Budget Basics
Stephenville ISD’s budget is divided into two main funds:
1) Maintenance and operations, also called the M&O fund
2) Interest and sinking, also called the I&S or debt service fund
Money in the maintenance and operations fund is used for daily operations (i.e. salaries, supplies, utilities, etc.).
Money in the interest and sinking fund is used to repay bonded indebtedness. School districts hold school bond elections to obtain authorization from local voters to sell bonds for capital projects. Taxes are collected for the repayment of the bonded indebtedness. Monies from the bond sale are used for construction and capital improvements to facilities and to buy furniture, equipment and/or to purchase land.
The money collected on the I&S side of the ledger cannot be used for maintenance and operations costs. Simply put, you cannot use I&S funds to pay salaries, which account for more the 80 percent of the District’s budget.
Reversing the increasing flow of local taxpayer dollars to the state’s budget rests with the Texas Legislature. It requires additional funds from the state and a commitment to higher prioritization of public education in order to ensure an educated workforce for the future of Texas.
What can you do to make an impactful change?
- Contact your legislator and share your frustration with the system currently in place. Find out who your representative is here.
- Demand action
- Stay engaged during legislative sessions
- Vote
What makes up a district tax rate?
A school district’s tax rate consists of two parts: 1) Maintenance and Operations (M&O) and 2) Debt Service (I&S). Maintenance and operations taxes fund the General Operating Fund, which pays for regular operating expenditures of the District such as salaries, supplies, utilities, insurance, equipment and other costs. The Debt Service tax pays for school bonds and can be used only to retire the principal, interest and expenditures of bonds sold for specific purposes.
What makes up a district budget?
Stephenville ISD’s budget is divided into two main funds: 1) maintenance and operations, sometimes called the M&O fund 2) interest and sinking, sometimes called the I&S or debt service fund. Money in the maintenance and operations fund can be used for daily operations (i.e. salaries, supplies, utilities, etc.). Money in the interest and sinking fund is used to repay bonded indebtedness. School districts hold school bond elections to obtain authorization from local voters to sell bonds and collect taxes for the payment of the bonded indebtedness. Monies from the bond sale are used for construction and capital improvements to facilities and to buy furniture, equipment and/or to purchase land. The money collected on the I&S side of the ledger cannot be used for maintenance and operations costs. By Texas law, you cannot use I&S funds to pay teacher salaries.
What are bonds? How long does it take to pay them off?
School districts can only sell bonds if authorization is received by voters. A bond is a debt instrument in which an investor loans money to the District. The proceeds from the bond are used to finance capital projects and other long term items. The District repays the principal of the bonds, along with interest, over a period of time. Under current Texas laws, the maximum maturity of a bond is 40 years. When a bond sale occurs, many bonds are issued with maturities that range from 1 to 25 years. Assets financed by the bonds that have a shorter asset life, are sold with shorter maturities that align with the asset’s useful life (example: technology devices).
What are fund balances?
School districts are required to use “governmental fund accounting” to track the sources and uses of funds. Texas school districts typically have many types of fund accounts, each of which consists of three components: assets – the fund’s economic resources; liabilities – the district’s financial obligations associated with a particular fund; and fund balance, the value of the assets that remain after accounting for liabilities. The use of non-spendable and restricted fund balance is limited by externally enforceable limitations such as law and regulations. The Board of Trustees allocates committed and assigned portions of fund balance for specific purposes. This includes funds for emergencies, small capital projects, one-time items and educational equipment. Due to the timing of receipt of payments from the state of Texas and tax collections, sufficient reserves are necessary to meet ongoing monthly expenditures.