Proposed Dallas budget addresses public safety funding mandate

A proposed fiscal 2026 budget presented to the Dallas City Council on Tuesday eliminates a shortfall, as well as boosts public safety funding in the wake of a voter-approved proposition that triggered a negative rating outlook from Moody's Ratings last year.

The $5.2 billion all-funds budget for the fiscal year that begins Oct. 1 includes $1.97 billion in general fund spending. A $36.5 million general fund budget gap identified in June would be eliminated mainly through "organizational efficiencies" and a reduction in overtime for uniformed personnel, according to the presentation.

General fund revenue is projected to grow by $61.6 million with half ? or $30.8 million ? of the increase applicable to Proposition U, which city voters narrowly approved on Nov. 5, Dallas Chief Financial Officer Jack Ireland told the council.

The measure requires the city to appropriate at least 50% of annual revenue increases to fund public safety pensions, boost police starting pay, and maintain a police force of at least 4,000 full-time sworn police officers compared to about 3,100 around the time of the election.

Shortly after the proposition's passage, Moody's, which rates the city's general obligation bonds A1, revised its outlook to negative from stable, citing the measure's expected credit impact, including reducing the city's fiscal flexibility and boosting the Police and Fire Pension System's liability by increasing police starting salaries and the number of officers.

The rating agency said the city's plan to address the charter amendment's mandates will be a "key focus" in future reviews.

The proposed budget increases police and fire spending by $63.1 million, which includes higher starting pay for police officers.

"We are hiring 350 police recruits in this coming year and increasing that to 400 in fiscal year '27," Ireland said. "We expect to end fiscal year '26 with 3,424 sworn officers."

He also said the city's contribution to its public safety retirement system will continue a five-year ramp up to reach actuarially determined levels. The proposed budget calls for a $225.7 million contribution, which is $20.6 million higher than in fiscal 2025.

Dallas' rate for maintenance and operations property taxes would dip to 69.97 cents per $100 assessed value from 70.47 cents and would be below the current state-mandated maximum property tax rate a taxing unit may adopt without voter approval, officials said.

A bill that would impose a tighter cap on cities and counties with populations over 75,000 passed the Texas Senate last week, sending it to the House, which has been unable to meet due to a lack of quorum.

Ireland said the capital budget includes a $250 million sale of GO bonds this fall, marking the second tranche of debt to tap $1.25 billion of bonds voters approved in May 2024. The previous issue was rated AA by Fitch Ratings and AA-minus by S&P Global Ratings, both with stable outlooks.

In October, KBRA revised the outlook on Dallas' AA-plus rating to stable from positive "based on the limited improvement in the city's pension funding metrics to date, which may limit future financial flexibility."