Topic: Budget - Legal Requirements
Reference or Contact: Chief Financial Officer
Sections 44.002 through 44.006 of the Texas Education Code establish the legal basis for budget development in school districts. Board Policy CE, CEA The following six items summarize the legal requirements from the code:
The superintendent is the budget officer for the district and prepares or causes the budget to be prepared.
- The district budget must be prepared by a date set by the state board of education (June 30 for districts with a July 1 fiscal year state date)
- The president of the board of trustees must call a public meeting of the board of trustees, giving ten days public notice in a newspaper, for the adoption of the district budget. Any taxpayer in the district may be present and participate in the meeting.
- No funds may be expended in any manner other than as provided for in the adopted budget. The board does have the authority to amend the budget or adopt a supplementary emergency budget to cover unforeseen expenditures.
- The budget must be prepared in accordance with GAAP (generally accepted accounting principles) and state guidelines.
- The budget must be legally adopted before the adoption of the tax rate.
TEA has developed additional requirements for school district budget preparation as follows:
- The budget must be adopted by the board of trustees, inclusive of amendments, no later than June 30.
- Minutes from district board meetings will be used by TEA to record adoption of and amendments to the budget.
- Budgets for the General Fund, the Food Service Fund and the Debt Service Fund must be included in the official district budget.
- The officially adopted district budget, as amended, must be filed with TEA through PEIMS (Public Education Information Management System) by the date prescribed in the annual system guidelines. Revenues, other sources, other uses, and fund balances must be reported by fund, object, fiscal year, and amount. Expenditures must be reported by fund, function, object, organization, fiscal year, program intent and amount. These requirements are discussed in further detail in the Data Collection and Reporting module.
- A school district must amend the official budget before exceeding a functional expenditure category, i.e., instruction, administration, etc., in the total district budget. The annual financial and compliance report should reflect the amended budget amounts on the schedule comparing budgeted and actual amounts. The requirement for filing the amended budget with TEA is satisfied when the school district files its Annual Financial and Compliance Report.
- In addition to state legal requirements, individual school districts may establish their own requirements for annual budget preparation. Local fiscal policies may dictate budgetary requirements which go beyond those required by the Texas Education Code and TEA.
These policies may include:
- Fund balance levels
- Debt service fund balance accumulation
- Financial performance comparison measures
- Staffing levels
There are four truth-in-taxation principles, which apply to taxing units:
- Property owners have the right to know of increases in their properties' appraised values and to be notified of the taxes that could result from the new value.
- A taxing unit must calculate and publish the effective and rollback tax rates before adopting an actual tax rate.
- A unit must publish special notices and hold a public hearing before adopting a tax rate that exceeds the effective tax rate or the rollback rate.
- If the unit adopts a rate that exceeds the rollback rate, voters may start a petition for an election to limit the rate to the rollback rate. School districts must hold rollback elections to limit tax increases above the rollback rate for the current year, without a petition.
One of the equalization features of the funding formula is a cap on wealth per WADA. Chapter 41 of the Texas Education Code establishes an equalized wealth level of $319,500 and gives districts above this level several methods to either reduce wealth or increase WADA in order to achieve the equalized level.
Districts may use any combination of five options: (1) consolidating school districts, (2) consolidating school tax bases, (3) contracting with the State of Texas to shed the excess wealth, (4) Contracting to educate children in another school district and paying the state for student attendance credits, or (5) de-annexing and annexing property between school districts. These steps affect the truth-in-taxation rollback rate steps.