Santa Fe ISD adopts 2025–26 budget; tax rate left preliminary amid state funding changes

The SANTA FE ISD Board of Trustees adopted the district's 2025'26 general fund, nutrition services and debt-service budgets at its June 16 meeting after a public hearing on the proposed budget and preliminary tax rate.

The hearing and subsequent discussion focused on how House Bill 2 and new state homestead exemptions change the district's revenue calculations, teacher pay mandates and timing of state reimbursements. Board members approved the budgets as presented and approved several related contracts and financial actions during the regular agenda; the board did not adopt a final tax rate and will return to that decision once final property valuations and state guidance are available.

District finance staff opened the hearing explaining the legal requirement to adopt a budget and outlining revenue assumptions. "As you know, by section 44.004, the Texas Education Code, we are required by law to adopt a budget prior to the first year of the new fiscal year," said Mr. Sanchez (staff member). He told trustees the presentation reflected months of internal modeling and recent changes tied to House Bill 2.

The district's presentation said state changes increased homestead exemptions and tightened "compression" in the funding formula, reducing local collections and requiring the district to model several exemptions. "The state has promised to make up that cost and send that directly to us. However, we have not seen any of that yet," Mr. Sanchez said. He cautioned the district must wait for guidance and implementation rulings from the Texas Education Agency before some calculations can be finalized.

Trustees pressed staff on the timing and sizing of state reimbursement and the definition of "certified classroom teacher" under House Bill 2. The district told the board the law mandates additional pay: $4,000 for certified classroom teachers with three to four years of experience and $8,000 for certified classroom teachers with five or more years of experience for districts with under 5,000 students. The presentation said the district's additional cost for the teacher pay mandate was roughly $600,000, while a 2% increase for other staff (including benefits) would cost about $700,000. Mr. Sanchez said the district included an option in the budget for the board to approve staff incentives later if state funds arrive.

On tax-rate mechanics, staff presented a preliminary maintenance-and-operations (M&O) rate of 0.7154 and a combined rate (M&O plus I&S) of 1.0777, which the presentation said already included eight "disaster pennies" sought to cover storm-related damage. Staff noted the district has five board-elected "golden pennies" in place, and that three additional golden pennies would require voter approval. Staff estimated a golden penny yields roughly $800,000'$900,000 and a copper penny roughly $50,000'$60,000 in this market.

Board members repeatedly said they wanted to balance caution about raising taxes with the need to preserve district reserves. "Those extra pennies don't belong to us. And if we don't need them to pay our bills, we have no right to go collect them," said a trustee. Another trustee said maintaining fund balance for unforeseen events was a priority and identified roughly 90 days of operating reserves as a target; staff estimated the district's current fund balance at about $9 million (roughly 62 days), with a 90-day target near $11'$12 million.

After discussion the board approved the 2025'26 general fund, nutrition services and debt service budgets as presented. Trustees also approved a package of related motions during the meeting (see "Votes at a glance" below). The board did not adopt a final tax rate at the meeting; trustees directed staff to return with final tax calculations after July valuations and TEA guidance and scheduled a final tax-rate decision for a later meeting (typically August).

Votes at a glance

- Adopt 2025'26 general fund, nutrition services and debt-service budgets: Passed unanimously (motion and second recorded; final vote recorded as unanimous). The budgets present total expenditures of $52,927,292 and projected revenue of about $53,200,000 (presented figures). (provenance: budget hearing and motion in the record)

- Approve order authorizing defeasance and redemption of a portion of the district's outstanding unlimited tax school building bonds, series 2017, amount not to exceed $4,918,650: Passed unanimously. Staff said the defeasance would occur in February 2026 and would yield interest savings (presented figure: roughly $2.2 million future interest savings). (provenance: agenda item)

- Ratify renewal of Texas First Bank as the district depository: Passed unanimously. (provenance: agenda item)

- Approve athletic trainer services contract with Methodist (five-year term): Passed unanimously. Staff reported Methodist was the only bidder and recommended the five-year contract with a maximum annual increase of 5%. (provenance: agenda item)

- Approve roofing contract with RGO Roofing and Construction LLC for W.A. Nelson Maintenance Warehouse and Kubicek Annex, not to exceed $269,010: Passed unanimously. Staff said work includes replacing tectum panels at the Nelson building, building up to current code with ISO insulation and a PVC membrane; FEMA mitigation discussions are ongoing for reimbursement. (provenance: agenda item)

- Approve contracted services with Harris County Department of Education Academic Behavior School East, not to exceed $149,750: Passed unanimously. (provenance: agenda item)

- Approve special education contracted services (physical therapy, dyslexia and bilingual evaluations), not to exceed $95,000: Passed unanimously. Staff said services include a part-time physical therapist and contracted diagnosticians for required dyslexia and bilingual evaluations. (provenance: agenda item)

What the action means next

Trustees adopted a working budget the district can operate under beginning July 1; staff emphasized the budget may be amended after final TEA guidance and county appraisal valuations. The board left the final tax-rate decision for a later meeting when the county appraisal district issues final valuations and the state releases implementation rules tied to House Bill 2. Staff will return with updated tax-rate calculations and a Truth in Taxation posting once valuations are final.

The board also approved a defeasance plan intended to lower future interest costs on outstanding bonds and approved several vendor contracts and service agreements that staff said are necessary for operations and student services. Staff noted several items (FEMA reimbursements, timing of state payments for HB2 mandates) remain uncertain and will affect cash flow and possible later budget amendments.