The overview
The ballooning shortfall is due to $52 million in additional costs, from special education services to technology software and property value projections.
Interim Chief Financial Officer Katrina Montgomery said AISD officials could have anticipated higher costs for things such as instructional materials or technology costs.
However, impacts to School Health and Related Services, or SHARS, were unexpected, she said. SHARS funds are reimbursements for Medicaid health-related services provided to students. AISD staff budgeted $16 million in fiscal year 2024-25 for SHARS, but will only receive $4 million for reimbursements, resulting in a loss of $12 million.
With the $52 million in additional requests, it would bring the shortfall to $144 million. However, district officials are currently working toward $34 million in reductions for the rest of the fiscal year, bringing down the projected shortfall for the end of the 2024-25 fiscal year to $110 million.
So far, the district has fully implemented an estimated $9 million in reductions, meaning the reductions have been officially accounted for and have come in, Montgomery told Community Impact. The district has an estimated $25 million in pending reductions. This means district officials have strategies in place and are anticipating lessening the shortfall by $25 million, but it has not “materialized” yet, Montgomery said.
Part of the reduction strategies include a spending freeze, managing overtime requests and a hiring freeze to start Feb. 28 and managing overtime requests.
The goal is to get the shortfall down to $78 million, Montgomery said at a Feb. 13 meeting board meeting, the original adopted shortfall in June 2024 for the 2024-25 fiscal year. That would require an additional $32 million on top of their current reduction plans to reach their goal.
Montgomery told Community Impact that district staff are still working out the details for how to cut an additional $32 million by the end of this year. Total, the district will need to have reduced $66 million by the end of FY 2024-25.
How we got here
The board of trustees approved a $78 million budget shortfall in June with projected property value growth of 6%, based on numbers the board received from the Travis Central Appraisal District, or TCAD.
In August, TCAD values instead projected a property value growth of only 1%, meaning the district would receive less than expected in property tax revenue. A decrease in property value growth also impacts how much the district retains from recapture, Montgomery said.
This added $14 million to the budget shortfall, bringing it to $92 million, officials said during a board meeting Jan. 30 The new projected $110 million shortfall is now from those additional costs.
The plan for FY 2024-25
District officials had been working on ways to save money over the next three fiscal years with the $92 million shortfall, but they now have to reconsider ways to combat a larger shortfall, Montgomery said.
In addition to the spending and hiring freezes, revenue and reduction strategies for the remainder of this 2024-25 fiscal year include but are not limited to, the following:
- Revenue from the November 2024 tax-rate election
- Interest earnings
- Eliminating operational vacancies, in which a position has been vacant and can be eliminated in order to allocate the funds elsewhere
- Reorganizing departments
- Initiatives to increase attendance, which would generate additional funding
- Analyzing which contracts can be negotiated, renewed or eliminated
The board will also vote on a contract at the next board voting meeting Feb. 27 to enter a lease agreement with Greater Austin YMCA, according to agenda documents. The lease includes a five-year contract with YMCA to use the fifth floor of the AISD central office. The district implemented a new hybrid work policy to vacate the floor and make it available for lease.
If approved, the lease would start March 28.
The district is currently operating on a budget of $954 million, with 89% of the costs going to payroll expenses for campuses and district departments.
Projections for upcoming FY 2025-26 and beyond
For FY 2025-2026, Montgomery said the district is considering various revenue and recapture assumptions. The district is considering situations that would impact the shortfall, such as property value changes or a lack of additional state funding.
If property values don’t grow, Montgomery is projecting the district would have a $105 million budget shortfall and would need to have $50 million in reductions to reduce the shortfall.
If property values decline by at least 11%, which Montgomery said is based on current projections from TCAD officials, the district would have a $121 million shortfall. There would need to be $108 million in reductions to reduce the shortfall, with the assumption that cuts from the previous year were met.
While TCAD projections may change, she said she wants the district to start preparing to create a balanced budget and make plans for reductions.
Budget reduction focus areas for FY 2025-26 include, but are not limited to the following:
- Implementing hybrid work policies
- Updating bus routes to mitigate wear and tear on the bus, such as gas and mileage usage
- Improvements to master scheduling such as including reducing growth in the number of teachers and aides needed in a class, and focusing master scheduling on student-choice, district officials said at a board meeting Jan. 30
- Reducing the use of portable classrooms
- Evaluating contracts
- Property monetization
“That’s the last thing we want to do, but that is something that is on the list at the very end,” she said.
District challenges
Montgomery said the district is facing current challenges that impact revenue and expenses for AISD.
She said factors include, but are not limited to:
- Growing fixed costs such as payroll, property insurance, utilities and other expenses
- Impacts to attendance and enrollment including competition with charters and private schools, decreases in federal funding and local concerns regarding deportations
- Uncertainty regarding property value growth
- Executive orders regarding federal grants
- Inflation growth
Superintendent Matias Segura said he is not assuming any additional funding from the state.
What’s next
Montgomery said she and other district staff will be working on ways to get to the $78 million shortfall goal. She is regularly meeting with the TCAD officials on their latest projections to make sure the budget shortfall is up to date.
The district is continuing their initiative to host public engagement opportunities for teachers, staff and community members to offer their feedback to budget reductions. The next public engagement opportunity is Feb. 22, and there are more planned throughout the spring, according to agenda documents.
