Lake Travis ISD has fortified its financial position over the years, but it now faces a lengthy siege on its $21 million in reserves and long-term solvency.

Although LTISD is a property-wealthy school district, its administrators are anticipating a triple threat of operating on a fixed income while tackling rising costs and the likelihood that the state’s legislators will spend most of their next sessions overcoming an estimated $18 billion shortfall.
As they seek a solution to a public school finance system that legislators are indicating they will place on the back burner, districts across the state fear their uncertain futures.
“Despite our sound financial management and healthy budget, we anticipate continued growth in student enrollment, and consequently, a need for additional facilities and the funds to operate those facilities,” LTISD Superintendent Dr. Rocky Kirk wrote in a district news release. “Without significant intervention from the state, we must begin to look at other alternatives that will allow us to maintain optimal balance regarding program, facility, operational and financial integrity.”
LTISD administrators have developed several strategies for school board members and a yet-to-be-established bond advisory committee to review that include converting Lake Travis Middle School to a ninth-grade center and building a new LTMS at another location.
Originally, LTISD administrators and board members had planned to open a second high school in about eight to 10 years, but now discussions are shifting toward less costly facilities while adding capacity at the new LTMS and Hudson Bend Middle School campuses.
Despite the downturn in the housing market, new residents from around the state, nation and world continue to pour into the Lake Travis area.
LTISD has averaged 328 new students each school year since 2005.
As this school year began with almost 7,000 students, a few of the district’s campuses such as Lake Travis Elementary School reported a snug fit in their classrooms.
However, demographic projections from 2009 point to possible overcrowding in two to three school years, especially at the secondary level, if the district doesn’t construct new buildings or use portable classrooms.
The district’s two middle school campuses each have a capacity of 1,800 students without using portable classrooms, but LTISD could exceed those if its moderate-growth projection of 1,848 or high-growth projection of 1,906 is realized.
Lake Travis High School’s capacity of 2,500 students would be exceeded in 2014 if the district’s moderate-growth enrollment projection of 2,602 students were on target and 2013 if its high-growth projection of 2,506 were to hit the mark.
The district also is exploring adjustments to student-to-teacher ratios and changes to middle school schedules.
As early as the 2011-12 school year, LTISD could shift from a five-period day schedule at its two middle schools to a seven-period day.
The scheduling shift would allow the district to phase in cost savings over time through either staff attrition or non-hiring of future growth positions.
Kirk said the district will continue to review scenarios that will get the most out of its staff and facilities given its current means of revenue collection.
Fixed income
If the status quo remains for state and federal funding, the district’s estimated $22.1 million fund balance this fiscal year would be depleted by 2014-15 if it doesn’t take action, said Johnny Hill, LTISD assistant superintendent for business and financial services.
Although it has staved off severe reductions to its reserves, LTISD is starting to feel the effects of operating on a fixed income which have resulted in an estimated $1.8 million deficit for the 2010-11 fiscal year.
In response to its failed tax ratification election in November 2009, LTISD trimmed administrative costs by 11 percent and extracurricular program expenses by 5 percent and adjusted salaries and health-care benefits with the goal of $750,000 in annual savings.
Because those two pennies would generate about $1.2 million in annual revenues not subject to state recapture, or Robin Hood, payments, LTISD administrators are considering another election.
“It’s our only way to bring in additional dollars,” Hill said.
The tax ratification election would have increased its maintenance and operations tax rate by 2 cents from $1.04 to $1.06 per $100 of assessed property value.
LTISD also assesses a debt service tax rate of 27.59 cents, for a total property tax rate of $1.3159.
As a property-wealthy district, LTISD sends 49.7 percent of the first 100 cents back to the state in recapture payments, which will total about $29.1 million this fiscal year.
The other four cents are immune from recapture and generate about $2.5 million in annual property tax revenues for LTISD.
Texas school districts are allowed to seek an additional 11 cents in property taxes, which are subject to a 66.3 percent recapture rate.
Hill said LTISD would not pursue that option because it would divert local funds at a substantial percentage.
