Cy-Fair ISD anticipates $73.6M budget shortfall due to inflation and lack of state funding

Cy-Fair ISD officials reported a shortfall of over $73.6 million in a presentation on the district's 2023-24 budget Feb. 12.

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The update was given by CFISD Chief Financial Officer Karen Smith, who said inflation rates increased by 19% from September 2019 to August 2023.

In addition, Smith pointed to a continued lack of adequate funding from the state and said as local property values increase, state funding decreases.

The details

Smith said the state determines how much funding each district receives using a complex formula that uses enrollment, attendance, district size and other factors.

Meanwhile, the district is estimating $1.2 billion in expenses. After receiving an estimated $65 million in federal stimulus funds, the district would still be left with about a $73.6 million shortfall.

What they're saying

Smith said districts across the state are facing similar issues.

"School districts have no control over state funding other than increasing attendance as the state funding formula is set in statute and districts can only spend portions of the funding in a certain manner," Smith said. "For example, ... the basic allotment is currently $6,160 per average daily attendance, which was last updated in the 86th legislative session. The state funding formula does not include an inflation factor-therefore, increased costs due to inflation are borne by the school district."

In addition, Smith said there remains some confusion in the community about school funding that could potentially harm efforts in the coming years to raise additional funds through bond proposals and voter-approved tax increases once the district no longer has COVID-19-era stimulus funds-known as Elementary and Secondary School Emergency Relief Funds-next year.

"Without additional funding from the state, districts are faced with budget cuts. This is very difficult when nearly 90% of our expenditures are payroll and ultimately can impact programs and services," Smith said. "There's also a misconception when districts pass bond elections that we should have plenty of money for robust programs and salary increases. However, bond funds and the debt service fund cannot be used to pay teacher salaries, for example."

What are the options?

Smith outlined the following actions the district's administration hopes to see carried out by the Texas Legislature to help fortify the upcoming 2024-25 budget:

• Increase the basic allotment in an additional session.

• Modify adjustments to state property values.

• Increase the average daily attendance amount by 1%, which would provide an additional $7.4 million to CFISD.

District actions could help alleviate the amount of the shortfall, potentially including:

• Increasing maintenance and operations tax rate in new voter-approval tax rate election

• Reducing expenses through budget cuts in areas other than payroll, which makes up 90% of CFISD's budget

• Approving a minimum four-month fund balance

• Seeking out new sources of revenue

Board President Scott Henry and trustee Julie Hinaman echoed Smith's recommendation that the district form committees to study where additional funds might be found or where costs could be cut well ahead of the next budget meetings in June.

What else?

Districts like CFISD in Texas continue to struggle with funding issues, despite the state's reported $32.7 billion surplus.

CFISD has offered an additional optional homestead exemption of 20% to qualified residents since 1983. However, that resulted in an $81 million loss last year that could have been used to fund district programs, Hinaman said.

Superintendent Doug Killian said he had recently met with state officials regarding relief from those losses.

"Two weeks ago, I went to midwinter conference and ... one of those meetings was to go and talk to the commissioner about our local optional homestead exemption and how much money we're losing in state aid because of that, and [I] gave him the idea that ... [the state] can pay up to 50% of our loss as long as you have leftover money ... this session," Killian said.

This article comes from our ABC13 partners at Community Impact Newspapers.