City Budget Day 2015

The most important policy themes going into the adoption of the new City budget.

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The City’s general fund spending has increased faster than resident income.

1. Growth Dividend? The City’s revenue generation approach is about to start a multi-year march towards a more regressive state as a result of the 20% homestead exemption’s coupling with static sales rate and utility pricing, as well as greater fees. And yet this planned transformation is barely explained in the mainstream press or understood by the typical voter, much less discussed with clarity by policymakers or staff.

Easily the most irritating trope of this budget discussion has been the assumption that a modest cut in median homestead property taxes matched with typical City FTE growth and slightly higher social services growth is a meaningful victory for “affordability”.

Given that most Austinites are renters, the homestead frame shouldn’t be the main one when objectively discussing affordability. Part of the reason that homestead taxes are going down is a shift of property taxation to multi-family. Renters are facing a budget where the sales tax is staying firm, there’s no significant shift in utility pricing, and fees are going up.

Even if no one cares about renters because of their limited political power, the focus on the median homestead obscures distribution of surges in assessed taxable value. Unfortunately, the location of the surge in taxable revenue hasn’t been publicly documented yet. Was it just the shift of taxation to multi-family and commercial? Did values at the lower third of homesteads jump? Or was it the top third? Any of these significantly undermine the politically convenient spin of a growth dividend relative to the focus on the small change at the median. It’s disappointing the media coverage has basically served as stenography for the “growth dividend” talking point.

Finally, the most relevant comparison point for affordability is income, not the previous year’s tax bill. It’s easy to generate property tax revenue if assessments are going up, but assessments don’t pay the bills – salary paychecks, social security, and retirement savings do.  If incomes are flourishing, then it makes sense to spend a lot. But if incomes are stagnant or decreasing or perceived as unstable, then Austinites might reject and resent the size of local government spending even if the share they fund is decreasing in nominal dollars.  It’s unfortunate that the previous Council’s work on creating a thoughtful “affordability benchmark” linked to income has not played any public role in shaping discussions about the appropriate spending level.

2. Social Disservice. The main, enduring spending shifts from this new budget are likely to be funding of police body cameras and an increase in funding for non-profits targeting high-need populations. These are both victories for center-left types like myself. However, as council-watchers are aware, the growth in funding for non-profits reflects the subjective priorities of the Council Members and it is being advanced with sundry rationales. It does not reflect, say, the data-driven deliberations of a private foundation seeking out maximum social impact and equity for its investments. This category of spending is important; a more rigorous approach is needed so that a culture of patronage doesn’t become feasible.

3. Not Patrolling Police Spending. At best, the proposed increase of 85 patrol positions may come down to 50. While some might claim this is some kind of important change, the reality is that this is pretty close to the maximum feasible number of quality cadets APD could recruit (according to the testimony of staff). There’s been no serious challenge to the City’s lack of rigor when it comes to police spending or urgency to fix this remarkable absence of a validated approach. Council is likely to punt the discussion on police staffing methodology to yet another external consultant group; past experience suggests these can be easily ignored or co-opted.

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