Controller presents quarterly report; Houston faces $229M FY26 shortfall, officials say

The City Controller’s office presented the quarterly financial report on Oct. 30, reporting an estimated ending fund balance for fiscal 2025 and a projected budget shortfall for fiscal 2026 of about $229 million.

“Good morning, mayor, honorable members of council,” the controller’s presenter opened, summarizing the office’s projection of an ending FY25 fund balance and noting recent downward adjustments to revenue forecasts. The controller’s office told the council it had reduced revenue projections to reflect the recently adopted tax rate and other updated assumptions.

Finance staff and councilmembers focused questions on disaster-recovery funds and the assumptions used in the FY26 projection. Finance Director Melissa Dabowski told the council that about $33 million of recently announced state disaster-recovery support is expected to come to the city as local match for debris-removal costs, and that the $229 million shortfall is the current planning estimate for FY26.

Councilmembers asked for clarity on what the shortfall includes and how one-time disaster receipts were treated in the projection. Staff said some federal funds tied to debris removal are already obligationally incurred and that additional periodic reporting on disaster finances would be provided. The controller and finance director committed to follow-ups on several items, including the timeline of FEMA reimbursements and the assumptions that produce the shortfall estimate.

The council later voted to accept the quarterly financial report by voice vote; the record shows the body moved and seconded the acceptance after the presentation.