Wednesday, May 8, 2024
AZLE — Texas schools are facing a perfect storm of financial problems, but Azle ISD expects to weather through.
“In theory, at least in the past, the whole budget concept was supposed to be a balancing act,” Assistant Superintendent of Finance and Operations Matt Adams said at the March Azle ISD board of trustees meeting. “As local share increases with our local property values going up, state share decreases or vice versa when they forced the compression on us. When local share went down because of tax compression, state share goes up.”
“Well, not really,” Adams said.
As a result of recently passed property tax relief for Texas homeowners, tax revenue that Azle ISD would have collected has compressed by $1.6 million. In all, Azle ISD has decreased its tax rate by about 30 cents per $100 valuation in the last five years.
While state revenue to schools should have, ideally, increased to cover the difference, it has instead decreased by almost $1.2 million. Additionally, the federal government also slashed funding for School Health and Related Services or SHARS reimbursements after a commission discovered discrepancies in how Texas officials had been coding the services under Medicaid. Azle ISD had been receiving over $1 million per year in reimbursements, but now only expects to receive $566,000. Adams said based on current knowledge, revenues could decrease by as much as $3.3 million in total next fiscal year.
These funding decreases come at a time when expenses for Texas schools are higher than ever. Inflation has caused technology, software, curriculum, supplies and other educational necessities to rise in price. Property insurance costs have also gone through the roof, increasing by $250,000 or 40% for the district this year alone.
While many school districts across Texas are adopting deficit budgets and fearing rocky financial prospects ahead, Azle ISD administrators said they feel lucky. With continuously increasing enrollment, climbing property values, and smart spending, the district considers itself in a good position to make up for the decreases in revenue.
Azle ISD typically budgets $2 million per year for potential HVAC and roofing needs; by budgeting less, Adams says the district can make up a large portion of lost revenues. In the last five years, Azle ISD has already made strides in catching up all the current HVAC and roofing needs of its facilities. The most major anticipated future needs in this category are also expected to be covered by the recently passed bond proposal. The 2023 bond money for upcoming major projects was deposited into school accounts, March 7.
Adams said the district can still enter 2024-2025 with a balanced budget by decreasing the budget for other potential expenses. Budgets for transportation expenses, and salaries for unexpected new hires were two other areas mentioned.
“We typically actually budget about $1.5-$2 million in additional funding on the salary side for positions that we may need throughout the year,” Adams said. “If we just decreased that by a million, we’d still have money in there for additional positions but that would get us to the $3.3 million we would need to cut in expenses so we could match our revenues.”
Adams suspects the district could decrease expenses by another $640,000 on certain nonpayroll items. The board of trustees has also reported success so far in asking Azle ISD schools to cut budgets by 10%. Azle ISD’s Superintendent Todd Smith stressed that the district’s top priority is to balance the budget while retaining Azle ISD staff. Even with the unexpected losses in revenue, Smith still hopes to increase staff pay by 2% in order to align Azle ISD with state averages.
Another sign of the district’s positive financial health, the assistant superintendent claimed, is its ability to fund programs established under the COVID-era Elementary and Secondary School Emergency Relief Funds with the school’s general fund instead, something many neighboring districts have failed to do, he said.
While grateful to have a path forward, board members still worry that budget decreases could spell trouble in the event of an emergency or major unforeseen expenses.
“I’m just worried about next year,” Board President Bill Lane said. “We’re not in trouble, but there’s a lot of districts that are.”
In one extreme case, Adams mentioned that a district in South Texas even intends to self-fund its own property insurance. In doing so, the district guarantees that it saves money if the insurance goes unused, but if a natural disaster or other unexpected damage were to occur its schools would suddenly be on the hook for the full cost of losses and repairs.
“The reality is, they’re one building, one flood away from (disaster),” Adams said.
One subject the board frequently revisited is the $32 billion surplus the Texas 88th Legislature left unspent at the end of the session, even after promises of increased school funding from representatives. At the start of the next legislative session, the governing body is expected to have an additional $24 billion surplus which the board hopes Gov. Greg Abbott and the Texas Legislature put toward increased school funding.
After recently switching to a July fiscal year, the board of trustees must approve the next fiscal year’s budget in June instead of August. With the date approaching and preliminary tax data expected in April, the board plans to convene a budget workshop sometime in the near future.
