The HISD timeline is set after district leadership, headed by Superintendent Mike Miles and financial consultants from Alvarez and Marsal, discussed the school district’s financial health, budget strategies and long-term fiscal sustainability.
The strategies included the possibility of school closures to offset HISD’s declining enrollment, which has decreased by 30,000 students in the last decade, and central office reductions. Miles’ preliminary budget overview accommodated a $47 million decrease “due to lost enrollment,” which he later explained included cuts in teacher positions.
HISD, along with an additional projected 8,000-student decline in the next school year, is also facing other issues, such as rising costs and the impending end of federal ESSER (Elementary and Secondary School Emergency Relief) funds.
Considering these factors, Miles set the next budget workshop for March 27 when HISD will present a more detailed draft of the district action plan and budget. The department and school budgets are projected to be finalized in April and May. The board will vote on the final budget in June 2025.
“We have to prioritize and ensure that our monies are going to the board goals and getting out of that intervention status. That’s a key goal of the budget,” Miles said.
School closures: a possibility?
The administration said it will not close any schools in the 2025-2026 school year but will raise the proposal to the Board of Managers this fall for closure consideration in the 2026-27 school year.
“We have not closed schools in quite a while in the district,” Miles said. “If we’ve lost 30,000 kids in six or seven years, that’s an untenable financial situation…We’re losing money and it’s not a financial equation altogether, but at some point, it’s a financial equation.”
Miles said that the school district “gains” $1.5-$2 million for closing a small school and potentially closing 15 schools will earn the district $30 million.
“It’s actually a little bit more than that because the recurrent expenses of the people that don’t have to be there, like teachers, custodians, maintenance workers, groundskeepers, et cetera, starts to compound down the road,” he said.
Third-party insights on HISD’s budget
Alvarez and Marsal, a financial consulting firm previously working with the school district, presented its analysis of HISD’s budgeting practices.
Jim Grady, the managing director at Alvarez and Marsal, emphasized zero-based budgeting, a process where departments justify new and existing expenses instead of “making incremental changes to the previous fiscal year plan.”
The firm also suggested maximizing funding from diverse sources, addressing HISD’s maintenance backlog, and “scaling” central office budgets in proportion to the declining enrollment.
The district expects to increase its maintenance expenditures. It plans to invest $100 million over the next two years in “urgent” security and health projects and $40 million in capital improvements in security and health.
After a projected budget deficit of $246 million, the firm estimated HISD’s liquid reserves at $660 million, available for use in Fiscal Year 2026 based on its current budgeted deficits, and a total estimated fund balance of $801 million at year-end.
Budget assumptions
HISD has made assumptions while evaluating its budget, including:
- Adding a maximum of five new NES schools while maintaining the number of New Education System (NES) schools at 130 for the next school year. If a per-unit allocation (PUA) school falls to an “F” rating,” it will be included in the list
- Determining staffing allocations and budgets for NES campuses based on enrollment numbers
- Projecting an increase in state funding for State Compensatory Education (special education, dyslexia, safety and security) to increase by $200 per student
- Expecting the 89th legislative session to mandate a teacher salary increase through new bills and laws
- Anticipating student funding to increase by $220, per House Bill 2
“We think we’ll bring in a balanced budget either this year or next year,” Miles said. “And if we don’t get money from the state, that will mean some cuts at central office and other places in the district.”
What lies ahead
While HISD awaits clarity on state funding that will hinge on the Texas legislature’s decisions, the district has yet to make any major decisions based on its budget assumptions.
Community members at the board meeting stressed the need for transparency from the current administration in terms of spending as the district navigates a critical financial planning phase.
