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Budget Basics

School finance in Texas and what it means for Round Rock ISD

Nationally, Texas ranks 49 when it comes to per-student spending. The standard allocation for educating a Texas student, which was boosted to $6,160 annually per student in 2019, has remained unchanged, even though inflation has risen by 14.5 percent. Furthermore, the school district can only receive the entire $6,160 sum for each student with perfect attendance. If a student is absent during the school year, the District’s entitlement for that student decreases, even though expenses such as teacher salaries remain constant.

The Solution

The Texas Legislature must take action by allocating more state funding and prioritizing public education. Action by the Legislature will help public schools equip Texas children with social and academic support, preparing our future leaders for tomorrow.

You can help:

  • Share your opinion with your representative.
  • Request action
  • And stay engaged during the legislative session, February – May

Round Rock ISD has had a AAA Credit Rating From Moody’s for the last 13 years.

Our general operating budget amounts to $445.4 million, with allocations between two primary funds: the Maintenance and Operations (M&O) fund and the Interest and Sinking (I&S) fund, also known as the Debt Service fund.

Budget FAQs

What makes up a district tax rate?

A school district’s tax rate comprises Maintenance and Operations (M&O) and Debt Service (I&S). M&O taxes finance the General Operating Fund, which covers the District’s routine operating expenses, including salaries, supplies, utilities, insurance, equipment, and other costs. The Debt Service tax pays for school bonds and can only be used to repay the principal, interest, and expenses of bonds issued for particular purposes. Each year, usually in September, the Board of Trustees approves the tax rate.

What makes up a public school district budget?
The M&O fund finances the school district’s day-to-day operations, including expenses like salaries, utilities, and supplies. The I&S fund pays off the bonded indebtedness. School districts conduct bond elections to secure authorization from local voters to issue bonds and levy taxes for repaying the bonded indebtedness. The proceeds from the bond sale are for constructing and improving facilities, and purchasing equipment, furniture, or land. However, the funds collected from the I&S side of the budget cannot be used for maintenance and operations expenses. According to Texas law, using I&S funds to pay teacher salaries is not permissible.
What is recapture? How does it impact us?
State funding formulas for school districts are designed to reduce state funding for education as property values increase. The State’s recapture plan, also referred to as “Robin Hood,” means Round Rock ISD taxpayers subsidize education costs for other Texas school districts.

Recapture is part of the Texas Education Code governing school funding that was enacted by the Texas Legislature. Recapture takes local tax dollars from “property rich” districts and redistributes the funds to “property poor” school districts to help fund operations. Round Rock ISD became a recapture district during the 2002-2023 school year.

This means that Round Rock ISD, and 159 other Texas public school districts, send millions of dollars in taxpayer funds back to the state every year for redistribution. These are funds that would have otherwise been used to help fund school operations and salaries in their zoned school district.

Only the Texas Legislature can reverse the increasing flow of local taxpayer dollars to the State’s budget.

How much has Round Rock ISD contributed to State recapture each school year?

2022-2023 $85,863,000
2021-2022 $61,479,569
2020-2021 $16,397,380

What are bonds? How long does it take to pay them off?
Voter authorization is mandatory for school districts to issue bonds, essentially debt instruments allowing investors to lend money to the district. The funds raised through the bond sale are used for financing long-term projects and other capital expenditures. The district repays the principal amount of the bonds and interest over an extended period. As per Texas laws, the maximum maturity period for a bond is 40 years.

Round Rock ISD has never issued bonds with a maturity period of more than 25 years, even though the assets financed by the bonds have a longer life span. During a bond sale, multiple bonds are issued, each with a maturity period ranging from 1 to 25 years. Assets with a shorter life span, such as technology devices, are financed with bonds with shorter maturities corresponding to the asset’s useful life.

What are fund balances?
School districts must employ “governmental fund accounting” to keep track of their funds. In Texas, school districts usually maintain various types of fund accounts, each comprising three components: assets (economic resources of the fund), liabilities (financial obligations of the district associated with a particular fund), and fund balance (the remaining value of assets after accounting for liabilities).

Round Rock ISD maintains an adequate fund balance to ensure smooth operations during periods of negative cash flow. Nonspendable and restricted fund balance use is limited by externally enforceable limitations like laws and regulations.

The Board of Trustees allocates committed and assigned portions of the fund balance for specific purposes such as emergencies, small capital projects, one-time items, and educational equipment, including musical instruments. The District’s Board Adopted Fiscal and Budgetary Strategy mandates a minimum unassigned fund balance of 25% of budgeted operating expenditures. Sufficient reserves are necessary to meet ongoing monthly spending because of the timing of payments received from the state of Texas and tax collections.

Can the District use fund balances as a “rainy day” fund?
A fund balance is not a reserve for emergencies. Instead, it is the surplus of assets a District possesses over its liabilities. This surplus comprises liquid assets like cash and investments and non-liquid assets such as delinquent taxes, accounts receivable, and inventories. Moreover, the surplus amount in a fund balance fluctuates significantly over a year. Therefore, when a district reports its fund balance, it reflects a particular moment in time that is subject to change as assets are collected, and financial obligations are fulfilled. For instance, districts with a fiscal year-end on June 30, like Round Rock ISD, may have larger fund balances than usual simply due to the time of the year.
Can a school board use the fund balance in any way they deem fit?
While School Boards possess discretionary authority over fund balances, it is essential to recognize that not all funds comprise readily available liquid assets. A significant portion of the fund balance constitutes non-liquid assets like delinquent taxes, accounts receivable, and inventories. And due to the timing of cash flows, the School Board only receives approximately 85% of revenues six to seven months into the fiscal year. In contrast, expenditures are evenly spread out throughout the year. Therefore, a significant portion of the unassigned fund balance, which the Board has discretionary control over, is utilized to cover expenses during periods of negative cash flow. Furthermore, other components of the fund balance, such as non-spendable, restricted, committed, and assigned funds, are subject to spending restrictions.
What is a Tax Ratification Election (TRE)?
A district that adopts a tax rate above its maximum M & O tax rate must hold a Tax Ratification Election (TRE) for the voters to ratify the higher rate. If a majority of the votes are cast in favor of the proposition, the tax rate for the current year is adopted by the Board. If the proposition is not approved, then the Board may not adopt a tax rate for the current year that exceeds the maximum rate.
How can funds generated from a TRE be used?
Unlike funds from a Bond Election, funds generated by a TRE can be used for various purposes such as increasing salaries and hiring teachers. In addition, TRE funds can also be used towards campus and facility improvements.