Austin manager proposes balanced FY‑26 budget that draws reserves, keeps pay raises and sets public hearings

City Manager T.C. Broadnax presented the City of Austin’s proposed fiscal 2026 budget on July 15, telling the council the plan is balanced while acknowledging it relied on one‑time reserves and identified deeper cuts that could be required in fiscal 2027.

“This is the first city of Austin budget that I’ve had the opportunity to guide from start to finish,” Broadnax said, adding the process began with an estimated $33,000,000 shortfall in the general fund and that the proposal the manager’s office submitted is balanced.

The proposal bundles $6.3 billion in all funds spending for FY‑26 and a $1.5 billion general fund. Key elements include a proposed 4 percent across‑the‑board increase for civilian city employees, a living wage increase to $22.05 an hour, investments in homelessness and encampment outreach, and a $2.9 billion capital budget. To balance the year, the plan taps $14.1 million from the budget stabilization reserve and programs one‑time funding from the housing trust fund; staff warned those one‑time choices and revenue constraints create pressure in FY‑27.

Why it matters

The proposal preserves many current services and some new investments while signaling constrained capacity going forward. Budget staff said policy limits on property tax growth, uncertainty in sales tax collections and reductions in some federal grants are forcing the city to use reserves and one‑time funds now and to consider service‑reducing options next year unless new recurring revenue is found.

What the proposal includes

- Compensation: A 4 percent across‑the‑board increase for civilian employees in FY‑26 and a living wage increase from $21.63 to $22.05. Carrie Lang, director of budget and organizational excellence, said the living‑wage movement follows a human‑resources methodology tied to CPI and the across‑the‑board increase.

- Public safety and personnel: Police pay increases of about 6 percent in FY‑26 (projected at $13.2 million) and 5 percent in FY‑27, EMS and police negotiated increases, and placeholders for Austin Fire negotiations. Budget staff said the proposal also includes overtime savings targets for police and fire and staffing adjustments intended to reduce overtime costs.

- Homelessness and housing: The Homeless Strategy Office would receive 12 new positions for street outreach and encampment management, and the proposal programs $8 million in one‑time housing trust fund dollars to support continued operation of the marshaling yard and $3.5 million in ongoing funds for an eighth‑street shelter. Lang said the housing trust fund balance is being used down to support these operations in FY‑26 and that the fund would be essentially exhausted by year end under current programming.

- Equity and community programs: The Office of Equity and Inclusion is shown in the manager’s package as a combined office that includes a new human‑rights division. Community speakers and advocates raised concerns in public comment about a $140,249 reduction listed as "contractuals" and asked the council to ensure contracts for trainings such as Undoing Racism and Latinx Challenge continue.

- Utilities and enterprise funds: The all‑funds proposal reflects growth in Austin Energy and Austin Water budgets. Staff expect utility transfers to the general fund to rise with customer growth; Lang said the transfers follow the city's policy and reflect higher utility revenues in recent years. Austin Energy interim general manager Stuart Riley said lower wholesale power costs are expected to reduce a typical residential bill in FY‑26 even as the utility continues to plan for resilience investments and long‑term cost recovery.

- Capital spending: The draft capital spend plan covers roughly $13.2 billion through fiscal 2030 with major programs including aviation, Austin Energy and Austin Water projects and the convention center expansion. Lang described a multiyear spend plan tied to existing bond programs and major projects in design or procurement.

Near‑term tradeoffs and FY‑27 risks

Lang and other staff emphasized that the FY‑26 package is balanced largely through nonrecurring choices. The team said that, absent additional recurring revenue, balancing FY‑27 under the current assumptions would require deep choices: staff estimated roughly $16.8 million in social‑service contract reductions, possible cuts to transfers to the housing trust and capital rehabilitation funds, and elimination of planned civilian wage increases in the second year of the two‑year plan.

Council action and process

Council set a public hearing on the proposed budget and related tax and utility rates for July 31 at 3 p.m. by motion. “Council member Kadri makes the motion,” the clerk recorded; the motion was seconded by “Council member Vela,” and the item passed without objection. The council also asked the manager to return a set of alternate tax‑rate scenarios (incremental cents) so the council and public can see the budget impact of different tax‑rate decisions.

Public input at the hearing

Public commenters focused on equity, housing and frontline social services. Doris Adams of Undoing White Supremacy Austin asked the council to preserve funding for Undoing Racism and other equity workshops, calling contractual reductions “vague” and urging detail. Monica Guzman of GAVA asked the council to maintain funding for childcare, equity programs, immigrant legal and mental‑health services and family stabilization grants. Alex Way of Texas Harm Reduction requested $824,000 to sustain street outreach and a drop‑in center serving people at high overdose risk. Michael Lofton with the African American Youth Harvest Foundation asked that the Harvest Trauma Recovery Center be made a recurring line item after noting the program’s rising client load.

What council members emphasized

During council Q&A, members pressed for clarity on reserve strategy, the housing trust fund drawdown, and potential costs tied to major projects such as Cap and Stitch. Several council members urged staff to provide more granular detail on what social‑service contract reductions would look like and to return scenarios showing the budget implications of 1‑, 2‑ and 3‑cent (and larger) property‑tax increases. Broadnax and Lang said staff would provide those manager alternatives and additional supporting documents and that the council’s budget portal and amendment forms would open to accept council changes.

Ending

City staff said they will publish supporting materials, open the council’s budget Q&A portal and provide the requested tax‑rate alternatives in the coming days. The council’s calendar includes work sessions on general fund departments, enterprise/CIP discussions, public hearings and an August adoption window. With the public hearing set for July 31, the budget process will continue through August with additional public input and council deliberations.