Public Policy

Mayor Whitmire Puts Forth Balanced Budget for FY 26, Closing Major Budget Shortfall

5/8/25

Mayor John Whitmire released the City of Houston’s proposed $7 billion Fiscal Year (FY) 2026 operating budget, which includes a balanced General Fund. For Houston’s business community, sound fiscal management at City Hall is more than just good governance – it’s essential to maintaining the services and infrastructure that enable our region to thrive. Perhaps most significantly, this plan reduces General Fund spending – the city’s primary tax-supported budget – by 2.4%, or $74.5 million.
 “We applaud Mayor Whitmire for making hard choices to put forward a balanced budget proposal,” said Steve Kean, President and CEO of the Greater Houston Partnership. “The mayor has made good on his commitment to address waste and duplication, and the Partnership is committed to working with his administration to put the City on a sustainable path, delivering the quality services Houstonians expect.” 

Explore the City’s structural deficit and potential solutions in our report, State of the City’s Finances: A Deep Dive into Houston’s Fiscal Issues Facing the City.
Key savings in the budget come from a combination of: 
Workforce reductions: Over 1,000 city employees took advantage of the Voluntary Municipal Employee Retirement Payment Option, resulting in over $99 million in annual savings across all funds, including $29 million for the General Fund. 
Operational efficiencies: Department budget reductions reached $16 million in savings. 
Strategic reforms: $19 million associated with the consolidation of departments.  
These efficiencies recommended in the Ernst & Young Citywide Efficiency Study underscore the city’s commitment to fiscal responsibility moving forward.
The proposed budget also addresses critical public safety needs, funding the first year of a new police contract and the second year of the firefighter contract. While also providing infrastructure investments, as the budget sets aside $184 million from property tax revenue for street and drainage projects, aligning with the recent drainage settlement agreement. 
During the press conference, the mayor highlighted that while this budget is balanced through efficiency and cost-cutting, the door remains open for future revenue discussions:
“It would be wrong for me to say we are not going to allow Houstonians to consider a garbage fee or other matters,” the mayor said. “My responsibility is to balance the budget and provide services. I made a commitment to address waste and duplication. [Later] we will talk to Houstonians about the type of city they want to live in.”

What’s next: Over the next two weeks, department directors will present their budgets in a series of workshops providing a deeper look into the FY 26 budget through Tuesday, May 20. After these sessions, City Council will review the budget, with a final vote expected in June.
 

Deal Catalyst’s annual The Future of Fund Finance U.S. conference will be taking place on June 9th at the New York Marriott Downtown. This one-day event will explore how alternative funding structures have grown in popularity thanks to their dual nature as both a financing tool for fund managers and as an attractive alternative asset investment opportunity for institutional investors alike.

Mayer Brown partners Ann Richardson Knox and Angela Ulum will be joining this year as event speakers. Ann will be moderating a conversation on “The Spectrum of Structures in Fund Finance” while Angela will be a panelist discussing “How Securitization is Playing an Increasingly Larger Role in Fund Finance.” For more information, please click here.

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While Generation Z complain about increasing rent prices and millennials worry over childcare costs, it is the so-called forgotten generation that have arguably been plunged into the most difficult financial position.

Generation X — typically those born between 1965 and 1980 — are dealing with a flurry of financial worries, as they juggle handling pension savings, supporting family members and paying off increasing debts.

Craig Rickman, pensions expert at Interactive Investor, said: “Gen X’s finances are being squeezed by the perfect storm of rising education fees, spiky utility bills and higher mortgage costs.

“Many may struggle to find surplus savings and/or income right now to beef up their retirement savings to the required level,” he added.

Only 28 per cent of Gen X are on track to meet their retirement savings goal, which could be due to the phasing out of defined benefit schemes as they entered the job market, according to research from Annuity Ready.

“An interesting trend that may impact Gen X’s financial security in retirement is the gradual demise of the defined benefit pension schemes in the private sector,” said Rickman.

These “gold plated” defined benefit pensions allow employees to receive a guaranteed inflation-proofed income for life, based on salary and years of service.

In contrast, a defined contribution scheme is not guaranteed for life, where the employee builds up a pot of money through a workplace or personal pension scheme, which is subject to the value of investment returns.

The Financial Conduct Authority’s Financial Life Survey for 2024 found 65 per cent of adults who were either receiving an income or had taken a cash sum from a pension had accessed a defined benefit scheme.

However, only a third of workers aged 45-54 — Gen X — were in a defined benefit scheme compared with nearly two-thirds in defined contribution schemes.

“That’s a stark shift and means a smaller proportion of Gen X compared to Baby Boomers [who] can effectively sleepwalk to retirement knowing that a guaranteed, life-long income awaits them,” said Rickman.

In addition, many in Gen-X have been squeezed by having to support their children and parents at the same time, turning them into the “sandwich generation” as they become not only “the bank of mum and dad” but also “the bank of son and daughter”, according to data from wealth management firm Saltus.

Parents are assisting their children in getting on to the property ladder, purchasing their first car and dealing with rising university fees, while also supporting the older generation with day-to-day living costs, including utility bills, medical care and shopping, Saltus said.

For those providing financial support to elderly relatives with more complex needs, the cost of both residential homes and nursing homes have risen to a weekly average of £1,400 and £1,500 respectively, based on data from care home finder Lottie.

And it is not just Millennials and Gen Z who are feeling the pressure of soaring house prices. With wages failing to keep in line with the rising cost of homes, Gen X has been forced to borrow more, says Rickman.

While this was more manageable during times of low interest rates, as they have increased along with repayments, disposable income and savings have taken a hit.

However, it is not too late for the forgotten generation to prepare for retirement, if they create a clear plan of how to save.

Claire Exley, head of advice and guidance at online wealth management company Nutmeg, says despite the negatives of defined contribution pensions, auto enrolment in schemes offers flexibility and “comes with more choice” over investments and additional contributions.

“Financial planning and advice is key,” Exley concludes.