Finance Q & A
The past several years have seen drastic changes in the way public education is funded. In 2006, the State approved compressing the property tax rate from $1.50 to $1 over a two-year period. Last year, the Texas Legislature ended its 2011 Special Session with a budget to reduce public education funding by $5.4 billion. Thomas Petrek, chief financial officer, discusses issues related to the district’s finances and funding.
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How did the 2006 compression of property tax rates affect the KISD?
The Texas Tax Reform Commission was charged to reform the franchise tax and for the state to reduce school property taxes for school maintenance and operation (M&O). The reformed franchise tax was supposed to supplement the reduction in school property taxes. The compression plan was approved in 2006, and it reduced M&O tax rate to $1.33 in 2006 and $1.00 in 2007. The state allowed school districts to add four cents to the M&O rate without seeking voter approval, so Klein’s M&O rate is currently $1.04. The compression plan has reduced school property taxes by more than $16.4 billion across Texas. The compression plan did not account for unforeseen circumstances like the increases in gas, utilities, student growth, a decline in the economy, etc.
What is the difference between M&O rates and Interest and Sinking (I&S) rates? What are the rates in the Klein ISD?
M&O is the amount the district receives to conduct its everyday business like paying for books, supplies, utilities, salaries etc. Currently the M&O rate is $1.04. I&S funds are used to pay the debt we incur to build facilities, purchase land, renovate existing infrastructure, etc. These funds cannot be commingled with M&O funds, again which pays for salaries and other operating expenses. Currently, the I&S rate is $.39. Both rates combined equal $1.43 for the 2011-12 school year.
What is the current fund balance?
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Board policy requires the district to maintain a cash reserve of at least two-and-a-half months of the next school year’s general fund estimated expenditures. Currently, the KISD has more than $100 million in its fund balance, which translates into a little more than three months of cash reserves available.
How did the $5.4 billion decrease in public education funding affect the district?
During 2011-12, the state reduction equaled a $16.2 million loss of general fund revenues, so the KISD had to decrease campus and department budgets by five percent and eliminate more than 330 positions - two-thirds of which were through retirement and resignations. During that time, the district received a one-time infusion of federal money from EduJobs and was able to hire approximately 120 teachers in critical needs areas to help keep class sizes down. The Board of Trustees passed a deficit budget of $3 million for the 2011-12 school year, and also approved using $3 million of the district's reserve funds to balance the budget.
What is the financial forecast for the 2012-13 school year?
Both branches of the Texas Legislature could not approve a joint budget for the biennium, so each branch selected a year of implementation. The Texas House reduced KISD funding by $16.2 million for the 2011-12 school year. In 2012-13, the Senate’s plan will be implemented. As a district, we are in a better financial state due to planning and programs in place from last year. The Klein ISD is considered a property-poor district and will receive $15.8 million in state funds, which includes additional funds for enrollment growth. We plan to give employees a cost of living raise and look to hire teachers to keep up with growth. The budget process has just started and will be approved this summer.
The forecast looks favorable for the district this year. What else would you like to inform our residents about?
Our district joined the Thompson and Horton school finance lawsuit. The goal of the lawsuit is to benefit all school districts and their students by requiring the state to establish an adequate, rational, and equitable funding system that is actually tied to the high standards it has set for all students. This lawsuit is important as we approach the next biennium for the state.
What else should Klein ISD residents know?
Klein ISD joined the Thompson and Horton school finance lawsuit. The goal of the lawsuit is to benefit all school districts and their students, requiring the State Legislature to establish an adequate, rational and equitable funding system that is tied to the high standards it has set for students. This lawsuit is important as we approach the next biennium for the state of Texas.
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What should Klein citizens do?
It is important for residents to speak to their legislative representatives about making education a priority, and to appropriately fund public education.

• View how a dollar is spent in the Klein ISD, www.kleinisd.net/dollar
• Contact information for legislators, visit 
www.kleinisd.net/legislators
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