DALLAS — The chief financial officer of the Houston Independent School District told trustees on Thursday to expect a severe reduction in state and federal funding over the next two fiscal years.

CFO Melinda Garrett said the situation is a result of Texas' looming revenue shortfall, which has been estimated as low as $11 billion and as high as $25 billion, and the expiration of federal stimulus programs for education.

Speaking at a budget workshop, Garrett said the district should expect $70 million to $163 million less in state and federal funding over fiscal 2012 and 2013.

State aid to local education is based on a formula determined every two years by the Texas Legislature. The 2009 Legislature increased the basic per-student allotment to $4,765 a year, up from from $3,218.

Houston ISD's $2.4 billion of outstanding general obligation debt is rated Aa1 by Moody's Investors Service and AA-plus by Standard & Poor's.

Garrett said she expects the Legislature will need more than its constitutionally mandated 140-day session to develop the state's biennial budget.

The regular session will begin in January, she said, but a special session will probably be needed.

Texas school districts are required by law to adopt a budget for fiscal 2012 by June 30, but Garrett said the state budget may not be completed by then.

"We are going to have to prepare the budget to anticipate the shortfalls," Garrett said.

If that happens, she said, school trustees may have to approve the budget without knowing the level of state aid, and then amend Houston ISD's fiscal 2012 budget after the state budget is approved.

Lawmakers may reduce appropriations to the Texas Education Agency to help balance the state's next two-year budget, she said, which would reduce services the district provides to students.

Garrett said she would provide a fiscal update to the school board every month as the district's budget is developed in 2011.

Funding for the Houston school system's $1.55 billion general fund budget for fiscal 2011 includes $1 billion in local property tax revenue, $495 million in state aid, and $8.6 million in federal aid.

Trustees decided Thursday to pay for summer school in 2011 with $14 million in federal stimulus funds, Garrett said, but a new revenue source for the summer program is needed.

"This money will not be here next year," the district CFO said. "The stimulus money is gone, and we will need to find other money to fund summer school in the future."

More than 55,000 of the district's 202,000 students enroll in summer school every year.

Houston ISD, one of 20 school districts in Harris County, is the largest school district in Texas and the seventh largest in the United States. Its 301-square-mile service area covers half the city of Houston and includes $110 billion in assessed property valuations.

Voters in the district approved an $805 million bond package in November 2007.

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