The adopted 2017-18 budget includes nearly 60 strategies to reduce spending and generate additional revenue. These changes were developed through the input and participation of staff, parents and community members over the course of several months and were vetted by leadership before being incorporated into the final budget.

Efforts were made to minimize the impact on students, staff and families, but some changes were required to balance the budget. What has remained unchanged is the District’s focus on teaching and learning, commitment to the classroom and desire to maintain competitive staff salaries. Adopted budget strategies have limited or no impact on student learning.

These adjustments, when combined with additional funds provided by the 85th Legislature, allowed Frisco ISD to balance the 2017-18 budget and provide a two percent raise for staff – a priority reinforced by stakeholders during the budget development process.

The additional funding provided by lawmakers was the result of an update to the state’s school funding formula based on property values in Austin ISD. This adjustment, incorporated into the two-year state budget approved in May 2017, put FISD in a somewhat better financial position than originally anticipated, but will not solve the District’s long-term challenges.

More work will be needed in future years to balance the budget and Frisco ISD will continue to engage parents, staff and community members regarding the best possible solutions, which include either more revenue or changes in the way the District does business. The only options to increase maintenance and operations (M&O) funding per student are to go back to voters for a Tax Ratification Election or to receive additional funds from the Texas Legislature.

The Tax Ratification Election, which voters turned down in August 2016, would have increased the maintenance and operations (M&O) tax rate by 13 cents, from $1.04 to $1.17. When combined with the interest and sinking (I&S) tax rate of $0.42, the combined tax rate would have been $1.59. The highest tax rate allowed under state law is $1.67 per $100 of property tax valuation, $1.17 for maintenance and operations (M&O) and $0.50 for interest and sinking (I&S).

The TRE would have meant an extra $37 a month or $442 a year for a home valued at $365,000. The additional funds would have supported the maintenance and operations (M&O) budget, which pays for staff, utilities, supplies, general maintenance of facilities and all the costs associated with running schools on a daily basis. As schools are a people-intensive business, about 80 percent of these funds go to personnel costs.

A 13 cent-increase in the tax rate would have generated approximately $30 million a year in additional revenue for FISD, which is what financial projections indicated FISD’s funding shortfall would reach by 2018. While only $16 million in additional revenue was needed for 2016-17, a plan was developed by administration to use any surplus revenue generated by the TRE to maintain lower class sizes, provide additional incentives to staff and address certain capital needs that fall outside the scope of the current bond program.

School districts can decrease the M&O rate at any time. However, state law requires an election be held each time districts seek to increase the tax rate even one penny above $1.04. Numerous elections can be time-intensive, costly and are more susceptible to voter fatigue. Neighboring districts, such as Allen and McKinney, both passed TREs in recent years to adopt tax rates of $1.67 per $100 valuation, or $1.17 for M&O, and have reduced their rates in the years since, though they are still above Frisco ISD’s current tax rate of $1.46.

In 2006, the Texas Legislature decided to reduce property taxes, mandating that school districts compress their maintenance and operations (M&O) tax rates by 33 percent. The M&O tax rate funds day-to-day operations of districts, such as payroll, supplies, utilities and more. Because this limited the ability to generate revenue locally, the state installed a hold-harmless provision, guaranteeing districts would never fall below 2006 funding levels. That safety net is referred to as Additional State Aid for Tax Reduction or ASATR. But in 2011 when the business margins tax meant to fund ASATR didn’t generate enough revenue, the Legislature decided to eliminate ASATR. Incremental cuts began and from 2011 to 2016, FISD lost an average of $21 million per year, or a total of $105 million in state funding, while maintaining a tax rate below most neighboring districts.

When funding cuts began in 2011, the District quietly absorbed the loss of funding through:

• Larger class sizes due to hiring fewer teachers

• Lower than average teacher salaries

• A strain on budgets and support staff to meet the needs of growth

The Frisco ISD School Board made a commitment to keep the tax rate as low as possible for as long as possible with the knowledge that there was additional taxing authority available and that a TRE would be necessary at some point in the future. The current $1.46 per $100 valuation is below most neighboring school districts and has been for many years.

As the District has absorbed reductions in state aid, FISD has maintained a lean central office and cut non-student centered services in addition to providing lower than average staff raises, lower than average teacher salaries and larger class sizes. The slide below shows how enrollment and the number of teachers have both grown by 33 percent from 2011-12 to 2015-16, while the ratios of administrative staff, professional support staff and auxiliary support staff to teachers have declined over that same time period.

Fast growth and increases in student enrollment have allowed Frisco ISD to quietly absorb the loss of state funding, because school districts receive more money when student enrollment increases.

When cuts began in 2011, FISD made reductions and revenue enhancements that saved about $10 million in the 2011-12 budget and most of those were moved forward in the next budget year and beyond. Savings were realized in a variety of ways, such as:

• Moving from the double to the triple routing of buses

• Reducing grounds maintenance schedules and custodial services

• Reducing utility costs

• Reducing travel and contracted services

• Reducing certain employee benefits

• Hiring fewer teachers and staff for growth, which resulted in increased class sizes

Additional revenue sources, such as modifying the after-school care contract were also utilized. Salaries were frozen in that year as well.

