1.  Presentation Objective: To provide an easy to understand school finance overview outlining the information necessary for one to draw factual conclusions and provide valuable feedback regarding school finances.

2.  Maintenance and Operations (M&O)  Debt Services or Interests and sinking (I&S)  Together equal the effective school property tax.  This presentation will focus on Maintenance and Operations (M&O) costs and tax rates.

3.  Legislation mandated property tax compression of the current effective rate in 2006.  As a result of the HB 1 and later HB 3646 legislation, Hamilton ISD M&O rates in 2006 ($1.31) were reduced to $1.04 in 2007.  Since 2007 the M&O rate has remained $1.04.

4.  Meant to be a “stop-gap” for a short time to equalize state funding.  The system has only slightly changed since 2006.  School Districts have been forced to provide educational services with no additional state aid or less aid state subsidy in some cases.  Often referred to Robin Hood or Wealth Equalization.

5.  What is it?  Hamilton ISD Target Revenue- $4912  Viewed as funding level per student  Adequacy vs. Equity Debate  Developed to ensure districts received the funding equal to that received prior to 2006  The Target Revenue system was never intended to be the school finance plan through 2010.

6.  Simply stated, the more students enrolled in a district, the more funding received per weighted average daily attendance or (WADA).  The funding system becomes increasing difficult to manage for districts with decreasing enrollments.

7.  The graph depicts the past 10 year enrollment trend for HISD.  Current trend lines indicate an average 20 student/year decrease through 2012-2013. 10 year Enrollment Trend for HISD

8.  Daily Attendance plays an important role in how school districts are funded.  The higher the ADA or attendance rate, the more money received.  HISD Current ADA is 772.

9.  Weights are given to special programs such as special education, career technology programs etc.  Weights are currently used as multipliers to provide a WADA  HISD WADA is currently 1331.0

10.  If property appraisals increase, the State subsidizes less.  Inflationary costs continue to rise (fuel, insurance, related services)  Payrolls increase each year according to adopted salary schedules.  Yet no additional funding is provided to schools unless enrollment increases or more revenue is generated.

11.  Personnel is the arguably the single most important factor having the greatest impact on a child’s education.  Personnel accounts for approximately 71% of the Hamilton ISD operating budget.

12.  Expenses have continually increased.  Revenues have actually dropped as a result of decreased enrollment.  The HISD budget has been balanced each year without additional state funding and decreasing enrollment trend.

13.  Estimates show 60% of school districts adopted deficit budgets in 2010-2011.  Fund balances or district savings were used to survive.  3 months operating expenses are recommended by school auditors and TEA and are utilized by school districts until state funding is received at the beginning of each year.  These funds will dry up eventually forcing districts to make cuts eventually.

14.  Increase enrollment  Raise taxes above the current $1.04 M&O rate.

15.  I&S- Currently $.17.  M&O- $1.04 and has remained at this level since the implementation of HB 1 in 2007.  State law currently set the cap at $1.17.  A maximum of $.13 could be proposed through a tax ratification election or TRE.  Any action to raise M&O taxes will require voter approval.

16.  The first 8 of the 13 pennies (silver pennies) will generate approximately $43,000.00/penny under the current funding system.  The next 5 of the 13 available pennies (copper pennies) will generate approximately $27,000.00/penny under the current funding system  Thus an additional $.13 will generate an additional $479,000.00 (approximate) to be used for future operating costs.

17.  $.01 increase will costs the average homeowner $6.30/annually  The increase of $.05 would raise the average homeowner’s property taxes by $31.50 annually. A $.13 increase would result in $81.90/year increase. (Assuming the average home in Hamilton remains approximately $63,000.00.)  Homestead exemption for 65 years and older.

18.  The Economic Climate  The idea of raising taxes could not be discussed/proposed at a worse time.  The second presentation will provide a general outline of cost savings strategies being implemented/explored without calling at Tax Ratification Election.