North East ISD Exercises Caution in Budgeting, Considers 3 Percent Pay Increase

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The NEISD Headquarters

Scott Ball / Rivard Report

NEISD is looking for a new District 3 trustee following the resignation of Joseph Treviño.

North East Independent School District trustees had a lot of questions at the first budget meeting of the year in mid-May. Many more arose when they met Wednesday night to discuss in greater detail the implications of House Bill 3, the school finance reform law passed in the most recent legislative session.

At the close of the session, NEISD was projected to receive about $26 million in new funding. Since the end of May, when district officials received the estimate, that number has changed.

Executive Director of Finance and Accounting Brian Moy received an email from the Texas Education Agency Tuesday afternoon indicating NEISD would actually be receiving a little less than $22 million.

“That one e-mail at 4:03 p.m., [and] $4 million down we went,” Interim Superintendent Sean Maika said. “There are so many pieces of this law that we don’t know. It doesn’t take many e-mails at $4 million … to eat up money very quickly.”

District officials stressed to trustees Wednesday night that HB3 is a complex piece of legislation that will take months to fully flesh out. The TEA is embarking on the rule-making process to fill in all of the administrative procedures needed to carry out the intent of the more than 300-page bill. This process could take until next spring, Moy said.

Another recent change altered the way NEISD considered how much money to put toward pay bumps for teachers and other district staff. House Bill 3 includes a provision that requires districts to use 30 percent of “net gain” in revenue toward compensation increases.

Moy told trustees that NEISD should be looking at the difference between 2018-19 revenue and 2019-20 revenue under the new law as the base net gain figure. This increases the amount required to be used toward compensation raises from $6.5 million to $9.7 million.

District staff proposed a 3 percent pay increase for all NEISD employees, in addition to a $600 bonus for teachers who have worked between six and 15 years, and a $1,200 bonus for teachers who have worked 16 years or more. In total, the pay increase would cost the district about $14.5 million.

NEISD officials don’t anticipate any changes to monthly premiums on the district’s self-funded health insurance plan. To cover rising medical costs, the district may look to rework its pharmacy plan and change the way it works with out-of-network emergency care coverage.

Aside from the money NEISD anticipates receiving from HB3, the district also projects $8.5 million in new revenue from a variety of sources, including change to property value and a settlement related to property value disputes. In total, the district expects about $30.2 million in additional funds for the 2019-20 fiscal year.

The district plans to increase staffing by adding 33 new teaching positions, 15 campus non-teaching positions, and 30 campus paraprofessional positions, many of which will be used at the pre-K level to help carry out full-day pre-K.

Amid uncertainty over future availability of state funding and the sustainability of HB3, NEISD officials implored trustees to think ahead and put remaining funds toward the district’s fund balance.

Moy told the Rivard Report that as a result of HB3, the tax rate would likely decrease from $1.36 for every $100 of property value to $1.29.

Maika described previous years in which the legislature granted districts authority to decrease tax rates, but couldn’t provide extra funding to make up for the lost property tax revenue. He referenced a 2006 school finance change that allowed districts to decrease their tax rates, but said that the state couldn’t kick in enough new money after the fact.

“It kind of makes me worried,” Maika said. “I don’t think they have a sustainability plan. And so it smells like 2006 all over again, and that’s what has us concerned about spending it all today.”

District officials recommended placing a little more than $14 million in the district’s fund balance, which acts like a savings account. Doing so would increase the total amount in the fund balance to about $136.5 million, or about 3 months of operating expenses.

Another provision of HB 3 that was not discussed Wednesday night was recapture payments. North East ISD was projected to start making payments back to the state in 2019-20, for a total cost of $1.9 million. In 2020-21, NEISD was projected to pay $27.8 million. The new school finance legislation knocks both of these costs down to $0.

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