Why do so many Austin-area school districts have budget deficits?

Austin ISD is staring down a nearly $60 million budget deficit. District officials and school finance experts say adjusting per student spending for inflation would alleviate some of the financial strain public schools are facing.

By Becky Fogel, KUT NewsJune 20, 2024 10:15 am, ,

From KUT News:

At an Austin ISD school board meeting back in March, Trustee Candace Hunter shared a sobering message.

“There is no rescue coming. There’s no one coming to save us. It’s only going to get worse,” she said.

Hunter, who represents District 1, was talking about the multimillion-dollar budget deficit Austin ISD is facing. Trustees and district officials have spent months trying to prepare the public for the fact that money is going to be tight and it’s unlikely Texas will lend a helping hand.

Originally, administrators estimated Austin ISD would be about $30 million in the holenext fiscal year. According to a presentation earlier this month though, that figure is now about $56 million, despite the district identifying tens of millions of dollars in spending cuts.

Austin ISD has tried to concentrate budget cuts within its Central Office to minimize the impact to classrooms. This budget presentation slide breaks down cuts the district has identified to save money and reduce the deficit.
Austin ISD

Just last year, the school board approved a budget with a $52 million deficit largely in order to offer competitive raises to retain and recruit staff.

The school board is voting on the budget Thursday. Earlier this month, Superintendent Matias Segura said the size of the budget deficit is going to force the district to make some hard choices.

“I just want to be real honest with everybody that it’s going to be a painful process,” he said.

But Austin ISD is far from the only school system in the state feeling this pain. Many public school districts in Central Texas will be adopting deficit budgets for the year ahead. How did so many districts wind up in the same (leaky) boat?

Per-student funding hasn’t kept up with inflation

For school finance expert Chandra Villanueva, the No. 1 way to fix the budget woes school districts are confronting is pretty straightforward: Raise the basic allotment, the minimum amount Texas must spend per student.

“The biggest issue that we’re dealing with is the fact that we have not increased base level funding since 2019,” said Villanueva, the director of policy and advocacy at Every Texan, a progressive think tank in Austin. “So costs have been rising year after year — we saw some record level inflation throughout the pandemic years — and our schools have not been given the additional resources to keep us with those rising costs.”

Edna Butts, the director of intergovernmental relations and policy oversight at Austin ISD, said she expects many school districts to advocate for an increase to the basic allotment when the next legislative session begins in January. Like Villanueva, she said that’s the best way to improve districts’ financial situations.

“An increase in the basic allotment gives districts more flexibility on where they spend the money,” Butts said. “That’s why most districts prefer an increase in the basic allotment versus money appropriated for a particular purpose.”

Increasing the basic allotment would also reduce Austin ISD’s recapture payment. Recapture, also known as Robin Hood, is a program that distributes funding from property wealthy districts to property poor ones. Austin ISD sends the largest dollar amount of any district to the state for recapture. But Butts pointed out that even though property values are high in Austin, more than half of the district’s students are considered economically disadvantaged.

“While we may be considered property wealthy, our families are not wealthy,” she said.

The last time the state Legislature voted to increase the basic allotment was five years ago when lawmakers raised it to $6,160.

While the base amount of per student funding in Texas is $6,160, schools get additional money if students are bilingual, economically disadvantaged or receive special education services, for example. So, according to the Texas Education Agency, per pupil funding statewide during the 2021-2022 school year was an average of nearly $15,000 — a figure that also includes federal funding.

A chart from the Texas Education Agency’s 2023 Annual Report which illustrates the various components that make up per student funding in Texas, such as federal dollars and the basic allotment.
Texas Education Agency

Still, Villanueva said, raising the basic allotment is the most efficient way to increase public education funding. She said that’s because it’s the “building block” of the state’s school finance formulas.

“So, [raising the basic allotment] reverberates throughout the whole school finance system,” she said.

Villanueva said to understand what schools are up against when it comes to inflation, consider your own household. Food and utilities cost more than they did five years ago but if your paycheck is basically the same, it’s not going as far as it used to.

But how high should the basic allotment be to account for inflation? Lori Taylor, a professor at Texas A&M’s Bush School of Government and Public Service and principal investigator for the TXSmartSchools initiative, calculated it would need to be approximately $7,100.

Taylor said that estimate may be on the low end because energy and materials costs for schools have risen even more quickly than labor costs.

“It’s not a bit surprising that districts are finding it more difficult to be able to staff their classrooms and purchase the resources they require now then they would have found it when the basic allotment was last set,” she said.

