Office of Superintendent of Schools Board of Education Meeting of June 23, 2011 Office of Chief Financial Officer Melinda Garrett,

Chief Financial Officer SUBJECT: APPROVAL BUDGET OF THE 2011-2012 RECOMMENDED DISTRICT

The recommended 2011-2012 budget for the Houston Independent School District (HISD) reflects the allocation of revenues and expenditures to support educational programs and services defined by the districts purpose, goals, strategic intent, and core values. It represents the vision of district leadership articulated through financial and operating policies and is a delicate balance of choices representing the educational needs of students and the ability of the community and the state to provide the financial support to serve them. Budget planning for 2011-2012 has been a ten-month process, which includes the complete zero-based budget review for all administrative support departments, district-wide accounts and a reduction to the campus resource allocation. The State of Texas announced an estimated $28 billion dollar deficit for the 2012-2013 biennium. Since HISD is required to adopt a budget by June 30 th and the Texas Legislature has not adopted the portion of the budget relating to public education funding, HISD has estimated the amount of funding loss and developed the budget accordingly. HISD projected a loss of state funding of $78.7 million, projected increased revenues from other sources of $6.08 million and increased expenditures of $13 million for a net decrease to the budget of $85.6 million. HISDs 2011-2012 Recommended Budget continues to include the four cents for maintenance and operations (M&O) approved by the Board of Education in 2006 2007. The revenue from the four cents will be transferred to the Debt Service Fund to pay for principal and interest payments on the districts indebtedness. The additional state funding earned because of the four cent shift in the tax rate will be transferred to the Capital Projects Fund and earmarked for the Pay As You Go program up to a total program contribution of $15 million. The recommended M&O rate will be $1.0067, and the recommended Debt Service tax rate will be $0.15, for a combined tax rate of $1.1567 per $100 of assessed value. Major increases to the General Fund budget include: Increase to District Health Insurance contribution - $7,287,419 Increase to Unemployment - $3,874,320 Tax Increment Financing Zone participation - $2,521,156 Increase for Literacy Initiative - $1,750,000 Page 1 of 3

 Increase for Project Grad - $1,350,000 AP/IB/SAT Tests - $918,789 Liability Insurance - $726,502 Major decreases to the General Fund carryover budget include: Reduction to Campus Resource Allocation - $58,443,000 Reduction for Special Education Maintenance of Effort - $15,000,000 Reduction to the Central Administration Departments - $17,972,312 Reduction to the Unique PUA and Small School Subsidy - $6,995,470 Reduction of district-wide stipends - $6,578,340 Reduction to TRS on Behalf & Above State Minimum - $ 5,916,633 Reduction to the ASPIRE program - $4,620,000 Reduction of district-wide benefits - $2,771,679 Reduction to JJAEP - $1,000,000

Projected revenues and other financing sources for the 2011-2012 General Fund are $1,552,122,468, which is a 1.62 percent decrease over final projected revenues for 2010-2011 and a .24 percent decrease over the original 2010-2011 budgeted revenues. Appropriations included in the recommended budget for the General Fund total $1,575,145,373. Taking into account the projected unspent funds at the end of the 2011-2012 fiscal year and the fund balance transfers for the Pay-As-You-Go capital program, the adjusted appropriations total $1,530,145,373 which leaves a budget surplus of $21,977,095. Also presented are the Title I, Title II and Title III budgets as part of the total budget presented to the board of trustees. Preliminary entitlements received from the Texas Education Agency (TEA) reflected a reduction in funding. However, after consultation with the agency it appears that the district should receive a revised notice of grant award (NOGA) within the next two weeks and the funding level will approximate the funding level received in 2010-2011. As a result, the programs that were previously moved to the General Fund from Title I will be moved back to Title I for funding. Should the upcoming NOGA not reflect the level of appropriations needed to fund these programs, they will be recommended for funding from the General Fund when the district presents the amendment to adjust the budget to reflect the final state funding as adopted by the 82nd Texas Legislature The 2010-2011 Recommended District Budget also includes the following recommended appropriations: Debt Service Page 2 of 3 $217,046,088

(includes transfer from General Fund for the four cent shift) Food Service Fund $116,747,242

Detailed information regarding the 2011-2012 Recommended Budget has been sent to board members under separate cover. COST/FUNDING SOURCE(S): STAFFING IMPLICATIONS: ORGANIZATIONAL GOALS/IMPACT: Included in the 2011-2012 Recommended Budget. Included in the 2011-2012 Recommended Budget. This item allows HISD to fulfill its purposes, strategic intent, goals, and core values and supports all of HISDs goals.

THIS ITEM REQUIRES CONSULTATION. THIS ITEM DOES NOT ESTABLISH, MODIFY, OR DELETE BOARD POLICY.

RECOMMENDED: That the Board of Education approve the 2011-2012 Recommended Budget for fiscal year 2011-2012 and to direct the administration to bring back a recommendation not later than the August 2011 board meeting related to the final budgeted surplus amount, effective June 24, 2011.

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