Chief Financial Officer Chris Scott provided the budget update to the board during the board study session Oct. 8.
What’s happening?
Per state guidelines, a district’s fund balance should be above 25% each year. When the 2024-25 budget was adopted in June, the fund balance was not projected to dip below 25% until 2026-27, Scott said.
“We were really anticipating that we were going to be spending this year starting this type of discussion in January or February, saying, ‘We really need to do something in 2026-27 to address this,’” Scott said. “... We don’t have that much time, because some things have changed.”
Since the budget was adopted with a projected deficit of $200,000, further changes have increased the shortfall, including:
- Certified taxable values received in July were lower than initial estimates, costing $550,000.
- There are new expectations for the district’s likely investment earnings, costing $700,000.
- Enrollment is lower than demographic projections, costing $825,000.
- The Texas Education Agency adjusted formulas for calculating taxes and EISD did not receive final guidance until August, costing $1 million.
Other long-term budget issues include School Health and Related Services funding, or SHARS, which reimburses districts for Medicaid-eligible services it provides.
In recent years, EISD received around $800,000 to $900,000 in SHARS funding, Scott said. However, the state is no longer reimbursing at the level it did, and EISD stands to lose about $600,000 of that funding.
Some context
Scott said there is a “hard line” between the debt service budget, which is how the district pays its long-term debts, and the maintenance and operations budget, which is how the district runs its day-to-day operations.
“So many times, particularly the public, tends to think of our money as fungible,” Scott said. “It comes in one place and we can spend it where we want. That’s really not the case.”
According to Scott, the M&O budget receives funding through Tier 1 funding, or local taxes and state aid, and Tier 2 funding, or the “golden pennies” system.
Most of the Tier 1 funding is based on basic allotment, or how much the district receives per student. This number has not been updated since 2019, despite an cumulative inflation rate of 22.7%, and will only change with legislative action.
In 2024-25, the district will collect nearly $145 million in Tier 1 taxes and send nearly $95 million to the state in recapture payments. Additionally, over 86% of EISD’s expenses go toward personnel, Scott said, and even 2% staff salary raises cost approximately $1.6 million.
The takeaway
Scott said administration is seeking guidance from the board on how to keep the fund balance above 25%. While some cost-cutting measures have already been implemented, the district will need to make about $6.5 million from revenue generation or cost cuts for the 2025-26 school year in order to accomplish this fund balance goal.
The board will also finalize its legislative priorities for the 89th Texas Legislative Session, which begins in January. Priorities previously discussed by the board include more funding for special needs services and unfunded safety mandates, investing in mental health resources and increasing the basic allotment.
“To our parents, we’re going to need your help to advocate for this, and to step up frankly, to help us combat some of these issues,” trustee Heather Sheffield said.
