How Texas School Districts Are Budgeting with the Lack of Funding from the State

Transcription:

Samantha Gilley Rachlin (00:07):

Good afternoon everyone. Thank you for being here. Welcome to the School District's Outlook panel. During this discussion, we're going to examine how school districts are handling state funding challenges from both the administrative and the credit perspective. We're going to touch on some current challenges facing Texas ISDs. How ISD funding in Texas compares to other states, how Texas ISDs are coping with these challenges through legislative impacts on ISD funding and the outlook for Texas public education. As you can tell from that, we've got a lot to talk about today, so we'll get going. First, I'd like to introduce our amazing panelists. I'd like to start with Karen Smith. Karen is the Chief Financial Officer at Cyprus Fairbanks, ISD, the third largest district in Texas with over 118,000 students and a budget of 1.2 billion. She has worked in school business in Texas for over 32 years with experience in finance, issuance of bonds, risk management, child nutrition, technology, and internal audits. Karen is an active member of the Texas Association of School Business Officials and the Association of School Business Officials International. She has served on ASBOs legislative advisory committee and is a current Asbo board member.

(01:36):

Jose Costa is a senior director with the public finance Department of Fitch Ratings and serves as the regional manager for the Southwest regional office in Austin. Jose works primarily on tax supported bond transactions in Texas, Colorado, and New Mexico. Prior to joining Fitch ratings in 1998, Jose worked for the New York City Mayor's Office of Operations and the Texas Legislative Budget Board, and we have Elaine Cogburn. Elaine started her career in public school finance in Lubbock ISD in 1995, and she currently serves as the deputy superintendent for finance and operations for Dripping Springs, ISD Elena served in eight school districts across Texas, including Dallas ISD, Plano ISD, and most recently Leander ISD. Elaine returned to Dripping Springs ISD in September, 2022, and she currently serves as president of the board for the Texas Association of School Business Officials. And lastly, we have Steven Doyle. Steven is an associate director at S and P Global Ratings.

(02:40):

He has rated Texas ISDs for the past eight years and is currently the primary analyst for the Texas Local Government Ratings portfolio. Thank you to all our panelists for being here today. We're really excited to get their perspectives and their expertise on these topics. And if y'all are ready, I had like to just jump into our questions and I'm hoping we can have a very organic conversation with a back and forth flow, so feel free to jump in with any input you have at any time. So let's start with the topic of this panel, which is what are the current challenges facing Texas ISDs from the perspective of both school administrators and also from a credit perspective? Let's start with Karen.

Karen W. Smith (03:27):

Okay. Now can y'all hear me? I want to make sure it was on. Well for us, you'll probably, and Blaine will probably say the same thing, and you've probably heard it from other school districts. It's the budget challenge right now. We heard earlier that there's been record funding coming into public education, and really what has happened is it's a balancing act between state funding and taxpayer relief or tax, I say taxpayer relief, I'm sorry, property taxes. And so what has happened through the taxpayer relief when that happened is that there was just a shift between property taxes and state funding, but school districts didn't get any additional funding. So what we've been trying to really do, at least our district is really educate our community and our board because they keep hearing there's record funding out there, but they don't understand then why are you having the budget challenges that you're having.

(04:21):

So we've tried to really work hard. I know Lane does the same thing where we've used the scenario of a cup and we say, this is the entitlement, this is how much money the state says we can have. And it's made up of state funding and it's made up of property taxes. And what's in our cup has changed. Our cup hasn't grown. So school districts have not received an increase in state funding since 2019. We all know what's happened. We've had record inflation, so that has been hard for us to keep up with. Also, some areas that we've really tried to promote that we're underfunded in, besides just the general funding for the school district is school safety and special education. We spend about $89 million more a year than we get in funding in special education, and we have mandates that we are required to follow.

