Understanding School District Budgets
In Texas, school district budgets are funded by two different tax rates: a Maintenance and Operations (M&O) rate which essentially funds all operating expenses, including instruction, salaries, maintaining school buildings, and student programs; and an Interest and Sinking (I&S) rate which funds bond debt.
With your personal finances, you can use the money you budget for debt or expenses however you wish. If your mortgage payment was reduced, your additional money could be used for home improvements or to save for your child’s college fund. In school finance, however, M&O funds can be used for anything to help the school district operate and sustain programs, but the I&S funds can only be used for debt repayment and cannot supplement district operations or salaries.
Two Tax Rates:
Funds from a bond issue can be used for the construction and renovation of facilities, the acquisition of land and the purchase of capital items, such as equipment, technology and transportation. By law, I&S funds cannot be used for the M&O budget, which means voter-approved bonds cannot be used to increase salaries or to pay rising costs of utilities or services. Plano ISD is having two elections simultaneously in November 2022: a Voter Approval Tax Rate Election (VATRE) which would increase funding on the M&O budget, and a Bond Election which would generate funding to renovate facilities through the I&S budget.
The total tax rate in Plano ISD has decreased by more than 17.9 cents in the last five years. The M&O tax rate was $1.17 in 2019, and the M&O rate has been set at $1.02240 for the 2022-2023 school year. The I&S rate has dropped three cents, down from $0.26900 in recent years to $0.23735 for 2022-2023. If the VATRE and bond propositions are approved by voters, the total tax rate will be $1.25975, which is six cents lower than last year.
However, a new state law now requires every school district to include the statement “THIS IS A PROPERTY TAX INCREASE” on the ballot, even when the school district is not expecting a tax rate increase. This is because the issuance of new bonds increases the term of the debt repayment at the current tax rate. If approved by voters, the PISD I&S tax rate, which pays bond debt, would not increase.
A few other factors contribute to Plano’s ability to issue bonds without increasing the district’s tax rate:
- Rising TAVs - Taxable Assessed Values have grown across Plano ISD.
- Paying Down Debt - PISD has a solid debt repayment plan and has a policy and regulation (CCA Local) that states the maximum maturity on debt issued is 20 years.
- Low Interest Rates - Based on current and projected market conditions, PISD can issue bonds at low interest rates. This makes it less costly to finance new bonds.