Houston City Council members approved a $7 billion operating budget for fiscal year 2026 on Wednesday, passing the plan in a 14–3 vote after weeks of negotiations and legal hurdles.
The vote followed a court-approved phased settlement in a years-long lawsuit over misallocated drainage funds—one of the final obstacles to adopting the budget.
The settlement was crucial in addressing the city’s historic $330 million deficit without raising property tax rates. Instead of tax hikes, the budget relies on spending cuts, efficiency gains, hiring freezes, and $107 million in reserve funds.
Despite a structural deficit, the budget meets the city’s legal definition of “balanced,” as revenues and other available resources, including reserves, are sufficient to cover planned expenditures.
The new budget includes a pay raise for officers in the Houston Police Department, negotiated by Mayor John Whitmire.
The drainage lawsuit, filed in 2019, has been a key sticking point in recent months as the city finalized a settlement. The lawsuit accused the city of diverting voter-mandated drainage fees to general operations between 2016 and 2019.
Under the settlement, Houston will contribute $16 million to the drainage fund in FY 2026, $48 million in FY 2027, and achieve full compliance by 2028.
This phased approach helped reduce the deficit from $330 million to approximately $220 million.
City Controller Chris Hollins said the court’s ruling was a turning point. Still, he warned of ongoing financial risks, citing speculative savings, reliance on one-time fixes, and repeated underestimation of overtime costs.
Hollins cautioned that these issues could lead to a future credit downgrade.
“There is no such thing as a perfect budget. It’s so easy to be against something than for something. Particularly when you don’t have to offer up any solutions,” Whitmire said before the vote.
Whitmire said he was proud of the budget, but also acknowledged the city has more work to do.
Three council members—Abbie Kamin, Tiffany Thomas, and Edward Pollard—voted against the budget, citing concerns about long-term sustainability and cuts to city services.
Activists at the meeting protested the budget’s impact on public services. After repeated warnings, police escorted the organized protestors from the council chambers.
City officials defended the plan as the best option to stabilize city finances and preserve essential services amid years of legal and budgetary uncertainty.
Mayor Whitmire emphasized that the budget introduces no new taxes or fees, and he credited cost controls, voluntary retirements, efficiency measures, and the drainage settlement as key components of his fiscal strategy.
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