Austin ISD plans to borrow $140 million this fall to cover paychecks until property tax money arrives, after its own budget office told trustees the district finished last school year $86 million in the red — $67 million worse than the deficit the board adopted — and with two campuses now failing long enough to put the district in line for state intervention.
The numbers come from a budget update Superintendent Matias Segura and Chief Financial Officer Katrina Montgomery presented to the board Aug. 27, and they land on a district of about 66,000 students, 2,157 fewer than the number its adopted budget assumed. The Texas Tribune reported Sept. 1 that Austin ISD “met the criteria to trigger a potential takeover with two campuses failing for a fifth year,” with nine more campuses at four consecutive failing grades. Districts have until Sept. 11 to appeal the ratings.
The borrowing is what the district calls a tax revenue anticipation note — in plain terms, a short-term loan against property taxes that are billed in October but mostly paid in December and January. The district’s slide says the note “provides crucial short-term liquidity” and “supports normal operating expenses of the school district until anticipated seasonal tax revenues are officially received.” The presentation draws a line between a budget deficit, which is spending more than you take in, and a cash shortfall, which is a timing gap, and calls the note “cash-flow financing, not new ongoing revenue.” Its timeline is board authorization in September, proceeds in October, tax collections from November to January and repayment in January. The board’s next regular voting meeting is Sept. 24; no agenda has posted yet.
Why the district ran short is spelled out line by line. Revenue came in $132 million below the adopted budget: $79 million from lower property values and successful protests, $45 million from delays and cost adjustments in selling district property, and $8 million in other revenue. Two offsets softened the blow — $79 million less owed in recapture, the state system that takes property tax money from high-value districts to fund others, and $8 million more in state aid, both tied to House Bill 2, the 2025 school finance law. Spending rose a net $41 million, including $27 million for teacher pay requirements under HB 2 and the state’s Teacher Incentive Allotment, $26 million in retirement system costs and $12 million in additional funding requests, partly offset by $30 million in vacancy and other savings.
The result is a district that budgeted to hold 15.21 percent of its spending in reserve and now projects 8.8 percent. The unaudited deficit stood at $95 million in June and $105 million by late August before the offsets brought it to $86 million. “Coming out $7 million to the better is a good thing,” Segura told the board, according to the Austin Current.
Two more consequences are already in motion. The Texas Education Agency’s preliminary financial rating for the district fell from an A, with a score of 95, to a B at 88, and the presentation attributes the drop to a single indicator: the district scored zero of 10 points on its staff-to-student ratio after scoring 10 of 10 the year before. Trustee Kevin Foster told the board, per the Austin Current, “I look at our first rating and I don’t see ill intent but I do see a blunt instrument,” and trustee Fernando de Urioste said, “I am pretty sure our families don’t agree with TEA as far as the decline in staffing.” The district’s bond ratings from all four agencies remained AA+ or better as of July.
For the current year, the district is counting on $51 million in cuts to protect a $19.1 million surplus it adopted in June: roughly $31 million by December from staffing “leveling” that began Aug. 25, vacancy savings, overtime and comp time, then about $20 million from substitute costs and benefit contribution changes. It has also added $12.5 million in costs since the budget passed, including 14 police positions, 24 transportation positions, a $3 million transportation hub reconfiguration and $3 million to reinstate band, offset in part by an estimated $2 million from closing Paredes Middle School. The $17 million sale of the former Brooke Elementary is expected to close Sept. 11.
The takeover exposure is a separate clock. Under state law a campus that fails five straight years can trigger the education commissioner’s appointment of a board of managers over the whole district, an outcome the Dispatch examined when the ratings came out Aug. 14. The Tribune counted at least 14 other districts — including San Antonio, Judson, Waco, Spring and Manor — with a campus at four consecutive failing grades that would reach the same threshold next year.
Gov. Greg Abbott has asked the comptroller to review spending at up to four unnamed districts, saying enrollment statewide has fallen while administrative spending per student has climbed; Austin ISD has not been named.
The district’s next scheduled deficit update is Sept. 24, the same meeting at which trustees are expected to vote on the $140 million note.