Houston mayor proposes $7 billion fiscal 2026 budget

Bloomberg News

Houston Mayor John Whitmire unveiled a fiscal 2026 budget on Tuesday that he said was balanced through an ongoing reorganization of city government.

Efficiencies, common sense, as well as the elimination of waste and conflicts of interest and a recent voluntary retirement program for municipal workers led to cost savings, according to the mayor.

"We're being very transparent with citizens about meeting our challenges, and I will also emphasize we're not through," Whitmire said at a city hall press conference. "We will be implementing the reorganization of this city government as we go forward."

The $7 billion all-fund budget is $160 million or 2.3% higher than in fiscal 2025, although its $3 billion in general fund spending is 2.4% lower, according to budget documents.

The mayor's plan projects fiscal 2025 will end on June 30 with a $383 million fund balance, which is much higher than Houston Controller Chris Hollins' latest projection of $244.7 million. The city's budget stabilization reserve fund, which was largely drained this fiscal year to address weather disasters, would be replenished with $12 million, bringing its balance to $14.25 million.

In a statement, Hollins said his office will "begin a thorough review, examining both revenue and spending projections with the scrutiny that taxpayers deserve."

The nation's fourth-largest city has for years faced a structural budget deficit, which stood as high as $320 million in the wake of successful litigation forcing Houston to allocate at least $100 annually for drainage and roads. Whitmire last month announced an agreement with the plaintiffs to phase in the spending over three years.

The mayor said public safety is his top budget priority.

On Friday, he and the Houston Police Officers' Union announced a deal aimed at helping the city recruit and retain officers through higher pay. The five-year contract, which will cost about $832 million, adds $67 million to the fiscal 2026 budget, according to the mayor. 

Last year, a court-approved settlement with firefighters included Houston's sale of general obligation bonds to fund $650 million in overtime pay from fiscal 2018 through 2024 and a five-year collective bargaining agreement that increases total pay by up to 34%.

Ahead of the July bond sale, S&P Global Ratings revised its outlook on Houston's AA rating to negative from stable, citing budget challenges due to increased debt service and salary increases.

Fitch Ratings, which rates the city AA, pointed to shrinking budget reserves for its outlook revision to negative in September. Houston has a stable outlook on its Aa3 rating from Moody's Ratings.

The proposed fiscal 2026 budget does not include any money from Texas legislation that would give the city 30% or $80 million from Harris County Toll Road Authority excess toll revenue to cover the costs of providing public safety and emergency services on toll roads, according to the mayor.