Houston takes action to save state grant funding

Bloomberg News

The Houston City Council on Wednesday amended a recently approved ordinance regarding police interaction with federal immigration enforcement to prevent the loss of about $114 million in state grants.

Top Texas Republicans — Gov. Greg Abbott and Attorney General Ken Paxton — claimed an ordinance the council passed April 8 decreases cooperation between Houston Police and U.S. Immigration and Customs Enforcement, which breaches a certification the city made to obtain the grants and violates the state's 2017 sanctuary city ban.

While Paxton sued the city to force the ordinance's repeal, the governor's office said it would terminate public safety grants and force Houston to repay money already received unless it took action to rescind or change the ordinance. 

Abbott's office sent similar warnings about ICE-related policies adopted by Dallas and Austin. 

Ahead of the Houston City Council's 13-4 vote to change the ordinance to address the governor's concerns, Mayor John Whitmire said the city cannot be strong going forward without its partners, including the state and federal governments.

"We've already spent some of the money getting prepared for (the 2026 FIFA World Cup) and for police overtime and the police cars," he said.  

Opponents of the amendment accused Abbott and Paxton of trying to bully the city into submission, while proponents said the city's already shaky finances were at stake. 

"This funding supports core functions, public safety operations, victim services, emergency response and critical infrastructure," Houston City Council Member Sallie Alcorn said. "If this funding is withdrawn, the city faces two options, reduce services or backfill with fund balance. And if we choose to backfill with fund balance, we come within striking distance of our financial policies … and if we get that close, that affects our credit rating, that affects our ability to borrow."

The nation's fourth-largest city is already facing a $174 million deficit in its current $3 billion general fund budget as a result of unrealized property tax revenue, as well as unbudgeted overtime and back pay for firefighters, Houston Controller Chris Hollins reported earlier this month.

Spending pressures and shrinking budget reserves led to negative outlooks in 2024 on Houston's AA bond ratings from Fitch Ratings and S&P Global Ratings. Both warned their ratings could be downgraded due to the continued depletion of reserves. The city has a stable outlook on its Aa3 rating from Moody's Ratings.