(Reuters) - Houston Mayor Sylvester Turner proposed a fiscal 2019 budget on Tuesday that tackles a $114 million deficit but does not address looming spending pressures, including the city’s share of recovery costs for Hurricane Harvey, which slammed Houston last August.
The budget fully funds public safety departments while avoiding layoffs, according to Turner.
“It’s a tight budget, but it’s a budget that will wipe out the $114 million gap,” the mayor told reporters.
Houston will continue to face a structural budget deficit every year due to a voter-approved cap on property tax revenue, Turner said, saying that more money was needed to beef up the city’s public safety force.
The $4.9 billion all-funds budget, which includes a $2.48 billion general fund, eliminates the deficit with the help of higher-than-expected sales tax revenue, $29 million from a settlement with a firm that did actuarial work for the city’s retirement systems, spending reductions and fund transfers, Turner said. [nL1N1R51ZA]
But the spending plan for the fiscal year that begins July 1 does not address Houston’s 10 percent to 15 percent share of $2.5 billion in hurricane recovery costs, more than $600 million in deferred maintenance needs, or upcoming contract negotiations with city worker unions, according to Turner.
Also not in the budget is a plan for dealing with the cost of city workers’ post-retirement healthcare benefits. Turner said he will unveil over the next year a plan to begin paying down the $2.1 billion unfunded liability that accrued over the last decade or so.
Houston took on its $8.2 billion unfunded pension liability through a Texas law enacted last year that put into place a 30-year cost-saving plan, which included the city’s issuance in December of $1 billion of taxable pension bonds.
Turner said while the bonds added $42 million in debt service payments to the upcoming budget, the city’s fiscal 2019 pension contribution is about $300 million less than it would have been without the plan. In January, S&P Global Ratings revised the outlook on Houston’s AA credit rating to stable from negative, citing the pension changes.
The proposed budget projects ending fiscal 2019 with a nearly $191 million general fund balance, according to budget documents.
Reporting by Karen Pierog; Editing by Leslie Adler