(05:19):

I heard one of the panel members earlier say something about unfunded mandates and we have mandates and requirements that we required to follow at federal level and also school safety. They passed a new bill recently this last session requiring a police officer at every campus, but the funding that was provided was $15,000 per campus. And that gives me about a fifth of a police officer because it cost me about $140,000 for a police officer for the officer's salary, their uniform, their weapons, and their car. And so it's things like that that have made it tough for school districts. Also, staffing shortages that we've had. We've had record people leaving school districts, teachers are tired as well as we have trouble finding bus drivers for example, and custodians. And an example I used with our school board was, although we've got people they go to UPS for example, or Amazon, well Amazon, if they can't find drivers, what do they do?

(06:28):

They just increase pay and they pass the cost onto the consumer. We as school districts don't have that option. So that's what's made it tough. And I think the last thing that I'll say with my school district is we offer, not many districts do, about 196 districts in the state offer a local optional homestead exemption, but because we offer that 20% local optional homestead exemption, we get less state funding. And so it's been very difficult with that, with having that less money. It's about 65 million that we lose out on the maintenance and operations side. And recently the last, I guess it was in the special session when they gave taxpayer relief of going from 40,000 to a hundred thousand, they actually took away being able to remove that local optional homestead exemption until January of 2028.

Samantha Gilley Rachlin (07:23):

And I guess that's so helpful, Karen, but Elaine, would you weigh in on a smaller, faster growth district and how you're coping with these challenges? Does that kind of contrast?

Elaine Cogburn (07:32):

Sure. Karen covered everything. So there's not a lot to add there, but a little bit different perspective. So Dripping Springs is right outside of Austin to the west. Our current average home price is 776,000. So we have a very rich School district, for lack of a better word, a very high recapture. When my community gets their tax bill, they automatically think that the school district is keeping all of that money, but we're not because as Karen mentioned, the cup, our cup runeth over and that overage is recapture that goes back to the state. So the misnomer that because property taxes are increasing, the school district is keeping all of that money is what we're having to fight. And so for us, yes, there are shortages in the same areas. I'm currently paying $30 an hour for bus drivers. That is the magic number that got us fully staffed. Last year at this time we had a 50% vacancy factor, and so a large portion of our community was not getting service. And so we had to increase the pay to do that. And as Karen mentioned, I can't just increase my pass on cost. I get the same dollars. We get the same $6,160 per student that we got in 2019. So inflation is a big factor. Our other big problem is teachers can't afford to live in our community. When the average home is 776,000, you can't live there. And if you've tried to drive to Dripping Springs lately, it's a nightmare. And so we're really focused right now on employee housing and doing something for our employees so that they can actually live in the community that they work in.

Samantha Gilley Rachlin (09:17):

Jose. And do you have a credit perspective from an economic challenges that you're seeing?

Jose Acosta (09:23):

Sure. In addition to Texas school districts in my portfolio, I also review school districts in Louisiana, Colorado, and Arizona. And when I look at a Texas school district credit profile, I certainly appreciate the very difficult funding environment that you must operate with. You're tasked with one of the most important functions of a civilized society, the education of our kids, but you must do it within a very controlled funding environment. There is some latitude with local enrichment efforts, but those are not options available to every district. So districts have relied in the past on annual increases in the basic allotments to keep pace with inflation and salary pressures. And prior to 2019, in your typical rating committee for a Texas school district, you could pretty much assume that there was going to be periodic increases to the base allotment. Unlike other states, Colorado, Arizona, where you were guaranteed a inflation index increase of the basic allotment in Texas, it was not quite indexed, but there were increases that we could count on periodically, and then there was a big 20% boost in 2019. But since then, the basic allotment has remained flat.

(10:50):

And as part of that 20% boost of, as you know, there was a new funding approach to provide homeowner tax relief through an annual compression of the m and o rates. Anyway, the allotment has remained flat just as districts face the mounting pressure of teacher shortages followed by the pandemic related declines in a DA and declining birth rates and charter school competition and then accelerating inflation. Certainly ARPA and ESSER funds helped districts mitigate the impact of those revenue pressures, but the pressure to increase teacher salaries persists and districts were forced with a difficult decision to either award or not award teacher pay hikes without any certainty that the legislature was going to increase the basic allotments.

Samantha Gilley Rachlin (11:48):

Steven, do you have anything to add from your work with S and P from an economic perspective?

