Mercedes ISD CFO warns of preliminary 2025‑26 deficit and legislative uncertainty

Mercedes Independent School District officials told trustees March 18 that the district’s proposed 2025–26 budget is preliminary and sensitive to pending state legislation, property value changes and attendance projections.

Miss Garza, the district chief financial officer, opened the budget section by telling the board, “This is very preliminary.” She laid out revenue estimates already baked into planning — including a working assumption of a $220 increase in the basic allotment per ADA used in early revenue modeling — and listed several pending bills the district is monitoring, including proposals described in the workshop as a teacher retention allotment, property tax changes and a potential education savings account program.

Why it matters: state allotments, property values and tax compression can materially change local revenue. Garza warned trustees that the district’s 2024–25 amended budget included a planned deficit of about $5.1 million and that under the workshop’s current revenue assumptions the 2025–26 general fund would still show a projected deficit (staff discussion identified a $4.2 million shortfall under the assumptions shown).

Key revenue and fund balance points

- Garza said the district’s adopted interest and maintenance and operations (M&O) tax rate is 34¢ and recommended maintaining that rate pending further analysis with the financial adviser. - The district’s audited fund balance from the prior year was presented as $14.6 million. Under the board’s previously approved amended budget, that balance would fall to about $9.4 million at the end of the year if no further changes are made. - Garza said the district’s 2025–26 planning assumes conservative ADA and enrollment (an ADA estimate of 36.41 and enrollment of about 4,001) and that if attendance holds above the conservative estimate the district would receive additional revenue at settle‑up in September.

Legislative and local uncertainties

Garza listed pending legislation the district is watching (as described to the board): increases to the basic allotment, a teacher retention allotment, proposed changes to property tax exemptions and a possible education savings account program. She noted the Texas legislative session was scheduled to end June 2 and said the district will update projections as bills are settled.

Garza also reminded trustees that county appraisal values and any new tax compression could reduce state funding. She said the district is “working with our financial adviser to possibly do another deficiency resolution to maintain [the M&O rate] at the 34¢.”

Board direction and next steps

Trustees asked for more detailed comparisons of budgeted versus actual revenue and for month‑by‑month tracking of ADA and revenue. Garza said staff will continue to update the board at subsequent budget workshops and provide clearer reconciliations between budgeted and expected receipts. The district will also hold a series of town halls to discuss program priorities and how limited resources will be allocated.