A budget proposal that lowers new taxes while enhancing affordability and equity.
The “Better Budget” proposal mixes cuts, spending shifts, and new programs to improve public investment outcomes while reducing overall taxation and spending levels relative to the staff-proposed budget. The specific changes are outlined below.
1. $8.1 million in cuts to stay below the Spelman Affordability Benchmark
The Spelman Affordability Benchmark is a index calculated by City budget staff as a result of a resolution passed by the previous City Council (PDF ). The index grows at the five-year average of income growth for Austinites and calculates an increase in the General Fund (GF) budget that matches said average. Therefore, the size of the GF increase matches the taxpayer “ability to pay”.
The proposed City budget for this year has a $52.6 million increase in GF spending; the affordability benchmark ceiling for GF spending increases for this budget year is $44.5 million. Matching income and GF growth requires $8.1 million in cuts. Net spending reductions of $8.1 million from the proposed budget are outlined below.
2. Freeze Austin Police Department officers until a value-added methodology is adopted
The proposed budget’s Austin Police Department (APD) officer increase is based on a flawed study that lacks any empirical data to back its recommendation. A a rigorous value-added methodology that considers opportunity costs must be adopted by Council before resuming increases in the sworn force. The freeze will save $7 million this budget year.
3. Skip the “Save Our Mansions” Tax Cut
The proposed budget includes a tax cut for homesteads based on six percent of assessment value. Since it is based on a percentage of value instead of fixed amount, this mansion-focused tax cut amounts to a big giveaway to Austin’s richest homeowners.
Undoing the special break will reverse the creation of a $5.2 million funding gap that required an increase in the property tax rate. Most outrageous is that said property tax rate boost wiped out the modest savings from the homestead exemption and actually created a net increase in the property taxes paid by many homeowners under the median household value. For this sizable group of homeowners, the exemption savings were not as big as the property rate increase needed to achieve a “revenue neutral” exemption adoption. Canceling “Save Our Mansions” and reducing the property tax rate is a better deal for these homeowners, as well as Austin’s renter majority.
4. Permanently dedicate a fixed percentage of the General Fund for subsidized housing
A shared prosperity approach to subsidized housing would switch from the current inconsistent mix of referendum-approved bonds, project-by-project negotiations, hard-to-administer fee-in-lieu programs, and narrowly-targeted Historic Preservation Districts into a fixed percentage of the City general fund budget being dedicated to subsidized housing.
Under this approach, all new units perpetually fund housing subsidies through the taxes they pay into GF, blunting knee-jerk criticisms about “affordable housing” contributions and “growth paying for itself”. This approach also helps local policymakers manage price/rent reductions through subsidized “oversupply” which is a more versatile and clearly legal tool than, say, rent control.
The medium-term goal should be for 1% of the GF to go towards subsidized housing (a doubling of the purchasing power of our existing bond-and-new-development-negotiation approach). This shift will start with 0.45% of this year’s budget or roughly $4 million. Since there’s already a $740,000 increase in tenant rental assistance, the net increase to the GF budget is $3.3 million.
5. Slow FTE Growth
City management is put in an awkward position by Council. On the one hand, the top civil servants are held accountable for department performance – this creates an incentive for well-resourced departments. On the other hand, Council would prefer tax bills be lower, but doesn’t actually always feel enthusiastic about specifying cuts and being politically accountable for those cuts. For GF spending to match resident income growth, Council has to be firm in making that a priority instead of an aspiration.
Council should instruct city management to come back with a budget amendment that cuts roughly $7.7 million in present-year spending in addition to the APD freeze above; this allows for both a property tax reduction and spending on other key priorities.
Remember, even after the APD freeze, there would still be a GF increase of $45.6 million consisting mostly of raises and new full-time equivalents (FTEs). My personal preference would be for the savings to come from reductions/mid-year hiring of FTEs instead of lower salary boosts for existing employees, but the City Manager and department leaders should decide what approach they deem best. They might opt to, say, provide 2.85% increases in some areas (as opposed to 3%) in order to save some FTEs, for example.
Ultimately, however, it’s important that Council firmly own the absolute spending level and priorities, instead of performing politically convenient blame-shifting to the civil servant executives.
6. Create a new Social Impact Fund. Start with a universal Pre-K plan
The new $3 million fund would be an “opportunistic” fund that avoids multi-year commitments. This is different from existing social services funding that is a consistent source of operating dollars for established NGOs. This fund is intended to fund emerging opportunities with high social impact potential. It replaces the ad hoc, “slush fund” approach of hearing community requests during the budget process with a structured approach that is explicitly not going to be a platform for on-going support.
A potential first project: fund the development of a real plan to finance universal pre-K locally. This will require coordination between AISD and the City of Austin, and any realistic plan is likely to require a referendum to raise sufficient revenue. The significant self-imposed tax increase for the medical school indicates that Austinites are willing to tax themselves if they agree with the value of the proposal.
7. Start a Municipal Identification program
I’ve covered the benefits of starting an Austin municipal identification program here. Austin’s municipal ID could also do double-duty as the backbone to a “digital vote” that allows residents to effectively participate in local policy-making, as I discuss here. This budget alternative allocates $200,000 based on implementation in other cities; a small decrease in the transfer to the General Fund reserves is used to finance the start of the program.
8. Establish a Fair Revenue Task Force
The task force would examine the different City revenue sources and come up with a revenue approach that places the lowest burden on those with limited incomes by potentially re-calibrating the mix of fees, property, sales, transfers, exemptions, and special assistance programs.
This proposal doesn’t have any impact on General Fund spending.
9. Start-up funding for police body cameras
The freeze to APD officer staffing means the $1.6 million capital budget for patrol cars is not needed this year. Council should shift these funds to serve as the first installment of the $7 million in capital needed for implementation of universal police body cameras.
10. Hire Fiscal Equity analyst
Austin fiscal policy discussion are unlikely to cease anytime soon. Sadly, they rarely feature robust analytical documents that explore the distributive impacts of policy decisions across districts, race/ethnicity, sex, gender, income levels, age, housing type, etc. Council’s fiscal policy discussions desperately need the equivalent of the City Demographer – a trusted analyst that generates insightful documents that improve the quality of public discussion.
This proposal budgets $100,000 for an analyst focused on continuously informing (a) the public and (b) policymakers about the equity impacts of their fiscal proposals.
11. Fund the design of a “world-class” human resources and benefits policy
Using existing accounts for external consultants (within and outside the GF) to fund a group of top experts supporting City staff in designing a plan that ameliorates pay disparities and serves as a model for paid (and unpaid) family and parental leave policy.
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