NEISD budget study: enrollment drop, state school finance changes and one-time gains shape a multi-year shortfall forecast

Business services staff presented Budget Study Session No. 1 to the Northeast Independent School District board on Wednesday, walking trustees through the district scorecard, the state funding formula and a multi-year fiscal forecast.

The presenter (referred to in the meeting as Miss Slackhorn) said the stewardship portion of the board's scorecard will guide facility prioritization, equipment replacement, and long-range facility plans required under the Texas Administrative Code. She told trustees the district will target campuses with fewer than 450 students, under 60% utilization or with cost-per-student more than 5% above the district average as the first candidates for capacity or program decisions.

On revenue, staff emphasized how property tax collections and the state funding formula interact. Using a "cup" analogy, the presenter said local property taxes fill the district's entitlement first and the state makes up the difference. She described the distinction between tier 1 (entitlement) funding and tier 2 (enrichment) "golden pennies," and said NEISD currently uses five of its maintenance-and-operations pennies and 30 cents for debt service.

Administration reviewed enrollment trends and projections: district enrollment peaked at over 68,000 students in 2014 and has fallen to roughly 53,000 in 2025-26, a decline of about 15,000 students, with projections of "over 51,000" for 2026-27. The presenter said that decline is a key driver of revenue loss.

The presentation included forecast figures and recent adjustments: staff cited a previous forecast gap of about $18 million between revenue and expenditures, and later noted a revised projection of roughly a $17 million loss for the current year based on updated receipts and one-time items. The presenter identified one-time revenue items that improved the near-term outlook: a $1.5 million IRS refund, roughly $500,000 from easement proceeds, about $300,000 in hail-insurance leftovers, and a transfer from Community Education; staff cautioned those items are not recurring.

Business services highlighted a growth area: career and technical education enrollment and a legislative change allowing certain JRTC classes to count toward CTE funding yielded approximately $3 million in additional revenue this year, the presenter said. The board also heard that the district received 324 interdistrict transfer applications; if all were accepted and met funding criteria, administration estimated about $2.6 million in additional revenue.

Staff reviewed the district's fund-balance metrics: the revised forecast projects roughly 3.3 months of fund balance for the current year, a level administration called acceptable, while projecting a possible decline toward 2.2 months in 2027-28 under current assumptions. The presenter described 3 months of fund balance as a comfortable operating target and warned that levels below two months could draw increased oversight.

Trustees and staff discussed next steps: the board approved public notice for the June 18 budget adoption meeting (vote 6-0), and the presenter outlined follow-up budget study sessions on June 1 (staffing, allocations, health insurance and compensation) and June 15 (final updates), leading to the public adoption meeting on June 18.

On student attendance, staff said average daily attendance (ADA) remains a central funding driver and that district attendance remains below pre-pandemic levels; improving attendance was described as a continuing priority. Board members asked about modeling for campus consolidations and savings; administration said prior consolidations saved roughly $6.6 million across three campuses (about $2.2 million per campus) but cautioned further decisions depend on finalized enrollment numbers and ESA/voucher effects.

"Given our deficit situation, one of our key actions should be to identify cost reductions and revenue increases," the presenter said, and outlined efforts to align spending with scorecard priorities and to review programs for return on investment.

The board held an extensive question-and-answer period on appraisal timing, taxable-value certification, VATRE (voter-approved tax rate) implications and debt-service constraints. Administration emphasized the district does not set appraisal values, that certified values are expected late July and that the state's hold-harmless and recapture mechanics will affect how local property-value changes translate to state aid and tax-rate adjustments.

The budget study session closed with trustees thanking staff and with administration noting it will return with more detailed forecasts and policy recommendations as numbers are finalized.