City of Austin to cut $5.2M from social services contracts

AUSTIN, Texas - The City of Austin is cutting $5.2 million from social services contracts for the 2026 fiscal year. 

This comes after voters overwhelmingly rejected a tax rate election in November, which made the city revise its budget. 

What is getting cut in the new Austin city budget?

By the numbers:

There will be 10 percent reductions for the Economic Development Department, Public Health, and Community Court. Homeless Strategy Office funding will be reallocated by four percent.

The total social services contract budget for Austin is $74.2 million. 

A city memo details $5.2 million in cuts to dozens of programs:

• Economic Development $451,859
• Homeless Strategies & Operations $1,457,200
• Municipal Court/Austin Community Court $629,565
• Public Health $2,738,379
• Total $5,277,003

What they're saying:

In a statement, Austin City Manager T.C. Broadnax says:

"During the FY26 budget process and adoption in November, a reallocation of social services funding was approved. The decision to reduce and reallocate funding for social services contracts was a difficult decision. However, the failure of Proposition Q sent a clear message that city government cannot be all things to all people. 

Staff have begun the process of notifying impacted partner agencies and organizations regarding the changes to their City contracts via phone calls, virtual meetings, and written notification. Given the number of impacted organizations, staff wanted to meet with our partner agencies before they heard about any changes through other sources. 

As part of the FY27 budget process, the City plans to conduct an inventory of all contracts across departments that provide social or community services with the goal of identifying duplication of service(s), realizing efficiencies by merging similar agreements, and ensuring that our investments are fiscally sustainable." 

Organizations react

Local perspective:

Workforce Solutions Capital Area connects people with jobs. They also administer federal and local childcare scholarships.

"We were prepared to absorb any of the cuts that would affect us. We know that we will be losing a few direct care scholarships. We estimate that's going to be about 10 children," Madison Mattise, senior director of childcare quality initiatives at Workforce Solutions Capital Area said. "The direct care scholarships funded by the Quality Childcare Collaborative, which is QC3, are technically for families that may have experienced hardship and have been kicked off of their federal scholarships. Our city is really innovative in trying to support families to not fall off what we consider a benefits cliff. The QC3 direct care scholarships are for families who have either had a violation of their child care requirements, that could be a parent who isn't able to attend workforce training programs for a while, or they may have actually completed a program, gotten a job that allows them to make a higher income and they no longer qualify under our rule of 85% state median income. This is a good thing, but we want to give them time to prepare to incur the childcare costs. The QC3 funding allows for us to give them about six months more subsidized childcare, so that they have time to plan and really prepare for the expense of a full childcare tuition."

Matisse says they have other funding avenues, such as the county.

"We're one of the lucky social services contracts in that we are able to absorb the 10 families through other funding opportunities. For families that do accept these direct care scholarships, it's a lifeline for them," Matisse said.

SAFE Alliance is another organization that is getting funding cuts to various programs. 

Dr. Pierre R. Berastaín, CEO of SAFE Alliance released the following statement:

"As a result of the recent funding reductions, The SAFE Alliance will be unable to serve approximately 345 survivors this year, meaning fewer households receiving safety planning and stabilization support, and fewer opportunities to intervene before situations escalate into homelessness, emergency medical care, or involvement with law enforcement and the courts. 

We recognize that the City is navigating a genuinely difficult fiscal moment, and we deeply appreciate the care with which leaders are weighing these decisions. We will, as we always do, work aggressively to raise private and philanthropic dollars to help offset gaps. But philanthropy cannot reliably replace public funding for core public-safety infrastructure. At a certain point, efforts to stretch limited resources, no matter how well-intentioned, begin to create harm rather than prevent it. When prevention and early intervention are underfunded, those costs don’t disappear; they are shifted into emergency rooms, jails, courts, and crisis systems, where they are far more expensive and far more harmful. The system always collects its debt. The question is who pays, and how much harm happens first."

What's next:

At a public health committee meeting on Feb. 4, the city will discuss potential future reductions. 

For the 2027 budget, they anticipate a $16.8 million reduction to social services contracts.