Houston’s “Balanced” Budget Still Ignores Glaring Problem - Texas Scorecard

Budget day at Houston City Council may have seemed more promising this year than usual. While many council members took time to praise Mayor Sylvester Turner on completing a “balanced budget,” structural problems with Houston’s fiscal woes remain unaddressed.

The only thing the mayor and council can actually count as a success is the record time in which the fiscal year 2017 budget was passed – not its content.

This budget, like budgets of the past, is full of deferred payments, one-time cuts, and accounting sleights-of-hand used to plug a continuously bleeding hole. The nearly $100 million in one-time cuts is the same kind of can-kicking done by the Parker administration and only buys Houston taxpayers another year before the issue returns again.

This is not an actuarially balanced budget by any stretch of the term. At best, it’s an attempt to appear financially sound to appease the concerns of ratings agencies that continue to downgrade the city’s bond rating.

Also shocking was council’s disinterest in an effort to cut costs following the budget vote. Council Member Greg Travis brought up his discovery of over $2.2 million that could have been saved if council would just hold off on voting in favor of a defibrillator contract that failed to go through the full procurement process.

The defibrillators were requested by a department head under emergency circumstances and without the approval of council. But, according to its charter, the city couldn’t be held financially responsible if council had not approved the purchase. “I’m passionate about it and I’ll be passionate about any other procurement, but when do we start [saving] today or next week?” Travis said in his attempt to get members to hold off on supporting the contract.

As if they had just previously solved all of the City of Houston’s problems and left it with a surplus, most council members lined up behind Turner and opposed Travis’ cost saving idea, by ushering in a more expensive contract. Actions such as that are precisely why Houston continues to plunge itself deeper into fiscal despair.

The city continues to ignore its glaring pension problem. “Since 2002 the City has never been able to make its full annual [pension] payment and now the debt has grown to over $5.5 billion,” noted Bill Frazer in his budget analysis. “From 2005 to 2010 the City borrowed money on the bond market, over $600 million, without taxpayer approval, to make its pension payments. That still wasn’t enough.”

Houston officials have opted to shoulder taxpayers with debt as opposed to reforming their employees’ pension scheme. Actually, with its alleged “balanced budget,” Houston will underfund its municipal employee pensions by about $66.7 million in 2017.

Turner has made it apparent that concessions—coupled with his sudden fervor for pension reform—will be used as leverage to convince voters to weaken or remove the revenue cap they previously instituted. But Houston’s financial future shouldn’t hinge upon voters giving into excessive tax increases.

“Unless the Mayor can negotiate reductions in benefits already earned, such as annual cost of living adjustments (COLAs) and deferred retirement options plans (DROP) abuses, then the annual payments will still remain very high and not even large increases in property taxes will fix the problem,” Frazer said.

There are, however, a few areas in this budget that deserve credit. His budget was roughly $82 million less than Parker’s last one and, through uncertain measures, he closed a $160 million projected gap. He successfully pressured the TIRZ boards to come to the table and contribute financially. But, even so, the fact remains that Houston’s financial problem is structural and needs more than accounting tricks and one-time remedies to fix it. Anything short of that is no more than a Band-Aid on a nearly severed limb.