Houston is a big American city that is unlike many others. Amid the upheaval of 2020, it staved off calls to “defund the police,” and instead has consistently boosted police funding; it maintains one of the strongest mayoralties by prohibiting city council members from placing items on the weekly agenda; and it remains one of the nation’s more affordable big cities. Houston does resemble other cities, though, in its lack of fiscal discipline.

Houston’s term-limited mayor, Sylvester Turner, took office eight years ago facing a $160 million deficit and pension liabilities totaling $7.7 billion. Nonetheless, Houston has continued to pass bigger, structurally imbalanced budgets, relying on one-time funding sources, federal relief aid, land sales, reserve funds, and, in recent years, its unusually high sales tax revenue. Turner’s claim in his final State of the City address that instead of starting “$160 million in the hole,” Houston’s next mayor will inherit “a surplus of nearly $420 million” is true only on paper. With Covid-era American Rescue Plan Act (ARPA) funds running out and sales-tax revenue expected to decline, that structural imbalance has Houston facing a steep fiscal cliff.

When Turner announced his $6.2 billion budget for fiscal year 2024 in early summer, he acknowledged that $160 million of ARPA funding would be needed to close the budget gap. “Any gap that may exist in fiscal year 2025 can be fully covered by the fund balance, placing the city in good fiscal position,” he said, seeming to anticipate criticism from the next administration.

Just weeks after the mayor’s budget announcement, his budget director told the City Council that starting in fiscal year 2026, Houston will face a budget gap of between $112 million and $181 million. That will grow to between $109 million and $244 million in 2028.

But it gets worse. The Greater Houston Partnership, the city’s largest Chamber of Commerce, recently released a report on the city’s finances that confirms what many critics have been saying for years. In addition to the city’s ongoing structural imbalance, Houston is facing significant liabilities: $3 billion for deferred maintenance on roads (plus another $594 million in deferred facilities maintenance), $1.14 billion to rehabilitate the city’s East Water Purification Plant, $2 billion to comply with a federal environmental consent decree, and up to $600 million for not reaching a collective bargaining agreement with the city’s firefighters.

Houston Controller Chris Brown, an independently elected fiscal watchdog, has been warning the city about the long-term effects of structurally imbalanced budgets. “(T)he consequences of years of inaction in narrowing our structural deficit,” Brown wrote in the Houston Chronicle in June, “will force the next mayor to exhaust a fund balance anticipated to be smaller than our projected deficit.” City officials have mostly ignored his concerns.

Houston mayoral and council candidates, looking toward next week’s election, have made costly policy promises: hundreds of new police officers, faster response times, better trash service, more infrastructure maintenance, additional housing for the homeless, and down-payment assistance for first-time home buyers. All will become increasingly unachievable when the financial reality sets in.

At a recent debate with the four leading candidates, State Senator John Whitmire said that it was hard to know the true condition of city finances because of the lack of transparency from city hall, while Congresswoman Sheila Jackson Lee promised to push for a structurally balanced budget; she also urged Houstonites to remove a voter-imposed property tax cap. Gilbert Garcia, former chair of Houston Metro, called for an audit of all city departments. Former City Council member Jack Christie said that he would implement an immediate hiring freeze and move to zero-based budgeting (in which all expenses must be justified, starting from “zero,” at the outset of each budget period.)

The city will likely be forced into deep budget cuts and revenue-generating steps in the form of new taxes, fines, and fees. The Greater Houston Partnership’s report suggested reforms like encouraging early retirement for some of the city’s more than 20,000 employees; privatizing services where revenue can be saved; auditing and consolidating or sunsetting city departments; and levying public-safety and trash fees.

The city’s population growth has all but stalled, and a 2023 survey conducted by the University of Houston’s Hobby School of Public Affairs found that 53 percent of Houstonians feel that the city is headed in the wrong direction, while 57 percent have considered moving in recent years. Attempts by the next administration to generate revenue will put more pressure on these residents and could erode some of Houston’s population gains of recent decades.

The next administration will take office in January and will need to prepare a budget by June. The new mayor will inherit these problems—and the fiscal strength of the nation’s fourth-largest city may hinge on the choices that Houston’s next leader makes in the first few months.

Photo by Brett Coomer/Houston Chronicle via Getty Images


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