The Katy ISD budget is in good shape and trustees could adopt next year’s budget by the end of the month, a district official said.

Chris Smith, the district’s chief financial officer, gave a district budget update at a special school trustees meeting Monday afternoon. He said if a budget had to be passed immediately, the district would be looking at an approximately $3.5 million surplus. This is because of additional state funding, which he said “saved our bacon.” Still, district officials had to sharpen their pencils to reach that surplus, he said.

The legislature is still addressing issues affecting school finance and what that might mean for districts across the state. He said the Texas Legislature, which began its biennial regular session in January, was looking at an approximate $33 billion surplus, much of which was to go for property tax cuts. However, legislators have been unable to reach an agreement to make this happen. The legislature also failed, he said, to implement enrollment-based funding and increased teacher pay.

Smith said Gov. Greg Abbott called the legislature into special session to deal with property tax cuts and border security. He said Abbott could add school finance to the special session, and that funds remain set aside in the budget. However, he said, lawmakers must come to an agreement on how to spend that money.

Smith said the House and Senate have differing proposals on property tax cuts. He said the House proposal involves a 5% appraisal cap on all real property, along with reducing an additional $0.1620 cents off each district’s compressed rate.

The Senate proposal, Smith said, involves a $100,000 homestead exemption, plus reducing an additional $0.10 off each district’s compressed rate. Smith described the Senate proposal as “less appealing” to a district such as Katy, which he described as fast growth and relies on selling bonds to build schools. If the Senate-proposed home exemption becomes law, districts will not get any state assistance for that additional money.

“I like the House version because I know we are going to be in the bond business and we’re going to continue to grow,” Smith said.

State funding is one of three factors that provide meaningful impact on district budget revenues. Another is local tax revenue, which can include such things as a tax ratification election, which was rejected by Katy ISD voters last November.

Smith said taxable values were budgeted at $54.6 billion in 2022-23, and are estimated to be $62.3 billion for 2023-24, a 14.14% increase.

The student attendance rate is part of this factor, Smith said.

Smith said attendance is down across the state, including Katy. Still, he said the district continues to grow. Enrollment is expected to increase from 91,872 in 2022-23 to 95,347 students in 2023-24, an estimated 3.8% increase.

The district expects to open two new elementary schools this fall, and a junior high and high school next fall, as enrollment continues to grow.

The third factor, Smith said, was fees, gate sales and interest, which he described as a very small figure.

Projected budget revenues are: tax revenue, ($512 million), other local revenue ($3.4 million), state funding, ($413.3 million), state TRS contributions, ($56 million), federal revenue ($6.9 million). Total estimated revenue is about $1.01 billion, he said.

Smith said 88.1% of the district’s expenses go toward payroll. Other expenses include services and utilities (5%), software, supplies and material (4.6%), other operating expenses 2.2% and capital outlay (0.05%).

“If anything, payroll is going to grow,” Smith said. “But really, nothing else will change.”

Smith said Katy ISD has the lowest administrative cost ratio, at 3.53%, of the 18 Greater Houston-area school districts. Spring ISD has the highest such ratio at 12.09%, he said.

Smith said trustees will review budget projections covering all budgeted funds at their July meeting. At that meeting, district officials will also know how the legislature addressed the school funding issues for the biennium. In August, the district will hold a public hearing to discuss the budget and tax rates.

Smith said some other districts are changing their budget schedules, but Katy is not. The current Katy ISD budget ends Aug. 31. Trustees are expected to adopt a new budget in August to take effect Sept. 1.