FISD has also implemented a number of process improvements as part as part of an ongoing effort to make operations more efficient and cost effective. These technology and business enhancements have helped the District automate processes, streamline workflows and electronically track information. These efforts have reduced the need to hire additional staff for growth and resulted in two international awards from Laserfiche, which provides business process management software. Follow the links to read more about changes which earned FISD the Laserfiche Run Smarter Award for Enterprise Transformation in 2016 and Laserfiche Run Smarter Award for Innovation in K-12 Education in 2013.

The District continues to look at ways to enhance revenue and become more efficient through process improvement, partnerships, sponsorships, etc., but protecting the classroom becomes increasingly difficult when approximately 80 percent of the budget is payroll.

FISD regularly benchmarks against other school districts across the state when it comes to revenue and expenditures. See the charts below.

Operating revenue and total basic educational costs per student are well below three groups of comparison districts, including peer districts, fast-growth districts with 30,000 to 80,000 students and the top 20 largest school districts in the state. (Frisco ISD is currently the 15th largest district in the state with more than 56,000 students).

In addition, Frisco ISD is significantly below average when it comes to functional spending in the areas of operations and general administration. The District is at or below average in other areas.

The District has maintained a tax rate below most neighboring districts for many years. Here’s a look at the 2016 tax rates of FISD and neighboring districts:

• Prosper ISD – $1.67

• McKinney ISD – $1.62

• Allen ISD – $1.59

• Little Elm ISD – $1.54

• Frisco ISD – $1.46

• Plano ISD – $1.439

• Lewisville ISD – $1.42

The maximum tax rate allowed under state law is $1.67 per $100 valuation. Follow these links to see rates for all districts in Collin County or Denton County.

A "tax swap" is a name given to a type of Tax Ratification Election that raises the maintenance and operations (M&O) portion of the tax rate, while simultaneously decreasing the interest and sinking (I&S) portion of the tax rate, so there is less or no overall impact to the combined tax rate.

The concept works when property value growth outpaces building needs, or a district has surplus M&O funds that can be used to retire debt. FISD would not generate enough surplus funds to pay down debt, but if property values continue to grow at the rate they have been, Frisco ISD will evaluate options to lower the I&S tax rate in the future.

Frisco ISD’s fund balance is not a cash reserve, savings account or rainy day fund – it is intended to cover cash flow deficits at the beginning of each fiscal year. The new fiscal year begins on July 1, but the District does not receive payments from the state or property tax revenue until November and December. The fund balance allows the District to pay staff and operate during the late summer and early fall months.

FISD currently maintains a fund balance equal to approximately 21.5 percent of the annual budget. The state recommends somewhere between 25 and 27 percent. Drawing down the fund balance too much could compromise the District’s outstanding credit rating, or put FISD in a position where it has to borrow money to make payroll.

At the end of 2015-16, FISD had $123 million in fund balance, and $12 million of it was earmarked for future needs, including the one-time incentive payment for staff that was paid in January 2017. That left $111 million in unassigned fund balance at the end of the year. Over the first four months of the 2016-17 fiscal year, FISD:

• Transferred $6 million to a capital fund to pay for capital items that FISD doesn’t anticipate having bond money or M&O money to pay for over the next 3-6 years, and

• Used $75 million to help cover expenses through the end of November.

By December 1, 2016, unassigned fund balance was down to $30 million, which is less than one month’s operating expenses.

The District’s monthly operating expenses grow each year as the student population grows, which means the amount of money needed in fund balance to cover expenses from July to December will continue to increase as time goes on. The budget adopted for 2017-2018 allows FISD to maintain its targeted fund balance level for one more year, but future budget decisions will need to be weighed against fund balance levels.

The state continues to shift the burden for paying for public education to local taxpayers. Current school finance laws involve property wealth equalization. A complex system of weights for certain student populations, allotments, adjustments, a cost of education index and property values are all used to establish the amount of revenue received and retained by a school district.

Under the current system, school districts are entitled to $514,000 of property value per student, which translates into approximately $5,140 to provide for the basic educational needs of each student. Districts are required to raise as much of that allotment as they can with local property taxes, and the state makes up the difference. Districts with excess property wealth pay recapture on tax collections associated with that value.

Because of the nature of the equalized formula, school districts like FISD do not receive additional operating dollars when property values rise. If property values go up one year, the state reduces its share of funding the next year. Since 2008, the state’s share of public education spending has shifted from 44.9 to 38.4 percent state-wide. For FISD, state revenue constitutes only 23.2 percent of the 2017-18 budget, down from 26.3 percent in 2016-17.

