Magnolia ISD projects balanced budgets while weighing HB 2 teacher pay pass-through and property-tax exemption impacts

Magnolia Independent School District staff told trustees the district is projecting balanced budgets across its three primary funds but faces constrained new revenue after the state’s HB 2 teacher pay provisions and recent property-tax exemption increases.

Eric, the district presenter, summarized state funding under HB 2 and how it affects local budgeting. He said the state’s largest item was a teacher pay increase pass-through: districts with fewer than 5,000 students get $4,000 for eligible teachers and districts with 5,000 or more receive $8,000 as a pass-through fund. “As a reminder, HB 2, the school funding bill that will dictate our funding for the next 2 years. The largest item was the teacher pay increase for teachers with 3 or more years of experience,” Eric said. Eric told trustees the district has set a local compensation plan that provides a 4 percent raise for most employees and a 5 percent increase for hourly staff, and that additional funds were targeted to narrow the district’s pay gap with neighboring districts.

Eric said the district faces new operating costs associated with putting two secondary schools into operation at once, estimating about $5,000,000 in additional annual operating costs for staffing, utilities and other expenses. After accounting for required expenses and the state pass-through, he said the district had roughly $3,000,000 remaining that could be directed toward additional staff raises.

On property values and tax-rate calculations, Eric explained that if the November propositions increasing homestead and over-65/disabled exemptions pass, district taxable growth would shrink. “In a normal year…we would have 11% growth. But…when you include those increases in exemptions, our property value growth was…right at 3%,” Eric said. He added that the state will hold the district harmless for maintenance-and-operations (M&O) revenue lost because of the exemption increases for 2025, but that there is a negative impact to interest-and-sinking (I&S) revenue. Eric showed district calculations that the district’s overall tax rate would remain just under a dollar, shifting slightly from 95.95 cents to 95.83 cents per $100 valuation in the presenters’ example.

Eric also cited local appraisal detail: total taxable value of new property was $734,000,000 for the current year, an increase from prior years’ new-value totals; average taxable residence value moved from about $327,000 to $314,000 and average annual tax due on a typical residence fell by about $130 in the district’s example due largely to larger exemptions. Eric said the district plans to publish public notices and hold a public hearing on the budget on August 25.

No formal budget motions were taken at the workshop; staff will return with formal budget documents and a public hearing on the proposed budget and tax rates.