For the second year in a row, Bexar County is dipping into its savings to balance the budget - a short-term fix that officials and experts warn can't continue indefinitely.
"Bexar County needs to start making those tough, unpopular decisions now because it's not going to get any easier kicking the can down the road," said Bob Bland, a professor of local government at the University of North Texas in Denton.
"I often find that the longer a county waits, the fewer options it'll have," he added.
The warning comes as the five-member Bexar County Commissioners Court prepares this week to adopt a $2.6 billion budget for fiscal year 2027, which starts Oct. 1.
Property tax revenue, which pays for about 80% of county government operations, is slipping. Millions in federal pandemic relief funds are running out. And a $145 million deficit will plague the county's next two budgets.
Next year's spending plan doesn't include a property tax rate hike or service cuts, but it would draw $68 million from the county's reserves. Experts say that leaves commissioners with fewer options to balance future budgets.
In other words, tax or fee increases and fewer county services could become all but inevitable.
The reserve fund is intended to be used for one-time fixes, to help the county get through temporary financial emergencies, said Eugenia Gorina, a professor of public and nonprofit management at University of Texas at Dallas. It's not a solution to budgetary problems that could last years, like a drop-off in property tax revenue.
This year, the county has drained $105 million in reserves to balance its budget, leaving $303 million in the fund. Under the proposed budget, there would be about $234 million left at the end of next year.
According to Bland, this approach is common among local governments - and they can quickly become hooked.
"I've found that once governments dip into their reserves, it's hard for them to not keep dipping because the local cost is very low," he added.
That reliance can have costly consequences.
Credit-rating agencies consider Bexar County's reserves as they're determining its financial strength. A steep or sustained decline in its reserves could put the county's high AAA bond rating at risk. A ratings cut would result in the county paying higher interest rates on its bonds, making its debt payments more expensive.
Bexar County requires its reserves to equal at least 10% of its operating budget, though it aims for a "cushion" of 15%, Budget and Finance Director Tanya Gaitan said.
Bexar County has a big cushion. The 2027 budget would leave about 32% of the county's $730 million operating budget in reserves at the end of the year.
But Gorina said the size of the reserve balance is only part of the story. The concern, she said, is that the county is turning to reserves in consecutive years to balance its budget. She said it's "only a matter of time" before the county's repeated use of savings puts it at risk of a credit-rating cut.
"Trends matter more than levels, and multiple deficits in a row is an indicator of fiscal stress," Gorina added. That is, the concern is the county's repeated reliance on reserves, not simply how much it has saved.
Gaitan said the county's reserve fund is big enough to support the county through fiscal year 2030. But Bland cautioned against continuing to spend from its savings.
"Two successive years of tapping reserves says that they're not managing their expenditures to stay within their capabilities," he said. "I'm not saying their bond rating will immediately lower, but it's certainly going to get the attention of bond-rating firms."
Some county commissioners are voicing the same concerns.
"I never go into a budget cycle expecting to have to dip into reserves," Precinct 2 Commissioner Justin Rodriguez told the San Antonio Express-News. "I want this to be the last time we have to do it, but it's difficult without knowing what's going to happen to the real estate market."
The proposed budget does not include funding for major new capital projects, even through the fast-growing county needs more roads, drainage and other infrastructure. Rodriguez said issuing bonds for flood-control projects and other infrastructure work could help "stop the bleeding" from the reserve fund.
There is one area where budget officers say the county will have no choice but to make cuts: pandemic-era initiatives.
In 2021, Bexar County received $389 million in federal funds through the American Rescue Plan Act, which supported local programs ranging from mental health services to education and youth programming. But the act requires that money to be spent by Dec. 31.
Funding for all 91 ARPA positions is included in the proposed budget's contingency accounts, meaning it requires commissioners' approval, Gaitan said. As Bexar County's governing body, commissioners court will decide whether to adopt the proposed budget - and, in turn, whether funding for those positions remains in place.
In a budget workshop earlier this month, budget officers recommended cutting dozens of positions across several ARPA programs, including library programming, domestic violence support and the public health department, and reducing others from full-time to part-time.
Program leaders spoke at the meeting, pushing the court to continue paying for positions they view as essential. Commissioners court's four Democrats
- Judge Peter Sakai and Commissioners Rebeca Clay-Flores, Tommy Calvert
- were sympathetic, saying they wanted to find ways to keep some of those employees on the payroll.
