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As public school funding is debated in Legislature, Katy ISD finance chief watches closely

March 28, 2017

Unless Texas lawmakers agree to increase funding for public schools during the ongoing legislative session, Katy ISD’s financial future will be more uncertain than it already is.

District funding sources have transformed drastically over time. With current laws, school administrators continue to feel increasingly strangled by a loss of revenue that has already led to budget changes, with more issues possibly ahead.

“The vast majority of my days are spent wondering, ‘what kind of things can we do with our precious dollars to be able to provide for children in an environment that’s full of obstacles and land mines?’” said Chris Smith, KISD’s chief financial officer. “We try to put all of those resources in the classrooms.”

Public schools are funded by two main sources: State funds and revenue from local property taxes.

One of the largest controversies in the state’s funding system is the “Robin Hood” law, a rule also referred to as “recapture” that forces school districts with a certain amount of property wealth to give funds back to the state, which is then supposed to distribute them to property-poor districts.

In Katy, that possibility isn’t too far off.

The threshold for districts to enter recapture is $514,000 per student in property wealth. As it stands, Katy ISD earns about $360,000 per student, according to its records. Smith said if nothing changes with the state’s funding, the district could reach the threshold in the next five to six years if it maintains its tax rate because district property values continue to rise, creating more property wealth.

The district could enter recapture even sooner if raises its taxes by any amount more than two cents, since that would create enough wealth to push it over the threshold. But Katy ISD would need voters to approve any tax increase since the district has reached the maximum amount it can levy without a vote, Smith said. At a tax rate of $1.5166 per $100 of property valuation, Katy ISD already has one of the highest tax rates in the Houston area.

Because Katy ISD’s revenue from property taxes has continued to increase, the state has provided less and less money.

Just three years ago, Katy tax payers were funding 51 percent of the district’s revenue while the state funded 41 percent, according to Smith. Now, taxpayers fund 65 percent while the state funds 35 percent, a drop-off equal to about $102 million. The changes have affected the district’s total revenue.

This school year alone, the district has operated with about $4 million less than in the 2015-2016 school year. The district removed more than $20 million of expenses for its 2016-17 general fund budget that had been in last year’s budget, including money for technology and furniture renovations, as well as funds to pay for new school busses. It is instead funding those expenditures through 2014 bond money, according to Smith.

Inadequate funding is an issue school districts face statewide. Years ago, more than half of districts across Texas, including Katy ISD, sued the state contending that the finance system is unconstitutional by the way it distributes money, among other issues.

Last May, the Texas Supreme Court ruled that the system, while deeply flawed, is constitutional. And during this legislative session, key government leaders such as Gov. Greg Abbott have pushed for laws that could potentially take away more money from public education in order to bolster private and home education.

Districts do have some hope, though. Public education funding has been a focus during the session. Weeks ago, State Rep. and Public Education Chairman Dan Huberty, R-Houston, unveiled House Bill 21, a $1.6 billion plan that would boost per-student funding for many public schools while making recapture districts pay less. The bill is pending in a House committee, and legislators are looking at other state budget changes.

“The state has a challenge on their hands,” Smith said. “My hope is that the state, as they work through their challenges, will find a way to do the things that the future of the state needs, which is education for the children.

“Will they do that? I wish I knew.”

Unless change comes, Smith said districts like Katy might have to start looking at expenses such as staff salaries, which make up the majority of the budget. A negative outcome could be salary freezes in a system that usually accounts for salary raises each year.

Smith’s hopeful that consequences like that won’t ever happen.

“That’s what we manage real hard to try and avoid,” he said.