Stephen Doyle (11:56):

Yeah, so maybe a little bit more of a positive slant compared to what we've heard. Certainly a lot to deal with for school districts right now. And a quick background, we rate debt issued by over 600 school districts and 98% of the ratings that we have have a stable outlook. So we generally view the portfolio as stable, not that there aren't things mounting pressures that will have an impact over the next couple of years. And that's largely supported by the very strong financial position of most school districts within the state, generally in Texas versus what we see nationally. We've got a more conservative management approach, a more conservative approach to the comfort level of where you want reserves to be. We usually see a minimum 25% or three month operating reserve and a lot of times reserves well in excess of that. So going into these different pressures, this situation right now with school funding and the legislature, school districts are positioned pretty well to be able to even reduce some portion of their reserves and still very likely maintain their credit quality. And so that's not to say that there aren't some unique challenges that are being faced right now with inflation, interest rates rising so fast, certainly a pressure with stagnant funding for the past five years. There's a lot of districts waiting to see what happens next January and sort of weighing the options as to how to deal with that interim period with these higher costs and stagnant revenue. But overall, we do still view the portfolio stable, largely supported by the strong financial position of the average Texas school district.

Samantha Gilley Rachlin (13:38):

Thank you for that perspective. And let's just take a few minutes really quickly, and I'd like to hear from Karen and Elaine, what are you seeing in other states if you are going to conferences, you have counterparts in other states that you're talking to, what are you seeing as Texas funding compared to other states?

Karen W. Smith (14:03):

I would say, well, first of all, I think it goes up and down, but we're about, I think now 47th lowest funded school district out of the United States. And one thing that's really I felt like has benefited me by being on the board of the association school business officials is I've met people from other states and part of the good thing I guess is a lot of 'em are having the same problems as we are. They're underfunded so that at least we can all complain together I would say when we get together. But then the other thing is most of the school districts are funded based on enrollment or what they call membership. And our school districts in Texas are funded based on average daily attendance, but we have to build buildings and we have to hire teachers based on enrollment. We can't do it on average daily attendance.

(15:00):

And so average daily attendance has been down in Texas for about 2% and on average, which for my districts, that's like $15 million less funding. And then I would say the other thing is with everybody, some districts, I think I heard y'all refer to the inflation factor, I mean, sorry, other states rather they provide an inflation factor, so there's a guaranteed amount that will go up each year. And some of 'em it's tied to the consumer price index, but that's one thing we don't have either. So there's no increase for inflation. And I would say the only other thing that all districts are kind of dealing with is the end of the stimulus funds. We have tried very hard at our district to, because I heard the reference to fund balance, and we have used that to help build our fund balance. We knew this was coming and have been planning for it for a while. So we've been trying to keep our fund balance at close to six months in fund balance because we know we're fixing to dip into fund balance. And so we've tried to plan around that.

Elaine Cogburn (16:18):

So I'm just going to say I keep my head above water, barely keeping up with Texas laws, so I rely on Karen to see what's going on at the national level. I just wanted to touch on the financial stability of Texas schools back in, I think 2014 working with the school board and dripping. Our board policy actually governs how much fund balance we must maintain and what kind of deficit budget we can adopt. So adopting a deficit budget and dripping is not a new thing by far. However, we've always been able to comply with our board policy, which says we can't have a deficit more than 2% of projected revenues. And with that limit that usually ends the year with a surplus this year, our deficit is $5 million. We need to get it to 2 million. So we're looking for 3 million to cut. And it is hard.

