School Budget Case Study: 2022 Pay Raises & Stipends, $10 Million 2023 Deficit?

Trustees for El Paso’s three largest school districts last week approved the largest pay increases for teachers in recent years, an effort to retain staff and fill vacancies in an increasingly competitive market that comes with the warning of massive budget deficits down the road.

El Paso Independent School District trustees — who were the last to vote on a budget — on Thursday bested the Ysleta and Socorro independent school districts by raising teacher pay by 7%, EPISD’s largest raise in recent memory.

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Socorro trustees boosted teacher pay by 6%, while Ysleta trustees settled on a 5% increase.

EPISD Superintendent Diana Sayavedra called the pay increase a “bold move” for the district that she has led since January. She recommended trustees boost teachers’ salary by 7%, 2 percentage points higher than what the administration proposed just last week.

“We need to keep pace with the other two large school districts,” she told El Paso Matters after the vote.

Though EPISD will still trail Socorro and Ysleta, it will now be in the top five of the county’s nine districts that offer the highest starting pay, Sayavedra said.

Under the new compensation plan for the 2022-23 school year, EPISD’s starting teacher salary will be $56,975, a jump from the current $53,125 starting salary.

YISD’s new starting salary will be $58,135, up from $54,985, and SISD’s will be $57,500, up from $54,244.

EPISD Trustee Leah Hanany, a former teacher in the Ysleta district, said the 7% teacher pay raise is “about what’s best for students,” citing studies showing that higher teacher pay correlates to improvements in student performance.

“I can’t tell you why boards of the past have allowed us to stay so far behind the other urban districts in El Paso,” said Hanany, who was elected in 2021 and is going through her first budget cycle. The new compensation package, she said, “sends the message that this district is no longer going to accept mediocrity.”

None of the trustees who joined the board before last summer addressed her comment.

All three school boards additionally approved $2,500 retention stipends for all employees, to be paid for with federal coronavirus relief money.

They also raised their districts’ minimum wage for hourly workers, which include custodians and cafeteria workers.

As of July 1, minimum wage workers will earn $12 in EPISD, $13 in YISD and $15 in SISD. Texas’ minimum wage is $7.25, which is the same as the federal minimum wage.

Due to rising inflation, YISD Kathryn Lucero pushed for a higher wage than the $13 Chief Financial and Operations Officer Lynly Leeper recommended.

But Leeper cautioned that YISD could not afford to match the $15 wage adopted by Socorro, noting that every dollar increase costs the district close to $5 million annually.

YISD trustees settled on giving hourly workers an additional $2,500 federally funded stipend next school year — on top of the $2,500 stipend everyone will receive.

“Our hourly workers are struggling right now to put food on the table and this would give them some additional funds to be able to survive through the remainder of the year,” Lucero said.

Deficit spending causes districts to dip into reserves

The generous employee salary increases come at a financial cost to the districts. None of the three districts will bring in sufficient revenues this next fiscal year, which runs from July through June, to sustain the compensation packages trustees adopted.

The impact on taxpayers remains to be seen, as the three districts will adopt their 2022-23 tax rate in August. Only SISD provided trustees with their proposed rate: $1.25 per $100 valuation — a two cent decrease from this year.

Because the tax rate reduction doesn’t offset the steep rise in property tax valuations, the average SISD homeowner will see an estimated $96 increase in school district taxes on next year’s bill, according to Chief Financial Officer Tony Reza.

Socorro ISD officials weren’t immediately available to provide the amount of money needed to balance this year’s general operating budget or the amount of days in its fund balance. Reza initially told trustees that $19.2 million in fund balance money would be needed — an estimate based on a 5% teacher salary increase and $12 minimum wage administrators recommended, which trustees exceeded.

YISD will face an estimated $10.6 million budget deficit, according to numbers the district provided. Leeper had recommended trustees approve a 4.5% raise for all employees, which would have caused about an $8.7 million deficit.

If the district cannot make that money up, it will have to dip into its fund balance reserves, she said. That would leave YISD with 75 days worth of operating expenses in its unassigned fund balance.

The Texas Association of School Boards recommends that a district’s fund balance doesn’t drop below 60 days. Dipping too much into the fund balance can also negatively impact a district’s credit rating.

“I’ll tell you frankly and upfront, the way I’m going to make that up — because it’s my job to make it up — is by looking at positions,” Leeper told trustees. “If they retire, if they leave, do I have to replace them?”

“If 82% of your budget is tied up in people, I can’t make up this kind of difference in operations or anywhere else,” she continued.

The projected $10.6 million deficit for 2022-23 is equivalent to the salary and benefit costs of 160 teachers, Superintendent Xavier De La Torre told trustees before they voted on the compensation plan.

Trustee Mike Rosales cast the sole dissenting vote against it, saying that he couldn’t justify further dipping into reserves.

EPISD will use about $4.1 million from the fund balance to balance the new budget, which will leave a little over 63 days of operating expenses in the fund.

It was the only district to project future years’ deficits based on employee salaries for 2022-23. In the following school year, EPISD will again face a projected $4 million budget shortfall, and in 2024-25, a staggering $37.5 million deficit.

Trustees expressed confidence in the superintendent’s plan for closing those gaps, but were honest about the difficult choices ahead of them needed to drastically cut down costs.

“Schools will need to be rightsized, aka schools will need to be shut down,” Trustee Daniel Call said ahead of the vote.

Trustee Al Velarde, who has been on the board the longest since 2015, said 2025’s looming deficit “scares the bejesus out of me” and was unlike anything he’d seen before.

“We have a huge mountain to climb that we are putting in front of us,” he said.

The vote to give teachers a 7% raise was unanimous.

This article first appeared on El Paso Matters and is republished here under a Creative Commons license.