DALLAS — Texas cities are grappling with significant budget challenges, leading to a series of unusual proposals aimed at reducing spending. Some cities have considered measures such as laying off employees, charging non-residents higher admission fees to local attractions like zoos, and even putting public funding for a new arena for the San Antonio Spurs up for voter consideration. These drastic steps highlight the pressing financial strains facing Texas’ largest cities, exacerbated by inflation, a sluggish economy, and legislative actions from state lawmakers.
“This is going to be our new normal going forward,” Dallas City Manager Kimberly Bizor Tolbert remarked during a recent briefing on the city’s budget.
The budget gap in Dallas stands at $51 million, while Fort Worth faces a deficit of $94 million. San Antonio is projected to have a $158 million shortfall over the next two years, and Austin’s structural deficit could exceed $100 million by the end of the decade.
In response to these financial pressures, Dallas officials are planning to lay off over 100 employees and reduce library hours. Similarly, Fort Worth is looking to cut vacant positions and limit pay increases for civilian staff. San Antonio and Austin are leaning towards raising property taxes, albeit while slashing services or seeking more cost-effective delivery methods.
City Manager Kimberly Bizor Tolbert and Mayor Eric Johnson at Dallas City Hall during a City Council meeting to discuss budget changes on Aug. 11, 2026. Manoo Sirivelu for The Texas Tribune
Despite these initiatives, experts caution that cities may find themselves in a persistent financial bind. John Diamond, senior director of the Center for Public Finance at the Baker Institute for Public Policy at Rice University, noted that making substantial spending cuts is politically fraught. Furthermore, persistent economic challenges such as inflation are unlikely to dissipate in the near future.
“I just don’t see an out,” Diamond expressed. “The fiscal health of the cities shows no signs of improvement.”
With the Texas Legislature reconvening in January, it appears unlikely that cities will receive much-needed assistance to address their financial difficulties. GOP lawmakers have emphasized strict revenue limits on cities in a bid to control the state’s high property taxes.
Governor Greg Abbott is advocating for further limitations on city budgets, making it increasingly difficult for local governments to raise property taxes without voter approval.
“You have to live on a budget, and if that’s not good enough, you have to make cuts,” asserted state Sen. Paul Bettencourt, a Houston Republican who chairs the Senate Local Government Committee.
Conversely, voices like state Sen. Molly Cook, a Houston Democrat, argue that such measures are misguided, particularly given the increasing demand for city services and infrastructure maintenance as Texas continues to grow.
“Local governments are closest to the people, and we’ve completely hamstrung them,” Cook stated. “The statewide preemptions and mandates on our cities are one of the most un-Texan things this Legislature continues to peddle.”
Slowing Revenue
The revenue decline for cities can be attributed to various factors, as noted by budget writers and analysts. Sales tax revenue has diminished due to a slowing economy, while rising costs for housing, food, and healthcare are forcing Texans to spend on essentials that yield little to no sales tax revenue.
Moreover, property values have stagnated, with cities like San Antonio and Fort Worth even experiencing declines, largely due to changes in local appraisal methods. San Antonio has seen property values decrease for three consecutive years, while Fort Worth’s budget shortfall was exacerbated by homeowners contesting their property appraisals.
State Sen. Paul Bettencourt, R-Houston, answers questions during a live event hosted by The Texas Tribune at Lone Star College Conference Center in Houston on Oct. 29, 2025. Douglas Sweet Jr. for The Texas Tribune
In an environment where tax increases are under intense scrutiny, cities are being cautious about how they navigate potential hikes. Texas law restricts property tax revenue increases to 3.5% annually without voter approval, a limitation that city officials attribute to their budgetary strains.
Bettencourt dismissed these claims, suggesting that cities can always seek voter approval for necessary projects.
Austin officials have opted to raise their tax rate to the maximum allowable under state law, following a failed voter initiative for a
