Midway ISD staff warn of multimillion‑dollar deficits under current Texas school finance proposals

Midway ISD finance staff told the board on May meeting night that the district now projects a multimillion‑dollar general‑fund shortfall for fiscal 2026 under current state proposals, and recommended adopting a budget in June with options to amend later if the Legislature changes school funding.

District finance officer Wesley (staff member) told trustees the district’s first scenario — based on a Senate committee substitute for the current school finance bill — yields a roughly $5.2 million general‑fund deficit, while a no‑new‑state‑revenue scenario would show about a $5.7 million deficit. "This first scenario ... is a $5,200,000 deficit," Wesley said, adding that changes in salary allotments for teachers and related increases in employer contributions to TRS are the main drivers of the gap.

The budget outlook matters because the board must adopt a budget before the fiscal year begins July 1. Wesley said the district will post the proposed budget in the local paper in June and bring it to the board for adoption, with the option to amend later if the Legislature finalizes different funding. "We'll post the budget in the paper. And then in June, we'll bring it for adoption," he said.

Wesley walked trustees through specific items in the April financial packet. He said the district made a required IRS arbitrage payment after bond proceeds earned excess investment income over the IRS threshold: "we exceeded that threshold and we had ... that's what the 364,000 is, to the ... to the IRS." He also presented projections for the child nutrition and debt service funds: a roughly $59,000 deficit in child nutrition next year and about a $3.8 million projected surplus in debt service assuming no defeasance.

Wesley and Dr. Allen (superintendent) explained why the planned teacher salary allotment in the committee substitute increases the district’s payroll burden even while the bill directs more money for teacher pay. The committee substitute raises teacher compensation via an allotment that districts must use largely for classroom teacher pay; Wesley said the allotment provides about $2,500 for teachers with 3–4 years experience and $5,500 for teachers with five or more years in the proposal, and that district TRS contribution increases and targeted allotments together raise payroll costs.

Board discussion highlighted uncertainty. Trustee Pam Watts and others pressed staff on assumptions — Wesley said the district expects to receive new special‑education evaluation funding of about $300,000 that reduces the worst‑case deficit to roughly $4.9 million, and he noted that the second year of any enacted biennial plan should look better because some proposed changes phase in.

Staff described contingency options if the district adopts a June budget before final state action. One scenario the board discussed would include a one‑time 1% recruitment/retention payment instead of a larger across‑the‑board permanent raise so the district retains flexibility if the Legislature later provides additional salary funding. Wesley emphasized that current budget scenarios assume no change in employer health insurance contributions and that those numbers remain another variable.

The board did not vote on a budget at the meeting; trustees were reminded the facility study committee will deliver a bond recommendation at the June regular meeting and that the district can amend an adopted budget in July or August if the legislative outcome changes.

Ending: Trustees asked staff for continued updates; Wesley said staff would refine projections as new legislative details arrive and bring the formally posted budget back for the board’s June action.