Santa Fe ISD adopts 2025–26 budget after public hearing that highlighted HB2 mandates and disaster costs

The Santa Fe ISD Board of Trustees on June 16 adopted the district'025-26 budgets for the general fund, nutrition services and debt service after a public hearing in which district staff described how House Bill 2, a larger homestead exemption and recovery costs from Hurricane Barr reshaped revenues and spending plans.

District presenter Alex Sanchez said the budget the board voted to adopt assumes $52,927,292 in general-fund expenditures and roughly $53,200,000 in revenue, and includes a preliminary tax-rate projection and contingency steps the board may take if state funding arrives later. "The state has promised to make up that cost and send that directly to us. However, we have not seen any of that yet," Sanchez said during the hearing.

Why it matters: House Bill 2 requires additional pay for certified classroom teachers and changes parts of the state funding formula; Santa Fe ISD officials said the state—ommitment to cover those costs has not yet been paid and implementation guidance from the Texas Education Agency is still pending. The board adopted a budget that incorporates the district—xpectation of state reimbursement but also sets aside options the board can use if funding timing or amounts change.

Major points and numbers

- Budget totals: The district presented $52,927,292 in general-fund expenditures and expected approximately $53.2 million in revenue for 2025-26. Sanchez characterized the revenue increase largely as the state—ormula responding to HB2 provisions.

- House Bill 2 teacher pay mandate: Under the statute, certified classroom teachers receive additional pay tiers tied to years of experience. Sanchez said the district estimates an added cost tied to those teacher incentives of about $600,000; the presentation also included a separate 2% increase for other non-mandated staff (estimated at about $700,000 including benefits).

- Local revenue compression and homestead exemption: The state increased the homestead exemption and expanded "compression," reducing the district's local taxable base. Sanchez explained the board is presenting a preliminary tax rate now because final valuations from the Galveston County Appraisal District will arrive in July and could change the rate.

- Disaster costs and disaster pennies: Sanchez told the board the district is requesting use of additional "disaster pennies" tied to declared disaster authority to cover Hurricane Barr repairs and related costs. The district reported roughly $1.5 million in hurricane-related costs still being paid and asked the board to include an additional eight disaster pennies in its preliminary rate calculation. The preliminary tax-rate figure presented to the board (including the eight disaster pennies) was 1.0777 per $100 of assessed value; the presenter said the preliminary maintenance-and-operations rate portion was 0.7154.

- Other pressures: Officials cited sharply higher utility and nutrition-service costs tied to inflation and post-disaster repairs, and noted the district had spent months modeling multiple valuation and exemption scenarios because final TEA guidance and county appraisal values were not yet final.

Board action and follow-up

During the regular session later the same evening, a motion to adopt the 2025-26 general fund, nutrition services and debt service budgets as presented was moved and seconded and passed unanimously. The board did not adopt a final tax rate at the meeting; staff said final tax-rate decisions will return to the board after receipt of final property valuations (anticipated in July) and can be revised in an August or September meeting.

Discussion highlights

Board members asked about fund balance and the district's reserve target. Sanchez said the district's current fund balance was approximately $9 million (an estimate he characterized as preliminary) and that a commonly cited benchmark is roughly 90 days of operating expenses (Sanchez said that level would be in the ~$11 million range for Santa Fe ISD). Several trustees debated whether to request more local pennies now to build reserves versus holding the rate lower given property-value increases that can make taxpayers feel like taxes rose even when the district's rate declines.

What the district said it will watch next

Staff said TEA guidance and the county appraisal final valuations are the two key pending inputs that could change the district—inal tax-rate decision and the final budget amendments. Sanchez said the board has the legal ability to amend the adopted budget and revisit compensation decisions later if the state subsequently releases funds.

Ending

The budget is adopted as the board—irst-line plan for 2025-26, but trustees retained the ability to amend the budget and the tax rate after final valuations and TEA implementation guidance are received. Staff told the board they will return with final truth-in-taxation materials once the Galveston County Appraisal District issues final valuations.