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.