At an Aug. 15 special meeting, the LHISD board of trustees approved calling a voter-approval tax rate election, or VATRE, on Nov. 5. The election comes as the district is facing its largest budget shortfall at $7.5 million amid cuts to state and federal funding, district officials said.
“It's important for our community to understand we do not want to raise taxes,” Superintendent Steven Snell said in an interview with Community Impact. “The last thing we want to do is raise taxes, but we're backed into a corner, and we feel we have no [other] option.”
Two-minute impact
The district is asking voters to approve a maintenance and operations, or M&O, tax rate of $0.7269 per $100 valuation, which is almost $0.06 higher than the FY 2023-24 tax rate of $0.6692 per $100 valuation. The district is required to get voter approval for a tax rate greater than $0.6669 per $100 valuation, Chief Financial Officer Rosanna Guerrero said.
The interest and sinking, or I&S, tax rate will remain at $0.50 per $100 valuation, making for a combined tax rate of $1.2269 per $100 valuation, Guerrero said.
The M&O tax rate funds the day-to-day operations of a district, including salaries, benefits and operational costs, while the I&S rate may only be used to repay debt, she said.
If the VATRE passes, homeowners with a median home value of $462,264 could expect to pay $4,444 in school property taxes in FY 2024-25, which is an estimated $217 increase from what homeowners would pay if it does not pass, according to district information.
At the Aug. 15 meeting, the board adopted the district’s $104 million general operating budget for FY 2024-25 with $7.5 million shortfall. If the tax rate election passes, the district would receive a $6.8 million increase in revenue and could lessen its budget shortfall to $2.9 million, according to district documents.
A higher tax rate would allow the district to replenish its fund balance and provide a 2% midpoint salary raise for all staff members, Guerrero said. If the VATRE does not pass, the district’s fund balance is projected to be depleted by FY 2026-27, she said.
“We are at a very critical time frame as a fast-growing district,” Guerrero told Community Impact. “In order to maintain that financial stability, we are given very minimal options, and the school-funding election is something that would help us maintain that level.”
Since 2018, the district's M&O tax rate has decreased by $0.375 due to compression from the state as property values grow.
How we got here
District officials have expressed frustration over a lack of state funding as the basic allotment of funding per student has remained at $6,160 since 2019, which is $4,000 less than it costs the district to educate each student, according to LHISD information.
Over the past year, the district has seen a $2 million reduction to its fast-growth allotment from the state and a nearly $900,000 reduction to Medicaid reimbursements for special needs students, Guerrero said.
The board adopted the district’s FY 2024-25 budget after making $2 million in cuts, including reallocating, freezing and reducing positions; increasing class sizes; and cutting campus and department budgets. The district cut administrative positions and instructional coaches, and reallocated library paraprofessional positions to special education aides, Snell said.
“If you start cutting staff, you're going to put more work on the backs of teachers,” Snell said. “They're already overworked and underpaid. ... It's going to be harder to retain them. It's going to be hard to recruit teachers.”
The district has also worked to reduce increased costs for utilities, fuel and property insurance amid inflation, Guerrero said. LHISD has faced growing operating expenses in welcoming 900 new students and opening two new campuses this school year, Snell said.
Also of note
Additionally, the district will ask voters to approve the purchase of attendance credits in the November election so it can begin paying recapture, which the district will be required to do under the higher tax rate.
The state determines how much local revenue school districts are entitled to. Recapture requires property-wealthy districts to pay the local property tax revenue they receive beyond their entitlement back to the state to be redistributed to property-poor districts.
LHISD is projected to pay around $618,000 in recapture for FY 2024-25, Guerrero said.
"The district is approaching recapture with or without the VATRE," Snell said. "The VATRE will put us into recapture. Part of the reason we're only asking for six pennies is to have a very low recapture payment that we can afford."
If voters approve a higher tax rate through the VATRE but do not approve the purchase of attendance credits, the state could seize the district’s property as a form of payment, Guerrero said.
Stay tuned
Snell will hold meetings with community members over the coming months to discuss the VATRE, school finance and the district’s needs, school board President Megan Parsons said in a letter to the LHISD community.
The district’s VATRE and attendance credit election will be held Nov. 5.
