BREAKING THE BANK

City of Austin earns near-failing grade for financial health, says nonprofit report

Austin earns near-failing grade for financial health, says report

Austin City Hall
Austin earned a D grade in a recent report detailing cities' financial health.  Austin, Texas - Your CIty Government/Facebook

Austin isn’t making the grade fiscally — and the city may be even worse off post-pandemic. That’s according to a recent report from nonpartisan, nonprofit think tank Truth in Accounting, which claims Austin warrants a D grade in terms of its financial health. 

The finding is part of Truth in Accounting’s Financial State of the Cites 2021 report, a comprehensive analysis of the fiscal health of the top 75 most populated cities in the U.S. Based on fiscal year 2019, and therefore reflecting a pre-pandemic economy, the report examines a variety of financial factors to determine each city’s “taxpayer burden” or “taxpayer surplus” to determine cities’ rankings and grades.

For instance, the report may assign a municipal government a C grade if it comes close to meeting its balanced-budget requirement, which is reflected by a small taxpayer burden. An A or B grade means governments have met their balanced-budget requirements and have a taxpayer surplus, while governments receiving D and F grades have not balanced their budgets and have significant taxpayer burdens, according to the report.

With a ranking of 51 out of 75 cities, Austin went into the COVID-19 pandemic in poor fiscal shape, the report claims, with the city’s fiscal year 2019 audited financial report indicating Austin has a taxpayer burden of $7,600. And any government with a taxpayer burden of $5,000 to $20,000, according to the Truth in Accounting scale, earns a D grade.  

“Austin’s elected officials have repeatedly made financial decisions that have left the city with a debt burden of $2.1 billion,” the report claims. “That burden equates to $7,600 for every city taxpayer.”

Many of Austin’s financial troubles involve unfunded retirement obligations that have built up throughout the years, according to the report, which states that of the $9.4 billion in retirement benefits promised, the city has not funded $2.9 billion in pension and $2.4 billion in retiree healthcare benefits.

“Austin did not have enough money set aside to weather the current pandemic and fluctuations in the market,” the report says, highlighting that Austin had $4.3 billion available to pay $6.4 billion worth of bills, with the $2.1 billion shortfall leading to the $7,600 taxpayer burden. “The city is expected to lose some revenue as a result of the pandemic. The uncertainty surrounding this crisis makes it impossible to determine how much will be needed to maintain government services and benefits, but Austin’s overall debt will most likely increase.”

Despite the distressing news, Austin is not alone in receiving a less-than-stellar fiscal grade. In fact, most cities analyzed in the report did not have enough money to pay all their bills. Based on Truth in Accounting’s grading methodology, no cities received an A grade, 13 received a B grade, 28 received Cs, 28 received Ds, and six cities received failing grades. A slew of other Texas cities earned a D grade in the report, including Dallas (ranked No. 61 out of 75 cities), Fort Worth (No. 54), Houston (No. 58), and El Paso (No. 42).  

San Antonio beat out Austin in terms of its fiscal health, earning a C grade and a No. 34 ranking on the report. With the report noting San Antonio entered the pandemic in “mediocre fiscal health,” despite the city’s debt load of $1.5 billion, a taxpayer burden of $3,500 merits an overall C grade. 

“San Antonio’s financial position worsened by more than 200 percent, or $1 billion, from the previous fiscal year, mostly because the city’s pension plans experienced investment losses, which resulted in a larger liability,” the report says, also indicating that, like Austin, San Antonio is likely to be worse off financially after the pandemic.

Elsewhere in Texas, Arlington (No. 16), with a taxpayer burden of only $200, received a financial grade of C, as did Corpus Christi (No. 19), which had a taxpayer burden of $1,100. The top-ranking Texas city in the report is the Dallas suburb of Plano (No. 9), which received a B grade, reflective of its $2,000 taxpayer surplus.