revenue cap is stupid public policy?

Because it is.

BagOfMoney

Sales taxes are Houston’s second-largest source of revenue for the general fund, which pays for most core services.

Just as concerning for city officials, however, was more news about the city’s largest general fund revenue source: property taxes.

Mayor Sylvester Turner, as he did in February, criticized what he said is an unjust and inequitable system that lets commercial property owners abuse legal loopholes to successfully challenge their property appraisals and pull millions out of local governments’ budgets.

As of February, the hole created by those tax lawsuits was to be a projected $16 million for the current fiscal year, which ends June 30. By Wednesday, Turner and his finance director, Kelly Dowe, said that projection had risen to more than $32 million.

Council cut the property tax rate last fall to ensure the city would not collect more property tax revenue than is allowed under the city’s decade-old, voter-approved revenue cap, which limits growth in property tax collections to 4.5 percent or the combined rates of population growth and inflation, whichever is lower.

Companies’ successful lawsuits are pushing tax collections below the cap, however, with no way to adjust the rate back up to fill that hole.

“It’s a double hit. Last year you all lowered the tax rate based on the revenue cap. Had we known then we were going to be down another $32 million, I don’t think you would have lowered it that low. You cannot budget that way,” Turner said. “I will again ask the Legislature to remedy this situation. Taxes from hard-working homeowners should not effectively subsidize wealthy commercial property owners.”

But hey, look on the bright side: The system is working exactly as designed.