Austin, Texas, trims FY 2026 budget after voters nix tax hike

The Austin, Texas, City Council approved a pared down fiscal 2026 budget late Thursday in response to voter rejection of a property tax rate increase, while groups continue to scrutinize city spending.

The 11-0 vote amended a $6.3 billion all-funds spending plan for the fiscal year that began Oct. 1 to address the loss of $109.5 million in additional revenue that would have been raised by Proposition Q, which was defeated by voters on Nov. 4.

"I believe the budget amendment that we just adopted reveals that we trusted the voters," Mayor Kirk Watson said. "We heard the voters, and we reacted to the voters, but I want to say thank you to the voters for engaging in the election and for sending the message."

City Council Member Marc Duchen, who voted against the original budget, said Texas' capital city is in a different place than it was in 2019 or even two years ago, noting, revenue is not increasing "at a breakneck pace" and Proposition Q's failure "showed how concerned local residents are when it comes to how we spend money."

"I believe that this change did afford us ? this opportunity to discuss priorities, to identify savings and to take an important stock of what's working and what's not, so I think the passage of the budget this year marked a moment to reset and rebuild," he said.

While the council also adopted a resolution to implement "financial best practices to strengthen" the annual budget process, Save Austin Now, the group behind Proposition Q's defeat, announced on Friday a petition drive to place a charter amendment on the May 2026 ballot requiring a recurring performance audit of the city budget by an independent contractor.

"We simply want the city of Austin and our city council to embrace an independent audit so we can finally see where we can be more efficient and make our city more affordable for the hard-working taxpayers who keep it running," Steven Brown, the group's co-chair, said in a statement.

A petition drive on the city's plan to replace its convention center was rejected by the Austin City Clerk last week for failing to submit enough valid signatures. In October, the city council approved up to $650 million of special tax revenue bonds backed by hotel occupancy taxes and certain incremental state tax revenue for the project.

Austin United PAC, which submitted more than 25,000 signatures in October, is trying to amicably resolve the matter, although "there is a substantial likelihood that litigation will be required," according to Bill Bunch, the group's attorney.

The petition seeks to put an ordinance on the May ballot to postpone the demolition and reconstruction of the convention center for seven years or until the project is approved by voters.

Austin, which had nearly $1.25 billion of general obligation bonds outstanding at the end of fiscal 2024, is awaiting recommendations expected in April from an advisory task force about placing debt propositions on the ballot next year.

Fitch Ratings upgraded the city's GO rating to AAA with a stable outlook from AA-plus in August.