Katy ISD CFO: Without state funding changes, 2025–26 pay raises unlikely as district plans two new schools

Katy Independent School District Chief Financial Officer Chris Smith told trustees on Jan. 13 that, unless the Texas Legislature changes state school funding, the district will likely be unable to afford a salary increase for 2025–26.

“We will not be able to afford a salary increase. Nobody's fault in this room. It's, it's it's just a fact of state funding,” Smith said during a presentation the board received at its work-study meeting.

Smith framed the 2025–26 budget development as starting from a constrained position: enrollment growth has slowed, some state funding allotments remain capped or prorated, and the district is already spending a large share of its general fund on compensation. He told trustees the district is planning to open two new elementary schools — identified in district materials as elementaries 47 and 48 — and must staff those campuses even as projected student growth eases.

Why it matters: Katy ISD is one of the fastest-growing districts in Texas, and the district said it expects only modest student growth year over year. At the same time, state-level funding decisions — including capped sets aside for the fast-growth allotment and changes to SHARS (School Health and Related Services) — are projected to reduce district revenue by millions.

Key numbers and trends - Salary/benefits pressure: Smith reported that salary and benefits now make up about 89% of the district’s general-fund expenditures, a level he said leaves little room for district-funded raises unless state formulas change. - Enrollment and staffing: The district said current projections show roughly 500 students of year-over-year growth for 2025–26, well below recent years’ rates. Smith described current enrollment as “sluggish” compared with prior projections; he said the district remains the fastest-growing in the state but growth has slowed. - Fast-growth allotment: The district estimated the 2024 fast-growth allotment was prorated, creating about a $9 million shortfall locally; if the program is capped again the estimated hit could be roughly $31 million for the district. - SHARS and related cuts: Smith said prior changes to SHARS funding reduced revenue by roughly $5 million and recent notices could add another $5 million impact, contributing to a projected multi-year shortfall; he said the district is projecting an $11 million reduction across SHARS going forward. - Fund balance and insurance: Smith said the district’s financial position is strong overall and that property-insurance costs came in better than expected, producing an estimated more-than-$1 million savings that will appear as underspending.

What trustees asked and the district’s response Trustees pressed on line-item detail, asking about categories in the budget (for example, the TEA-defined “other” category that schools report under the FASRG chart of accounts) and the projected results of a property-value audit recently submitted to the Texas Education Agency. Smith said the audit yielded a large “eight-figure” positive amount but that the district has not yet determined how much of that will be recognized as revenue in the near term.

Trustees also asked whether staff pay increases might be possible if the Legislature uses projected state surpluses to buy down local tax rates. Smith said tax-rate reductions do not automatically translate into more classroom funding and repeatedly urged the board and community to press for changes in the state funding formulas.

Context and next steps Smith told the board he expects additional budget amendments related to the property-value audit and other revenue adjustments to come forward in February or March. He also said the district will present long-term debt projections to the board next month as part of the 2025–26 planning cycle. Salary decisions, Smith said, should be held until the Legislature's actions are clear, because committing to raises prematurely could create budget risks.

Ending note Smith and other staff framed the district’s immediate task as balancing a commitment to student and staff safety and to competitive compensation while awaiting clarity from the legislative session that began the day after the meeting.