Villanueva said much of the financial distress school districts are dealing with could have been avoided if the Texas Legislature had used some of its nearly $33 billion budget surplus to increase funding for public schools. Although there was bipartisan support to increase the basic allotment last year, the fight over school vouchers ultimately derailed the effort. Gov. Greg Abbott has said he will not consider more funding for public education without the approval of a voucher program that provides families with taxpayer dollars to pay for private school.

Federal pandemic relief is ending

A stagnant basic allotment has made it more challenging for school districts to cover expenses, from keeping the lights on to offering raises to retain teachers. But it’s not the only factor putting pressure on school districts’ bottom lines. Yep, there’s more.

Federal pandemic relief dollars expire this fall. Schools have until Sept. 30 to determine how to spend any remaining Elementary and Secondary School Emergency Relief funds. According to the Texas School Alliance, Texas received about $19 billion in ESSER funding.

Taylor said some school districts treated the relief dollars as temporary in their budgeting process, while others used them for long-term commitments.

“So, they increased pay or they increased hiring,” she said. “And once those funds from the federal government are being wound down, they are in a budgetary strain because there is no replacement for those funds.”

For its part, Austin ISD said the end of ESSER funding won’t have a major impact. Officials said the dollars paid for 16 positions and only three remain.

Special education is underfunded

Another issue affecting public school funding is Texas’ loss of $300 million in special education funding. The School Health and Related Services program, or SHARS, allowed school districts to get Medicaid reimbursements for providing services such as occupational therapy and nursing to certain students with disabilities.

A federal audit found Texas overbilled Medicaid, so the U.S. government cut funding. According to an analysis by Community Impact, Austin ISD lost more than $7 million in funding as a result.

This is an especially tough break for public schools because the state itself underfunds special education. A 2022 report from the Texas Commission on Special Education Funding found the state was already underfunding schools by nearly $2 billion.

Districts must have armed officers on campus

The Legislature also required public schools to take on additional expenses when lawmakers last year approved a measure requiring an armed officer on every campus. The legislation provided districts with $15,000 per campus to comply, but that’s not enough to cover the cost of officer salaries and equipment.

Eanes ISD, for example, formed a police department to comply with the law, which cost it over $1 million — considerably more than the district received from the state for school safety.

“Anytime there’s an unfunded mandate, especially if it’s something that’s non-academic like school safety, it’s going to hurt the classroom,” Villanueva said.

State funding is based on attendance

Another factor affecting the amount of money school districts have on hand is lower attendance rates in the wake of the pandemic. Texas primarily funds schools based on how often kids show up to class. Villanueva said relying on average daily attendance puts districts in a precarious position.

“The teachers don’t get an extra day off just because some kids didn’t come to school that week. You don’t get to shut the building down early,” she said. “So, we still have all these fixed costs that the school has to budget on and they have to be prepared for every student. None of those costs change just because a kid misses a couple of days of school.”

But Taylor said it’s good to incentivize schools to ensure students are engaged and come to class.

“I think it is a relatively perverse incentive to switch to a funding model where you will be funded whether or not you prevent the absences of children,” she said. “I think that it’s important in this post-COVID era to recognize absences due to illness versus absences for other reasons, but the emphasis should be instructional time in the classroom.”

Both Taylor and Villanueva said another factor contributing to the budgetary issues school districts are facing is lower student enrollment. Austin ISD, for example, had more than 83,000 students during the 2016-2017 school year. Now, the district enrolls about 73,000 students.

What’s next

The Austin ISD school board is set to vote on the 2024-2025 budget Thursday. Trustees are also considering whether to call a Voter Approval Tax Rate Election to pay for staff raises. Butts said dozens of districts held VATREs last year to plug holes in their budgets and more are thinking about taking this step. The Manor ISD school board, for example, is considering calling a VATRE.

On the state level, Villanueva would not only like to see Texas increase the basic allotment, but also to study what it costs to educate a child here.

“We need to actually take a look at what does it cost to actually get to the levels of performance that we want to see,” she said.

Taylor agreed it’s good for states to have up-to-date research on what it costs to educate students. She also said sometimes going through “a bit” of budget stress can help districts identify waste.

“There’s a silver lining of ringing out some of this inefficiency, but at some point the inefficiency is gone and now you’re into the bone,” she said. “And that’s not good.”

Ultimately, Butts said, the state isn’t doing enough to fund public education.

“If the state doesn’t put more money in public education, those deficits are just going to grow,” she said.

If you found the reporting above valuable, please consider making a donation to support it here. Your gift helps pay for everything you find on texasstandard.org and KUT.org. Thanks for donating today.