Northeast ISD reviews budget outlook and potential impacts from pending state school‑funding bills

At a board meeting that began at 5:31 p.m., Susie Blackhorn, executive director of finance and accounting for Northeast Independent School District, led the district’s first budget study session and outlined how district revenue is driven by property taxes, state funding formulas and pending state legislation that could change both revenues and mandated expenditures.

Blackhorn said: “The bulk of our revenue comes from property taxes.” She presented the district’s revenue breakdown for the general fund and explained how the state’s funding formula (tier 1 and tier 2) allocates dollars based on average daily attendance, special program weights and how many “pennies” a district adopts above its base tax rate.

Why it matters: the district’s revenue outlook and compensation commitments are tied to complex state formulas and to several bills moving through the Texas Legislature. A large school‑funding bill under active consideration, described in the presentation as a committee substitute to House Bill 2, would reconfigure several allotments, create a new teacher retention allotment and change how some enrichment (“golden”) pennies are treated. Those changes could require the district to pass mandated pay increases for certain classroom teachers while not providing funding for the district’s employer payroll taxes and teacher retirement contributions.

Most important facts

- Revenue mix: Blackhorn reported the general fund receives roughly 63% of its revenue from property taxes, 26.7% from state formula aid and 5.6% as an on‑behalf contribution for teacher retirement (TRS). Federal and other local revenues make up the remainder.

- Basic allotment and weights: The presentation used the state base allotment of $6,160 and reviewed common weighted allotments (special education, bilingual, compensatory, dyslexia at a 0.1 weight, career and technical education, gifted and talented and others) that feed tier 1 entitlement calculations.

- Tier 2 and “golden pennies”: Blackhorn explained that the state guarantees a yield on the first eight pennies a district adopts above its base rate; the district currently has five of those “golden” pennies. The district’s debt service rate was reported as $0.30 and the combined total tax rate described in the presentation as “just a smidge over a dollar.”

- Preliminary appraisal trends: Using preliminary appraised values from the county appraisal district, the presenter said the district’s single‑family values were essentially flat (single‑family up about 0.3% before protest adjustments), existing home values down slightly, and commercial values showed larger swings (about 7% growth pre‑protest). Blackhorn cautioned that preliminary values can shift during the protest process and that certified values arrive later in the summer.

- Fund balance projections: Under current law and the district’s enrollment forecast, Blackhorn projected ending fund balance for 2026–27 around $121 million (about 2.7 months). Using the committee substitute to House Bill 2 as described to trustees, the finance office’s projection for 2026–27 was about $127 million (about 2.8 months), largely because many proposed revenue changes are tied to specific mandated spending (for example, required teacher pay increases).

Legislative items and potential budget impacts

Blackhorn reviewed bills already signed and bills still moving in the Legislature. Items highlighted in the presentation included:

- Senate Bill 2 (signed): creates education savings accounts (ESAs) and requires public schools to provide special education evaluations for participating students upon request; the presenter noted ESA amounts vary by student category.

- Committee substitute to House Bill 2 (school funding): described as a wide‑ranging, 225–229 page bill that would increase the basic allotment modestly (presentation noted a $55 increase from $6,160 to $6,215) and change how some tier‑2 pennies are treated by rolling certain yields into the basic allotment. The bill also would create a teacher retention allotment. Under the bill as presented to the board, for districts with 5,001 or more students the proposed retention allotment would be $2,500 for teachers with 3–4 years’ experience and $5,500 for teachers with five or more years’ experience; teachers with fewer than three years would not be guaranteed a raise. Blackhorn emphasized: “Don’t let the word retention be confused with our retention supplements that we do. This is meant as retaining teachers in the profession, so this is meant to be a pay raise for classroom teachers.”

- Funding caveat: The finance office noted the state’s proposed allotment language would require districts to pass the money to eligible classroom teachers but would not provide additional state funding to cover employer payroll taxes or TRS contributions associated with those raises; the district’s estimate of that employer cost is about $1.8 million.

- Special education: The presentation summarized a future change to a special education funding model that shifts to an intensity‑of‑service approach and would not take effect until 2026–27, with details to be determined by the commissioner. The bill discussed would provide a $1,000 reimbursement per special education evaluation (the presenter estimated roughly $1.4 million to the district) and a separate two‑year reimbursement for evaluations of private‑school students that the district would perform at parent request if the bill is enacted. Blackhorn warned that the district is already required to provide evaluations under current law and that any temporary reimbursement could expire after two years.

- Prekindergarten and private providers: The presenter said the proposed bills would prohibit districts from charging tuition for non‑eligible pre‑K students if the state’s intermediaries determine private providers have available capacity; the presentation noted the bill language did not define “available” and left details uncertain.

Attendance, enrollment and local levers

Blackhorn reviewed attendance and enrollment’s central role in funding. She reported a slight improvement in attendance compared with last year and said the district’s preliminary projection for 2025–26 enrollment was just over 55,000 students. She emphasized that state funding is driven by average daily attendance and that increasing attendance or enrollment are the principal local levers to increase state funding.

Next steps

Trustees were reminded the board must adopt budgets for the general fund, debt service and school nutrition by June 30 and that the board approved publication of a notice to discuss budget and proposed tax rate (board action to publish a notice was taken at the meeting). Blackhorn and staff told trustees they would update them at the next budget study session and that final outcomes could still change depending on last‑minute legislative action and certified property values later this summer.

The district presentation and staff indicated that more detailed budget conversations — including compensation and health insurance proposals — will be the focus of the next study session and a follow‑up regular meeting before the board’s anticipated budget adoption meeting in mid‑June.