Fort Worth has reached a new milestone as the fourth city in Texas with a population exceeding 1 million. The city’s population surged by more than 100,000 people between 2019 and 2024, outpacing all other major Texas cities, including nearby Dallas. Despite this rapid growth, Fort Worth is grappling with a nearly $17 million budget shortfall this year.
Cities across Texas are feeling the squeeze on their budgets. With inflation rising, limits on property tax increases, and uncertainty over federal funding, many local governments face tough decisions. Some are trimming expenses, while others are considering tax hikes to fill the gaps.
Sales tax revenue, a key source of income for cities, has slowed down after a spike during the pandemic. Fort Worth enjoyed double-digit sales tax growth in 2021 and 2022 but now expects a more modest 4% increase. Austin saw its sales taxes jump over 21% in 2022 but experienced flat growth this year and expects a possible decline soon. This pattern reflects a broader trend in Texas, where sales tax revenue growth is slowing, partly because people are spending more on essentials like housing and food, which don’t generate sales taxes.
Property taxes, the largest revenue source for many cities, are also under pressure. Since 2019, a state law caps how much cities and counties can raise property tax revenue each year without voter approval. While this has limited tax hikes, it also restricts city budgets at a time when demands are growing. Officials say the law helps keep property tax bills in check, but some lawmakers argue local governments could be doing more to manage their funds.
At the same time, costs for city services continue to climb. Expenses for vehicles, materials, and labor have all increased. Public safety is a particularly large and growing part of budgets, with police, firefighters, and paramedics requiring higher pay and better equipment. Fort Worth plans to increase pay for first responders, making public safety the biggest contributor to its budget growth. Other cities like Austin and Dallas are also facing similar challenges, with Dallas committed to hiring hundreds of new police officers following a voter-approved mandate.
Some smaller communities face even tougher struggles. Hemphill County saw a 30% drop in taxable property values recently, forcing officials to raise tax rates just to keep up with rising employee insurance and other costs. In Ector County, reliant on oil and gas, stagnant budgets make it hard to offer employees pay raises that match living costs.
To tackle budget gaps, cities are cutting where they can. Fort Worth trimmed over $12 million by cutting vacant positions and contracts, although some cuts were reversed to avoid hurting essential services. Longview had to cut staff and reduce its vehicle fleet.
Looking ahead, cities are weighing tax rate changes. San Antonio plans to keep its rate steady, but rising property values will still mean higher bills for homeowners. Dallas and El Paso intend to lower tax rates but also expect property value growth to push bills up. Austin is asking voters to approve a 20% hike in its city tax rate this November, which would mean roughly $300 more per homeowner annually. This move has sparked debate over affordability, especially since Austin has struggled with high housing costs in recent years.
City leaders say these increases are necessary to provide services and maintain the quality of life as their cities grow. Austin’s mayor pointed out the tough balance between higher taxes and keeping the city affordable but stressed that underfunding services could lead to decline.
Across Texas, local governments face the challenge of meeting growing needs with limited funds. The budget crunch is likely to continue, forcing cities to make hard choices about taxes, spending, and how they serve their communities.