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For even the most civically minded, a Dallas City Council budget briefing tends to be dry at best.
Sometimes there is a bit of squabbling as representatives bicker over funding bike lanes instead of playground shades or IT upgrades. Still, for the most part, it’s a slog to get through the 100-slide presentations from city officials who actually understand what the word inflation means. (And not just in that general, “Man, have you checked out the price of beef lately?” way.)
Whether you’re reading between the lines or not, it is clear that Dallas has a budget problem — to the tune of about $34 million. We haven’t quite gone over budget yet, city officials told the council on Wednesday, but it’s projected to happen by the end of the fiscal year in September.
To address the budget deficit, Dallas City Manager Kimberly Bizor Tolbert has announced a hiring freeze (which does not affect the police or fire departments) and has halted travel, major departmental purchases and overtime for non-uniformed city workers. That may be enough to help Dallas get out of the red by the fiscal year’s end, but it’s a Band-Aid.
The mayor won’t put off his luxury trips forever, and before long, some department is going to need a new and flashy and expensive toy.
What Is Causing Dallas’ Deficit?
We know what you’re thinking: “Isn’t this year’s budget the largest in Dallas’ history, at $5.2 billion? Why are we pinching pennies?” There are three main stressors on the current budget that are forcing Dallas to slim down, one of which is funnier than the other two, so we’ll start with it.
The city pays for employee health insurance and, in recent years, it has found itself on the hook for rising pharmacy costs and utilization. This year, health benefits will cost Dallas $13.8 million more than was budgeted, and Chief Financial Officer Jack Ireland suggested on Wednesday that the rise of GLP-1s, like Ozempic or Wegovy, is particularly to blame.
We’ll pause here so you can make a few jokes about how Ozempic is forcing the city to slim down.
Other general fund expenditures are $16.4 million over budget, with police and fire overtime accounting for the largest portion. Park and Recreation and Dallas Animal Services’ needs have also contributed to the expense, but nowhere near the level of our public safety departments.
And to wrap us up, sales tax revenue isn’t growing at the speed city officials planned for, and is forecast to come in $3.8 million short. (The actual deficit is $6.1 million, but a few advantageous reimbursements to the city have helped offset some of that loss.)
The general volatility of sales taxes as a revenue source is problematic for Dallas. Twenty-four percent of Dallas’ general fund revenue comes from sales tax, but after a period of significant growth following fiscal year 2020, the trend has begun to slow. The budget for this year assumed that sales tax would grow by 4.6% from last year, but instead it has grown by only 3.3%.
So there’s still growth, but not to the extent that city officials planned, and spent, for.
Ongoing Challenges
Fair warning: property taxes aren’t sexy, but they are important. We’ll get through this part as fast as we can.
Property taxes make up 58% of Dallas’ general fund revenue. Though property values are growing at a pace that would make a millennial hoping to buy a home break down in tears, Dallas is also lowering the tax rate. In fact, they’ve done so for 10 consecutive years. Since fiscal year 2023 alone, the city has forgoen more than $100 million in revenue to reduce the tax burden on homeowners. We also have generous property tax exemptions that amount to $437.4 million in revenue foregone.
This is objectively good for Dallas residents, and we aren’t saying it’s not. But as mentioned in a separate briefing on the city’s debt liabilities, nearly a third of the revenue from property taxes automatically goes toward paying off Dallas’ debts. (This is debt taken on through bond programs, which are voter approved and pay for things like parks and street repairs.) This means that Dallas is in a cycle similar to that of a 24-year-old who just got a credit card for the first time and realized that paying it off would take a chunk out of his paycheck. We’ve all been there.
Even if Dallas wanted to start bringing in some of that forgone property tax revenue, the state limits that growth to 3.5% a year, and city officials believe that cap may be further lowered in next year’s legislative session.
The city budget is also under tremendous strain due to its obligations to the police department. Pension obligations have been a point of tension for years, nearing crisis levels before city officials finally began to figure out what to do. (That’s a whole other dummy’s article.) Additionally, voters in 2024 approved a city charter amendment that funnels revenue toward the police department and demands higher salaries and increased hiring. All of that comes with a price tag, and the city has no choice but to comply.
Finally is a problem diagnosed by Council member Cara Mendelsohn, who said on Wednesday that Dallas has “an incredible problem with spending.”
Priorities, Priorities
As that 24-year-old with a credit card knows, spending money is easy. Slowing down is much harder.
Preparing for the budget season, city staff sent council members a survey to gauge priorities and where cuts might make sense. Several representatives criticized the survey as flawed, but what it did reveal is that everyone at the horseshoe wants something different, and no one is comfortable with cuts.
This writing has been on the wall. There was upheaval when it was suggested that a few library branches close; the same when community pools were on the chopping block. But questions like, “select up to three city services that you think should be lower priority in the fiscal year 2027 budget,” were overwhelmingly left blank by the horseshoe.
Less than half of the council was comfortable with the suggestion that programs that do not align with the city’s main priorities could have their funding reduced. Only two council members indicated support for raising property taxes a smidge. Council member Chad West was correct when he remarked that the horseshoe is “all over the board” on just about every line item.
Something will have to give, though. Already, early drafts of the fiscal year 2027 budget, which goes into effect on Oct. 1, show a 3.7% increase in spending. That growth is overwhelmingly driven by police and fire expenditures, and with the economic uncertainty of inflation, tariffs and supply chain issues, the next year is full of unknowns.
City leaders have already told the council that things need to be optimized, leveraged, streamlined and even jettisoned. “Eliminate or reduce low-impact programs” is the second-to-last strategy in the city’s approach to balancing the FY27 budget. It’ll be up to the council to determine, and try to agree, on what those low-impact programs are. Otherwise, we’ll find ourselves back here, strapped for cash.
“We’re going to have to make some hard choices,” said West. “We’ve got to prepare for the worst.”
