El Paso school districts are bracing for budget shortfalls next school year after the state miscalculated the way it would make up for the lost tax revenue after Texas voters approved increased tax breaks for homeowners.
Voters in November 2025 approved raising the homestead exemption on school taxes from $100,000 to $140,000 and increasing the additional exemption for people with disabilities or who are 65 or older from $10,000 to $60,000. Though that decreased how much school districts would collect from property taxes, lawmakers promised schools would be “held harmless” for the revenue loss and would make up for it with additional state revenue.
The TEA’s hold-harmless formula is expected to cut next school year’s tax revenues in the El Paso Independent School District by about $17 million, the Ysleta district by more than $10 million, and the Socorro district by about $18 million, though SISD still plans to adopt a balanced budget, district leaders said.
District leaders have promised to cut costs without affecting the student experience, and said they do not expect to lay off employees or close schools.
But some, including El Paso Teachers’ Association President Norma De La Rosa, worry that the funding cuts will make it difficult to cover salary expenses, forcing them to lay off school employees or face financial exigency — the equivalent of bankruptcy for school districts.
“You can probably be assured that it’s going to call for the districts to call for a (reduction in force), because they’re not going to be able to maintain the salaries. They’re not going to be able to keep people because they’re going to have to make cuts,” De La Rosa said.
In March, the Texas Education Agency said it identified issues with last year’s property value data that affected reported funding amounts.
The state revised the methodology used to calculate state aid intended to cover the local tax revenue loss due to a state law that freezes homeowners’ school property taxes when they turn 65 or become disabled.
The TEA said the recent fluctuations in funding were a result of amended property value data provided by the appraisal districts and noted that all school districts in the state are being “fully held harmless.”
“One set of projected appraisal data was available for the start of the school year, another set of updated actual appraisal data was received in February 2026, which had some errors in it, and a corrected set was received in March,” the TEA said in a statement. “The funding calculations change each time, based on the data provided to TEA.”
El Paso school districts say they’re still being shorted on tax revenue, especially as they work to set next year’s budgets by the end of June while already facing budget constraints, and in some cases deficits, caused in part by enrollment losses.
“They are not holding us harmless as they committed to and we see that per-student funding is decreasing, not increasing as they committed,” YISD Chief Financial Officer Lynly Cambern told El Paso Matters.
Cambern said the state initially set aside $800 million in hold-harmless funding, which was reduced to $450 million after the change in methodology.
EPISD Board President Leah Hanany said the changes hit some districts harder than others.
“There are roughly 10 districts across the state that were impacted much more heavily because of how the formula interacts with homestead exemptions. We happen to be one of those districts,” Hanany said.
Before the methodology change, EPISD expected to have a balanced budget for the 2026-27 school year after accounting for a loss of about 1,700 students and making staffing changes, Superintendent Brian Lusk said during an April 2 board meeting.
“The work that we did and the way we aligned the budget for the upcoming year, we had a balanced budget. We had raises factored in,” Lusk said. “We had basically had to cut nearly $20 million, and we accomplished that. Now, we’re facing another hurdle.”
EPISD projects its spending to exceed its revenue by $10 million, even after cutting an additional $7 million in administrative spending from the budget, Hanany said.
Last year, the YISD board adopted a budget with a $22.2 million deficit for the 2025-26, the current school year. Cambern said the district cut expenses by about 3% since then, reducing the deficit to $12 million. Now, she expects the current school year’s deficit to rise back to $22 million and a deficit of more than $10 million for the next.
School districts with budget deficits usually need to dip into their savings to cover expenses for the year if they are not able to cut costs or generate additional revenue.
YISD had $43 million in reserves at the end of the 2025-25 school year. If the district does not cut expenses, it could be left with just $11 million in reserves by the end of the 2026-27 school year.
EPISD estimated it will have enough funds in its reserves to keep the district running for just under 67 days at the end of the 2025 fiscal year, but did not give a dollar amount.
The district expects to lose about 1,500 students over the summer, decreasing its enrollment numbers from 32,500 to 31,000, according to a budget presentation given to the YISD board last month. This would cause the district to lose about $15 million in state funding, Cambern said during the meeting.
Now, the district is requiring school principals to get additional approval before making purchases for their campuses.
“We carefully scrutinize every expense, especially with an adopted budget deficit, but we’re going to add an extra layer of review, just to ensure that it’s mission-critical, that it’s necessary for student academic growth, or to protect the student experience and that or that it’s necessary for student safety, as aligned with the Texas School Safety Center,” Cambern said.
Cambern said the state may need to step in to increase school funding keep schools and programs running without affecting students.
“There are discussions that have to happen at the state Legislature in this next session in order to preserve student experience, without some measures by the state it obviously impacts operations, and eventually it would impact student experience,” she said.
SISD Chief Financial Officer David Solis said the district initially noticed a spike in the state’s projected hold-harmless funding, but did not count on it when developing the budget.
“When we saw the increase, we did question it. We were very hesitant to consider that as new money,” Solis told El Paso Matters. “We anticipated that it may not stick. It would have been nice to have the money; we weren’t counting on anything that significant.”
YISD leaders blamed the state when it adopted a $5.7 million budget deficit for the 2023-24 school year after lawmakers failed to raise school funding as the district anticipated.
Cutting from the top
EPISD is working to make further budget cuts by offering buyouts to administrative employees from its central office to cut vacant positions from the budget.
The board voted unanimously Tuesday to offer a $3,000 incentive to all central office employees who give early notification of their plan to resign or retire at the end of the current school year. This does not include principals or employees who work at a campus.
District officials said they will not be able to estimate cost savings until they get data on the number of employees who take the incentive.
EPISD has 76 administrative positions for a director or higher with 69 campuses, but did not say how many total central office positions it has, according to a presentation given at a finance committee meeting April 14.
Employees have until May 8 to provide a written notice to the district.
“We’ve been very clear as a board and then an administration that we do not want to balance this budget on the backs of students. So, you’ll see that we’re looking first at central office efficiencies, even at the very highest levels, and structural changes there before we even consider impacts to classrooms,” Hanany said.
“We’re still aggressively pursuing a balanced budget, and we feel confident that we can close the gap in a way that maintains stability for our schools and prioritizes instruction for our students,” she added.
Cambern said YISD is already in the lower range for upper-level administrative expenses compared with the rest of the state.
“I think we’re already operating very leanly. We are not heavy, administratively,” Cambern said.
Last school year, YISD spent $329 per student on administrative expenses, which includes salaries, election costs, transportation, supplies and electronic devices, according to TEA school budget data. EPISD spent $377 per student and SISD spent $264. At the same time, Texas schools on average spent about $450 per student on administrative costs.
Last year, SISD planned to lay off hundreds of employees as it faced financial collapse and was under the watch of two state conservators. Both YISD and SISD offered separation incentives to employees if they notified the districts early of their plans to resign or retire in an effort to cut and restructure staffing costs. This allowed SISD to reduce the number of layoffs.
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