Financial Transparency & Budget Challenges

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The Eanes ISD Board of Trustees and District administration are looking at ways to address a projected $6.3 million funding shortfall for 2025-26, while keeping the welfare of our students, staff and families at the forefront. Discussions about the budget will take place in open board meetings and community meetings to be announced soon. The Board held a a special meeting dedicated to the budget discussion Nov. 11.

After the Nov. 11 Board Budget Workshop, the Board directed the administration to further research, among other things:

blending Barton Creek Elementary and Valley View Elementary;
implementing a naming rights program to generate revenue;
eliminating Professional Learning Community periods (grades 6-12)

BACKGROUND
Since last spring, Eanes ISD has encountered several unforeseen economic challenges resulting in a net budget deficit of approximately $3.3 million for the 2024-25 school year. Unless the upcoming 89th session of the Texas Legislature decides to increase school funding for the first time since 2019, the financial outlook worsens in coming years, with projected deficits of $6.3 million in 2025-26, $9.6 million in 2026-27 and $11 million in 2027-28.

Eanes ISD cannot afford to wait. Immediate steps are necessary to prepare for these funding shortfalls and to be responsible stewards of taxpayers’ money. As such, we have begun to provide preliminary information at campus and Board meetings, presenting the reasons for the deficit, and prefacing bigger, more complex budget discussions to come.

Current and projected deficits are the result of external factors beyond our control. These include an unexpected decline in property tax appraisals, stagnant state funding, decreased federal funding, lower investment earnings due to falling interest rates and declining student enrollment attributed to lower birth rates and high housing costs.

There is often a misperception that, because Eanes ISD is the number-one-ranked public school district in Texas and is considered “property-wealthy,” we are not subject to financial challenges. This is not the case. The state’s recapture component in the school funding formula reclaims $95 million of Eanes ISD’s local property tax revenues every year - approximately 60% of funds that would otherwise support our students and staff.

LONG-RANGE FACILITIES PLANNING COMMITTEE
This is a resilient school district with a history of innovation and a hallmark of resourcefulness. Just as the Long-Range Facilities Planning Committee (LRFPC) is currently exploring opportunities to make schools more efficient, more profitable and more conducive to learning, the challenge to re-invent Eanes ISD and to re-generate the financial future is here. These opportunities would be funded out of the Interest & Sinking (I&S) part of the budget, which is not impacted by budget constraints.

Tax Rate

School budgets and tax rates are split into two different revenue streams funded by taxpayer dollars, the Maintenance and Operations budget, or M&O, and the Interest & Sinking budget, or I&S. The money generated from each part can only be used for specific types of expenses. Eanes ISD’s total tax rate of $0.8855 is the second lowest in the area and senior citizens can “freeze” their tax bill if they file an Over-65 Exemption.

Maintenance and Operations (M&O)
Funding coming into this bucket is primarily used for operating the district. Employee salaries and benefits; student educational resources; classroom supplies and equipment; and contracted services – like utilities, insurance, transportation, legal and audit services, etc. – are paid from this source of funding.

To relate this to an average community member, this is similar to things like car fuel and routine maintenance, groceries, clothing, cleaning supplies, and utilities like electricity and water.

The M&O funding source is split into two tiers: Tier 1 and Tier 2.

Tier 1
The Tier 1 Entitlement is based on the Basic Allotment (BA), as set by the Texas legislature, guaranteeing every school district a certain amount of funding for each student based on the Average Daily Attendance (ADA). The BA is currently set at $6,160 per student, with additional funding depending on district and student characteristics.

Tier 2
Funds that enrich the educational offerings a school district provides students – on top of the BA, currently set to $6,160 – fall into M&O Tier 2. Examples of these enrichments include small class sizes and specialized programs or courses that go beyond those required in the Texas Essential Knowledge Skills (TEKS). Funding in Tier 2 comes in two forms: Golden Pennies and Copper Pennies.

Golden Pennies
Golden Pennies are a portion of the M&O tax rate that bring in revenue above the Tier 1 Entitlement and are not subject to Recapture, meaning 100 percent of the revenue generated from this part of the M&O tax rate stays in the district. They are referred to as “golden” because of their high value to a school district and because state aid can be generated to fully fund the calculated entitlement.

In 2017, Eanes ISD voters approved two golden pennies, and in 2020, voters approved the additional two golden pennies in Voter Approval Tax Rate Ratification Elections (VATRE). EISD currently uses eight (8) golden pennies as part of its M&O tax rate out of a total of eight (8) allowable golden pennies.

Copper Pennies
Copper Pennies are a portion of the M&O tax rate that brings in revenue above the Tier 1 Entitlement and can generate additional state aid but is subject to Recapture. To benefit from copper pennies, Eanes ISD voters must approve the addition of copper pennies to the district’s M&O tax rate in a Voter Approval Tax Rate Ratification Election (VATRE). If approved, the copper pennies would yield $20 million, netting an estimated $4 million in additional revenue after $16 million is recaptured by the State.

Interest & Sinking (I&S)
Debt Service is financed through a separate part of the overall tax rate, the Interest and Sinking (I&S) fund. Debt Service pays for the district's debt, taken on through the sale of bonds for capital improvement projects such as school renovations, technology, school buses, etc. A school district’s I&S tax rate is set by local school boards, and is determined by how much revenue is required to pay off bond debt.

I&S funds can only be used to pay debt to support major facilities repair and renovation, and construction projects that are proposed in bond elections. I&S funds are not subject to recapture, which means 100% of funds from the I&S side of the tax rate stay in the district. I&S funds can only be used for debt service – they cannot be used for operational expenses or salaries.

Recapture

The State's Recapture program exacerbates the financial strain on districts like Eanes ISD by diverting taxpayer dollars to fund state initiatives such as infrastructure, healthcare, prisons and state services, rather than utilizing the State's $33 billion surplus. This mechanism siphons resources away from local educational needs, placing additional pressure on already strained budgets.

Eanes ISD will send $94.7 million of its taxpayer dollars to the State of Texas for the 2024-25 school year.