Houston Faces $4.5 Billion Shortfall, Earning a “D” Grade

Houston’s financial condition showed some improvement in fiscal year 2023, but the city still faced a $4.5 billion shortfall. This equates to a Taxpayer Burden™ of $5,700, earning Houston a “D” grade and classifying it as a “Sinkhole City” in Truth in Accounting’s latest report.

The city’s financial position improved by $1.6 billion, largely due to a significant increase in investment income, which rose by $15.4 million (219.8%). This growth was driven by higher interest earnings and reduced losses on investments. Additionally, Houston benefited from a $577.5 million reduction in retiree healthcare liabilities due to favorable changes in actuarial interest rates.
Key findings from the report include:

• Houston had $6.5 billion available to pay $11 billion in bills.
• The city’s financial shortfall amounted to $4.5 billion, leaving each taxpayer with a $5,700 burden.
• Increased investment income and a reduction in retiree healthcare liability improved Houston’s financial position.

Despite these improvements, Houston still faces long-term financial risks, including pension investment market volatility and future changes in actuarial assumptions. Effective financial management will be critical to maintaining fiscal stability.

For those interested in a deeper dive into Houston’s finances—and how it compares to other major U.S. cities—you can read the full Financial State of the Cities 2025 report here.