Tomball ISD could see a $2 million surplus in fiscal year 2019-20 from House Bill 3’s change in the school finance formula, Chief Financial Officer Jim Ross said during a June 11 board of trustees meeting.
HB 3, signed into law June 11, allots $11.6 billion to reform the state’s school finance system.
The TISD board of trustees unanimously approved the district’s FY 2019-20 budget June 11—a budget created prior to Gov. Greg Abbott’s signing of HB 3 earlier that day. In addition to the budget, the board approved a general pay increase of 2%.
With the state investing additional dollars into education, Ross said he projects TISD will receive about $2.17 million more than the previous year in funding for FY 2019-20, which begins July 1. An additional $1.79 million is anticipated to come from the state through a formula transition grant. This grant contributes funds so each school district in the state sees funding increase at least 3% from the previous year, Ross said. However, this grant money will be phased out annually by 20% over five years, he said.
“It’s not going to be very long that we have the extra money coming in from this funding,” Ross said.
HB 3 gains, losses
Excluding the temporary grant funds, TISD’s estimates indicate funding will increase 1.64% this year under the new legislation, Ross said.
With a $141.8 million balanced general fund budget adopted June 11, the district anticipates a $2 million surplus from HB 3 as the adopted budget is balanced and did not factor in HB 3 changes, he said.
“We need that, because remember what we start doing next year is opening new schools. You’re going to need to buffer yourself a little bit with that,” Ross said.
TISD officials broke ground on a new educational and athletic complex in late May, the future site of a new elementary school and junior high school slated to open in fall 2020 and fall 2021, respectively.
Apart from a $2 million budget surplus, Ross said the district anticipates little net effect from HB 3.
“We didn’t see a lot of new money. … The Legislature is very impressed with the amount of money they put into public education, but it didn’t come to Tomball,” Ross said. “We did not see a favorable result in this as other [districts] do, but it is not something that Tomball ISD can’t live with because we’re quite accustomed to high performance at a very low cost. I feel confident we will be fine.”
Under HB 3, the district is no longer subject to recapture, the redistribution of property tax revenue from property-wealthy to property-poor districts, Ross said. Additionally, the per-pupil allotment to districts increased from $5,140 to $6,160—the first time this basic allotment has increased in four years, he said.
However, with changes in the funding formula to eliminate the cost of education index—an adjustment to the basic allotment compensating districts such as Tomball in highly competitive areas with uncontrollable costs—and other allotments, Ross said he estimates the district lost about $2.87 million from the new legislation.
“There was a significant change in the basic allotment that’s being talked about a lot as a huge increase, but when you change all those other components with those eliminations and you do those type of decreases, that really changed the way this looks,” Ross said. “For us, it virtually wiped out all the gains that we had with the increase in that basic allotment.”
If the basic allotment had increased and no other changes were made to the funding formula, Ross said he estimates TISD would have gained $19.5 million in the upcoming year.
When comparing surrounding districts’ gains from HB 3, Ross said TISD remains at the bottom of the list for revenue per pupil.
“The measurement for me is how much did we get in revenue per pupil,” he said. “We were the lowest of these groups; we’re still the lowest. Even with these changes, we’re in no different position than we were before as far as with revenue per [average daily attendance].”
HB 3 requires districts’ maintenance and operations rates to decrease from $1.04 per $100 valuation to $0.97 per $100 valuation, Ross said.
However, TISD’s interest and sinking rate—that which funds the district’s debt payments—was $0.02 short per $100 valuation in the adopted FY 2019-20 budget, leaving a $2 million shortfall in the debt service budget due to slower growth than expected in the property tax base, he said. To make up the funds, Ross said he anticipates the I&S rate increasing slightly.
Ross said he foresees about a $0.05 net decrease per $100 valuation in the property tax rate as a result, saving the average taxpayer in TISD about $150 in FY 2019-20.
A tax rate will be adopted at a later time, he said.