Off the Kuff Rotating Header Image

recession

The rough fiscal road for school districts

It’s gonna be bad. How bad remains the question.

Coronavirus already has wreaked havoc on school districts — closing campuses for the remainder of the school year, shifting learning online, and exposing a wide digital divide between students who have ready access to the internet and those who do not. And that is only this year.

Next year, even if the restrictions are lifted, the coronavirus still could spark a budget crisis for traditional and charter school districts across Texas.

School finance officials and state leaders already are warning that the economic disruption caused by the pandemic, coupled with the ongoing oil slump, could result in a plunge in state revenues as sales taxes drop and commercial property values slip. Texas Comptroller Glenn Hagar already has said the state is in a recession.

As districts work to finish their 2020-2021 budgets for approval this summer, Rep. Dan Huberty, R-Humble, said it would be prudent for them to squirrel away some money, even if it is too early to tell how much of an impact the pandemic will have on funding next year.

“Talking to superintendents, my message to everybody is, let’s get through this year, let’s get to summer time, and next session we’ll need to watch things very closely,” Huberty said.

[…]

[2019 school finance reform bill HB3] requires districts to base their upcoming budget on current year property values, instead of the previous year’s values. Districts receive a larger infusion of state money too, but the rate at which they can tax local property owners effectively will be capped by the state, said Catherine Knepp, an associate at the Moak, Casey & Associates school finance consulting group. How much local tax rates have to be lowered depends on the rate local property values rise and several other factors.

“Districts were still figuring out how to do that,” Knepp said, “Then enter coronavirus.”

For local revenues, Knepp said districts most likely to be impacted by the coronavirus closures will be those in which a larger share of their tax bases are commercial or industrial property rather than residential. About 60 percent of Deer Park ISD’s tax base, for example, comes from industrial properties that could suffer if the oil slump continues or if businesses there shut down entirely.

[…]

Huberty said the Legislature plans to save $1 billion of federal stimulus money for the next session to help fund schools and other parts of the state’s budget. Although it is too early to tell how much damage could be done as businesses and much of public life remains closed, he said money could be tight next session and said superintendents should begin looking where they could trim their budgets.

“The bones of what we put together with HB 3 remain intact, and we got some stimulus money from the feds to help us out with next year,” Huberty said. “But we’re going to have to look at everything.”

It’s a whammy from multiple fronts, as state revenue as well as local property tax revenues will be down, and the deep drop in oil prices will mean the Rainy Day Fund isn’t as topped up as it has been lately. On top of all that, when local revenues do start to recover, they will have to deal with the cap imposed by HB3. Which, as I understand it, does have an exception for things like epidemics, though who knows how that will play out. Even if everyone agrees to waive the restricting revenue cap, even the previously existing one could force tax cuts at a time when the districts are starved for funds. This will be an issue for multiple Legislatures, not just the 2021 Lege. It’ll also be a fine how-do-you-do for the TEA-appointed Board of Managers in HISD, whose first task (assuming they eventually get seated) will be dealing with the expected ginormous budget hole. Bet all those people who applied for the position a couple of months ago are having second thoughts now.

Turner to ask feds for some relief

Can’t hurt to ask.

Mayor Sylvester Turner

Mayor Sylvester Turner is asking the federal government to let Houston use an estimated $400 million in aid to help close its ballooning budget gap and reduce the number of expected furloughs in the fiscal year that begins in July.

Turner said the CARES Act, part of the $2 trillion stimulus passed by Congress last month, will give the city much-needed resources, but the rules accompanying those funds prevent the city from using the dollars where they are most needed: the budget.

“You don’t have to appropriate us more dollars, just allow us to have flexibility with regard to those dollars that have already been awarded,” Turner said he told lawmakers. The mayor said the request was made in a letter to Congress signed by 110 other Texas mayors.

There are three rules for the federal aid, according to Turner: expenditures must be directly related to COVID-19, it cannot previously have been budgeted, and it must be spent by the end of this year.

That helps, Turner said, but it would help more to use the funds as a budget stopgap. Southwestern cities like Houston have incurred fewer direct pandemic expenses than northeast cities because they took earlier social distancing actions, Turner said. The real brunt for governments here is the projected drop in sales taxes, which is expected to punch a massive hole in the Houston’s already cash-strapped budget. Sales taxes are the city’s second largest revenue stream, after property taxes.

It’s that or budget catastrophe, and there’s no good reason why we should have to have the latter. Which doesn’t actually matter, since I’m sure the Trump administration will say No, and even if somehow they say Yes or the Turner administration tries to find some clever way around the obstacles in their path, state Republicans will turn fire and fury our way. Because, obviously, being able to stave off massive cuts from a budget shortfall that was unforeseen and no one’s fault is totally irresponsible. That’s just math. Anyway, this is the process before us. May as well see where it leads.