The action comes weeks after voters failed to pass an increase to the district’s tax rate during a Nov. 5 voter-approval tax rate election, or VATRE. The district is now facing a projected $7.5 million shortfall and is expecting to deplete its fund balance by 2026.
What happened
The district adopted a total tax rate of $1.1669 per $100 valuation. The district’s maintenance and operations tax rate of $0.6669 decreased by $0.0023 from FY 2023-24 due to compression from the state, Chief Financial Officer Rosanna Guerrero said. The interest and sinking tax rate remained at $0.50.
In the Nov. 5 election, the district asked voters to approve an increase to the district’s tax rate of about $0.06 through Proposition A. Proposition A narrowly failed with 50.67% of voters, or 10,319 people, casting their ballots against it, while 49.33% of voters, or 10,045 people, voted for it.
The impact
LHISD is now projected to receive $7.2 million less in revenue than would have under the higher tax rate, Guerrero said. Additionally, the district is unable to provide 2% raises for staff totaling $1.6 million and fund nearly $315,000 in new positions to accommodate growth.
The district is expected to face a budget shortfall of $7.5 million for FY 2024-25, which would reduce its fund balance to around $8.19 million. This would put LHISD well behind its goal of maintaining at least three months of operating expenditures, which would be $25.9 million, Guerrero said.
“It’s not viable,” Guerrero said about the district’s projected FY 2024-25 fund balance. “It’s not financially stable, and we’d have to look at making drastic cuts in order to be able to maintain the financial stability of the district.”
Looking ahead
By FY 2025-26, the district is projected to face a $15 million budget shortfall amid enrollment growth and maintaining staff positions. The shortfall could cause LHISD to deplete its fund balance by the spring of 2026, Guerrero said.
“Realistically, we cannot get there,” she said. “It’s a very, very difficult financial situation to be in, and we have to do everything possible to refrain from getting into that financial situation.”
Depleting its fund balance would affect the district’s financial rating with the state as well as its credit rating for bond sales, she said.
Also of note
In FY 2023-24, LHISD received an “A” superior financial rating from the state with a score of 94 out of 100, Guerrero said.
The Financial Integrity Rating System of Texas scores districts on their financial management practices each year, according to the Texas Education Agency.
Next steps
Guerrero recommended the district consider ways to reduce its budget shortfall this fiscal year and begin looking at next fiscal year. The district will need to “make drastic changes” for FY 2025-26 and may need to look at passing a balanced budget, she said.
The district’s revenue could increase if it receives additional funding for certain student groups and programs, exceeds its enrollment growth projections, and continues to maintain a higher attendance rate.
Additionally, Texas lawmakers could increase school funding during the state's 89th legislative session beginning in January, Superintendent Steven Snell said.
LHISD could save money from vacant positions and minimize costs across campuses and departments.
In August, the board of trustees may call another voter-approval tax rate election for November 2025, Guerrero said.
