Austin is gearing up to slice roughly $5.28 million out of its social-service contract budget, a belt-tightening move that will hit dozens of nonprofits that run housing, public health, and court-based programs. The cuts come as the city rewrites its FY 2025–26 spending plan after voters rejected Proposition Q, and staff say they have to close a revenue gap. Nonprofit leaders warn the move could trigger service reductions, staff layoffs, and fewer clients served across programs that already run lean.
City Manager T.C. Broadnax detailed the changes in a memo to the mayor and City Council that staff circulated this week. As reported by KVUE, the memo shows the city will trim about $5.28 million from social-service contracts this fiscal year.
How the cuts break down
According to city staff, the savings will come from a 10% across-the-board reduction to social-service contracts managed by Austin Public Health, Austin Economic Development, and the municipal and community courts, along with a 4% reallocation inside the Homeless Strategy Office. Community Impact reports those moves total about $5.28 million out of the city’s roughly $74 million social-service portfolio for FY 2026.
Which nonprofits would feel it
An itemized list in the memo shows several major players facing steep reductions. Roughly $1 million would be cut from the Austin Area Urban League, nearly $480,000 from Caritas, almost $430,000 from Integral Care, about $340,000 from SAFE Alliance, and roughly $360,000 tied to Austin ISD contracts. The Austin American-Statesman obtained the memo and published the program-level breakdown.
Nonprofits say they were blindsided
The reaction from service providers has been swift and anxious. “This has come as a complete surprise and shock to the nonprofit community,” Walter Moreau, executive director of Foundation Communities, told the Austin American-Statesman after learning his organization is facing roughly $500,000 in reductions. Christina Collazo of Todos Juntos told the paper she and other leaders were given only weeks to implement cuts, a timeline she called “very difficult to make work.”
Why this is happening
The cuts stem from a revised spending plan after voters rejected Proposition Q in November, a measure that would have raised about $110 million for homelessness, health, and other services, city reporting shows. The Austin Chronicle and other outlets have detailed how the defeat forced the city to trim tens of millions of dollars and tap reserves to balance the FY 2026 budget. City leaders say they tried to protect shelter operations and some staffing increases while trimming contract spending across the board.
Broadnax’s memo, according to Community Impact, also warns that the $5.28 million is only the opening act. Staff project another $16.8 million in social-service contract reductions could be needed next year, and have launched a citywide inventory of grants and contracts to look for duplication and inefficiency. Officials say that review could lead to program consolidations or shifts of services to other funders, although the full scope remains in flux as departments notify partners.
City Council members are set to review the memo and related budget tweaks at upcoming work sessions and could float amendments before anything is final. The City of Austin website lists the full budget calendar and public hearing schedule for FY 2026, giving residents a chance to weigh in before the cuts become reality.
