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Ahead of a briefing in which Dallas City Council members commended city officials for going “above and beyond” in finding, somehow, somewhere, wiggle room in Dallas’ budget, the horseshoe was assured that financial strife is not exclusively a Dallas problem.
It’s Dallas’ problem, to be sure. Lags in sales and property tax revenue, mandated increases to police funding and inflation have made the cost of doing business higher than ever. This year, city leaders resorted to furlough days, travel bans and hiring freezes to keep Dallas in the black. After addressing a $51 million deficit in the next fiscal year’s budget, Dallas City Manager Kimberly Bizor Tolbert warned that the economic strain is not going to be this year’s problem: it’s a new normal.
But “this issue is not specific to Dallas,” said Dallas Chief Financial Officer Jack Ireland on Tuesday. Across the United States, many major cities are approaching the start of the new fiscal year in a state of fiduciary stress.
This time last year, 20 of the largest 25 cities across the U.S. faced budget deficits, according to The Pew Charitable Trusts. More than halfway through 2026, many of those cities remain on the financial brink. The story is consistent across the board: the economy has slowed and, with it, revenues, but payment obligations have stayed the same. Even in Germany, that equation has played out and left municipalities plum broke.
Texas cities are under unprecedented strain due to a bill passed by the Texas Legislature in 2019. The law prohibits cities from increasing their property tax revenue by more than 3.5% without voter approval and was designed to lower tax burdens for residents. In reality, though, Texas cities have been hamstrung by the law, even as state legislators have pushed to lower the cap even further. In 2025, the Texas Senate considered a bill that would make the revenue increase cap only 1%.
In April, Houston officials announced that they were anticipating a record-breaking $174 million deficit in the next year’s budget. Austin city manager T.C. Broadnax has proposed raising property taxes by the highest-allowed rate to fill a $26.4 million gap. Fort Worth’s budget for the next fiscal year is nearly $80 million short. By 2027, San Antonio’s shortfall is estimated to top $158 million.
“There will have to be some significant belt-tightening [across Texas],” John Diamond, senior director of the Center for Public Finance at the Baker Institute for Public Policy at Rice University, told the Texas Tribune last year.
Some cities carry debt; others promote raises for employees or billion-dollar construction projects that may be a boon in the future, but require major investments now. In Dallas’ case, it’s all of the above.
In California, Sacramento and San Francisco both worked to close budget deficits this year. ($66.2 million and $200 million deficits, respectively.) Officials pointed to the end of COVID-era federal aid as part of the reason for the belt-tightening. During the pandemic, cities found themselves flush with cash. In Dallas, the money was used to purchase properties and expand city departments. Now that the well has run dry, though, many cities are realizing that decisions made with that money, such as expanded hiring, carry a cost.
“A lot of [the budget issues] basically break down to labor costs, particularly health care and pension costs for various city workers, which have been rising a lot faster than inflation and also faster than the revenue of these cities to keep up,” Derek Stimel, an economics professor at UC Davis, told ABC10 in California.
In the draft of the fiscal year 2026-2027 budget that Dallas officials were briefed on Tuesday, city employees would no longer have access to a copay healthcare plan. Tolbert said the decision has been a long time coming because of the unsustainable rise in insurance costs for employees. The plan would also end coverage for GLP-1 usage prescribed solely for weight loss.
In Denver, a projected $200 million shortfall this year led the city to lay off 200 employees. The city’s budget strife has largely been driven by many of the same factors plaguing its peer cities, plus two 20-year contracts that guarantee annual 3% payment increases to two neighboring communities’ fire departments. The contract does not have inflation triggers or review periods built in; “the ink is dry,” said Denver Fire Chief Desmond Fulton.
Guaranteed public safety investments are also a consideration in Dallas’ budget. Thanks to voter-approved Proposition U, the city is now obligated to meet a certain threshold of police and fire pension payments. The mandate also outlines goals for police hiring, entry-level salaries and new revenue investment. Although the city says it is not required to meet those benchmarks because it has already cleared the pension obligations, a majority of this year’s budget growth will go toward public safety anyway because officials say they heard from voters that it is the top priority.
The proposed budget for FY26-27 tops $5.66 billion, the largest in Dallas’ history. The Dallas City Council will consider the proposed financial plan over the next month and will have the chance to make amendments, strike line items, or save programs at risk of being defunded. A final budget will be approved by the end of September and will take effect on Oct. 1.
