Superintendent's Column:
When 'hold harmless' isn't so 'harmless'

By Kirk Lewis

Unable to sleep the other night, I turned on late night television and caught the final minutes of some movie in which earth was being destroyed by an asteroid. Two people, a father and daughter, were huddled together on the beach watching the enormous tidal wave speeding its way toward total destruction of the eastern seaboard. What a perfect metaphor for the 2007-08 budget development process! During last summer’s special legislative session, the state plopped its asteroid off our coast. We stand this year on the beach watching the tidal wave approach. It has been an interesting process. 

As we studied House Bill 1 last year, it was evident that the primary provision was tax relief. Make no mistake. It is not a school finance bill. While the bill does some good things for our local homeowner, it does little for public schools. The second phase of that property tax relief bill impacts us this year. When we worked last year’s budget, we said that the bill was a one year fix. Never has a statement been more prophetic. 

Though school finance is complicated, please allow me to share with you a few key points as it impacts Pasadena Independent School District. 

Key Budget Points

• Under House Bill 1, the district’s revenue is capped at the revenue per student collected through state and local sources at the 2005-06 level from this point on. The state called this provision a “hold harmless” provision. It is in reality a cap. The money we received two years ago is the same amount we will receive next year and the year after that from those sources.
• Increases in local property value have no impact on the district’s revenue flow for our operational budget. If our local property values increase $400 million above what they were in 2005-06, the state recaptures that money, almost dollar for dollar, and returns it to the state general revenue fund.
• Increases in tax collections have no impact on the district’s revenue flow. Because we are capped at the revenue we received in 2005-06, any delinquent taxes we collect above that revenue amount, is recaptured by the state, almost dollar for dollar, and returns it to the state general revenue fund.
• Pasadena ISD gains revenue only through enrollment growth and the changes in weighted demographics. If our ADA increases, the formula does supply additional funding.
• When we put the formula through its paces, the net gain in revenue from state and local sources for Pasadena ISD in 2007-08 is $2.3 million. That $2.3 million represents less than one percent of the district’s total budget in 2006-07.

Expenditures

The following items represent known cost increases for the 2007-08 school year:

• Opening of Lomax and Milstead middle schools in the fall of 2007-08--$4.1 million.
• New teachers for enrollment growth and continuation of Expectation Graduation commitment--$3.2 million.
• Increased cost of electricity--$3.1 million.
• Property insurance increases due to Hurricane Katrina--$2.7 million.

Those four items deemed critical to the district’s success exceed a cost of $13.1 million. Every one percent increase added to salaries adds an additional $2.6 million. The new revenue generated under the capped formula yields only $2.3 million. Can you see the tidal wave approaching? 

I believe these are things you need to know. Unless the legislature changes the formula (and there is no push to do so this legislative session), we face some difficult decisions in Pasadena ISD and in districts across the state.  

My promise to you is that we will find a way. The administration and board is committed to doing all it can to emphasize salary and our commitment to our core instructional focus in next year’s budget. Our goal in this budget year is to “preserve the core, abandon the past and stimulate innovation” as we build a budget that is responsive to the needs of our students, staff and community.