That said, increased property values and the revenue they generate do help Frisco ISD tremendously in the area of debt management. Although FISD doesn’t get to keep all of the taxes collected through the maintenance and operations (M&O) tax rate due to the equalized funding formula, it does get to keep all of the taxes collected locally through the interest and sinking (I&S), or debt service tax rate. It is not subject to recapture. Because of this, FISD has been able to maintain a relatively low debt service portion of the tax rate while building schools to meet the needs of tremendous growth.

As a further note of clarification, the school district does not appraise or assess property values.

Frisco ISD's budget for the 2017-2018 school year includes central administration cuts totaling $1.88 million in the 2017-18 school year through budget cuts, reorganization, elimination of positions, termination of contracts, new fees and more. View the full list of recommendations here.

Frisco ISD has always prioritized teaching and learning and worked to apply available resources to the classroom. Since the reduction of state funding in 2011, leaders strived to maintain existing programs and minimize the impact on students, teachers and schools.

As a result, central administration staffing and spending has not kept up with the District’s fast growth. FISD ranks at the bottom for general administration spending across several comparison groups, including 9th out of 10 peer districts, 9th out of 10 for fast-growth districts with student populations of 30,000 to 80,000 students, and 16th out of 20 among the top 20 largest school districts in the state. The District spends more than $300 less per student than the average of these three comparison groups for operations and general administration spending. For general administration alone, FISD spends approximately $35 less per student than the average, or approximately 22 percent.

Frisco ISD continues to add more students each year than any other school district in Texas. Without additional campuses, existing schools would be become overcrowded, straining staff and other resources and escalating the wear-and-tear of facilities and equipment.

Current enrollment exceeds 56,000 students in 68 schools. Outside demographers project enrollment at build out will be between 71,000 and 81,000 students, with the moderate growth scenario projecting more than 73,000 students by 2026.

New campuses are designed and built according to modern building and technology standards to promote efficient and cost-effective operations. Cheaper materials would increase the total cost of ownership, considering maintenance over the long-term. A Citizens’ Bond Committee also provides feedback on the development of bond packages and receives annual updates regarding the progress of the bond program.

FISD has been committed to a model of high schools with enrollments smaller than others in the area for many years. Elementary and middle schools are consistent in size with other districts across the area and state. Prior to the beginning of major growth in FISD, a group of citizens worked to help develop a plan for the size of secondary schools. The overriding concern was to keep schools small so that students could have opportunities to participate and excel in activities and form meaningful relationships with each other and with the adults in the school. In Frisco ISD, the configuration and size of school chosen was to serve grades 9-12 at a size to house between 1,500 and 1,800 students. Since that time, to provide as much stability as possible, existing high schools have been modified to accommodate up to 2,100 students. This keeps schools small, allows for more growth prior to rezoning and has provided additional capacity in the District equivalent to adding another high school. (Six high schools with 300 student additions serves 1,800 more students). The District would not deviate from this model of smaller high schools without thorough engagement and conversation with parents and citizens, as the 2015 strategic planning process affirmed community support for the current model. Equity between campuses would be an important consideration.

Frisco ISD is planning an in-depth efficiency study of building capacity and facility usage prior to rezoning for the 2018-19 school year to maximize the use of existing campuses. This review will examine enrollment projections and trends regarding which schools are experiencing growth and which are experiencing declining enrollment. Long-term considerations will involve the potential to delay future construction as long as possible and prepare for the eventual build out of the District. This review will examine attendance zones across the District as a whole and set the stage for a larger-scale rezoning effort this fall. FISD anticipates this effort will impact far more families than rezoning for 2017-18, as the District will also be drawing attendance zones for four new schools.

Frisco ISD made a commitment to smaller high schools, which has resulted in the District’s 10th high school slated to open in 2018, with more expected before build-out. District leaders knew a third stadium would be needed in addition to Memorial and Toyota Stadium and this was a topic of discussion and consideration prior to the 2014 bond program. But just like the opportunity to participate in Toyota Stadium, FISD was able to be part of a public-private partnership with the City of Frisco.

For the District’s $30 million contribution to the City of Frisco, amortized over 25 years, FISD is able to access and use a world-class indoor stadium. As has been seen in recent years in neighboring communities, it can take $50-60 million to build a stand-alone high school stadium. In addition, FISD will not incur ongoing maintenance and operations costs, resulting in a savings of $250-$300,000 annually. The funds for this partnership come from the Tax Increment Reinvestment Zone (TIRZ), and the roughly $2 million annual payment is made to the City of Frisco, not the Cowboys.

The Tax Increment Reinvestment Zone (TIRZ) was established in the late 1990s. It is comprised of 713 acres in the Stonebriar Mall area and consists of mostly commercial and some multi-family residential properties. There is approximately $1.3 billion in value at this time, which yields $19 million a year in tax revenue to FISD. The tax revenue generated through the taxable value in that area goes into a special fund that allows the District to participate in public-private partnerships that benefit the growth and development in the area and also allows FISD to balance its debt service (I&S) tax rate by reimbursing its debt payment with these funds. By law, these funds cannot be used for the maintenance and operations of the school district, such as teacher salaries.