Officials say rate hike is needed for teacher salaries, programs

In August, Austin ISD will decide whether to hold a special election in November to raise its tax rate.

AISD's board of trustees president, Mark Williams, said the district expects that expenses will outweigh revenues by $29.5 million next year, and the board of trustees has agreed to dip into reserves to make up the difference.

At the same time, district leaders want AISD to remain competitive with neighboring districts after two years of frozen salaries, AISD Chief Financial Officer Nicole Conley-Abram said. The board has approved using reserves to give staffers a 3 percent raise for one year only, a $14.2 million expense.

Officials said that the district would need additional revenue to take on ongoing expenses.

The district would need to raise the tax rate to support its existing programs, make the raise permanent and follow up on stated priorities such as full-day pre-K, she said.

"It is a necessity. It's not a matter of if. It's a matter of when," Conley-Abram said of raising the tax rate. "School districts are operating under a disadvantageous structure that is unlike the city or the county or other jurisdictions. As a result, we have had to be efficient. We have made dramatic changes in how we do business."

"Over the last three years we have been cutting and trimming to the extent that is possible," she continued. "We are only coming to taxpayers out of requirement to sustain some of the efforts put in place."

Following last year's cut of 1,153 positions and austerity budgeting, school officials do not anticipate the need to cut any more jobs or make significant budget reductions for this fiscal year.

Types of tax rates

During the budget process, the district publishes two possible tax rates: the effective tax rate and the rollback tax rate, according to the state comptroller's website. Both are measured in cents per $100 of property valuation.

The comptroller's office explains that the effective tax rate is the rate the district would need to tax citizens to bring in the same amount of revenue it did last year. The rollback tax rate is the rate the district would need to tax citizens to bring in what the district spent in the previous year, plus an extra 4 cents.

If a district wants to raise the tax rate above the rollback rate, it needs to hold a tax ratification election, or TRE.

If voters oppose the raise, the tax rate stays the same as the prior year.

A TRE is a way for the district to get a sustainable source of additional revenue, Conley-Abram said.

The tax rate itself

School districts are facing increased pressure from limited sources of revenue and increasing costs, Conley-Abram said.

A tax rate is made up of two parts: maintenance and operations (M&O), and interest and sinking (I&S), which covers long-term debt and contractual obligations.

In 2006, the state implemented the "target revenue" system, which limits the M&O part of the tax rate. This "essentially freezes all districts at their 2005–06 funding levels," according to an AISD presentation.

The current M&O rate is capped at $1.04 per $100 of property valuation. A TRE can raise the M&O rate to a maximum of $1.17 per $100 of property valuation.

Joe Smith, former Hudson ISD superintendent and editor of education website, said that in the last seven years, 366 Texas school districts have held TREs. Of the 424 elections held—some districts have held more than one—304 passed.

During the 2011 legislative session, the state government slashed $4 billion from education funding for the next two years. AISD lost $35.6 million in funds in 2011–12 and anticipates losing $26.4 million in 2012–13.

To help close a shortfall for the 2012 fiscal year, AISD cut 1,153 jobs.

Several school districts are suing the state to change how funding is provided.

On the expense side, the district has had to absorb six years of inflation and rising costs of basic needs such as water and electricity, Conley-Abram said.

It is unclear what the Legislature will do with school funding during the 2013 legislative session.

"We are operating at core levels right now. If I had to cut anything, it would be things that are really going to hurt," she said.

Making their case

The board's next step is to decide before Aug. 31 whether to hold a TRE this fall to add 5 to 9 cents to the tax rate.

The board will also approve the revenue part of its budget at that time. It approved the expenditure budget in June.

Several board members support offering the raise for district employees but were unsure about a TRE during the June 18 board of trustees meeting.