The city of Houston will avoid a massive budget shortfall caused by COVID-19 thanks to more than $600 million in funds from President Biden’s American Rescue Plan Act, Mayor Sylvester Turner announced Tuesday.
The $5.1 billion proposed budget for fiscal year 2022 is a $227.96 million increase over last year's spending.
But the ARPA funds will also be needed to address revenue losses in fiscal years 2023 and 2024, Turner said at a press conference Tuesday.
"But for the dollars being made available by President Joe Biden and those in (Washington) D.C., there would have been major budgetary cuts,” Turner said. “Having said that, this is not just one and done. We'll continue to have to be mindful for next year, and the year after next, because we will still be impacted by the coronavirus and there will still be impacts on our sales tax.”
Over the coming weeks, the city will hold a series of public workshops to assess the fiscal priorities of each city department. City council is expected to vote on a final version of the budget on June 2.
It’s the first time in years that the Houston mayor doesn't have a budget shortfall to fix. The city lost an estimated $178 million in revenue during the pandemic — a lot of that coming from decreased sales tax revenue — which will be covered by the $607 million in federal funds.
Turner said the budget proposal doesn't necessitate any layoffs, which he attributed to the ARPA funding.
The city previously received $404 million in federal CARES Act funding, which had to be spent by the end of 2020. This time, the city will have a longer timeframe to spend ARPA funding, with a deadline at the end of 2024.
The city and the firefighters union have been locked in a legal dispute over salary increase negotiations since the contract expired in 2017. The mayor said he'll make an announcement next week with a pay increase proposal, "that the city can afford." The salary increase would be effective beginning July 1, he said.
The mayor recently unveiled his police reform agenda, and at Tuesday’s budget announcement, he said he hoped to use ARPA funds to help implement those changes.
In addition to revenue losses from the pandemic, Turner also pointed to financial strain from the city's voter-mandated revenue cap. The cap is projected to cost the city $265 million this coming year, Turner said, and a cumulative $1.18 billion since 2015.
Houston City Council will vote Wednesday on an item that would give the mayor authority to spend the ARPA money, but some groups have urged council members to oppose the measure, seeking instead for the City Council to have a larger role in the process.
The Texas Organizing Project, the Texas Gulf Coast AFL-CIO, the Workers Defense Action Fund and the HOME Coalition signed on to a letter asking council members to amend the item and gather more input from outside stakeholders.
“We are greatly concerned that precluding the need to further involve City Council short circuits the deliberative, consultative process Houstonians deserve,” the letter reads. “Without such a process in place, it is unlikely the funds will have the transformational impact they could.”