The overview
Houston has a projected $330 million budget shortfall heading into the FY 2026 budget season; however, Whitmire said during a May 6 news conference that this proposed budget addresses the shortfall through numerous initiatives that he said will make the city more efficient and save it money.
One of the largest financial strains posed to the budget was a drainage lawsuit the city has been dealing with since 2019, which would’ve forced Houston to allocate $100 million toward the street and drainage fund by the end of the fiscal year. However, the city and the plaintiffs reached a deal in April to allocate these funds over time by 2028, with the city paying only $16 million to the drainage fund this fiscal year and $48 million the following year, according to previous Community Impact reporting.
Another example of savings Whitmire pointed towards was the voluntary retirement program, a one-time voluntary retirement incentive offered to 2,700 retirement-eligible city employees in March. A third of the eligible employees accepted the retirement program, which Finance Director Melissa Dubowski said will save the city $30 million.
The Mayor’s Chief of Staff Chris Newport said consolidations were also made in city departments and specific positions, all of which saved the city $7 million. Newport said an example was the merger of the 311 call center and the city’s water billing center. Whitmire also pointed out that the Houston Police Department’s human resources and IT department is moving and working under the same umbrella with the city’s HR and IT departments as part of the consolidations.
The city is continuing its efforts to improve the city’s efficiency after the Ernst & Young efficiency study released in February laid out the city’s spending habits and efficiency issues, Whitmire said. The study found that the city is currently operating with over 4,000 vacant positions, predominantly in the police, public works and fire departments, as well as departments having duplicative contracts and leadership positions who only manage fewer than four employees, according to previous Community Impact reporting.
Budget explained
The $7 billion proposed budget is a $160 million increase compared to the FY 2025-26 budget.
The city will have a general fund of $3.03 billion, a $74.5 million decrease from FY 2025-2026. According to a May 6 statement from Whitmire, the decrease in general funds is primarily due to the cost-saving and efficiency increasing initiatives.
Roughly 60% of Houston’s general fund is going toward the city’s two public safety entities, with the Houston Police Department seeing $1.1 billion and the Houston Fire Department receiving $659 million. Earlier in May, Whitmire announced his proposed contract between the city and the Houston Police Officers’ Union, which will raise officer’s salaries to 36.5% over five years.
However, some city departments received cuts, such as the Department of Neighborhoods and the Library Department seeing $7 million and roughly $2 million in cuts, respectively. Whitmire said he doesn’t expect these cuts to affect city services.
The $2.9 billion revenue for the FY 2026-27 proposed budget will be made up of:
- Property Taxes: $1.46 billion. A 5.7% increase from the FY 2025-26 budget
- Sales Tax: $902 million. A 1% increase from the FY 2025-26 budget
- Franchise Fees: $146 million
- Other revenue: $417 million
Dubowski said she will give more details and a breakdown on the proposed budget during the May 7 Budget & Fiscal Affairs meeting at 2 p.m. at the Anna Russell Council Chamber at City Hall second floor. The meeting will be streamed online on HTV.
FY 2026-27 begins July 1 and ends June 30, 2026.
