SCHOOL FINANCE CONSULTANT Dr. Doug Carr conducted a workshop for Fairfield Independent School District trustees, giving a history of state school financing and some insight into the future. To fund operations in fiscal year 2010-11, Fairfield Indpendent School District trustees must sharpen their pencils at budget time to overcome a funding cap imposed by state school financing legislation and a drop in property values.

Fairfield school board members met last week in a workshop with Dr. Doug Carr, a school finances consultant, to begin preparations for writing the district budget this summer.

“There is no way to say we can live on a flat line revenue when costs continue to go up,” Dr. Carr says.

Carr is a specialist in Chapter 41, or property wealthy, school districts that must share tax collections with Chapter 42, property poor, districts. FISD is a Chapter 41 district and sent $12.5 million of its property tax collections to the state for redistribution last year.

He explains that schools are funded in three parts, property taxes collected by the district, state aid for mandated programs such as free and reduced price meals, and Additional State Aid for Target Revenue.

The state sets a target revenue for each school district based on what has been determined to be the dollar amount needed to provide a public education for each student in the district. If property taxes and state aid do not provide enough money, ASATR kicks in to reach the target.

“The state has to step in and fill your glass with ASATR,” the school finance specialist says.

A problem looming, Dr. Carr reports, is that Texas is looking at a budget deficit when the legislature convenes in January 2011 and there are concerns as to where the ASATR funds will be found.

He also notes that the legislature will be working

In addition, FISD has picked up funding through growth in school population over the past several years. Student population is currently above 1,800.

But, as much as school funding equality has been trumpeted in Austin, that is simply not the case.

“There is no such thing in the state as equity right now,” Dr. Carr declares.

He points out that most school districts are targeted for funds of $4,000- 6,000 per student, but the top amount is $13,000 per student and the bottom is $3,700.

Dr. Carr gave trustees a history of state school financing legislation and a review of where district money is spent.

“Schools basically spend money on three things, payroll costs, fixed costs and discretionary costs,” he says.

Out of a $29 million budget for 2009-10, Fairfield sent $12.5 million to the state for redistribution, leaving $17.2 million for operations, which was divided as 39.7 percent for payroll, 51.9 percent for fixed costs and 8.4 percent for discretionary spending.

About the only places to cut the budget are the discretionary and payroll columns because there is little adjustment in fixed costs which cover utilities, insurance and fuel.

“That piece of the pie continues to get bigger and there is little you can do about it,” Dr. Carr says.

“It’s probably time to hunker down and squeeze that dollar until it screams,” he adds.

The school finance specialist points out that the state target revenue calculations not only set a minimum to be spent per stu- on closing the state budget deficit and political redistricting next year, so school financing fixes probably won’t be addressed.

Dr. Carr prepared a spreadsheet for trustees that tracks FISD budget figures from 2005-06 when the state financing plan was overhauled under House Bill 1, through changes that set a cap on school property taxes and projections through 2012- 13.

The school finance specialist predicted that Fairfield schools will face a $563,337 deficit next year if no reductions are made in spending.

However, that projection was made before Freestone Central Appraisal District issued the 2010 property valuation estimate last month that shows the district losing $169 million in values which could equate to as much as a $2 million reduction in revenue.

“We have yet to live through a period when property values go down,” Dr. Carr says.

He explains that the state school funding formulas are based on everincreasing property values, but those values have dropped statewide this year.

Under the state school financing formula, Fairfield was allowed target funding of $5,609 per student, which has grown to $6,940 per student largely because of work by administrators and a tweak in the formula under HB 3646 that went into effect in 2008-09.

The increase in the target funding amount came about through Weighted Average Daily Attendance figures that add revenue for students enrolled in special education, the reduced or free meals, English as a Second Language, career and technology, and other programs. dent, subsequent fixes, such as a cap on school taxes of $1.04 per $100 assessed valuation, established a ceiling on revenue.

In an economy where property values are in decline, school districts across the state are finding it more difficult to generate additional revenue to cover rising operational costs.

An option available is to shift some expenses from maintenance and operations, paid for by the $1.04 levy, to bonds which must be approved by voters.

Proceeds from a bond issue can go to buy new school buses and equipment, and for school upgrades. And, funds raised through a bond issue are not subject to recapture by the state.

FISD already is paying on three construction bonds, issued to build the elementary and intermediate schools and enlarge the senior high, at a tax rate of 15.6 cents per $100 assessed valuation, which is added to the $1.04 levy for a total tax rate of $1.196.

The district can raise about $244,000 per penny of tax rate.

One saving grace is that FISD has an unencumbered fund balance of $7 million, equal to a little more than three months of operating expenses, of which a part could be used to fund the budget. However, Dr. Carr warns against draining the fund balance as some districts have been forced to do.

Budget work by trustees and administrators will take up most of the summer.