The Board of Education on Monday discussed proposed changes to HISD’s Resource Allocation System that address the district’s $115 million budget deficit for the 2018-19 school year.
The changes include a reduction to the Per Unit Allocation (PUA), an increase in the small school subsidy, and the centralization of funding for Career and Technical Education.
HISD faces a $115 million budget deficit for the 2018-2019 school year. To address the deficit, the district is proposing cutting $70 million from central office. Originally, the district proposed cutting $45 million from campuses, but that figure was reduced to $34 million by anticipating and assigning unspent funds from the 2018-2019 budget.
As HISD continues to prepare a budget for the 2018-19 school year, the district anticipates a projected deficit reduction from $208 million to $115 million. This revised deficit includes several budget assumptions related to Hurricane Harvey relief and pending litigation.
When HISD first began budgeting for the 2018-2019 school year, it was in the immediate aftermath of Hurricane Harvey. Using a worst-case scenario, the district’s financial team projected a $208 million deficit based on four dynamic factors: the Local Optional Homestead Exemption (LOHE) lawsuit, a recapture payment to the state, a potential property tax value decreaseand an anticipated student enrollment decline. District administrators crafted a revised budget outlook for the 2018-19 school year.
Community meetings scheduled on budget deficit
The district’s legal team feels confident that the state will prevail in the LOHE lawsuit. For HISD, this means a reduction in its recapture payment because the TEA will recognize half of the 20 percent local homestead exemption given to homeowners. A decision in the lawsuit could come after a hearing this spring. A win would reduce HISD’s recapture payment by $51 million.
Under the Texas Education Code, TEA Commissioner Mike Morath has the authority to adjust property values. Based on the damage sustained from Hurricane Harvey and the lasting impact of the storm on our students and staff, we anticipate the commissioner will adjust property values, which in turn, would reduce our recapture payment. Governor Greg Abbott, Lt. Governor Dan Patrick, and other state leaders have publicly stated their support for this action. Click here to review a September 2017 press release from Lt. Governor Dan Patrick that confirms his support for schools districts in Region IV impacted by Hurricane Harvey, which includes HISD. In addition, Commissioner Morath surveyed school districts after the hurricane to gather projections on their property tax collections post-Harvey. HISD estimates a $42 million adjustment for property value loss associated with Hurricane Harvey.
In addition, the HISD Board of Education favors a district budget performance review to be conducted by a firm that has previously worked with large school district budgets. An agenda item is anticipated for the April 2018 board meeting. If approved, an immediate audit would begin with a completion date set for the end of the year.
Financial impact of Harvey and recapture creating deficit for 2018-2019 school year
As HISD begins to prepare a budget for the upcoming 2018-2019 school year, the district is estimating a $208 million shortfall as result of the financial impact of Hurricane Harvey and recapture.
HISD has seen a decline in student enrollment and is planning for a further decline for the coming school year, which will mean a decrease in state funding. The district also anticipates the storm will have a significant impact on the city’s property values, which will be released in April 2018. HISD’s main source of funding is property tax dollars. To date, the district has received no indication of how much and when they’ll be reimbursed for Harvey-related expenditures.
Click here for a complete FAQ on HISD’s 2018-2019 budget. This document will be updated frequently.
These factors, combined with the district’s 2018-2019 recapture payment, is creating an estimated $208 million deficit and is requiring HISD to make difficult choices about how funds will be allocated at the school and district level for the upcoming 2018-2019 school year. Continue reading