North East ISD Cuts Personnel, Utility Budgets to Trim $17.1M Deficit

At the outset of the 2017-18 school year, North East Independent School District Superintendent Brian Gottardy wrote to district residents, describing NEISD’s financial situation as “dire.” Gottardy explained that because of financial constraints, the district could not afford raises for its employees.

Campus faculty and staff complain of other restrictions on heating and air conditioning that shut off shortly after the final bell rings, even though students, administrators, and teachers remain on campus.

District administrators say these cuts are part of a “cost-containment plan” to help combat financial woes worsened by enrollment losses at the elementary school level, in part due to students opting for charter schools.

The other critical piece, they contend? Keeping teachers’ jobs at the cost of teacher raises.

“That’s kind of the tradeoff,” said Brian Moy, the district’s executive director of finance and accounting. “If you are starting at a deficit, if you know you have a certain required staffing level, if you are looking at the mandated staffing ratios, and it is a choice between having the teacher and not having the teacher than providing the raises, the choice is going to be having staff.”

However, teachers union representatives say there are other, better ways to both guarantee teachers’ jobs and raise their pay, such as cutting administrative staff at the district’s central office.

In June, district officials forecasted a $17.1 million deficit. That budget gap represents little more than 3 percent of the district’s total operations. NEISD officials project they could shave $7 million off the budget gap through “active management of the budget throughout the year and conservative estimates of staffing of vacant positions.”

To put the $17.1 million deficit in context, for 2017-18, NEISD planned to pay $2.7 million for social work services, $7.9 million for health services, $4.9 million for security and monitoring services, and $15.5 million for curriculum and instructional staff development.

Moy said 87 percent of the district’s costs go to staffing. That means to make meaningful cuts, it must reduce personnel costs, he said.

“We do have a fund balance that can absorb a small deficit for a year, maybe two, but if the trends are longterm, then you have to start making cuts,” Moy said.

The district can also cut the deficit through natural attrition of staff, said NEISD Chief Financial Officer Dan Villarreal. The district won’t get rid of staff, he said, but when positions become vacant, it can choose not to fill them.

NEISD’s human resources department uses a staffing committee to review requests for filling vacancies or adding additional staff. “Staffing needs are prioritized based on the campus or departments’ needs and the impact on their mission,” a statement from the HR department reads.

Budget cuts also impact salary increases. Gottardy pre-empted this discussion in June 2017, saying it wouldn’t be a possibility. NEISD last raised teacher salaries in 2016-17.

Tom Cummins, executive director of the local chapter of the American Federation of Teachers, said somewhere between 400 and 600 teachers leave the district each year because they retire, move out of the county, switch districts, or leave teaching altogether. This means the district will likely have to hire more teachers for the next school year.

Cummins suggests cutting administrative staff at the district’s central office. 

“They have a lot of mid-level people in the central office that are superfluous to what is being done in the classroom,” he told the Rivard Report. “That is a place where they can have savings. In our opinion, the central office is overstaffed.”

Enrollment growth

At a board meeting last month, Gottardy lamented the financial impact that he said charter schools have had on NEISD’s enrollment. More than 2,000 students departed NEISD in 2016-17 to enroll in one of the “big four” charter schools: BASIS Texas, Great Hearts Texas, IDEA Public Schools, and KIPP San Antonio, Dorian Galindo, the district’s interim director of performance and planning, told board trustees.

The majority of student loss took place in grades 2 through 5, Galindo said. She projected the enrollment decline in 2017-18 will cost the district roughly $2 million.

When a trustee asked Galindo if the elementary students who had left eventually returned, she said yes, but that trend may not last forever.

“Typically, they do come back because there [are] a lot of electives and different types of programs that students can participate [in at NEISD] that they can’t as they move through the higher grade levels at charter schools,” Galindo said, stressing that charter administrators recognize that elective deficiency. She mentioned BASIS, in particular, as a charter that is developing stronger elective programs for the future at a main campus.

“We know it is coming where [charter schools] are actually going to start trying to target those higher grade levels,” she said. “We should be prepared.”

Galindo estimated charter schools’ impact would only grow in future years. In 2011, nonprofit Choose to Succeed organized to attract “the nation’s best public charter schools” to San Antonio. Choose to Succeed’s goal was for charters to serve 80,000 students by 2026. Estimates for 2017-18 indicate the “big four” serve 17,890. In 2016-17, Galindo said they served 11,533 students.

Declining enrollment can reduce the need for teachers, which could cut staffing costs, mitigating charters’ financial impact. However, Moy said, enrollment decline is rarely an even proposition. 

