The state’s financial support for Katy ISD is decreasing as property values increase. This is the case for both KISD’s debt service fund as well as its general fund,  KISD chief financial officer Christopher J. Smith said.

Smith likened the district’s debt service fund to carrying a mortgage. Now that the state has stopped contributing, he said taxpayers are left with the full repayment.

“At one point, the state of Texas paid 23 percent
of our debt payment, our mortgage, if you will,” Smith said. “Now it’s 100 percent [paid by] the local
tax base.”

Despite the decrease in overall state funding, the KISD board of trustees approved a 1 cent tax decrease for the 2015-16 budget that went into effect Sept. 1. The tax decrease was made possible because of several factors, including early bond debt repayments and extra revenue brought in from higher property tax appraisal rates.

State funding

Texas Sen. Lois Kolkhorst, R-Brenham, said the state helps school districts with debt service
payments so taxpayers do not carry the full brunt of debt repayments.

She said it also helps ensure the debt will be repaid with the backing of the state.

“It’s just an investment that the state makes on behalf of the local taxpayers,” Kolkhorst said.

Smith said that the state’s funding formulas are complex, but Texas helps with the “mortgage” for up to $350,000 per student in wealth.

Last school year was the first time the state did not contribute to Katy’s debt service fund, Smith said.

“Wealth per student has grown to the point where we no longer get anything from the state [for the debt service fund],” Smith said.

According to budget projections for 2015-16, KISD has an enrollment of 73,578 students, which is an increase of about 3,100 students. The total tax base in Katy is projected to be $32.985 billion. Divided by enrollment, wealth per student would be $448,299.76, which is higher than the $350,000 threshold.

Kolkhorst, a member of the Senate Committee on Education, said it is possible to raise the wealth per student bar so the state would contribute more, but that comes with some caveats.

“If you raise [the wealth ratio], you need to put more money into [the available state funds],” she said. For a district like Katy, adjustments mitigate money for smaller districts that have less valuation to tax, Kolkhorst said.

Kolkhorst said the Legislature is trying to address policy and budget issues with fast-growth districts like Katy that must keep up with enrollment.

The state gained $5 billion in overall revenue from property appraisals last year, Kolkhorst said, however the state gave $4 billion back to taxpayers through increased homeowner tax exemptions from $15,000 to $25,000.

“We realize that there was a windfall off of tax valuations going up, and so there were two things that we did,” Kolkhorst said. “We gave tax cuts, and we didn’t spend all the money.”

She said the state may need the remaining money for education funding pending the outcome of a lawsuit that challenges whether Texas is funding public education adequately or equitably. More than 600 school districts were represented under six different plaintiff groups in the case, which was heard by the Texas Supreme Court on Sept. 1.

If education funding were found to be inadequate by the court, the state would be ordered to invest more money in it overall. At issue in the case is whether there is a balance between school districts of different sizes. For example, Cy-Fair ISD, a high-growth district, receives $5,600 per student while smaller districts may receive $12,000 to $20,000 per student. A decision could come as early as January.

Paying for growth

To meet enrollment growth, KISD is building two elementary schools, two junior highs and one high school, with another elementary down the road, Smith said. The schools, along with comprehensive renovations to other facilities, are part of the 2014 $748 million bond measure.

Smith said the 1 cent tax decrease was made possible because revenue from property valuations was higher than originally projected, but Smith  said he did not know what would happen next year with appraisals. Another contributing factor is the August early bond repayment that saved the district $15 million in interest payments.

The debt service tax decrease was the first in nine years, for which the district was thanked publicly at the August school board budget meeting by community members and board members.

“I think when you all originally came to us with the bond, you projected maybe a half cent to a 1 cent increase. You turned around and you’re showing us a 1 cent decrease,” board of trustees president Charles Griffin said. “Thank you for stretching the dollar.”

John Pendergraff, who ran for the board of trustees in March, spoke during the public comment portion of KISD budget meeting Aug. 25. He said despite the 1 cent tax decrease from the district, overall taxes are still going up.

“I understand the rate has gone down, but effectively everybody in the district has seen a 10 percent or more [overall] increase in their taxes this year. We appreciate your attempt to lower it a little bit, however, we’re getting priced out of our house,” Pendergraff said.

Kolkhorst said she does hear from constituents who do not want to pay more in property taxes.

Smith said as support from the state continues to decrease in the future, the district’s residents' support will continue to fill in the gap. He said state support is vital to help manage growth.

“Even though [state funding is] dropping, it’s still a significant amount of our revenue,” Smith said.