Klein ISD previews 2026–27 budget; board hears boost from HB2, catch‑up payment and strong fund balance

KLEIN, Texas — Klein ISD trustees on April 20 heard a budget workshop in which district staff outlined the preliminary 2026–27 financial picture, including new state revenue under House Bill 2, a retroactive over‑65 hold‑harmless payment and projections that leave the district with a stronger fund balance than anticipated.

Dan Schaefer, who led the budget presentation, told trustees the district originally planned a $33.7 million deficit but closed the year much better than expected: "We planned a $33.7 million deficit... where we landed at the end of the year was 12.4," he said, noting the improvement stemmed in part from a roughly $13.9 million catch‑up payment from the state. Schaefer said House Bill 2 generated about $29.4 million in additional state revenue for the district but also carried $17.3 million in required spending, leaving roughly $12.1 million of newly flexible dollars before other adjustments.

Why it matters: trustees were told the combined effect of HB2, the hold‑harmless recalculation and other fiscal actions should produce about a $20 million swing between the originally adopted budget and expected actuals this year, creating a projected fund balance of about $255.9 million (roughly 45% of next year's expenses). The board's fund‑balance policy target is 25%, and staff said the plan is to use roughly $20 million of fund balance to balance the two‑year biennium while maintaining well above the board minimum.

Schaefer highlighted several drivers behind the improved position: one‑time ESSER funds during COVID (about $100 million received district‑wide for pandemic response and incentives), recurring savings from a 2022 bond that shifted capital costs off the general fund, and operational savings from a large rezoning that yielded approximately $6.4 million in recurring savings. He also said departments identified about $1.4 million in additional controllable savings.

Staff cautioned that some new revenue must be spent as required. "House Bill 2 generated $29.4 million ... additional required expenses of $17.3 million," Schaefer said, meaning roughly 59% of the new revenue was earmarked for specified items. Trustees asked whether the recent state catch‑up payment and the over‑65 recalculation would be recurring; staff said a conservative recurring estimate is about $10 million annually but acknowledged the Legislature could alter formulas in future sessions.

The presentation also outlined near‑term budget pressures: a drop in interest earnings (about $2.3 million less than prior estimates) and market‑driven increases in electricity and garbage contracts. Staff proposed a fuel contingency of about $900,000 for transportation and noted a $266,000 shift in where certain CTE certification costs are recorded after the state agreed to cover them — a change that frees federal funds for other student needs but increases general‑fund reported expenses.

Attendance and enrollment figures drew particular attention as revenue levers. Schaefer said pre‑COVID attendance was about 95% and recent rates have been 92–93.4%; he estimated each 1 percentage‑point increase in attendance equates to roughly $3.75 million in revenue, which trustees called a high‑priority focus area.

Board President Doug James and trustees praised finance staff for active management during several volatile years, and several trustees emphasized the importance of preserving programs and staffing formulas at the campus level. "We've been able to maintain a very competitive pay," Schaefer said when summarizing personnel and retention efforts tied to funding decisions.

Next steps: staff noted key dates in the adoption process — a preliminary tax‑rate hearing on May 30, a proposed special board meeting May 18 and the public budget meeting on June 8 — with the fiscal year scheduled to begin July 1, 2026. The board adjourned at about 6:00 p.m.

Details drawn from the April 20 workshop include: House Bill 2 additional revenue ~$29.4 million and $17.3 million required expenses; a retroactive over‑65 catch‑up payment of about $13.9 million; projected fund balance near $255.9 million (about 45% of next year's expenses); planned use of roughly $20 million of fund balance for 2026–27 to balance the biennium; attendance improvement value ~$3.75 million per 1 percentage point.