Enrollment for the 2021-22 school year was 3,000 students fewer than the district had projected, resulting in a smaller budget based on per-student funding, Villa said. The reduced funding could lead to financial issues that would build on each other, he said.
The district has already taken steps to reduce this shortfall, Villa said. The district is not hiring for certain vacancies and has begun using federal COVID-19 funding—Elementary and Secondary School Emergency Relief, or ESSER—reimburse itself for pandemic costs, including the $1,000 staff retention incentive issued in October, Villa said.
The Texas Education Agency analyzes a district's reserves called cash on hand as part of its Financial Integrity Rating System of Texas, or FIRST, score. For school districts to maximize their points in this category, they should have 90 days' worth of cash reserves in the fund balance. This is not a legal requirement, but school districts are rated on this financially by TEA.
The lower enrollment means AISD is at risk of losing its Superior Achievement Financial rating that the TEA determines if its reserves dip. To get the best rating from the TEA, districts should have 90 days of cash reserves in the fund balance. Austin ISD has set a goal of maintaining roughly 72 days' worth of cash reserves, Villa said.
If AISD falls below its goal for reserves, Villa said it could also place the district's AAA bond rating at risk. As of November, AISD has the highest bond rating given to school districts currently, but a lower bond rating could result in millions of additional interest rate costs for school districts when they sell bonds.
The district also relies on strong reserves to operate the district and afford payroll from July through December, because the majority of local tax revenue are collected starting in January, Villa said.
“The district is moving forward with addressing its budget deficit this fiscal year because we also have a goal to pass a balanced budget for the [20]22-23 school year,” Villa said. “This will not be possible if we don't start addressing our budget situation this school year.”