"I'd like to find a way to work with you and the budget to see what we can live with," Rodriguez told Laura Cole, the director of Bibliotech Navigators, an ARPA program that offers free digital skills training to seniors.
But Precinct 3 Commissioner Grant Moody, the court's lone Republican, repeatedly said cuts would be necessary as the county confronts its budget deficit.
"Those programs that my colleagues want to see continued are going to be funded on the credit card, coming out of reserves, and we need to be very clear and mindful of that," he told the Express-News.
Bland said the county has two choices if it wants to avoid relying on reserves: increase the revenue it brings in or cut, reduce or consolidate services.
While county government relies heavily on property taxes, state lawmakers have increasingly limited how much tax revenue it can collect.
In 2019, the Legislature approved a 3.5% cap on annual property-tax growth for counties, requiring voter approval for increases above that threshold. Lawmakers considered lowering that threshold to 2.5% last year, but the proposal ultimately failed in the House.
But even without those constraints, Bexar County's leaders have been loath to touch the property tax rate - other than to trim it in flush years. Commissioners court hasn't raised the tax rate in more than 30 years, and it won't this year.
The state has also mandated homestead-tax exemptions to reduce the amount of residential property the county can tax. Texas provides exemptions for disabled veterans, and voters approved an additional exemption for surviving spouses of disabled veterans last November.
"The costs of those exemptions are borne at the local level," Bland said. "The state leaves it to local governments to figure out how to cover their generosity."
On top of state exemptions, both Bexar County and the city of San Antonio have adopted 20% homestead-tax exemptions for residents.
Gorina said local governments facing budget pressures like Bexar County often look for ways to generate new revenue, including by raising fees, such as those for park pavilion rentals or tourism-related services.
Bexar County expects to collect $43.9 million in fee revenue next year, down from $50.6 million this year. But Bland said increasing fees for services - including those provided by the military services office and emergency management department - could be "politically unpopular and tough to sell."
Some commissioners are looking for savings within the county's existing operations.
Moody pointed to Plan Your Vote, a third-party website that provides voting information, as one service he believes could be handled by the county's elections department. Funding for Plan Your Vote is included in a $130,000 line item in next year's budget.
Raising the county's property tax rate could have brought in more revenue, making it less tempting to tap reserves. But the commissioners court unanimously rejected that option earlier this month - partly because county residents are already struggling with rising prices for gas, groceries and other staples.
As a result, the tax rate will remain flat, at just under 30 cents per $100 of assessed value.
Bland said the county would have benefited from a higher rate.
"It would also send a positive signal to the rating agencies, and they might even look rather forgivingly on the county dipping once again into the reserve fund," he said.
For his part, Rodriguez said he would only support a future tax rate increase if county staff first extensively analyzed its potential effects on taxpayers.
"Our constituents are getting hit hard from all ends right now, so I have a hard time going that route with just a wing and a prayer," Rodriguez said.
Tommy Calvert was the only member of the court to publicly voice concern about not considering a tax rate increase.
"We need to think about strategy because the deficit may become more acute than what we're currently projecting," he said last week.
One of the budget office's most dramatic recommendations is to cut the county's public health staff by more than half. The department was created in 2022 with ARPA money in response to the lack of access to healthcare in some of the county's unincorporated areas.
It currently operates on a $10 million annual budget with 28 staff members. Andrea Guerrero, the department's director, asked the county to retain 27 positions and a $2 million budget. The budget office recommended funding just 12 of those positions and slashing its spending to $984,000.
The recommendation eliminates several administrative positions, but the department would be able to continue key services - including its Safety Team Active Response program, which serves domestic violence survivors, according to the budget office.
But the office is recommending cutting STAR's 12 case manager positions to five. Gaitan said the program receives fewer than half the calls that similar programs in Dallas and Tarrant county receive, despite having a larger staff than those programs.
Moody is pushing for the county-owned University Health's Institute for Public Health, also set up during the pandemic, to pick up the preventative health services that would be lost to budget cuts.
Guerrero countered in the meeting that STAR has handled 3,100 active cases so far this year.
"We've had seven domestic violence homicides this year, compared with nine total last year," she added.
The future of the public health department and other county programs will be decided on Sept. 15, when commissioners finalize next year's budget.
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This article originally published at Bexar County continues to dip into savings. What happens when the money runs out?.