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Schools Push Bond Proposals Despite Ample Revenue, Enrollment Dip

Thanks to property tax revenue and a glut of state and federal relief funds, Texas schools have remained relatively strong in the midst of an economic downturn that has cut through some private industries like a scythe. Reports even show higher pay for teachers this year.

Despite this relative security, districts across Texas continue to ask voters to approve loans that will load more debt onto an already considerable heap.

Public school districts draw funding from two sources: local property taxes and money from the state. The local portion is calculated first and the state’s portion fills the gap left over. Since 2008, the share of property tax revenue has steadily grown while the share of state money has shrunken.

On average, Texas schools take about 40 percent of their budget from the state and 60 percent from their neighborhoods. Since the pandemic and the shutdowns in its wake both had relatively little effect on the values of property, public schools have enjoyed a fairly steady stream of funding from home. From the state, schools have also benefited from aid programs routed through Texas’ Coronavirus Relief Fund, itself supplemented by the federal CARES Act.

While some larger districts did not see the boost they expected, the state made districts whole. State money is tied to attendance: the higher a school’s attendance, the more money it gets from Austin. Relief money helped cushion schools against a steep drop in attendance that could otherwise have decimated schools’ funding in 2020. Texas has also received a second federal package for education funding, though it has not yet been distributed.

Although the state can’t release a full chart of Texas’ school finance trends until December, it looks like some school districts haven’t changed course on new projects financed by bonds, despite relative financial security and fewer students than last year.

Wichita Falls ISD is preparing to set a bond election to fund new recreational facilities. The districts of Katy, Waxahachie, Richardson, Comal, and New Braunfels number among the school boards considering bond proposals for campus renovations. What’s more, the proposals for new or expanded campuses may prove ill-foreseen if enrollment continues to fall.

Bond debt has driven school districts past all other taxing entities in the race for most outstanding local debt. School districts account for 37 percent of all outstanding local debt in Texas with over $138 billion dollars owed. Interest counts for about a third of that debt, most of which is voter-approved.

School districts vary in their fiscal responsibility with regard to debt. Comal ISD ranks among the top 15 school districts for capital appreciation bond (CAB) debt outstanding, and Katy ISD’s principal outstanding debt of over $1.7 billion for Fiscal Year (FY) 2019 earns it fifth place for most principal outstanding in the state’s data set. Waxahachie owed a little under $400 million in total debt service as of FY 2019, putting it near the bottom of the top 100 districts.

A spokesman from the Texas Association of School Boards told The Texan he was not aware of any district with heightened debt concerns due to the year’s economic downturn.

Nonetheless, smooth sailing is not necessarily guaranteed for schools in 2021. The coronavirus introduced a host of new costs, and the state may reckon before 2021 ripens into the spring whether schools with fewer students than last year need more money.

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