The City of Austin’s budget has again attracted the attention of the Texas Legislature.
The Texas House Governmental Oversight Committee held a hearing on Wednesday to discuss, among other topics, how local governments shift services onto third-party consultants and nongovernmental organizations. The hearing followed Austin’s annual budget process, during which discussion often focused on the city’s use of grants and contracts for social services provided by third parties.
Committee testimony revealed blind spots in the city’s fiscal oversight and led to a proposal for a statewide database to track local government grants and contracts.
The committee, chaired by state Rep. Cody Vasut (R-Angleton), invited only Austin Mayor Kirk Watson and Austin Chief Financial Officer Ed Van Eenoo to testify on the topic.
The City of Austin pays third-party organizations through grants and contracts to provide certain services, such as homelessness and housing support. During questioning by Vasut and state Rep. Ellen Troxclair (R-Lakeway), Van Eenoo said the City of Austin still allows social services providers to lobby council members — contrary to the recommendation of a 2019 audit — and does not rescind funding for poor performance.
“Right now, there are not good consequences in place,” Van Eenoo told Troxclair.
Watson said he plans to present an item to the city council that would forbid lobbying by social services contractors.
The issue of third-party vendors providing social services on the city’s behalf was a significant point of debate on the dais this summer.
Due in part to declining property tax revenue, the Austin City Council had to find ways to trim its Fiscal Year 2027 budget. When the council received the city manager’s draft budget, some members, such as Council Member Mike Siegel (Dist. 7), proposed reallocating funding from the police department to save more social service contracts.
Watson has also called for an audit of social service contracts and a general review of city services.
Troxclair criticized the city for failing to address transparency concerns sooner.
“When the same findings appear year over year over year, it tells you something about the city’s response,” Troxclair said.
State Rep. Richard Peña Raymond (D-Laredo) suggested creating a statewide database to track local government grants and contracts.
“I really do think we should consider asking every city and every county to give us that information,” Raymond said.
If implemented, it wouldn’t be the first state law passed in response to the Austin City Council. After the city cut $150 million from the police budget in 2020, the Texas Legislature passed House Bill 1900, which restricts the taxing and spending power of cities that make disproportionate cuts to their police budget.
The City of Austin ultimately passed a $6.6 billion budget, amounting to roughly $6,600 for each of the city’s 1 million people — the highest per-capita amount among the top five cities in the state, according to published budget documents and U.S. Census Bureau estimates.