Chief Financial Officer Chris Smith briefed the Katy ISD Board of Trustees on July 28 about the district's draft 2025-26 budget, explaining assumptions, risks and a timeline that will culminate in a formal tax-rate adoption in September.

Smith said the budget draft anticipates a draw on fund balance driven in part by teacher pay increases required by the legislature and by conservative enrollment assumptions. He said the district's projected use of fund balance in the draft is a planning assumption not yet finalized: "This district usually underspends its budget; historic underspending is a backstop," Smith told the board.

Key points from the presentation included:
- Tax rate: staff will recommend maintaining the district's tax rate at the maximum compressed floor the board will be asked to adopt in September. Smith said appraisal districts provided preliminary values and the district ran the figures through the Texas Education Agency's compressed-rate portal.
- Property values: certified appraisal values include a new $40,000 homestead exemption; when that exemption is reflected in the certified rolls it reduced taxable values but the state provides Additional State Aid for Homestead Exemptions (ASHIE) to make up the difference.
- Fund balance and one-time audits: Smith said the district's audited ending general-fund balance was approximately $364 million and that one-time property-value audits (tax-year audits) can produce intermittent revenue; results are unpredictable and, he said, should not be budgeted as recurring revenue.
- Enrollment and revenue assumptions: the proposed budget assumes a net increase of about 524 students; Smith said growth has slowed and that figure is conservative.
- Timeline: staff will publish required notices in August, hold the public hearing August 18, and the formal tax-rate adoption is scheduled for the September 22 board meeting.

Smith also reviewed other funds: the food-service fund shows a planned drawdown of reserves that the district is managing; the debt-service fund will use a portion of its strong balance to make an aggressive principal payment tied to bonds sold earlier this summer. He said the district sold $450 million in bonds in June to maximize eligibility for a new state aid program and to reduce long-term interest costs; the early sale increased near-term debt-service cash needs but is expected to save taxpayers interest over the life of the bonds.

Trustees asked for clarifications about timing for property-audit results and about the magnitude of the projected general-fund draw. Smith said one recent audit led to a $16 million payment that was posted in December; he said additional audit results are possible but timing depends on state processing. He confirmed staff will present an amended budget and more detailed numbers at the August budget meeting.

No board vote was required; the presentation was provided to inform the August and September budget steps.