Trustees Shed Light on Funding Dilemma (TX)
June 1, 2010
Facing an $18 million budget deficit for the 2010-2011 school year, representatives from Lewisville ISD are traveling the district to inform residents about a possible referendum to raise the tax rate.
School board members Amber Fulton and Tom Ferguson were at The Colony City Hall on Monday night, sharing information on the district’s finances while also taking questions from residents.
As background, Fulton explained how House Bill 1 changed the state’s school funding system in 2007, effectively freezing school budgets at their 2005-2006 levels without accounting for inflation.
“Our income has remained flat while our expenses have continued to rise,” Fulton said.
For example, the district spent $269 million on salaries in 2005-2006. That number increased to $339 million in 2009-2010. Utility costs were at $13.4 million in 2005-2006, compared to $17.5 million in 2009-2010.
Logic would seem to dictate that as more people move into the district and as property values rise, the district’s funding would increase accordingly but that is not the case, Fulton said.
“There’s confusion out there, that as property values go up the school district is receiving more money,” she said. “But an increase in property value is not helping us.”
The district’s tax rate is divided into two funding categories. Thirty-six cents goes into the Interest and Sinking fund, which is spent on capital improvement projects, land acquisition, school buildings, and buses. By law, money from this fund cannot be spent on anything other than those items. For example, the district cannot spend funds allocated for facility enhancements on teacher salaries, “or else Tom and I would go to jail,” Fulton said.
The district’s Maintenance and Operations tax rate is $1.04, which covers salaries, utilities, supplies, insurance, and equipment. As the district’s property tax revenue increases, it receives less funding from the state based on the 2005-2006 numbers. As a result, current expenditures exceed funding by a little more than $200 per student in a district with more than 50,000 students.
As an aside, Fulton pointed out that on average, only Alabama, Louisiana, and Mississippi spend less money per student than Texas.
& #x0A; Facing a $27 million deficit last year, the district managed by plucking what Superintendent Dr. Jerry Roy calls the low-hanging fruit, items that were farthest removed from the classroom. Campus budgets were cut 5 percent. A hiring freeze was instituted, except for teachers. Staffing ratios were maintained through attrition, and administrative budgets were cut, some by as much as 50 percent. The district also cut its substitute teacher budget by $1 million, reducing opportunities for staff development.
Unlike some districts around the state, LISD has not resorted to charging students participation fees for pre-college testing services and extracurricular activities.
“We believe involvement in extracurricular activities is an excellent way to keep kids in school,” Fulton said. “(Participation fees) would hurt kids, and we think you appreciate the strength of those programs.”
Payroll is the district’s highest expense, accounting for 83 percent of its M&O budget in 2009-2010.
“We’re committed to not laying off employees,” Fulton said, adding that administrative staff reductions take place as people leave, and new teachers are hired when experienced teachers retire. “Otherwise, there’s not a lot we can do with that number.”
Through the good years, LISD has built a fund balance, or savings, of more than $100 million. “That helps us with our bond rating and interest rates (on debt),” Fulton said, pointing out that the LISD was the first school district in Texas to receive an AA+ bond rating from Standard and Poor’s, a rating it has maintained for three consecutive years.
In lieu of other options, the district might ultimately be forced to fund its operations by dipping more and more into the fund balance, w hich is akin to a household spending money from its savings account on everyday expenses, Fulton said. “Eventually, your savings will run out, but your mortgage is still there.”
Two years ago the board passed a resolution establishing a minimum fund balance of $45 million in order to maintain its bond rating. In addition, state law requires the district to set aside at least three months of operating expenses in case of emergency.
“We’re trying to plan in advance of that situation and not get to that point,” Fulton said.
School board trustees, including three new members recently elected, will be meeting for a budget workshop in June. Based on feedback from residents, the board will decide at that time which of three proposed options will be pursued:
*Option 1: Do nothing to the tax rate and absorb an $18 million deficit by increasing class sizes for fifth grade and up, eliminating non-core programs, and reducing staff. These would be what Dr. Roy calls “Draconian cuts,” Fulton said, or changes that would start to show up in the classroom. The district might also be forced to eliminate its drug-testing program and its night school;
*Option 2: Increase the M&O tax rate 2 cents, generating $7 million. The deficit would be reduced to $11 million, requiring increased class sizes and reduced programs; or,
*Option 3: Increase the tax rate 13 cents, generating enough revenue to maintain the district’s current operational standards while receiving additional revenue from the state.
An election to increase the tax rate would be called by the end of July, with the actual vote taking place in September.
Summing up her presen tation, Fulton said the district is working hard to generate feedback from the voters on the issue, and is hoping to “inspire people to invest in public education,” she said.
“We’re faced with having to sell a tax increase to the voters. Is this a popular place for me to be standing? This is a horrible time to have to stand up and say that,” Fulton said. “What we would hope is that through these types of forums and opportunities, we generate informed voters and participation.”
Ferguson shared another one of Dr. Roy’s quips, noting that, “It’s better to send a kid to Penn State than the state pen,” he said.
Highlighting an issue brought up during the recent school board election, one attendee explained that the district’s comprehensive annual financial report was not readily available for review.
“If you want to get the taxpayers to pay (up to 13 cents), you need to be more financially transparent,” he said.
That said, he encouraged the district to make sure voters understand the relationship between quality schools and property values.
“People are attracted to housing based upon schools. They’re also weighing the tax rate,” he said. “We’re sitting here looking at this deficit. People need to understand that if we let the school district go down, what’s going to happen to your real estate values five years or 10 years from now?”
Former The Colony mayor John Dillard expressed concern that state legislators in Austin are increasingly taking over the decision-making for school districts such that they are not truly “independent” any more.
Fulton agreed. “We are independent more in title than in practice,” she said.<br /> ;
The Colony City Council member Richard Boyer wondered if the district had in fact turned over every stone looking for cost savings.
“Some of the tough sell is that your own rules (limit your options),” Boyer said. “You want to leave $45 million in the bank. That’s a stone. You don’t want to lay anyone off. That’s a stone.”
He also noted that an option to break even was not on the table. “You’re either running a deficit or having a nice surplus,” he said.
As an example of its efforts to find savings anywhere it can, Ferguson said the district had reduced its janitorial staff by 70 people this year, meaning it was cleaning classrooms and facilities every other day instead of every day, saving $500,000.
Fulton replied by noting that the district was trying to be incremental in its approach to savings, rather than make huge cuts all at once. “We feel we’ve been pretty thorough,” she said.