The Houston ISD board of education approved a $2.2 billion budget at its June 10 meeting, including a $2,500 raise for the roughly 12,000 employees on its teacher salary schedule.

That raise could be boosted further at the board's Aug. 12 meeting.

The move passed unanimously, but only after board member Elizabeth Santos initially called for a $5,000 raise, an amount that Chief Financial Officer Glenn Reed said could put the district in a challenging position with regard to its reserve funding. Though not required by law, the Houston ISD board follows a policy requiring the district to keep at least three months' worth of operating revenue—or roughly $469 million—in its unassigned reserve fund at all times in case of emergency.

The budget amendment from Santos was itself amended by Trustee Anne Sung, who lowered the amount to $2,500 and required the district's budget staff to come back at its August meeting with a recommendation on whether teachers should get an additional boost. Sung's amendment also requires the district to begin development of multiyear strategy to achieve and maintain competitive teacher pay with the region.

A $5,000 raise would have cost the district roughly $67 million, dropping the fund balance—projected to be $491 million at the end of the 2021-22 fiscal year—down to $424 million. By contrast, the $2,500 raise will cost the district about $33.5 million, dropping the fund balance to $457.5 million, an amount Reed said is more likely to rise back above the $469 million threshold once fallout funding is taken into account.

Additionally, HISD could see an additional $25 million-$30 million come back into its coffers in hold harmless money from the state, and coronavirus relief funding from the Elementary and Secondary School Emergency Relief Fund could also play a role in funding some of the district's priorities, Reed said.

When the topic comes back to the board in August, officials will know more about what it can expect in terms of hold harmless and ESSER funding, Reed said. The district's ESSER funds have been approved, Reed said, but it still needs to get approval from the Texas Education Agency on its plan for how the funding will be spent.

Santos said she called for the raise because she believed it was time for the district to bring its teacher salaries up to make them more competitive with surrounding districts. HISD teachers were paid a competitive starting salary of $54,369 in the 2020-21 school year, according to district information. By contract, starting teacher salaries in Cy-Fair ISD, Katy ISD and Spring Branch ISD were $56,000, $55,525 and $58,000, respectively.

"This is not a question of budgeting conservatively; it’s a question of priorities in the budget," Santos said. "We cannot hope to serve the needs of our children by being cheap on the most important determinant of their success—high quality professional educators."

Although most board members supported the general effort to pay teachers more, some said that it needed to be done in a way that is fiscally responsible. Sung pointed out that a pay raise is a cost that would affect future budgets as well. She said she did not want to put the district in a position where, due to financial strain, it would have to cut positions three or four years down the road.

Meanwhile, both Reed and Trustee Kathy Blueford-Daniels cautioned that any increase to teacher salaries would have to be cut from somewhere else in the budget.

"It is [doable] with some tough decisions," Reed said. "It would not affect the 2021-22 budget, but for 2022-23 we’re going to have to make some hard decisions."

Other trustees suggested that it made more sense to tackle the issue once incoming Superintendent Millard House was in charge and a more robust discussion could be had, though all nine board members ultimately backed the $2,500 raise.

Trustee Holly Vilaseca referenced the district's 647 educator vacancies. In her support of the raise, she said it was important for the board to show teachers they were willing to make a good-faith effort to make salaries more competitive.

The $2,500 pay raise is in addition to a step increase for employees on the teacher pay scale schedule. The budget also included a $1,000 retention bonus that will be given out in September.

Budget notes

The district projects to have about $2.2 billion in appropriations in the 2021-22 school year, Reed said. Revenues are projected at $2.1 billion with a roughly $82 million deficit.

The tax rate in the budget is slated to be a maximum of $1.1284 per $100 of property valuation, down from last year’s $1.1331, according to a press release from the district. However, the district will not adopt a tax rate until later in the year, after appraisal values are confirmed by the Harris County Appraisal District.

The district is projecting an enrollment of roughly 197,000 students in the 2021-22 year, down about 10,000 students from the previous year, Reed said. The district will pay about $213 million in recapture payments back to the state.

The district is expecting about $40 million in fallout, a term used to refer to unspent dollars at the end of the fiscal year that can go back into reserve funding. The district will use $42 million from its unassigned reserve fund to offset the remainder of its deficit, plus the funding needed to pay for the $2,500 raise approved later on during the meeting.

“That’s kind of what that is for," Reed said of the reserve. "This is for times where either the state makes cuts and we want to spread them [out] over a couple years or we lose 10,000 kids and you don’t want to do cuts that are going to have significant operational impacts all in one year. We hope that we get the majority of those 10,000 students back and that $42 million use of fund balance goes away, but right now, that’s the proposal.”