“The problem is that every time a student leaves, you lose that amount per student of state funding, but for the most part, if three kids leave from this grade level at this school, two kids are not there at this school, you don’t necessarily lose a teacher for every 22 kids that aren’t in the district,” Moy said.

As Moy referenced, student enrollment growth plays a significant role in the state financing formula, which is based heavily on district property wealth per student. Property wealth is calculated by dividing the overall property wealth by the district’s average daily attendance of students. Districts with high property wealth per student receive less state support than districts with low property wealth per student.

For example, in 2015-16, Alamo Heights ISD, the Bexar County district with the highest property wealth per student at $1.2 million, received 10.5 percent of its total revenue from the State. In comparison, Harlandale ISD, which had the smallest property wealth per student in 2015-16 at roughly $82,500 received 71.9 percent of its funding from the State.

In San Antonio, where property values continue to climb, districts need growing student enrollment to maintain similar levels of state support. In districts like NEISD, where property values grow each year, but enrollment has steadily declined since 2013, state financial aid shrinks accordingly.

The amount of property tax revenue is also dependent on the tax rate the district levies to support its operations budget. Since 2007-08, NEISD has set its maintenance and operations rate at $1.04 per $100 in property value. State law requires voter approval to raise the tax rate above this amount. If NEISD raised the rate, it could collect more property tax revenue.

District officials discussed whether to raise the tax rate during the making of the 2017-18 budget. Ultimately, the district decided against it, but Moy said residents will feel a greater tax burden whether NEISD raises the rate or not.

“It doesn’t matter if we tax at a higher amount, if the value of the home goes up, the State takes away funding,” he said.

NEISD’s financial woes will likely worsen come 2019-20, when the district projects it will start having to send payments back to the State, through a system known as “Robin Hood” or recapture. This financial circumstance comes into play when a district crosses a threshold of having too much property wealth per student.

Moy said if the finance formula stays the same, NEISD’s payments will only increase over time. He projects the first year will require the district to pay just under $7 million.

“But if property values go up, that recapture payment balloons up to $32 million,” he said.

These kinds of financial woes aren’t limited to NEISD. This school year, neighboring Alamo Heights ISD is coping with a $2.2 million budget deficit, while also remitting recapture payments of $37.3 million back to the State.

Local superintendents met in February to discuss how they can collectively work with the City of San Antonio to lobby the State for a better school finance policy.

“Almost 10 years ago, we were probably getting closer to 40 percent from the State, and five years ago was a third,” Villarreal said. “Next year we are only getting one-fifth, as the property values go up, we get less state funding. Our revenue stays flat.”

Cutting Back on Utilities

Until the Legislature makes any major changes, NEISD must continue abiding by its cost containment plan to reduce expenses wherever it can. The second largest cost to the district is utilities, Villarreal said.

“We are hit with rate increases from SAWS and CPS [Energy] just like everyone else,” Villarreal said.

With each new campus built, utility use can be done more efficiently, but there are plenty of aging buildings in the district, which has been in operation since 1949.

In lieu of constructing all new buildings, the district tries to control usage habits.

“Even in the older buildings, they are now equipped with [controls],” Moy said. “We can turn on and off the heat or air at a certain or specific time. Turn it on just in time for the building to become comfortable when the students arrive.”

All district air conditioning and heating are controlled through a central hub, said Associate Superintendent of Operations Ron Clary. The district automatically shuts off air conditioning or heat 30 minutes after school is out, but individual campuses can apply for longer services for special events. Campuses can also keep services turned on at a central location, like the library, for teachers who work longer hours.

“While the things that we do produce results, I’m not saying they are popular,” Clary said. “It is just something that we absolutely have to do to control our cost usage because every dollar we save in utilities can be used elsewhere, in the classroom or wherever.”

Clary said the district gets “a lot of flack” for some of its energy management policies. District employees even referred to a past energy manager as the “Prince of Darkness.”

However, Clary said, when teachers learn the annual utility budget is roughly $15 million for 68 campuses and additional facilities, and it costs approximately $3,000 to run utilities each hour, they “don’t like it, but they understand it.”

Cummins said he hopes the district will reduce the hours teachers work if NEISD plans to cut the time air conditioning or heating is turned on.

“We are very well aware that there are going to be cuts next year because there is no legislative session before next year,” he said. “But… if they are cutting back on utilities in the schools, if they are cutting down on air conditioning, they are going to have to cut down on the number of hours teachers work there.”