(17:08):

I mean, 3 million sounds like a drop in the bucket for Karen, but that's 3% of our budget. And it is really, we've found all but about 800,000 and we're going to ask the board to take about a million dollars out of fund balance for one year to get us through this hump. And people ask, well, why are you seeing this? Now? Part of it is inflation, but the bigger factor for us is we've always been a fast growth school district, but the growth has slowed. So because of interest rates, families aren't moving out of older neighborhoods and younger families aren't moving in because they just can't afford a 700 or million dollars home with little kids. We're still growing fast, but the decline in the growth rate is what's causing us to not have the money that we need to balance our budget. When we look at the drop in projected enrollment from two years worth of studies, it equates to about a $5 million loss in revenues, which is exactly what we're trying to cut. So we do have about seven months of fund balance or seven months of operations in fund balance. And so I know a lot of my neighboring districts are very envious of that and are trying to put policies in place, but they're dealing with boards that want to pass on teacher raises and fill vacancies. And so it's a really difficult challenge right now dealing with inflation staffing shortages and no increase in the basic allotment.

Samantha Gilley Rachlin (18:29):

And Steven, I'm going to ask you this question. How do Texas schools compare to other districts across the country in terms of their primary credit metrics?

Stephen Doyle (18:38):

And so a lot of it's like you'd imagine debt is higher, reserves are higher debt really necessitated by the enrollment growth over the past decade, 15 years that a lot of districts have seen where new facilities were needed or updates to existing facilities. So we expect those metrics to still be higher. I touched on the fund balance earlier. I'd say the average for an A or AA category credit that we have is 40% or so of operating expenditures and reserves. So that is an outlier to the good for Texas schools on a national scale. Obviously there are certain states that have restrictions that come into play with those levels, but that is a cushion that does not exist in many other states. So that's an outlier. Also, the economic backdrop here, comptroller Hagar touched on all the positives economically. While that doesn't directly translate to funding for districts on a case by case basis, it does support the overall fiscal health of the state and maintain that surplus. We know it's gone down from 30 to 19 billion, but as long as that is healthy or anything that contributes to the health of that figure should help with the per pupil funding, especially while we're going through these discussions about the need for increased basic allotment after senate bill two. So those are the main areas that we see as distinctive areas for Texas credit.

Samantha Gilley Rachlin (20:05):

And so I guess the natural offshoot of that is how are districts coping with these challenges here in Texas? And I'd like to ask Jose, what are some of the ways districts are dealing with these challenges based on your ratings discussions with them?

Jose Acosta (20:21):

Well, just to circle back a little bit, it's these kinds of scenarios where financial management policies and practices become so important from a credit perspective, as we've discussed because Texas school districts on average carry large fund balances relative to most other states, they have more capacity to weather these kinds of operating pressures and still maintain a solid financial position. Now, this is not a sustainable scenario with the long-term, but with the time being, we're not seeing a widespread diminishment of financial resilience save certain story credits, but it certainly helps that districts in Texas have a high level of expenditure flexibility, again relative to other states to cope with revenue pressures. They don't operate within a collective bargaining framework. And the only maximum student to teacher ratio requirement applies to K through four. Not to downplay that, but as rating analysts, we do have to get comfortable that districts haven't set themselves up for a fiscal cliff given the eminent conclusion of federal stimulus funds. And so despite these challenges, one subset of school districts that in our rated portfolio that may see some positive rating pressure under our new criteria, which we published on April 2nd, our fast growth districts under a new model supported approach, fast growth districts may see some positive rating pressure or at least avoid negative rating action in the face of large liability burden increases due to growth related capital needs.

(22:14):

Our local government rating model, the LGRM now assigns fixed weights to issuers demographic and economic trend and level metrics. And these DNE metrics inform the health and growth of the revenue base. And whereas before we did consider them qualitatively, now assigning them quantitative weights I think is going to provide some uplift pressure for those kinds of districts.

Samantha Gilley Rachlin (22:54):

And Elaine and Karen, I would love for y'all to just, y'all are in the trenches of school administration. How are y'all coping and what does that look like on a day-to-day basis and going forward into each fiscal year?

Elaine Cogburn (23:07):

So as I mentioned, this is the first year in my history with the district that we've really had to make budget cuts and so we've looked at everything. And so one of the big impacts is going to be class size because we've tried to stick to 22 to 1 in the required grade levels. We are a district of innovation, so we can waive that and we're looking in grades two through four, moving to 23 to 1, and that saves us about five or six FTEs. And so that's a big savings in our budget. Also looking at scheduling at the secondary level and putting more kids in the classroom. The interesting thing with the ESSER funds expiring this year, this is when we really need them. You can't make great strides in the educational loss in a year or two, and now the funds are expiring and the state and the federal level are expecting all of these momentous gains in education.

