Waco ISD projects multimillion-dollar shortfall; legislative changes complicate next budget

Waco Independent School District finance staff told the Board of Trustees on May 20 that the district is projecting a multimillion-dollar shortfall and that legislative proposals in Austin make next year's budget uncertain.

At the meeting Cheryl Davis, Waco ISD's chief financial officer, presented a preliminary projection that the district faces roughly a $7.5 million deficit in the current fiscal year and showed a revised budget gap that reflects prior-year adjustments and purchases. Davis told trustees the district's adopted budget began with an $8 million deficit but subsequent timing of purchases and other items had pushed the revised budgeted deficit higher; she said current-year spending is tracking below the revised plan.

Key numbers and drivers

Davis reported the following items to trustees:

- Preliminary local taxable values reported to the district for the coming year were about $10.2 billion; Davis said certified values will follow and that the district is still refining estimates because state and appraisal-district adjustments remain possible.

- The district has about $1.0 million in additional foundation school program revenue tied to homestead-exemption hold-harmless calculations and roughly $2.0 million from higher investment income than budgeted earlier in the year.

- Davis said one near-term risk was possible recapture (the state's redistribution when local values rise); early calculations showed a potential recapture payment of roughly $272,000 on the preliminary values.

- Davis said special education counts increased, generating an estimated $2.1 million in additional state special-education funding; she cautioned the district will likely commit roughly $1.0 million of the state special-education revenue to cover increased special-education costs.

Legislative uncertainty

Board members and staff discussed language in committee substitutes for the Texas House and Senate related to school finance. Davis and trustees highlighted three items that could materially affect Waco ISD's finances:

- Teacher compensation proposals (HB 2/committee substitute) would create a statewide pay increase structure; staff estimated that Waco ISD's share of the classroom-salary increase would be in the millions, but the state appropriation as drafted would not cover employer benefit costs subject to TRS. Davis estimated district benefit costs from a statutory salary increase at roughly $750,000 and said the district had not yet factored benefit exposure into its preliminary projections.

- Changes to homestead-exemption amounts and a reallocation of 'golden penny' (tier 2/Robin Hood) funds to pay for increases in the basic allotment could reduce the district's net gain from higher local values; Davis's quick scenarios showed a potential loss of roughly $448,000 under some proposals.

- Special-education proposals and a new intensity-based funding element could change state reimbursements; Davis said some special-education funds are targeted but that the district is still assessing how the new formulas and timing will affect local budgeting.

Trustee questions and district actions

Trustees asked whether the district was preparing multiple budget scenarios and whether staff could wait for another year of state data before a major adoption. Davis said the district is holding a healthy fund balance that could be used to smooth one fiscal year of transition but that it could not sustain structural deficits indefinitely. She described several administrative actions under consideration: modest cuts to supplies and materials, closing an under-enrolled campus (Alta Vista) and identifying fixed-cost savings that could yield several million dollars in recurring savings. Davis said the district will continue to refine projections as legislative language finalizes and as certified local property values are released.

Timing and next steps

Davis reminded trustees of statutory and administrative deadlines: certified property values and the legislature's schedule may require the district to set tax-rate assumptions and adopt a budget within state timelines. She said the district expects definitive legislative outcomes by the session's scheduled end and will bring updated revenue and expenditure projections to the board as bills are finalized.

Ending

Trustees did not take action on budget items at the meeting. District officials said they will present updated scenarios and, if needed, proposed budget changes later in the summer and fall once the legislature adjourns and certified property values are final.