Although House Bill 2 from the 89th legislative session introduced $28.9 million in funding for Katy ISD, which would have otherwise grown the shortfall to about $35 million, district officials said the impact has been largely offset by inflation, rapid enrollment growth and a lack of state-funded cost adjustments in recent years.
However, Chief Financial Officer Chris Smith said at the Aug. 18 work study meeting that the projected shortfall was not a cause for concern due to historical underspending.
"Nobody spends their entire budget,” he said. “As the year moves on, we’ll likely end close to break-even, if not a surplus."
The snapshot
Smith said the budget estimate is based on a 0.5% enrollment growth, the operating costs of the new Boudny and Cross elementary schools and a tax base decrease of 2.1%, anticipating the passage of higher homestead exemptions by voters in November.
The largest expenses are payroll-related, constituting 89% of expenditures, Smith said.
Most of the district’s $1.13 billion in revenue is coming from the state, while 39% is local and less than 1% is federal, per the presentation.
The financials
Smith said the budget assumes the district’s tax rate at $1.12 per $100 of property valuation for the third consecutive year, including a:
- Maintenance and Operations, or M&O, rate of $0.73 based on the state formula that changes depending on property value growth, and 5 cents of voter-approved “enrichment pennies” that are not subject to state confiscation
- Interest and Sinking, or I&S, rate of $0.39 for debt service
Smith said in 2023-24, the state provided tax relief to homeowners, which led to a $0.18 drop in tax rates. During the 88th legislative session, lawmakers set aside $12.6 billion to “compress” tax rates, therefore cutting local revenue by about 24% and increasing reliance on state funding, Community Impact reported.
Taking a step back
While the published notice states the rate required to maintain the same level of revenue as the 2024-25 school year is only $1.06, Smith said the additional spending mandated by HB 2 to fund staff raises increased district expenditure, therefore requiring the same rate.
Next steps
The tax rate will receive board approval in September, per an Aug. 25 news release from KISD.
