Houston and Harris County are expected to receive more than $1.5 billion through the stimulus bill approved by Congress Wednesday, providing a massive cash injection that city officials say will help close a budget shortfall widened by the pandemic for the second year in a row.
The measure provides local governments with their most generous round of COVID-related funding yet, and it comes with fewer spending restrictions than last year’s aid. Houston will receive an estimated $615 million, putting the city at more than $1 billion in direct federal relief during the pandemic, while Harris County is projected to receive $914 million — more than double its allotment from the first round of local aid last March.
“I'm hopeful and optimistic that we will be able to use this money to, essentially, bail the city out of a very dire financial situation,” said City Controller Chris Brown, who monitors the spending of Houston’s more than $5 billion city budget.
Many local governments, including Houston, have seen their sales tax revenues plummet as the pandemic slowed consumer spending on dining, tourism and other leisure activity. And while rising appraisal values mean the city is projected to take in more money from property taxes this year than last, officials say the pandemic’s true toll on property tax revenue may not be felt until early 2022, when homeowners make payments for this year’s not-yet-certified tax rolls.
Much to the relief of local officials, the latest round of federal aid allows cities and counties to spend the funds to replace revenue lost due to the pandemic. Trump administration rules barred local governments from using the first round of local COVID relief to plug budget holes, stipulating it could only cover expenses tied directly to the pandemic, though Mayor Sylvester Turner’s administration still was able to use the funds to avoid furloughing city employees.
Marvin Odum, the former Shell executive appointed by the mayor to oversee the city’s COVID recovery, said Wednesday he is "very optimistic the funds will be able to be used to mitigate the city's budget shortfalls resulting from COVID-19." Still, he noted that beyond the broad language in the bill, federal officials have yet to release specific rules for how local governments can spend the funds.
“I’ll just caution that clarity on the guidelines for these programs tends to come over time. It’s not always available immediately,” Odum said.
Republican lawmakers bitterly opposed the local aid, including Senate Minority Leader Mitch McConnell, who accused Democrats of sending “wheelbarrows of cash to state and local bureaucrats to bail out mismanagement from before the pandemic.” Meanwhile, local officials across the country have warned they would have to enact deep cuts to city services, such as fire, police and trash collection, without federal aid to offset their revenue losses.
"Every mayor, every county judge, every local official that I visited with since before December, they all need help,” said U.S. Rep. Sylvia Garcia, D-Houston, a former Houston controller and county commissioner. “Every city in America will get dollars to help with their revenue shortfalls. And that’s huge, because they can keep the firefighters working, they can keep police departments open, they can get the garbage picked up."
Even before the pandemic, Houston officials in recent years have scrambled to close major city budget gaps, often dipping into reserves to balance spending and revenue. The city’s public safety costs, which make up more than half of spending on core services, have steadily increased as the budget remains capped by a limit on how much property tax revenue the city can take in each year.
“It's going to solve, in the short term, some of these problems, but the real challenge is, you cannot solve a structural problem with one-time financing sources,” Brown said. “You actually have to do the hard work to cut recurring expenses. And that's the only way you can narrow that budget gap over time.”
Local governments will receive half their federal aid within 60 days of Friday, when President Joe Biden will sign the bill into law, according to White House press secretary Jen Psaki. They will receive the second half of the funds at least a year later.
That means Houston will receive more than $300 million to offset its revenue losses next fiscal year, along with any potential shortfall before the current fiscal year ends June 30. Odum said the city finance department is projecting a budget gap of between $160 and $200 million next year, while Brown — whose office generates its own estimates separate from Turner’s administration — said he expects the shortfall to be even higher.
Brown noted that while finance department projections assume the city will see a less-than-1 percent reduction in sales tax revenue this year, the actual decrease has been 7 percent.
“The (Turner) administration, I don't think, has properly evaluated the reductions in sales and property tax,” Brown said. “There's a $40 million variance between us and (the) finance (department) in sales tax alone.”
Brown estimated city officials will have to lay off about a dozen city employees for every $1 million trimmed from the budget, meaning Houston could have been looking at more than 2,000 layoffs without any federal aid.
Instead, Houston’s relief will far exceed its budget deficit. The city also is expected to devote a chunk of the aid to direct COVID relief, such as testing and vaccinations. Turner’s administration exhausted the previous round of aid, totaling $405 million, in December. Those funds covered contact tracing efforts, city workers whose jobs were consumed by COVID, and relief to renters and small businesses, among other areas.
Turner, who proposes the annual budget to city council each year, did not respond to questions Wednesday about how he intends to spend the new round of relief aid.
jasper.scherer@chron.com
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Houston’s share of stimulus bill expected to top $600M, help avoid cuts to city services, officials say - Houston Chronicle
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