'Gonna be tight': Mayor Kirk Watson talks upcoming budget process

AUSTIN (KXAN) -- Financial leaders with the City of Austin have warned: The city is likely to see a budget deficit in the 2024 fiscal year largely caused by an unexpected dip in sales tax revenue. That will also bleed into how the city addresses its FY 2025 budget.

"While it's been up a few of these months, including last month, it's still overall under what the forecasts were for sales tax revenue," Mayor Kirk Watson said. "The two biggest places you get funding for the general fund is property tax revenue and sales tax revenue."

It will mean tough decisions moving forward -- and you can have a say in what the city's priorities are. Austin City Council members will be hosting their budget town halls between now and July, you can also voice your opinion online here.

The city manager will propose his budget in July, recommending ways the City of Austin can hit a balanced budget. City Council will then make adjustments, which will ultimately be voted on before the next fiscal year. The fiscal year starts Oct. 1.

"It's gonna be tight and we need to address it that way," Mayor Kirk Watson said. "We all have things that we believe need to be funded and the community is giving input about what it wants to see funded."

Looming ARPA fiscal cliff

On top of sales tax revenue shortfalls, the City of Austin will also have tough decisions to make around how it pays for programs currently using federal American Rescue Plan Act (ARPA) funding. That was one-time funding given to local and state governments during the pandemic.

The City of Austin received $188.5 million in ARPA funding. More than half of that money is going toward addressing homelessness.

But the funding will soon run out. All of it needs to be allocated by the end of 2024 and spent by the end of 2026. The City of Austin has already allocated almost all of its funds, according to documents KXAN previously received through a Texas Public Information Act request.

"Nobody likes to use the word cliff, but we're going to face a time where -- a lot of money came, it was utilized to provide necessary services -- but now how do you fund that when that money stops? And that's a pretty simple way of saying it, but that's exactly what's going to happen," Watson said.