The Lewisville ISD school board met last week to discuss the district-wide budget moving forward. Facing an impending crunch due to state recapture, they discussed a two cent tax swap that would raise the M&O tax rate, which would require an election, and lower the I&S tax rate, as well as whether to approve a 2 percent or 3 percent raise for district staff. The swap would shift tax dollars from funding construction and facilities into paying for instruction.
District CFO Mike Ball presented updated three-year projections on the district’s funding. Over the course of the next three years, the district projects to see its fund balance bleed from $165.5 million at the end of this fiscal year to $144.9 million to $96.7 million, accounting for employee raises and increasing expenditures and local property values.
“We still are in a spot where, over the next couple of years we’re going to need to make some adjustments to either our revenues or our expenditures or both in order to stay in the great financial shape we’re in,” Ball said.
The fastest rising of the district’s projected expenditures are state recapture payments, which go from an estimated $700,000 this fiscal year to $37.4 million the next to $65.3 million in FY 2020. The district was thrown into the state’s recapture program earlier than expected this year when enrollment declined by 782 students, far more than district officials had projected to lose, along with the area’s rising property values. Which districts owe money for recapture is determined by the ratio of property tax wealth to average daily attendance.
“We’d have to add another 6A high school to our enrollment and then we’d still owe some recapture,” superintendent Kevin Rogers said. “There’s just not a realistic scenario out there.”
Board members were also worried about reports that the state could put a cap on the growth rate of revenue collected through property taxes, only allowing it to increase by a certain percentage each year. The board requested district employees start running numbers on how revenue would be affected by such a cap. Board member Kristi Hassett further asked about the likelihood of receiving additional state funding if a cap were passed.
“They send correspondence that we should start increasing our tax rate and things like that rather than sending additional funds from the state,” she said.
In an effort to raise more money, Ball proposed a two cent tax swap — increasing the maintenance and operations rate, currently $1.04, by two cents and decreasing the interest and sinking rate, currently at $0.3675 by the same two cents. Ball said such a swap would trigger an increase in state aid and not affect taxpayers at all, but increasing the M&O rate would require an election. Ball said several other districts had done something like this over the past few years.
However, Ball and the board expressed concern about making the timing work for a September election on the M&O rate, given the requirements on when they would have to set their tax rates, how far in advance notice is required for elections and the possibility that the proposition would fail, leaving them with a reduced I&S rate and no compensation.
“We don’t want to not make this work,” Rogers said. “If we botch at it, I think we do more damage than good.”
Board members were in favor of the idea.
“I agree that the timing is less than optimal, but we need to continue to talk about this availability because of the fact that we’re in Robin Hood and because of the current housing market,” Hassett said. “All the conditions right now outside the timing condition, are ripe for this kind of situation. If we were to have a housing bubble, it would reverse this idea, because we would continue to have a rising property values where we can easily have that swap without affecting our taxpayers but drastically affecting our budget and our students.”
With the district tightening its belt, much of the discussion centered on whether district employees should receive a 2 or 3 percent raise next year. LISD has given its employees 3 percent raises three of the past four years. The district recommended a 2 percent raise this year.
According to the staffing presentation by employee services assistant superintendent Buddy Bonner, employees represent 80 to 85 percent of district expenditures, and staffing is dictated by enrollment trends. As such, part of the district’s response to losing so many students this year was to cut staff by letting unfilled positions remain vacant and not hiring replacements for some employees who left the organization, and they’ve saved $927,679.75 that way this year. He said that district salaries are currently 101 percent of the market in most pay grades.
Board members were not united on how to proceed. Tracy Scott Miller said at the outset he would push hard for a 3 percent raise and stuck to that stance, but by the end of the discussion, much of the board said they were comfortable with 2 percent but wanted more information.
In addition to wanting to find ways to better reward long-term employees, Jenny Proznik was critical of the district for only providing projections based around 2 percent raises for the next three years. She wanted to see projections with 2.5 and 3 percent raises before coming to a decision.
“I’m disappointed that if you wanted our input on it that it wasn’t provided in the documentation of what did 3 percent look like and what did 2 percent look like,” she said. “I would have liked to see what the actual numbers are.”
Ball said he expected an action item on staff raises at the June 4 board meeting.
The full district presentation is available here.