Killeen staff warn of tight 2027 budget, cite $16.9M loss from exemptions

City staff presented a preliminary 2027 budget forecast and warned the council that the city faces tight finances driven by limited revenue growth and rising personnel costs.

"These are just projections," said Mister Cagle, the staff presenter introduced by the mayor, explaining the budget calendar and assumptions. He told the council a 1 percent cost-of-living increase would cost about $860,000 and that a 1-cent change in the tax rate generates roughly $1 million in revenue. Using current assumptions, the early forecast shows a roughly $1.9 million shortfall on a roughly $130'$138 million base.

The presentation highlighted a larger structural issue: reductions in state reimbursement tied to the disabled-veteran (DV) property tax exemption. Citing the city's calculations, Cagle said the city's revenue loss from DV exemptions for 2026 was about $16.9 million, which he described as the equivalent of roughly 17 cents on the tax rate. "The state ought to reimburse us for that," he said, noting the state reimburses school districts and arguing cities should receive similar treatment.

Why it matters: staff said modest revenue growth (projected at about 2 percent overall) combined with inflationary pressures and personnel expenses could leave limited flexibility for new initiatives. Cagle emphasized personnel costs as the primary driver of expenditures and gave a first-year cost example for a new police officer of about $219,000.

Council members asked about options. Several said staff should aggressively pursue federal and state grants and prepare shovel-ready projects that could be matched by outside funding. Council member Gonzales praised staff for highlighting the issue and urged continued lobbying of state legislators and leveraging grant opportunities. "We have to be first in line for that," she said.

Cagle and others discussed legislative alternatives if full reimbursement is unlikely, including seeking a local tax-growth cap adjustment in cases where exemption concentrations are high. Council members referenced possible companion measures to Senate Bill 10 as options to explore with the city's lobbyists.

Next steps: staff will continue refining the forecast, accept council budget priorities via email, and present a formal budget in July that will show a balanced proposal for adoption later in the summer. No votes or motions were taken at the workshop.