McKinney ISD officials project tax rate decrease, nearly $7M shortfall for 2025-26 school year

As district officials wrap up the 2024-25 school year, the outlook for the next year’s budget includes a reduced property tax rate and a nearly $7 million shortfall.

An update on the district's projected budget and tax rate for fiscal year 2025-26 was given by Chief Financial Officer Marlene Harbeson during a May 12 board meeting.

The current situation

According to a presentation at the meeting, the 2024-25 budget included:

• $256.3 million in revenue
• $273.4 million in expenditures
• $17.1 million deficit

Other contributing factors including state funding formulas, changes in program-specific federal funding, inflation and stagnant student enrollment, the presentation states. Womack said a deficit budget is not the result of financial mismanagement, but rather due to an increase in operating expenses and effects of inflation without new funding to compensate.

The district has implemented a number of cost reduction strategies, Womack said, including eliminating vacant positions, reorganizing central office positions, reducing central office budgets and other efficiency operational adjustments. The district has also begun pursuing revenue-generating opportunities like the open enrollment program Choose McKinney.

“There’s not a program that we offer that we want to cut or reduce ... however when you have rising expenditures and stagnant revenue, you are forced to have to make a decision and any decision you make to reduce a program is a bad decision overall,” Womack said.

Looking ahead

A breakdown of the preliminary budget for FY 2025-26 includes:

• $258.9 million in estimated revenue
• $265.8 million in expenditures
• $6.9 million projected shortfall

• The maintenance and operations rate, which is set at $0.7080. This portion of the tax rate is determined by state law, Womack said.
• The interest and sinking rate, or debt service rate, which is set at $0.37. This portion of the tax rate is determined by district officials.

The average single-family home in McKinney has increased about $6,000 from the prior year to around $581,600 in 2025, according to the meeting presentation. Harbeson said the owner of an average single-family home can expect their tax bill to decrease by $162.

Certified property values will be available in July ahead of the board adopting a tax rate in August, Womack said.

The context

The projected budget does not include a pay raise for teachers, and is based on current law. The 89th Texas legislative session, which is currently underway and slated to end June 2, may result in changes to this budget outlook.

House Bill 2, which would increase funding for public education by $7.7 billion, was initially approved by the Texas House of Representatives on April 16, but the bill needs to be approved by both chambers to become law, Community Impact previously reported.

Harbeson said depending on the outcome of the legislative session, additional funds directed to school districts may have specific limitations for how they can be used, such as wage increases for teachers.

“This is like the worst time of the year to have to have to come up here and have to talk about projections because you're in the middle of a legislative session and essentially everything I tell you, I’m probably going to tell you the polar opposite of it when we come here next month,” Harbeson said.

The budget process for the 2025-26 fiscal year is ongoing. District officials are expected to hear further updates on the budget prior to it being adopted later this year, Harbeson said.

Diving in deeper

Womack said the budget is developed through estimates of various factors, including property values and student attendance.

Womack said the district is putting additional emphasis on improving attendance rates, which would result in $3 million in additional state funding for every 1 percentage point increase in attendance rates. District officials estimate attendance rates at 94%, which is a decrease from rates seen prior to the COVID-19 pandemic when district officials would project attendance at 96.5%, Harbeson said.

“No matter what amount the state of Texas says that we get to keep in revenue, we only get to keep that portion that is related to the number of kids and how frequently they attend school,” Womack said. “Attendance, really, is the definer on how much funds we get to keep here in McKinney ISD, it’s not the local property tax value. Values are important to some extent, but attendance means more than even the local property values or the amount that our community pays in taxes.”