Storm’s Damage Still
Hurting Schools
School districts affected
by Hurricane Ike face
tough budget choices.
The complicated Texas school finance system has administrators sharpening their pencils every year, but for some whose districts were affected by Hurricane Ike, the fiscal 2010 budget is even more difficult than normal.
The biggest challenges are reduced tax revenue and predicting enrollment, says Jamey Harrison, Bridge City Independent School District (ISD) superintendent.
Dozens of school districts closed for weeks after Ike made landfall on Sept. 13, 2008. The small High Island Independent School District on the Bolivar Peninsula east of Galveston is among the worst-hit districts. Superintendent Paula Quick joined the district in August 2008. A month later, Hurricane Ike left most of her staff and students homeless, wiped $45 million — more than one-third — off the district’s tax base and prompted the exodus of one-quarter of the student body, which now stands at 166.
District/County Appraisal Changes
| Taxing entity | 2009 tax | Change |
|---|---|---|
| Galveston Co. | $20.756 B | -1% |
| Galveston ISD | $4.28 B | -14% |
| Friendswood ISD | $2.14 B | 4% |
| High Island ISD | $58 M | -56% |
| La Marque ISD | $1.53 B | -5% |
| Orange Co. | $4.264 B | -21.5% |
| Bridge City ISD | $572.42 M | -0.8% |
Government Tools That
Made the Difference:
Local property tax dollars from real and personal property are the bulk of most school district funds. School board trustees vote to set a tax rate per $100 property value with maintenance & operations and interest & sinking components.
Average Daily Attendance (ADA) dollars are the second major component of public school funds and are distributed by the state of Texas. The value of local revenue will affect the value of the state’s ADA contribution.
So what can a district do to balance its budget when property values have gone down and enrollment is falling as displaced families relocate, leading to fewer state dollars coming in? Tough decisions, such as cutting jobs and programs are one answer, but before they take those steps, budget writers are looking for alternative funding sources and existing district reserves.
“We are looking at three to five years to rebuild the peninsula’s tax base,” Quick says.
About 80 percent of the budget goes to personnel, leaving precious little for other spending. Quick knows she has to cut $100,000 before the High Island trustees can consider passing the district’s approximately $2 million budget.
Eleven High Island ISD staff members lost their homes and possessions; 69 percent of the students are classified as homeless. Yet with 52 Federal Emergency Management Agency (FEMA) trailers on the way, Quick says the community has rebuilding in its sights.
“I remain optimistic,” she says.
High Island and other hurricane-affected districts will receive some budgeting help from the state’s school finance “hold harmless” provision, which means the district won’t have less money per student than fiscal 2009 because of the loss of local revenue. However, any drop in enrollment would reduce the state’s total weighted average daily attendance contribution.
“Because of hold harmless, we don’t expect a huge hit on the maintenance and operations (M&O) side from the dip in property values,” says Bridge City’s Harrison. According to the Orange County Appraisal District, the 22 percent drop in appraised property values — about $156 million — was largely from damaged homes in Bridge City ISD.
Fewer Students Equals Fewer Dollars
“We have lost 7 to 7.5 percent of students, so we will lose revenue based on that,” Harrison says. Some students whose homes were heavily damaged and have been traveling to school from outside the district could move too.
“Predicting student enrollment is making writing the budget this year and the following year tenuous, to say the least,” Harrison says.
One boost for fiscal 2010 will be additional dollars allocated for students who were classified homeless after the storm made their homes uninhabitable.
“Because they are not homeless any more, the following year we will get less,” he says. “We will have to use this money for one-time expenditures. In two years, we’ll have substantially fewer M&O dollars.”
Despite 65 percent of kids and 75 percent of staff being homeless during the year, Harrison says he expects Bridge City to retain its recognized rating from the Texas Education Agency.
One option to raise revenue would be to increase the property tax rate. But school administrators and boards are loath to do that — especially given the current economic recession.
“We’re at the cap, so we’d have to go to the local taxpayers,” says La Marque ISD’s Director of Finance Laurie Jenkins. “Our board is not interested in doing that. Our most significant expense is salaries, and they’re not interested in reducing salaries. That leaves us in a jam and something has to give.”
Reduced Tax Base Hurts Some Districts
Ken Wright, Galveston County’s chief appraiser, says the total tax roll was reduced 2 to 3 percent, but some parts of the county were damaged worse than others. A building boom, particularly in shopping centers, added commercial value to the tax base — increasing the values of inland communities such as League City and Friendswood — offsetting the 4,500 destroyed homes removed from the county’s tax roll.
La Marque’s estimated 3 percent tax base reduction is a combination of storm damage and economic factors, Wright says. The reduction in petroleum companies’ inventory value — such as La Marque’s Dow Chemical plant — is a factor, too, for Galveston taxing entities.
The lost property tax revenue is expected to reduce La Marque’s local tax revenue by more than $1 million — a substantial hit on the estimated $30 million budget. The district’s fund balance at the end of fiscal 2008 will be almost halved to $2.9 million when the current budget year ends Aug. 31, Jenkins says.
The district is considering increasing the student-to-teacher ratio, cuts to maintenance, travel and staff development to stay away from cutting programs. But years of trying to keep salaries competitive with neighboring districts has La Marque in a bind — there aren’t many places left to make budget cuts, including deferring building improvements cut from previous budgets.
Harrison says raising M&O tax rates isn’t an option in Bridge City, but increasing the debt service tax rate is likely. Like La Marque, Bridge City will be forced to dip into its fund balance, but it won’t rely on taxpayers to meet additional construction expenses, including a new campus to replace two older, damaged elementary school buildings — an expense that only will partially be covered by insurance and FEMA funds.
“What we won’t do is put a bond issue to the voters,” Harrison says. “This storm had a devastating economic impact on our community. It would be remarkably irresponsible for us to ask taxpayers to fund the extra funds needed to build the new campus.”
Instead, grants and philanthropy are being targeted, he says, efforts that are proving quite successful.
For High Island, the property tax-dependent school finance future depends on its tax base recovering. If it doesn’t, the small district may be forced to give up its independence and consolidate with a larger neighbor.
“I write grants — homeless grants, transportation grants, anything I can to help survive this time,” Quick says. “I make sure I have articles in the paper and send out newsletters to let everyone know. Let the pen be mightier than the sword.” TR
Find out more about funding for Texas schools.