(24:00):

Well, we're just getting started and now the money's going away. And every district that I know is talking about budget cuts. And so I feel like we've taken three steps forward and we're about to take two steps back just because the funding is gone. And I know a lot of districts they couldn't spend the money because it's so difficult to spend. We really had to move some things out of the general fund in order to spend those funds. We did it strategically. So I have less than a million dollars coming back to the general fund from ESSER expiring. And we didn't hire a lot of people, but one of my previous districts did hire a lot of additional staff through those funds and now that they're expiring, it'll be very difficult to lose those positions. So it's like the perfect storm for sure.

Samantha Gilley Rachlin (24:45):

Yeah, absolutely. And Karen, how is Cypress Fairbanks, ISD hoping,

Karen W. Smith (24:51):

Well, she mentioned budget cuts and that's definitely happening as I mentioned earlier with the ESSER we tried or the funding, we tried to plan for these budget cuts, and so we're going to try to cut about a third of our deficit. We feel like we can't cut all of it at one time. And then we're also looking at, people might say, why give raises if you've got a deficit budget, but we've got custodians and maintenance workers that live paycheck to paycheck and transportation drivers, and we can't not give some of these people raises. As Elaine alluded to, even with teachers, many of our teachers are living paycheck to paycheck and rental prices have gone up, and so they can't keep up. We're trying to plan for just a small raise, so we're going to do additional cuts just to have a raise.

(25:46):

We have seen throughout the state's been the same way. We've had a rather large increase in our economically disadvantaged percentage. I already mentioned special education. Our numbers have gone way up and also our bilingual population, so that requires more money that we have to spend towards those areas, but we're not, as we said, getting additional funding. And it's different than the state when they talk about their rainy day fund, they are not allowed to get to adopt a deficit budget. And if it comes out that it's going to be a deficit budget, then they prorate funding in our situations. It's not a rainy day fund. And for a June 30 year end, you really need more than three months. In found balance, you really need at least four months because we have, it's December, January before tax collections start coming in, but I have to make to make payroll all those months before my tax collections come in.

(26:47):

So you've got to have a cashflow available to make payroll. I would say also just once again, educating the community and educating our legislators. And then the other thing we're looking at down the line is we felt like we had to show that we are using fund balance first. So this has been planned and after we've gone into fund balance, we'll look at possibly a voter approval tax rate election maybe the following year and considering maybe that, but we felt like if we didn't show a little bit of going into fund balance, show a little bit of pain first before we did something like that. And I think a lot of districts have been, some of them that have not passed a voter approval tax rate election are kind of taken that same approach.

Samantha Gilley Rachlin (27:36):

And Steven, I want to give you an opportunity to, are there any things you're seeing in your ratings discussions with districts that you'd like to add?

Stephen Doyle (27:44):

Yeah, in talking with districts, we've heard a lot about use of reserves, at least as a partial cover of the gap that they're facing with the 24 budget, especially looking into the 25 fiscal year budgets. A lot of that is based on the fact that reserves were already built up with ESSER funds and just general years of conservative practice to where they're well above some sort of minimum or formal fund balance policy to where they can draw down. Like Karen mentioned, it does differ depending on your reliance on local revenue. And so that timing can come into play. The use of it for liquidity differs by district depending on your local property wealth. But generally these are the times where fund balance is important and boards and districts can really test those levels, why they chose them and when there are pressures was that level correct, things like that.

(28:35):

So we're hearing a lot of those types of discussions. Karen mentioned Vader, the voter approval tax rate elections. We've heard of a few of those passing. In many cases that does not produce substantial additional revenue. It depends, but it can help alongside other tactics. We also hear of cost cutting that is probably the least logical given the 80 to 90% of budgets are staffing related. So unless you've got some big attrition based tactic that you could utilize, it's very difficult, especially when we're in a time period where most teachers are arguably underpaid, and so wages are supposed to be going the other direction. And then you've got learning loss, increased special education counts, things like that. That is probably the least likely outcome or at least the least likely outcome to make a big difference when schools are facing these big budget gaps. But there have been a lot of crazy headlines with the sizable gaps that districts are facing heading into the next fiscal year, but those are probably the main solutions that we've heard districts discuss so far.

