San Antonio City Council Budget and Financial Forecast Meeting - May 6, 2026

[The San Antonio City Council received a comprehensive financial update from Budget Director Freddy Martinez covering the FY2026 second-quarter report, five-year forecast, and ongoing challenges. The presentation highlighted slowing revenue growth, a structural deficit, rising healthcare costs, and the need for significant budget reductions. Council members engaged in a wide-ranging discussion about priorities, potential tax increases, service cuts, and collaboration with other entities.]

Discussion Items

• Economic and Revenue Overview: Martinez reported moderate economic growth locally and nationally, with slower sales tax growth, declining hotel occupancy tax revenue, and a projected 23.5% drop in residential permits. The city’s unemployment rate rose slightly to 4%. Revenue for the General Fund is projected to be $2 million below budget.
• Healthcare Cost Pressures: The city faces a $45 million projected overspend in healthcare benefits for FY2026, with $19 million already recorded in the first six months. Martinez noted that 4 of 51 stand-alone emergency rooms account for over half of claims. The administration plans to target providers and educate employees to curb costs.
• Five-Year Forecast and Structural Deficit: The five-year forecast shows a structural imbalance, with revenue growth (assumed at 3.5% for property tax and 2% average for sales tax) not keeping pace with expenses. The forecast projects a cumulative deficit of $264 million through FY2031 unless corrective actions are taken. Two scenarios were presented: Scenario 1 requires $130 million in cuts over two years; Scenario 2 involves using state revenue growth (32.9%) to reduce the need to $7 million in cuts over two years, implying a potential property tax rate increase.
• Council Member Positions:
  • Mayor Jones emphasized the need for significant action, noting the deficit grew from $225 million to $264 million in one year, and urged targeting healthcare costs through employee education and provider negotiations.
  • Councilmember White argued the problem is spending, not revenue, and called for cuts to non-essential programs, opposing any tax increase. He stressed focusing on core services (public safety, infrastructure).
  • Councilmember Spears opposed layoffs and tax increases, arguing the city has a revenue problem from tax breaks for businesses and luxury housing. She called for increasing revenue through fees and reducing incentives.
  • Councilmember Galván warned against cutting libraries, parks, and human services, stating that such cuts would harm vulnerable residents and make the city less attractive for business. He urged honesty with the public about service reductions.
  • Councilmember Castillo suggested exploring fee increases for building permits, code enforcement, and short-term rentals to hold bad actors accountable and generate revenue.
  • Councilmember Macky Rodríguez advocated for regional collaboration with suburbs and the county to eliminate redundancies, and for creative thinking during tough times.
  • Councilmember Core requested detailed breakdowns of non-mandatory services and completed project percentages, and noted the importance of sustainable economic development.
  • Councilmember (unnamed in transcript but speaking) supported Scenario 2 (tax increase) to avoid deep cuts to services like pre-K and sidewalk repairs, arguing that underfunding now leads to greater costs later.
• Comprehensive Budget Review: The city has reinstated a comprehensive budget review process started in FY2025, with results expected for the FY2028 budget. Council members also discussed the need to review all subsidies and outstanding debts, and to consider using hotel occupancy tax funds or other restricted funds for General Fund relief.

Key Outcomes

• No formal votes were taken; the meeting was informational and set the stage for upcoming budget decisions.
• Next Steps: The council will consider FY2026 budget adjustments and revenue/expense alignments based on the six-plus-six report at a mid-May meeting. A full budget forecast for FY2027 will be presented on June 17, 2026, incorporating additional data and reduction plans. The proposed budget for FY2027 will be considered on August 13, 2026.
• Directives: Staff will explore fee increases, code enforcement, and vacant property ordinances as discussed. The administration will continue targeted efforts on healthcare cost containment. Collaboration with Bexar County and neighboring cities will be pursued to identify efficiency savings. A comprehensive analysis of all city subsidies and outstanding receivables will be prepared for future discussion.