“We would never ask our taxpayers to do that. It wouldn’t be good management to do that,” Hill said.
When legislators passed House Bill 1 in 2005 to compress schools’ tax rates from a maximum of $1.50 to a base of $1 per $100 of assessed value in response to criticism over growing school taxes they also capped state and property tax revenues for all school districts to their 2006-07 revenue per student level.
However, they established a targeted revenue system to offset the losses.
Based on weighted daily attendance, each enrolled student nets a public school district $6,169 from the state in targeted revenue, which is $12 million for LTISD this year. Districts earn more per Gifted and Talented, bilingual and special needs student.
LTISD, however, is spending $7,822 to educate each child.
No matter how much a district’s enrollment and property values increase or decrease, the targeted revenue will always be divided by the weighted average daily attendance.
“So at the end of the day, whether property values increase or decrease, our level of funding — or target revenue — from the state remains static, yet local costs continue to increase,” Hill said.
Rising costs
Inflation counters the intended effect of HB1 by eroding a school district’s ability to maintain its level of programs, LTISD officials say.
As enrollment continues to climb, so does the need to hire additional teachers and support staff members.
Hill said that the district hires about one new teacher for every 15 new students.
Although LTISD devotes about 85 percent of its annual budget to payroll, it has little wiggle room to adjust its largest expense.
The Texas Education Code prohibits districts from cutting teacher salaries and mandates step pay increases for districts such as LTISD that have salary schedules.
Last year, LTISD gave its teachers a 2 percent raise at a cost of $800,000, which was comparable to what other similar school districts in the area awarded.
The district also hired 27 teachers and staff members for this school year at a total cost of $1.5 million in compensation.
“If we were in a business, like a lot of them that are downsizing, we might be able to [make cuts], but we’re growing at a clip of 5, 6, 7 percent enrollment each year,” Hill said. “It’s difficult for us to make cuts when our business is booming. Our business continues to grow.”
As was the case for many employers, the district’s health insurance and benefits plan rose by 7 percent, which resulted in $300,000 in additional costs.
In addition, its utility costs are rising by 2-3 percent per year, property insurance by 1-3 percent and contracted services such as software and technical support by 2-3 percent.
“The problem is every year these other costs are going up, and the [targeted revenue] has not been inflated,” Hill explained.
Legislative X-factor
The Texas Association of School Boards is aiming squarely at the Legislature with its proposed plan that would replace the two-tier targeted revenue and state funding system with a single tier.
Under the TASB plan, a district’s revenue is calculated by multiplying the district’s weighted average daily attendance by the district’s effective M&O tax rate by a single guaranteed yield.
A hold harmless, minimum gain guarantee or annual gain limit is then applied to help ensure that districts do not lose revenue under the TASB Plan.
“The school finance system has not kept pace with districts’ needs and has resulted in significant funding gaps among school districts statewide,” TASB’s plan states.
Texas legislators say finding a solution is not impossible, but they differ on how the system should be changed and when.
District 47 State Rep. Valinda Bolton said she opposes any solution that would increase class size.
“The career politicians at the Capitol are already talking about closing the expected $18 billion dollar budget deficit by increasing class size so the state can reduce how much money goes to education. I will fight any efforts to balance the budget on the backs of our students,” Bolton said.
Meanwhile, LTISD is banking on an unchanged, uncertain future.
“As long as the school finance system stays stagnant and the costs continue to go up, we’re going to make recommendations to our board and they’ll make decisions to keep us financially solvent,” Hill said.
He said if the proposed measures are enacted, the increased savings should help the district operate for another five to six years.
“Without a fair and equitable long-term solution to school finance, we can only operate within our current means. For us, and for many other districts across the state, that translates into increasing student capacity [at campuses] and deferring new construction,” Kirk said. “Rest assured, however, we will do everything possible to protect the integrity of our student programs and services.”
Editor’s note: This article is the first in an occasional series that will take a closer look at Lake Travis ISD’s financial outlook, facilities needs, educational strategies and Texas’ public school finance system.

We welcome your comments on our stories but will publish only those that do not violate our commenting guidelines