Samantha Gilley Rachlin (29:43):

Okay, thank you. Now I like to switch topics a little bit to the elephant in the room legislative impact, though I know we had some conversations before the panel and things that y'all had brought up as concerns were with what's coming in the next legislative session, concerned that the state can't afford the funding levels currently promised. I like to just go down the line and hear each of y'all's thoughts about what concerns you and what you're seeing. And let's start with Jose.

Jose Acosta (30:14):

One potential concern coming from the ledge are private school vouchers, which could further erode a DA in school districts that depend on that for their revenue stream.

Samantha Gilley Rachlin (30:31):

Okay. Yep. Elaine, please jump in.

Elaine Cogburn (30:34):

Definitely. That's my biggest concern. I'm a hundred percent convinced some form of vouchers will pass in the 25th or 2025 legislation, even if not before then I don't know how to measure the impact on my specific community just because getting to and from Austin and dripping is kind of a headache. So I can't imagine a lot of parents are going to want to transport their students, but how much will that take out of our system? That's not something that I can really measure at this point, but it could be an impact. I wish that we would be on a level level playing field. So if a private school student is going to get 10,000, give a public education student 10,000, and that's not what we were seeing in the past proposed laws. And so I'll ask for is a level playing field, and I don't mind competition believe in our schools and I believe in the product that we produce, but we've got to do it fairly.

Karen W. Smith (31:40):

And I'll say that really ditto on what they're saying is the school vouchers do concern me and it's more maybe I should be concerned about how many are going to possibly leave and go to private schools. But I'm not as concerned about that because what I'm hearing is that a lot of the private school places, they're just going to increase their tuition because they want to keep being able to regulate the kids that are coming to their schools. And that's the difference is that's very difficult for the public schools is we see it already with private schools and charters, they'll leave, but then after something doesn't go right or they don't let 'em stay, they come back to us. And so we can't turn away kids, nor do we want to turn away kids. I'm also concerned that the state can't afford all the tax relief they're doing, and as soon as something changed the way they've been able to afford all this is our property values have been going up and they've been going up, we have a change with the economy and I'm really concerned that we'd be back in a situation where they would actually prorate school funding.

(32:51):

So when you haven't had an increase in school funding and then they cut your funding on top of that, that's definitely a concern. I think also, I don't think there's going to be any appetite, at least that's what I'm hearing for the legislature to do much for school district that's at this point in time. So we are just hoping that they will provide, maybe even if we don't get much of an increase in the basic allotment, provide more funding towards school safety, special education, bilingual, economically disadvantaged, because that would help us also because it reduce is the fact that we have to kick in more than the state gives us. So those are some of the areas I'm concerned about.

Stephen Doyle (33:36):

Yeah, we're also watching school choice closely with both chambers fighting. I mean, it's reasonable to think that something will come out of that in terms of vouchers or the savings accounts, and we're watching how that will eat into any potential increase for traditional public school funding. And if that increase will truly meet the inflation that's occurred for districts, especially alongside all the additional mandates with public safety and so forth. We're also looking at the increased reliance on the state fiscal health with more funding coming from the state when decisions like this are made while the state has a huge budget surplus, it's like how do you estimate that threshold for the point of pressure to where that is not a sustainable situation, especially when we saw the Lieutenant Governor's charges for additional property tax relief studies, so right after Senate bill two. So those are the main things that we're looking for for this next session, but really the increase in per pupil funding, what that final amount is and how that aligns with what districts are dealing with the past couple of years.

Samantha Gilley Rachlin (34:47):

Thank you all. And I just like to kind of, I'm going to call it a wrap up, but really it's going to be an in depth conversation. What do you each see as the outlook for Texas schools going forward? And I know that's a very loaded question and I like all of you to give your thoughts. I want to start with you, Steven.

