Are Texas ISDs Using Debt to Pay for Day-to-Day Expenses?

The answer: Yes, at least according to the recent school finance decision.

Included in the district court’s 364-page Findings of Fact (FOF) is a mention of “some” Texas school districts assuming long-term debts in order to pay for short-term operational expenses. This, of course, runs contrary to prudent financial management practices.

Here’s the specific reference (pg. 316):

FOF 1389.      Because the system does not provide sufficient M&O funds under Tier I and Tier II to support a basic education, some districts have been compelled to use I&S revenues to finance M&O expenses such as buses and technology. [emphasis mine]

Using the Interest & Sinking (I&S) fund—which is meant to “pay the interest and principal on district-issued bonds, usually for construction of facilities and other capital needs”—to finance day-to-day Maintenance & Operations (M&O) expenses is akin to a person using their credit card to purchase regular daily meals. The practice is simply not sustainable, and it promotes inefficiency within the operating budget.

It’s also interesting to note that the district court identifies “buses and technology” as M&O expenses. These short-term expenses have become regular staples of school bond packages and are contributing significantly to Texas’ emerging local government debt crisis.