Stack of cash

Gov. Greg Abbott signed House Bill 3 into law Tuesday, providing school districts across Texas with a host of changes when it comes to school funding and related matters.

But Lewisville ISD officials say it’s also led to many questions.

During a work session Wednesday, the district staff went over several aspects of LISD's upcoming budget and how HB 3 plays into it.

HB 3 calls for a variety of measures, including spending $4.5 billion statewide for transformational education reform, providing $5 billion in property tax relief, reducing recapture by $3.6 billion and providing $2 billion for teacher compensation. The bill increases the state's portion of education funding from 38 percent to 45 percent.

Mike Ball, LISD's chief financial officer, said the net impact of HB 3 on LISD is a projected increase of $8.5 million.

One question from LISD – where’s the rest of it?

“We appreciate the Legislature worked on the school finance system,” said Superintendent Kevin Rogers. “It's not a good system, and they took on a big task to revise it. But the issue we have is we would get different (projections) from different groups that showed LISD would benefit in its bottom line anywhere from $22 million to $28 million. Now it's at $8.5 million, so that's disappointing.”

The $8.5 million benefit factors in several aspects to the new law, such as a drop in LISD's maintenance and operations (M&O) portion of the tax rate from $1.04 per $100 valuation to $0.97. While that's good news for taxpayers, LISD stands to lose $27 million in tax revenue, assuming a property value growth of 8 percent.

It also factors in the decrease in the amount of money LISD has to send back to the state, or recapture, from $34 million to $21 million.

“Two legislators called me and said our recapture would be zero,” Rogers said. “And that's not accurate. I'm not faulting them, but it's disappointing.”

Also included are spending obligations such as salary increases.

All districts are subject to the requirements. However some districts, even those smaller than LISD, ended up with larger net benefits, Rogers said.

Salary compensation

A big task for LISD going forward is figuring out the compensation. Per HB 3, 30 percent of a district's revenue gain must be used to provide compensation increases to full-time employees other than administrators.

For LISD that equates to about $2.6 million. Of that $2.6 million, 75 percent must go to pay increases for teachers, as well as full-time librarians, counselors and nurses. Teachers with more than five years of experience get the priority. The remaining 25 percent would go toward non-administrators.

The district staff will present various salary increase options June 27 when the board approves the compensation plan. At that time it must decide if it wants to approve a bump of 2 percent, 3 percent or something else.

Rogers said like the recapture discussion, lawmakers indicated pay increases would be larger than they’re actually going to be.

“A lot of teachers think they’re about to get a $3,000 to $4,000 raise,” Rogers said, “but that’s not part of the model.”

In its preliminary budget LISD has proposed an increase of 2 percent, which would cost $7.5 million, plus a $1 million contingency.

Each additional percentage costs approximately $3.75 million, Ball said.

LISD's looming deficit could play a factor in which way the board goes. Ball said despite a $4.5 million cost-savings effort this past year LISD is facing an $11.4 million deficit at the end of the 2018-19 fiscal year with a projected deficit of $24.4 million to open 2019-20.

“I would love to do a 3-percent (raise),” Board President Katherine Sells said. “But at the same time there's a fiscal responsibility of sitting in this seat, and I can't in good conscious continue to see $24 million and $27 million deficits.”

The board will have many options on the compensation, such as how it will be distributed to those with more than five years.

Other highlights

The bill also funds full-day pre-kindergarten for low-income students, creates reading standards for kindergarten through third grade so students read at grade level by the third grade and directs more money to schools with a higher concentration of under-served students.

It accelerates student achievement through college, career and military readiness (CCMR) outcomes bonuses, dual-language programs and extended year summer programs for economically disadvantaged students.

HB 3 requires districts to conduct efficiency audits before going to voters for a tax increase. It also creates a “do not hire” registry.

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