DALLAS — Voters in Texas face a light load of school bond requests at the polls on May 14 as districts across the state focus on belt-tightening instead of capital projects.
While lawmakers in Austin are debating and discussing the state’s public school funding system, 35 local districts are seeking a total of $1.54 billion of general obligation bonding authority at the May election, according to information compiled by TexasISD.com.
May’s total is off from the $2 billion sought by 68 districts in May 2010 and the almost $2.5 billion sought in November 2010.
More than 60% of the districts were successful at the elections in May 2010, but in November the success rate fell to 47.4%.
Texas school districts can hold bond elections only in May and November.
The Legislature is sure to cut state aid to local public education by billions of dollars over the next two years. The only question is how many billions, as lawmakers deal with an anticipated 5.4% drop in general fund revenue.
The House version of the fiscal 2012-2013 budget would cut $8 billion from current spending, while the less-austere Senate version would limit the reduction to $4 billion.
The House measure allocates $32.3 billion of direct state aid. The original Senate version called for $32.8 billion of aid, but last week the Senate Finance Committee restored $5.7 billion of the cuts.
Based on the current formula, state aid should be more than $42 billion over the two years.
Direct state aid typically accounts for around 40% of a district’s total revenues.
Joe Smith of TexasISD.com said the only certainty is that direct state aid to local public education will drop next year for the first time in many years.
“Local school districts are going to see less money from the state — a lot less — during the next biennium than in the current one for the first time I can remember,” said Smith, a former district superintendent. “And I can remember a lot.”
He said a number of factors have contributed to the low level of school bond elections.
In addition to the uncertainty over state aid, local districts are hampered by the awkward structure of school finances in Texas, he noted.
“A lot of districts have stopped their building programs,” Smith said. “They have the money to build a new school, but might not be able to staff it. Those districts up against the limit on their maintenance and operations tax rate are just holding onto their unissued bonds.”
The school-district property rate in Texas is divided into two segments.
The maintenance and operations rate is limited to $1.04 per $100 of assessed valuation, although it can be raised to $1.17 with voter approval. The interest and sinking rate for debt service is capped at $0.50 per $100.
“Thirty-five is a rather low number of districts seeking bonds,” Smith said. “I can remember when we used to have 100 elections in a cycle.”
The districts seeking bond proceeds for new facilities tend to be those considered property-rich, according to Smith. Poorer districts often allocate larger portions of debt proceeds to maintenance and equipment upgrades rather than new schools.
“The property-rich districts look at bond issues as a way to generate more money that they don’t have to send to Austin as re-capture,” he said. “Those tend to be short-term bonds, three to five years.”
The prospect of districts laying off teachers and closing campuses for lack of finances has put a damper on school bond elections in Texas, said Alicea Fletcher, managing director with the Dallas office of investment banker Stern Brothers & Co.
“Politically, it is hard to ask voters to raise taxes to build new schools when you are laying off teachers because the state aid is not there,” she said. “The voters often don’t understand the distinction between the property tax for operations and the property tax for debt service.”
Many districts in Texas have been able to keep up with enrollment growth in recent years with financing from voter-approved bonds, according to Fletcher. If they have maintained sizeable reserve funds, she said, those districts can afford to defer bond elections for a time.
“The state funding is biased in favor of new facilities, because the state has agreed to provide equal access to facilities,” Fletcher said. “Growing districts have been able to issue bonds to build new schools. That’s not the biggest need in most districts.
“But property-poor districts with worn-out buildings and a real need for maintenance and renovations have a harder time getting bonds passed,” she added. “The need for maintenance is there, but it never seems to get done.”
School bond elections had to be officially called by district trustees by March 14.
Less than two weeks after trustees of North East Independent School District in Bexar County set an election on a $399.4 million of GO bonds, they reversed their decision and withdrew the election due to the questions over state funding.
NEISD superintendent Richard Middleton recommended that trustees defer the vote until the next state budget was firmed up and finalized.
“We have no idea about what’s going to happen to us with this Legislature,” Middleton said.
Smith said NEISD might not be the only district to rethink its plan for a May vote.
“I would not be surprised if we saw one or two more being postponed,” he said.
The largest single request on the May 14 ballot is now the $297.4 million sought by the Socorro Independent School District in El Paso County.
The district would use the proceeds to build new schools and upgrade the air-conditioning systems at 13 elementary schools.
Local voters defeated a $397 million bond proposal in 2007.
Voters in the McKinney Independent School District will decide on a $191 million bond package. Officials there said the bonds are needed for campus additions to accommodate enrollment growth.
The Richardson Independent School District is seeking $170 million of general obligation bonds for work at its 70 facilities.
The bond proceeds would provide $115 million for infrastructure and support projects and $56 million for curriculum and instruction.