Stephen Doyle (35:11):

Yeah, so I think, like I've said before, the strong financial position going into this will be a big deal. A lot of districts will be able to weather at least a one or two year period where they can draw down some level of reserve and still maintain reserves that are well above the national average for school districts. I think what comes of the next session and how that sort of hints at the future stance of the legislature will be a big deal deal and will really guide districts in how they have to position themselves in terms of cutting tax rate, elections, things like that. I do think it's important to remember that generally management teams for school districts in the state are more conservative. So there is usually a little bit more cushion with things like budget assumptions and how they go about keeping their financial house in order.

(36:00):

And we've still got that economic backdrop that is a strength compared to places like the Northeast where you've got just consistent enrollment declines, consistent taxable value declines year in, year out. At least we don't have that situation alongside some of these other issues, which should help keep the state's fiscal health at least stable for the near term. So which bodes well for traditional public schools in light of SB two and the increased reliance on state revenues. So those are the main factors that we'll look for. Debt levels are still going to be elevated, especially with interest rates going up, the need for new facilities or the rehabbing of existing facilities, those costs have increased materially recently. So something to look out there for as well.

Karen W. Smith (36:50):

I would say I agree with my concern about the additional taxpayer relief. The districts have done this before, Lane's been lucky enough not to have done this much, but I know 2008, pretty much through 2011, 12, a lot of school districts were cutting. So we know how to do it and we know what we need to do if we have to. We are fortunate, unlike Elaine, she mentioned they don't have a lot of attrition at her school district, but we do have a lot of attrition. So we have the flexibility just not to fill those positions. But what comes with that is you're not providing the quality of education that the students deserve. And I will say, I have family that live in Florida and they always promote, or our legislators promote the voucher system in Florida and how wonderful it is. It has changed public education, it has the very few of the schools that are that wonderful anymore and anybody that can afford to moves to charters or private schools.

(38:00):

And so it's kind of left with the haves and the have nots. So it has really affected the education system and what we're dealing with on combination with that is record people, we already mentioned this leaving the profession, but then we have tons of discipline issues. I don't know why, but since Covid, we have had an abnormal amount of discipline issues and we have trouble getting teachers and students to show up to school. So we have increased substitute cost and then our average daily attendance is down. But I just don't think that the state is going to, I'm concerned about any additional taxpayer relief.

Elaine Cogburn (38:43):

Well, I don't want to end on a doom and gloom note. I've been doing this almost 30 years and every year has been a budget challenge. So we get through it, we do it, we do the work, we come out on the other side, and the majority of our teachers, they're in it for the right reason. They love kids, they love education. And so we'll get through this. It feels a little bit different right now because of the voucher thing, but we made it through Hurricane Harvey, we made it through COD, we'll make it through this, what it looks like on the other side. I don't know that's anybody's guess. I try to not go to the doom and gloom. It kind of feels that way these days. But I think education will remain strong in the state of Texas. I know our financial reserves are very strong because we've had great financial management and I've got a board that wants to maintain that. And so it's just a balancing act for us.

Jose Acosta (39:37):

I would agree that districts do have more exposure to state aid revenue cuts now that we've accelerated the compression of the local property tax rate to provide tax payer relief. And if we continue to see flat basic allotment trends, that's certainly not ideal. But again, school districts in Texas do have a very healthy fund balance and typically pretty strong financial management practices as professionals such as yourselves. And that is so important during these periods of uncertainty within your revenue environment. So excuse me. So I would point to our model again though, that does indicate there's ample capacity to weather some of these revenue pressures and hopefully you'll get some relief soon.

Samantha Gilley Rachlin (40:41):

Alright, well thank you. And that wraps up our discussion. I want to thank each of our panelists for bringing their unique perspective and expertise to all of these topics. I think this was really wonderful and I want to thank y'all. The panelists are going to be available to answer any questions after the panel and in any networking sessions. So feel free to come up to them, tell them what a great job they did and ask any questions you may have. And thank y'all so much for coming.