Nearly $8.4 billion in new state funding was not enough to save Texas public school districts from budget shortfalls and campus closures, school administrators said June 1.
During a nearly 10-hour public hearing at the state Capitol, school district leaders spoke of efforts to stretch their budgets amid high inflationary costs as teachers explained their decisions to leave the classroom due to pay cuts and large class sizes.
The big picture
Last year, Texas lawmakers passed House Bill 2, a sweeping school finance bill designed to increase educator salaries, create a new pot of money for fixed costs, provide more training for teachers and boost special education resources. HB 2 sent approximately $8.4 billion to public schools after six years of largely stagnant state funding.
The measure also included a $55 increase to the base amount of per-student funding schools receive from the state, known as the basic allotment. That increase fell short of what some school leaders requested to keep up with inflation, although many groups lauded the passage of HB 2 as a whole, Community Impact reported.
At the time, lawmakers said they hoped HB 2 would help offset growing financial pressures faced by some districts, and help schools recruit and retain experienced educators.
Roughly one year later, districts across Community Impact’s coverage areas are cutting staff and closing campuses, citing enrollment declines and budget shortfalls. Austin ISD faces a $181 million shortfall for FY 2026-27 and is closing 10 campuses, while Judson ISD plans to close four schools to reduce its $37 million budget shortfall. Plano ISD recently announced a $44 million shortfall.
“We live, figuratively speaking, paycheck to paycheck,” said Alejos Salazar, superintendent of Lasara ISD in South Texas. “We depend on you all to educate our kids.”
Paul Neuhoff, chief financial officer for Navarro ISD in Seguin, asked lawmakers to give districts more money to help them pay staff, offer competitive benefits amid high inflation.
“This is an essential help that we need in order to maintain operations,” Neuhoff said June 1. “Our utilities have increased close to 60% since 2019; [teacher retirement] payments have gone up 62% since 2021. Last year, … operating our bus fleet cost $3.92 a mile, and that’s before the spike that we have in diesel prices that are going to impact us this year.”
Zooming in
During the June 1 hearing, dozens of current and former public school teachers told state lawmakers about seeing their colleagues leave the classroom in recent years or making that decision themselves.
Rachel Preston, a French teacher for Austin ISD, said she learned on the second-to-last day of the 2025-26 school year that the district could not afford to continue employing her full-time. Preston said she wanted to continue teaching but felt it would be “financially irresponsible” to do so.
“I have to either find something part-time that makes up for the pay I will lose or [find] another full-time job,” Preston said. “This funding deficit is the final straw for me, and it will be for countless other educators across the state who must leave or who lose their jobs as class sizes rise, enrollment in public schools drop and neighborhood schools close.”
Jenny Schnaidt, a Katy ISD kindergarten teacher, spoke of unsustainable class sizes as experienced teachers leave her school district. She urged the Legislature to increase the basic allotment, which districts can use for a variety of needs, including purchasing classroom materials, renovating facilities and paying teachers or staff.
“I have taught for a total of 19 years, and each year I watch more of my colleagues leave the profession,” she said June 1. “Both the teacher incentive allotment and the teacher retention allotment are great ways to compensate teachers who have proven their effectiveness in the classroom, but it isn’t enough. We desperately need a basic student allotment increase to support student learning.”
More details
Before Texas lawmakers pass a major school finance bill, state agencies issue reports detailing the fiscal impacts for each of the state’s roughly 1,200 public school districts. School officials rely on those reports when planning their budget and deciding whether to support legislation.
During the 2025-26 school year, some districts received less money than originally expected under HB 2.
“Our state’s funding formulas from HB 2 produced uneven results for school districts,” said Boerne ISD trustee Rich Sena. “For example, after subtracting state aid for the teacher retention allotment, our district would have actually had less funding than the prior year, despite enrollment growth and inflation. This certainly runs counter to the intent of HB 2.”
Rep. Jeff Leach, R-Plano, told Texas Education Agency staff during the June 1 hearing that their funding estimates have “consistently been wholly unreliable.”
“When I’m talking to my districts during [the legislative] session about a bill, and we can agree on how it might impact them,… but then for it to be implemented, and for districts that thought they were getting at least a few million dollars in extra revenue to actually lose money,” Leach said. “What do I say to my voters at that point? What do I say to my school districts?”
Rep. Diego Bernal, D-San Antonio, urged the TEA to step in and help districts that reported funding losses this school year.
“We put in HB 2 a provision that allows Commissioner [Mike] Morath to make changes if there are unintended consequences with regard to entitlements, and I think that what I have here is unanticipated,” Bernal said. “He has the authority to step in if that happens.”
TEA representatives told lawmakers that while Morath, who leads the agency, has that authority, he can not do so “unilaterally” without guidance from the Legislature and the governor.
“This is a major problem that in advance of next session, in advance of the next major school finance bill, we have to figure out how to get right and fix it,” Leach said.