CLARIFICATION: Christopher Smith is KISD's Chief Financial Officer. He projected the district may have a 28.4 million budget deficit by the 2019-20 school year and a 31.5 million deficit by the 2020-21 school year.

Katy ISD Chief Financial Officer Christopher Smith warned trustees at a May 21 work study meeting they may have to make strategic decisions to address a potential budget deficit. Smith said the potential deficit is due to the Texas Supreme Court and Texas Legislature’s inaction in addressing inequities in the school state funding system and the financial strains brought about by damage to the district as a result of Hurricane Harvey.

“We’ve amended this budget like I’ve never seen a budget amended before, because of Hurricane Harvey,” Smith said.

Smith said the district’s general fund has taken a nearly $25 million hit in May from expenditures associated with damage incurred as a result of Harvey. These renovations include repairs to the Education Support Complex, which cost the district an additional $491,000, and the nearly $9 million University of Houston annex that was purchased to house displaced Creech Elementary School students.

Smith said the continued decline of state revenue has created a funding cliff, and Harvey’s impact on reappraised values and property insurance premiums have also impacted the budget.

Smith projected the district may have a 28.4 million budget deficit by the 2019-20 school year and a 31.5 million deficit by the 2020-21 school year. He recommended budget reductions like abandoning programs or addressing staffing ratios.

“It shows pretty big deficits over the next couple of years,” Smith said. “As long as we have things in our budget that’s subject to inflation..and those funding formulas don’t increase, it’s really tough to fund those [new programs].”

Trustees approved the budget amendments at the May 29 meeting. Some thanked Smith for the warning.

“I’ve seen sobering reports before but I want to thank you for giving this much heads up,” trustee George Scott said.

The amendments involve an increase in the proposed revenue budget, which included $105,464 from additional tax increment reinvestment zone revenue from increased property values and $11,650,000 in additional state Tier 1 revenue the district received for offering free and reduced lunch during September and October 2017, post-Harvey.

The amendments created a net increase of more than $10 million in the district’s fund balance for May.

Despite this increase, Smith told trustees the projected deficits the district could see in the next few years should be taken seriously.

Trustees will hold  a public hearing on the 2018-19 proposed budget and tax rate Aug. 20. The budget will be adopted at the Aug. 27 meeting and the tax rate will be adopted at the Sept. 24 meeting.