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New Houston ISD Superintendent Mike Miles’ plans for the district are built on the promise of more.
More pay for teachers. More staff in classrooms. More security officers on campuses.
But all of those extra perks cost lots of money. And right now, HISD can’t afford them without digging deep into its savings.
To carry out Miles’ vision for Texas’ largest district, HISD projects to spend nearly $250 million more than it will receive in the current fiscal year — a total that would dwarf any recent operating deficit incurred by the district, financial records analyzed by the Houston Landing show. The deficit projection calls into question the long-term sustainability of plans announced by Miles, who wants to increase investments even more in the coming years if financially feasible.
For the moment, HISD’s projected 2023-24 deficit does not spell financial peril.
HISD’s chief financial officer estimated that the district has about $900 million in reserves, well above the roughly $500 million mark that the state encourages HISD to keep. Nearly half of those reserves were built up over the past several years, a period during which HISD routinely over-budgeted its costs. HISD’s state-appointed board, which took power in June along with Miles as part of state sanctions against the district, has signed off on tapping the reserves.
But HISD can’t continue to spend beyond its means forever. It’s a reality that Miles acknowledged in an interview last week.
“We understand how budgets work and we understand what levers to pull,” Miles said. “I’m not here to save money. I’m here to help teachers raise the quality of instruction and get kids ready for the year 2035.”
Still, Miles hasn’t detailed how he plans to close the gap, leaving some local officials and community members concerned about HISD’s financial outlook.
In the interview, Miles refused to detail what expenses he’ll eliminate in future years to shrink the deficit, saying he doesn’t want to “cause alarm everywhere.” (One area that he said wouldn’t be cut: spending on classroom learning.)
At the same time, it’s unclear whether Texas legislators will decide later this year to dedicate more money to public schools. Gov. Greg Abbott is expected to call a special legislative session on education for October. While public schools could receive additional funding, many Texas Republicans are more focused on giving families money to spend on private schools and other educational expenses.
“(Miles) is going to bankrupt the district,” said elected HISD Trustee Elizabeth Santos, who was stripped of her board powers as part of sanctions against the district. “I’m super fearful of what’s going to happen.”
Money to burn
Despite repeated claims by administrators that the district faced major deficits, requiring a pause on pay raises and tough cutbacks, HISD has stockpiled huge amounts of cash in recent years. The district added about $480 million to its reserves between fiscal 2016 and fiscal 2022.
The new administration has wasted little time spending it.
Miles has announced significant investments in 28 “New Education System” campuses receiving major overhauls. Teachers at those schools will now make average salaries of about $85,000 and receive a $10,000 stipend. (A teacher with 10 years of experience, roughly the district average, earns $67,500.) HISD is also adding teacher apprentices to help educators in NES elementary and middle school classrooms, with a starting pay of $68,000.
In addition, HISD is giving $10,000 stipends to educators in 57 other “New Education System-Aligned” campuses that are significantly changing their operations. The district also is paying for new reading and math curriculums at the 85 NES and NES-Aligned schools and adding more than 50 police officers in response to a new state law requiring an armed official at all campuses.
The spending isn’t expected to stop there.
Miles has said he plans to add more schools from as many as three additional feeder patterns to his NES program next year. The district also is pursuing “District of Innovation” status, which could result in a longer school year that necessitates paying teachers more. And under a pay-for-performance model set to kick in two years from now, first-year HISD teachers will make at least $72,500 annually compared to the current $61,500 rate, according to a district planning document.
In last week’s interview, Miles said he and HISD’s chief financial officer, Jim Terry, will watch the district’s budget to ensure the “rainy day” fund to ensure it remains sufficient.
“Jim and I have good experience at this and we’ve watched the numbers closely,” Miles said. Miles and Terry served together as superintendent and chief financial officer, respectively, of the Dallas Independent School District several years ago.
But Miles hasn’t earned the trust of parents like Meghan Hokom, the mother of students at West Briar Middle School and Westside High School, who said the spending plans feel like an irresponsible gamble.
“He’s treating our entire district as an experiment on our dime,” Hokom said.
A cash crunch?
To date, Miles has outlined parts of a roadmap that would allow HISD to close the deficit next year.
The new superintendent expects to cut some costs through eliminating hundreds of central office jobs, along with planned efficiencies in bus transportation and human resources. (An August investigation by the Houston Landing revealed Miles had overstated central office job cuts while more than doubling the number of administrators earning annual salaries of more than $150,000.)
Miles also expects some costs this year will not recur, such as interactive whiteboard purchases and the $10,000 stipends.
And while Miles hasn’t laid out plans for closing or consolidating schools as a cost-saving measure, he’s alluded to that potential. In an interview with the Landing upon taking the job, Miles said he “most likely” will bring a list of campuses that should to be closed ahead of the 2024-25 school year to HISD’s appointed board.
A 2019 report by the Texas Legislative Budget Board showed HISD’s schools have space for roughly 250,000 students, while enrollment fell to about 182,000 students in early September. Closing about 40 schools of the district’s nearly 250 campuses could save HISD $26 million in annual operating costs, the Legislative Budget Board said.
On the revenue side, Miles argued HISD could receive more state funding for summer school and pay-for-performance teacher compensation models, which likely would total tens of millions of dollars annually. Terry also said he expects public school districts will receive some additional funding following the October special legislative session.
In the meantime, the lack of clarity risks further inflaming tensions between community members opposed to Miles’ administration and HISD’s leadership.
Ann Eagleton, a longtime budget hawk and parent of HISD graduates, said she’s alarmed by the pace of the district’s spending — particularly in light of next year’s expiration of pandemic stimulus cash that has helped cover costs of catching up students.
“I don’t really feel like the board of managers is asking that many questions about how we’re going to move forward,” Eagleton said. “Because once that surplus is gone, it’s gone.”
HISD Board President Audree Momanaee did not respond to a request for comment.
Marguerite Roza, director of Georgetown University’s Edunomics Lab, said the district should be transparent about potential cost-saving measures — such as school closures — if expected revenues don’t land. Shuttering schools would likely have the biggest impact on Houston’s lower-income neighborhoods, which are home to many of HISD’s under-enrolled campuses.
“(Miles) is saying, ‘Trust me, I know what I’m doing,’” Roza said. “I don’t think it’s unreasonable for people to say, ‘Can you bring us along with you?’”
Miles said his administration will spend the next several months monitoring the district’s spending and any new revenue developments. His team expects to create a 2024-25 draft budget by March or April of next year.
If the outlook isn’t as optimistic as he hopes, the district could scale back on some of its plans.
“There won’t be any surprises to us,” Miles said.
Reach out to me at asher@houstonlanding.org with your questions, tips and thoughts on Houston schools.
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