Round Rock ISD's short-lived surplus now projected to be $3.8M shortfall

Covington said RRISD was not expecting to owe additional funds to the state via recapture, but that has changed with new revenue estimates as of February, he said.

This is because tax collections are higher than projected in January, Covington said, triggering recapture. That is a payment to the state of local property tax revenues that exceed what the district is allowed to keep based on the state's funding formula.

The hold harmless threshold that kept the district from falling back into recapture was included in the passage of an increase to the homestead exemption from $40,000 to $100,000. Under this mechanism, the state committed to make up any losses in formula funding a school district might incur as a result of the change.

Covington said administrators were able to reduce the immediate impact of these changes—an $8.1 million projected shortfall—to $3.8 million by identifying $4 million in one-time expenses included in the 2024-25 budget, as well as finding eligible line items that can legally be funded with bond monies. The only projects that are eligible are improvements to capital assets, land acquisition and infrastructure, under state law.

Superintendent Hafedh Azaiez said the district is still working toward a balanced budget, despite the changes in its financial outlook.

"That's what we're working toward, is to make sure that we end up in in a balanced budget," Azaiez said. "The Cypress sale, we want that money to actually to be more like a surplus, and we want to end up in a surplus when you consider the Cypress sale."

What else?

Covington said some other sources of revenue are also expected to decrease, due to projections in estimated investment income as interest rates stayed steady, as well as state revenue and reimbursements for Medicaid-funded services provided to students.

Because of a change in the way the district is reimbursed for Medicaid-funded services, Covington said the district had been overpaid for services provided. Now, not only will RRISD not receive the $1.5 million in School Health and Related Services it expected for the school year, the district will have to cut a check for about $100,000, he said, to settle what was overpaid.