Mercedes ISD may cut about 30 positions from the school district to address declining general revenue and a decreasing fund balance, interim Superintendent Maria Filomena Leo said last Wednesday.
Leo first made the announcement at a school board meeting the previous evening, when she explained that the district’s fund balance has decreased from nearly $5 million to about $500,000 over the past 10 years. She referred to the fund balance as a “cushion” for school districts in case of emergency and as a way to measure the health of an institution.
Major expenditures, including a contract for energy services, and the construction of an athletic stadium, have contributed to the decrease in the fund balance, she said.
“The state recommends that a district carry a fund balance to be able to operate all schools’ (functions) for 90 days. Ours currently would take us through we’re estimating less than a week,” Leo said, adding that staff costs are increasing while revenue decreases due to declining enrollment.
The Texas Education Agency annually evaluates the financial health of school districts via the Financial Integrity Rating System of Texas (FIRST). The FIRST ratings analyze several indicators with assigned point values that add to a total possible score of 100.
School districts that score between 90-100 points receive an A or “superior” rating. Those that score between 80-89 receive a B or “above standard” rating, while those that score between 60-79 receive a C or “meets standard” rating. Districts that score below 50 receive a “substandard achievement” rating — an F.
For the last two fiscal years, MISD has received a C rating.
The district earned 72 points in fiscal 2016-17. That score dropped 12 points the following year, FY 2017-2018, when the district earned a 60.
According to summaries of the FIRST ratings available on the school district’s website, the district scored poorly in its operating reserve fund and its debt liability ratio last year.
The report summary also shows that the district’s expenditures outweighed available funds, and it did not have a sufficient debt service ratio to meet its outstanding debt obligations. Those facts led to zero points on three of the FIRST’s 15 metrics.
Expenditures outpaced revenues in FY 2016-17, as well; however, that year’s FIRST ratings summary shows the district was in better shape to meet its debt service obligations at that time.
Salaries and health benefits make up a large portion of the budget, and Leo said she believes the district has “one of the highest contributions toward the employees’ health insurance premium.”
Half of the positions cut may be teachers, she said, but did not identify other staff reductions.
Leo stressed that while departments such as transportation, athletics and extracurriculars are being considered for “more efficient ways” of operation, this doesn’t mean those departments’ staffs will be reduced.
“Everyone assumes that if we say we need to hold expenses, that means do away with people … that is one of several measures,” she added.
About 300 students left the district over the last two years, according to Leo. The district also accommodates students with disabilities in a co-op with La Feria and Santa Maria school districts. Last year, La Feria school district left the co-op and took about another 200 students with it, according to Leo.
The declining fund balance also affects the district’s ability to respond to emergency situations, such as the heavy flooding the Mid-Valley experienced in 2018. “It is worrisome to know that we don’t have the reserve that we would hope to have,” she added.
Leo said the district can pay salaries among other necessary functions through the end of the year.
“We’re very optimistic,” Leo said of the district’s prognosis for stymieing its decreasing fund balance. “All will be well; it’s simply not as healthy as we would like it to be.”
Staff writer Dina Arévalo contributed to this report.