As Texas school districts navigate an evolving landscape of financial pressures, shifting demographics, and legislative changes, ensuring sustainable funding solutions is more critical than ever. For superintendents, CFOs, and trustees, securing cost-effective financing is essential in meeting district needs while maintaining fiscal responsibility. As bond underwriters, we understand these challenges and are committed to helping districts optimize their capital financing strategies to ensure long-term success.

Key financial considerations for Texas school districts

State and local funding challenges

  • While the Texas economy remains strong, school districts face financial strain due to rising operational costs, inflation, and the lack of an increase in the basic allotment since 2019.
  • The basic allotment remains at $6,160 per student, which has not been adjusted for inflation, leading to funding shortfalls in many districts.
  • While Texas has increased its overall education spending, much of this funding has gone toward property tax compression rather than increasing direct support for classroom instruction.

Rising infrastructure and capital needs

  • Many Texas school districts are experiencing aging facilities, growing student populations, or, in some cases, declining enrollment, leading to underutilized assets.
  • Rising property values have expanded taxable wealth, providing many districts with greater bonding capacity.
  • Despite increased capacity, districts must earn voter trust through transparent bond proposals that outline clear financial benefits.

Market conditions and bond issuance strategies

  • Interest rate fluctuations and market volatility directly impact the cost of borrowing.
  • With taxable property values increasing, many districts now have greater access to bond financing, but securing voter approval remains essential.
  • As bond underwriters, we work with school districts and their financial advisors to identify the most advantageous times to issue bonds, structure transactions efficiently, and secure competitive rates. By taking a proactive approach to debt management, districts can maximize their resources and ensure funds are allocated effectively.

Strategic solutions for school districts

Leveraging bond financing

  • School districts can utilize general obligation (GO) bonds to fund large-scale projects, from new school construction to technology upgrades.
  • A well-structured bond issuance plan ensures districts meet their financial obligations while managing tax burdens.

Public-Private Partnerships (P3s)

  • With workforce housing becoming a pressing issue for many Texas school districts, especially in high-cost areas, P3s can be a valuable tool in addressing housing shortages for teachers and staff.
  • Creative financing solutions can make these initiatives feasible without straining district budgets.

Transparency and community engagement

  • Gaining voter approval for bond elections requires clear communication about funding needs, tax implications, and project benefits.
  • Districts that engage their communities early and transparently tend to experience greater success in passing bond measures.

Preparing for the future

With shifting political and economic conditions, Texas school districts must remain agile in their financial planning. A key component is engaging a strong underwriting firm with deep experience in structuring transactions that align with a district’s financial goals. A well-structured financing strategy ensures access to capital and fosters community trust by demonstrating fiscal responsibility.

By partnering with experienced financial professionals and bond underwriters, districts can implement sound fiscal policies and proactively approach capital financing. This strategic approach allows school leaders to ensure their districts remain well-positioned to provide high-quality education for years.

At UMB Bank, we are committed to helping Texas school districts secure the financial resources they need to thrive.

Learn more about how UMB Bank, n.a. Public Finance can support your organization’s financing and capital needs, or contact us to be connected with a public finance specialist.

Disclosure

This communication is provided for informational purposes only. UMB Bank, n.a. and UMB Financial Corporation are not liable for any errors, omissions, or misstatements. This is not an offer or solicitation for the purchase or sale of any financial instrument, nor a solicitation to participate in any trading strategy, nor an official confirmation of any transaction. The information is believed to be reliable, but we do not warrant its completeness or accuracy. Past performance is no indication of future results. The numbers cited are for illustrative purposes only. UMB Financial Corporation, its affiliates, and its employees are not in the business of providing tax or legal advice. Any materials or tax‐related statements are not intended or written to be used, and cannot be used or relied upon, by any such taxpayer for the purpose of avoiding tax penalties. Any such taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent tax advisor. The opinions expressed herein are those of the author and do not necessarily represent the opinions of UMB Bank or UMB Financial Corporation.

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