Northwest ISD projects balanced 2025–26 budget but warns teachers' pass-through pay raises will raise local costs

NORTHWEST ISD — District finance staff told the board during a budget workshop that preliminary revenue projections leave the district positioned to present a balanced 2025–26 budget on July 23, but that uncertainty in new state law and benefit costs tied to teacher raises could reduce fund balance and constrain local pay increases.

Jonathan, staff member, the district’s presenter on the budget, said the Legislature’s House Bill 2 created a teacher retention allotment that “is a straight pass through. They give us the money, we turn around and give it right to the teacher.” He added, “no one has a definition of who is a teacher,” and warned that the district is still waiting on Texas Education Agency (TEA) technical advice about who qualifies.

The teacher retention allotment (TRA) is estimated by staff at about $8.2 million for the district in 2025–26. That allotment increases state revenue but, because the money must be passed through to qualifying teachers only, it also creates local costs the state did not cover: district staff estimate additional employer-side benefit expenses tied to the raises of roughly $1.5 million. Jonathan said that combination reduces the net operational benefit of the allotment and complicates local compensation planning.

Why it matters: The district aims to preserve student programs and a strong fund balance while maximizing compensation. Staff estimate that, after the cuts already made for 2024–25 and projected growth, the district currently shows about an $8.9 million surplus in the example presented — but that surplus depends on unresolved details about which employees qualify for the TRA, final property valuations and how constitutional homestead exemptions are applied.

Summary of key figures and assumptions presented - Projected additional students: 1,100 (staff noted another preliminary estimate of 1,174 and said they used a conservative 1,100). - Teacher retention allotment estimate: about $8.2 million (state pass-through revenue). - Employer-side benefit cost for teacher raises (estimated, not funded by state): about $1.5 million. - Prior-year mid-cycle shortfall referenced: roughly $15.8 million deficit that led to cuts in 2024–25. - Fund-balance targets and projections: the district prefers a 33% fund balance (about four months of operating expenses), must maintain at least 25% for its bond rating, and projects a fund balance of roughly 26.7% on a balanced 2025–26 budget under current assumptions and the new law.

Discussion and constraints District staff emphasized several points that limit their flexibility. Jonathan said preliminary property values have been volatile: he noted a prior instance when preliminary values later decreased by $5 billion. Staff assumed 5% property value growth for 2025–26 in the materials presented and estimated homestead-related value reductions of about $1.5 billion tied to the constitutional amendment language on the ballot. Those valuation uncertainties affect how much state versus local revenue the district receives.

Staff also noted ambiguity in the TRA language: differing definitions in related legislation and questions about which data sources TEA will use (staff suggested PEIMS teacher codes such as code 087 as a plausible source). Jonathan warned that local practice about when a staff member earns a service year may also affect eligibility and the district’s final cost.

On expenses, staff showed a 2024–25 budget that required significant trimming to avoid eroding student programs further. Cuts already made included some fine-arts and low‑enrollment program reductions and classroom-ratio adjustments. Even after those trims and the projected growth-related revenue, staff said a meaningful portion of the TRA must be passed through and additional employer costs will remain local obligations.

Board directions and next steps Board members directed staff to return with a balanced budget and a compensation plan at the July 23 meeting. Jonathan said the district will present a draft comp plan and budget to trustees about a week before that meeting and will specifically call out the TRA as a separate column on the salary schedule so the board can see which increases are state pass-throughs and which are locally funded. Jonathan said, “we want it to be obvious of what that was and what we have to either make up or fix or what we lost.”

No formal vote or ordinance occurred in the workshop; staff framed the session as discussion-only and said any final budget adoption and compensation decisions would be on the board agenda at the July 23 meeting.

Ending Staff emphasized the provisional nature of many figures and said the district will update the board if TEA guidance, final property values or other data change. Trustees pressed for conservatism in assumptions so that the district can protect student programs and its bond rating while delivering the promised staff salary increases.