San Antonio staff warn of structural deficits for FY26–27; council weighs three scenarios

City of San Antonio budget staff presented a mid‑year update on June 27 showing FY2025 balanced but projecting growing structural deficits over FY2026 and FY2027, and offered three high‑level options for council direction.

Justina Teit, director of budget for the city of San Antonio, told the council the presentation “will focus on fiscal year 2025 and project it into 2026 and 2027,” and said staff incorporated two additional months of updated revenue data since the May forecast. Staff noted uncertainty around federal funding and several state bills that could reduce property valuations and revenue.

Troy Elliot, the city’s finance lead, reviewed the city’s revenue mix — led by property tax, sales tax and CPS Energy payments — and financial policies including a target 15% year‑end general fund balance and a $3 million contingency in capital funds. He emphasized the need to protect the city’s bond ratings while responding to a less favorable revenue outlook.

Staff outlined three scenarios to close the FY26–27 gap: (1) deep departmental reductions and operational cuts, (2) a mix of fee and charge increases with smaller cuts, and (3) a hybrid approach that uses CPS Energy excess sales proceeds together with targeted adjustments. Under staff estimates, the largest deficit scenario for FY27 reached into the low hundreds of millions of dollars absent action.

On CPS Energy, staff described an existing policy that reserves excess sales proceeds and uses a baseline $10 million in planning, with a range of possible returns to the general fund depending on market and operational factors. Staff cautioned that returning CPS proceeds to the general fund versus reinvesting them in capital is a policy choice with tradeoffs for recurring versus one‑time needs.

Councilmembers responded with consistent direction to prioritize core services. Councilmember Cor said the presentation clarified “where we need to make difficult decisions” and urged staff to present three concrete opportunities that minimize harm to essential services. Several members stressed keeping public safety staffing stable: councilmembers asked for follow‑up data on the proposal to hire 65 officers and the budget impact of those positions.

Councilmembers repeatedly elevated affordable housing, street and sidewalk repairs, drainage and homelessness services as highest community priorities — points staff had surfaced in the community survey. Several members said they preferred a cautious approach to raising the tax rate and asked staff to pursue district‑level spending analyses and options to use one‑time CPS-related funds for targeted, nonrecurring investments.

Next steps: staff said the proposed budget will be prepared for public release in August with adoption possible in September; council requested additional district breakouts, vacancy lists and cost estimates for prioritized hires before final direction.

The work session was advisory; no formal vote or ordinance was taken.