Though the next fiscal year’s proposed budget, like most school districts across the state, is in deficit, it’s the financial situation they will face in 2010-11 that concerns Royse City Independent School District financial director and superintendent, they said Thursday night in a special school board meeting.

“Districts all across the state are in a pickle,” said superintendent Randy Hancock. “Everybody is challenged.”

Royse City ISD’s immediate challenge for 2009-10 can be taken care of through the fund balance it has developed over the last three years.

Tapping into it for the just under $780,000 to make up the difference between revenue and expenses in the general operating fund still keeps it at a level above the stated district goal of 15 percent of the operating budget.

But with shortfalls continued to be forecast for the 2010-11 year, the board will face some tough decisions regarding “severe” cuts noted Hancock and finance director Jimmy Butler.

For next year, the general operating fund will continue to be locally supported by the property tax rate of $1.04, bringing in an expected $10.3 million.

The state will kick in its $23 million, based on formulas having to do with average daily attendance. Local and state sources account for nearly all funding of general operations. Adding the federal and other local sources, revenue into the general fund is projected to be $34,068,829.

General operating expenses will be just about $35 million, leaving a shortfall of $796,914.

Last year the shortfall was half that.

Butler presented a budget preview to the board, which will meet in a later budget workshop, prior to the required August public hearing on the proposed tax rate and budget.

On the debt service, or interest and sinking portion of the budget, the board is considering the finance director’s recommendation to raise the tax rate up 3 cents, from .39 to .42.

“Healthy” payments are looming on the debt, of which all the 2005 authorized bond debt has been issued and projects completed.

Local tax revenue to pay debt is expected to be nearly $4.16 million. The state contribution will be almost $2 million, bringing total revenue into debt service to $6 million.

Total debt expenditures, which include increased principal payments and decreased interest payments, will be almost $6.2 million. The actual $135,573 shortfall will be picked up in the fund balance, which will drop from 21 percent of the debt budget to 17 percent, still above the district’s goal of 15 percent of the debt service budget.

Prior to 2007 legislation, rising property values were a great predictor of additional district’s general operating revenue.

But “equalization” legislation changed that. Now, higher property evaluations don’t significantly impact a district’s operating budget. The state decreases funding as local tax revenue increases. Therefore, significant gains in the operating budget remain difficult to achieve, according to district officials.

Higher property values do allow a district to keep the tax rate lower on the debt side, because debt service is funded primarily by local tax revenue, without as much state formulated funding.

For 2009-10, valuations have remained flat, Butler said. Debt payments have gone up for three years, so with the flat valuations, the district is expecting to increase that tax rate related to debt service.

Royse City ISD’s food service fund is breaking even, which is “quite an accomplishment” for school districts in general according to Hancock. The fund balance in food service is running at 5 percent, Butler pointed out, and allows the district to leave lunch and breakfast prices at the same rate as last year.

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