The El Paso Independent School District is weighing layoffs and other budget cuts as it considers declaring financial exigency, an extreme and rarely used step that allows the district to break contracts with employees and vendors in an effort to recover from an imminent financial crisis.
“We know with financial exigency, the option could be that we can consider a reduction in force. Because we’re in a position where if we don’t make significant changes, we can’t carry the current budget into the future year and operationalize that,” EPISD Superintendent Brian Lusk said during a news conference following the meeting.
Outside auditors, during a board meeting Tuesday, recommended the district declare financial exigency to address a $52.8 million deficit this year and a looming $42 million deficit next year.
While the outside auditors, district administrators and the school board didn’t directly mention layoffs, Lusk said layoffs have to be on the table. Payroll for the district’s 7,400 employees makes up 89% of the district’s expenses, or about $502.3 million.
On Wednesday, the Ysleta Independent School District internal auditor and chief financial officer warned the school board it’s also facing another deficit and is in danger of wiping out the district’s savings if it didn’t make significant changes in the upcoming 2026-27 budget. While no specific proposals were discussed Wednesday, the CFO last year warned the board of financial exigency if it kept dipping into its reserves rather than make budget cuts.
Michael Hinojosa, a Texas Education Agency conservator who works with districts in similar situations, said financial exigency primarily allows a school district to break contracts without legal repercussions. Hinojosa was appointed to oversee the Socorro Independent School District in 2024 after an investigation found the district had improperly graduated students. He told the SISD board in April that his time with the district should conclude this month.
“The board has to vote to tell the world, and they have to prove that they’re broke. And if they do that, they can sever contracts without penalties, both employment and other types of contracts with vendors and utilities,” Hinojosa told El Paso Matters.
EPISD’s policy on layoffs in the case of financial exigency allows the superintendent to call for salary reductions, furloughs, layoffs and other unspecified means of reducing personnel costs, which would need to be approved by the board.
If Lusk recommends a reduction in force, the board can approve the termination of contracts before their terms end – including those that were approved Tuesday.
The EPISD board unanimously approved contracts for teachers, nurses, librarians and other certified employees for the 2026-27 school year, but did not say how many.
The district has over 3,500 teachers, over 1,000 support staff such as librarians, counselors and nurses, 2,100 auxiliary employees in maintenance, transportation and security, 250 administrators and about 45 educational aids, according to October data from TEA.
El Paso Teachers’ Association President Norma De La Rosa said employees’ jobs could be at risk if the district declares financial exigency, but hopes the budget could be cut in other ways.
“I told my members there could be layoffs, people could lose their jobs. I’ve been very honest with them that it could be a consequence. I’m hoping that it does not come to that,” De La Rosa said. “I’m hoping that the board and the superintendent are going to do everything else that they can first, through selling off buildings and land, and putting a freeze on hires.”
What is financial exigency?
Texas school districts can declare financial exigency if a district’s savings per student has decreased by more than 20% in the past two years, according to the TEA. Under the state formula, EPISD’s has declined by 39% since 2024, according to El Paso Matters’ calculations.
Districts can also declare financial exigency if their enrollment declines by over 10% in a five-year period, if they face a natural disaster or catastrophe, or are hit with unexpected expenses that require a district to pay at least 15% of its budget.
The EPISD board will need to vote whether to declare financial exigency and submit an application to the TEA outlining its reasoning for the declaration.
District officials did not say when that will be, but noted they will work quickly.
“In the next week and a half, we really need to outline that path forward and share with the board our expectations and a recommendation for them to consider, so that as we get to the June budget approval, which is an annual process, we’re in a position for them to approve a budget that is balanced,” Lusk said.
Once a district has declared financial exigency, it has 20 days to notify the TEA.
A declaration of financial exigency expires at the end of the fiscal year, June 30, unless the board adopts a resolution to extend it. The EPISD board must adopt a budget for the 2026-27 school year by June 30. It’s not clear how EPISD would time a financial exigency declaration.
Financial exigency a growing threat?
Hinojosa said EPISD is in a better position than SISD when he was appointed to oversee the district.
But that may not last long without action, he said.
“It’s not as bad as Socorro’s, but it’s going to become as bad, so I think that they have to take some bold moves,” Hinojosa said. “It’s not like they have to do a reduction in force right now, but it’s in their best interest if they start cutting back expenses right now, especially since they are projected to lose 1,000 students next year.”
Last year, SISD planned to lay off hundreds of employees under Hinojosa’s and conservator Andrew Kim’s watch to avoid calling for financial exigency. SISD restructured its staffing and offered an incentive for employees to notify them early of their plan to retire or resign to reduce the number of layoffs.
The threat of financial exigency is not unique to El Paso.
Hinojosa said about 8% to 10% of the state’s 1,200 school districts are in similar financial situations, though most have not officially called for financial exigency.
“It’s about to get worse because of vouchers, and then you add the declining birth rates,” Hinojosa said. He referred to the state’s new Texas Education Freedom Accounts program which allows families to pay for private school using taxpayer dollars, and the county’s birthrate, which has declined by about 24% over the last 10 years.
“So, if it’s not a problem now, it’s going to become a problem for over half a state.”
TEA officials said 18 school districts have officially declared financial exigency over the last 10 years.
Calls for accountability
Lusk told El Paso Matters that the district’s former chief financial officer, Martha Aguirre, had deliberately withheld information on the budget from them. Aguirre resigned earlier this month, just as auditors discovered the extent of the budget crisis.
District officials said the systemic issues with its budget tracking had been in place for several years under previous leadership.
Interim Chief Financial Officer David Bates said Tuesday that it was common practice for some expenses to be excluded from the budget, then expended anyway without asking the school board for a budget amendment, in the hopes that future savings would balance it out.
The district’s policy requires the board approve any purchases over $100,000.
“It was a gamble that didn’t pay off,” Bates said.
During the meeting, trustees and members of the public called for the district to hold whoever was at fault accountable, even though many of the leaders who could have been responsible for building this year’s budget are now gone.
“I’m sure that there are still people working there who have to be held accountable, because this wasn’t just one person doing it. I’m sure several people knew about it, and that needs to be dug into and looked into,” De La Rosa said.
Trustee Mindy Sutton said she hopes the district can discover the motive of the employees responsible for withholding information from the board and hold them accountable, in accordance with the district’s policies.
“If someone’s not doing their job or meeting the expectations of what they were hired for, then there needs to be consequences, in my opinion,” Sutton said.
Lusk said during the press briefing that the district won’t investigate the situation further to discover who is at fault.
“I don’t think right now is the time to place blame. I think right now is the time to find solutions to the problems that we have, so we’re going to continue to look at some of the challenges that we have, and we’re going to work towards solutions so that this doesn’t happen again,” Lusk said.
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