Houston on a Fiscal Cliff

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.

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