City of Austin could see budget deficit, headed for 'fiscal cliff' with ARPA funding
Financial leaders at the City of Austin cautioned Austin City Council Tuesday about assigning additional dollars to programs or staff until the city can better understand a possible budget deficit for the 2024 fiscal year largely caused by an unexpected dip in sales tax revenue, they said.
AUSTIN (KXAN) — Financial leaders with the City of Austin cautioned Austin City Council Tuesday about assigning additional dollars to programs or staff until the city can better understand a possible budget deficit for the 2024 fiscal year largely caused by an unexpected dip in sales tax revenue, they said.
The City's Financial Services Department said its short more than $8 million so far this fiscal year in sales tax revenue versus predictions and suggested if that revenue stream remains flat, the deficit could go up to $15 million by the end of the fiscal year. The fiscal year starts October 1.
Austin City Council approved a record-large $5.5 billion budget last year.
"We built our FY 24 budget assuming 4% sales tax growth so flat is not good enough. If our sales tax remain flat against that 4% assumption that we made in the budget, we are going to have a budget deficit that we'll need to deal with," said City of Austin Chief Financial Officer, Ed Van Eenoo.
Interim City Manager Jesús Garza said he's had conversations with administrative staff about what the possible budget shortfall could mean. Financial leaders will come back to council in the next couple of months with a more detailed look at the budget and a five year projection of revenue.
"The last thing we want to do is begin to hire individuals who then begin to make commitments…and then three months later find out that we can no longer afford that individual because we don't have the income to pay for it," Garza said. "We're not quite there yet but those are things where we temper ourselves in terms of not getting over our skis."
ARPA funds running out
As the City of Austin moves forward on its budget process, Van Eenoo also reminded council members that the surge of money from the American Rescue Plan Act (ARPA) is running out. Those dollars need to be assigned no later than this year and spent by the end of 2026.
"We're heading towards a fiscal cliff with our ARPA spending," he described it to council members.
The City of Austin received $188 million in federal ARPA funding, according to Van Eenoo. Austin City Council approved a spending framework of more than $250 million though, which included additional grants and some general fund reserves.
"A $266 million influx of funding into our budget, that allowed us to elevate services in a number of areas and over the next three years that funding is going to start dropping off," Van Eenoo said.
Whether the ongoing programs and services payed for with ARPA dollars are funded through other sources or go away will be something the city has to address in its budget process moving forward.
Aside from directly addressing COVID-19, the City of Austin has largely used ARPA money to address homelessness and provide rental assistance.