Budget Challenges

Posted by Doug Killian, Ph.D. on 5/1/2024 5:00:00 PM

Dear CFISD Community:

It is with a heavy heart I write this month’s message to our CFISD community. As you know, I briefly outlined our 2024-2025 budget picture in February and sought your feedback as we navigate these challenges. Thank you for all your suggestions–we received 1,200 responses, many with ideas we ultimately used. We relayed these to our Budget Reduction Advisory Committee (BRAC), which met several times this spring to develop recommendations. Believing in site-based decision-making, we also asked stakeholders, including department heads and campus principals, what they thought of the ideas.

I wanted to update you on where we are currently in the budget planning process. As I previously shared with our Board of Trustees, the projected budget deficit is approximately $138 million for 2024-2025. We are looking to reduce approximately one-third of our deficit and have money for a raise. We have already heard that surrounding districts are providing a raise and that our state TRS healthcare insurance will increase for staff next school year. The deadline for the Board to pass a budget is July 1.

With this deadline quickly approaching, we began notifying employees at the central office. This is where our cuts started. In fact, the first cuts were 5% at all central office and districtwide departments, followed by an additional 2.5% cut, when we realized the impact to campuses would be deeper than initially expected. With the fourth-lowest administrative cost ratio in the state, our district’s efficiency is working against us–making it impossible to reach our target amount without touching campuses or departments. Many of the decisions we are facing will have a negative impact on staff and/or the district, and for that, I am so sorry.

How we got here

There are a myriad of factors contributing to our deficit budget.

  • Since the 2019-2020 school year, the district has experienced a decline in average daily student attendance, which has cost the district an estimated $15 million annually. Attendance is down after the pandemic, causing us to lose funding, but we still have costs associated with classrooms, teachers, and schools.  This is an area where we need your help.
  • The 20% Local Optional Homestead Exemption (LOHE) we have offered as a benefit for CFISD taxpayers since 1983 continues to create budget challenges. We estimate a loss of $63 million annually in tax collections from the LOHE. We love our taxpayers, and have shown that love for more than 40 years. Our local legislators appreciate that, and are seeking to help make up that funding for such a low-cost administrative district that cares about tax relief. Please appreciate their support and any effort they are able to bring to bear on our issue. They are behind us. We need this funded.
  • The state legislature increased the school safety allotment from $1.04 million to $2.3 million to try and help; however, our actual costs for CFISD safety and security initiatives amount to $51 million yearly. Both our district and our legislative delegation believe in supporting school safety. They have put money behind it. We just need more as we are a proactive district that wants to provide the safest environment possible.
  • Yet another budget challenge comes with our special education allotment. The federal government has tremendous special education rules and regulations, and provides little funding to implement them. Our state has recognized this issue and provided makeup funds to help. We receive $88 million from the state, but our actual costs amount to $138.5 million. Our legislature has identified this as an issue caused by the federal government. The CFISD local general operating budget covers the $50 million gap. If we could move the federal government to fund the gap or our state could help more with the exploding costs, it could help us address the needs of our rapidly growing special education population.
  • Record inflation of 19% since 2019 has increased costs. We have not gone to our voters to increase revenue to make up the difference, but the state has funded property tax relief.
  • Finally, the 2024 expiration of federal stimulus funding (ESSER funds) eliminated a funding source that has helped offset the deficit for the last three budget cycles, which ends in September, leaving us with an additional funding hole.

Where we are

I want to preface that these are painful conversations for everyone in the district, from the Board to the BRAC to the campuses. In a service-oriented industry like ours, where 90% of our budget is staff, we are relegated to reducing costs in this area after already reducing over $14 million in non-personnel areas. Again, since CFISD maintains the fourth-lowest administrative cost ratio in the state, there are not many additional administrative cuts that will significantly impact our budget. In fact, if we eliminate all central staff (including HR, Payroll, benefits, technology, curriculum support, and every hourly support staff), plus all the campus administration and instructional support, we would not make up our projected deficit. We have already committed to using some of our fund balance to minimize the impact this year. Still, we must maintain a safety net in the fund balance to make payroll for the first four months of the school year until property tax receipts start coming in.

The Budget Workshop on April 22 was an opportunity for our Board to hear recommendations from the BRAC and provide input and feedback in advance of our budget deadline. The BRAC recommendations were not close enough to our one-third target amount in year one. Since then, we have reduced our target amount with a plan to utilize the existing fund balance to offset cuts and minimize staff reductions.

The modified budget reduction plan impacts approximately 150 district and campus-level administrators and professional support staff, 60 operations and 21 maintenance positions, and non-personnel reductions totaling more than $14 million at central and district departments. That still leaves us impacting 320 teachers, 66 paraprofessionals and support staff. We are NOT laying off people. We will use vacant positions that have not been eliminated to move staff into. We have prioritized filling open teacher and paraprofessional positions to help campuses meet their classroom needs first. Again, classrooms are prioritized to fill with displaced staff.

The Board also requested modifications to the transportation plan for a hybrid solution that would include a hazardous route plan for elementary and middle school students, resulting in about $6.2 million in cost savings.

We remain committed to providing a staff salary increase for 2024-2025, allowing CFISD to remain competitive with neighboring districts while minimizing the burden of inflation that our employees are experiencing. Additionally, many of our staff live paycheck to paycheck and rely on raises to counteract rising insurance costs.

The trustees and I have been in frequent communication with our legislative delegation, advocating on behalf of the district regarding our budget challenges. The most urgent request of our legislators is their help with the Texas Education Agency Commissioner to utilize excess state funds to offset the district’s loss of revenue due to the LOHE for approximately $30 million. All our legislators have shared their willingness to advocate on our behalf. However, it’s just one-time money, and our legislative delegation has expressed support for more permanent funding for a low-admin-cost, tax-relief-granting district in the next session. That temporary funding will give us more time to seek additional savings and efficiencies to address our shortfall. We are blessed to have our legislative delegation help with this in the next session. That does not begin until January, which is halfway through next year’s budget.

We are also exploring various revenue-generating ideas, including increases in advertising, naming rights and expanded outside facility use. While a Voter-Approved Tax Rate Election (VATRE) would generate the most revenue, it requires voter approval. Based on the statute, November 2024 is the earliest we could hold an election; therefore, it cannot impact our bottom line until the 2025-2026 budget year.

Looking ahead

Unfortunately, we know that our budget challenges will not go away after one year of reductions. Suppose we do not receive increased state funding and/or generate additional revenue. In that case, we will face an even more significant estimated deficit in 2025-2026, necessitating twice as many positional cuts. Therefore, some locally funded increases in revenue, such as a VATRE, could mitigate some of the program and positional cuts. This would be a much better option than eliminating the LOHE as it provides some weighted state funding while still providing homeowners tax relief.

I wish I had more inspiring news to share with you, but we all must clearly understand our current situation and the path forward. Again, I’m sorry to be the bearer of bad news. Despite these difficulties, we are tasked with providing the best possible education for more than 118,000 students, and we remain as committed to that challenge as ever.

In the best interest of children,

Doug Killian, Ph.D.
Superintendent of schools