Liberty Hill ISD

Welcome to Liberty Hill ISD's Budget Basics page, designed to provide our community with clear insights into school finance, helping you better understand and navigate the financial aspects of education.

• Develop a deeper understanding of how school districts are funded in Texas.
• Gather information about LHISD’s current budget outlook.
• Stay informed about upcoming community decisions that will impact you.

Here, you will find an overview of how districts are funded and where the money goes; definitions of key concepts and common acronyms; and frequently asked questions.

Public schools in the state of Texas are funded from three main sources: local school district property taxes, state funds, and federal funds, with the majority of funding coming from local property taxes collected by school districts and state funds.

Local/Other: Property taxes paid by homeowners (61%) and businesses (3%) make up the majority of the revenue LHISD receives or about 64% of LHISD’s operating budget revenue. Property values are determined by the Williamson County Appraisal District (WCAD). 

State: Texas school districts receive funding from the Texas Education Agency (TEA) based primarily on student attendance. State revenue makes up the difference between total revenue earned and local tax revenue. About 35% of LHISD’s operating budget revenue comes from the state, but the state’s share has been decreasing due to LHISD’s increasing property values. The funding formula is set in stone. 

Federal: Federal revenues are directed toward reimbursements only and make up only 1% of the operating budget revenue. 

School Taxes by the Glass

Local property taxes fill the glass first, and the state fills in any space that is left. 

In an area like Liberty Hill ISD where home values are rapidly increasing, even when the tax rate stays the same or is lowered, homeowners will likely see an increase in the total amount of taxes owed due to the higher property values.

The general fund accounts for the district’s operating budget and supports the district's daily operations and is broken down into the following main funding areas:

Salaries & Benefits: The bulk of the fund, approximately 85%, is dedicated to Salaries & Benefits, ensuring the compensation of educators and staff members.

Campuses & Departments: The remaining 15% is allocated to Campuses & Departments, supporting various operational needs across schools and administrative units within the district.

Like the average household, LHISD is facing rising costs in fuel (11% increase), utilities (31% increase), and insurance (74% increase), mirroring broader economic trends. These increases necessitate careful budget management and exploration of cost-saving measures to maintain financial stability.

Maintenance & Operations (M&O)

Funding coming into this bucket is primarily used for operating the district. Employee salaries and benefits; student educational resources; classroom supplies and equipment; and contracted services – like utilities, insurance, legal and audit services, etc. – are paid from this source of funding.

Interest & Sinking (I&S)

Funds from this portion of the tax rate can only be used 1) to pay off bonds sold for construction and capital improvements to facilities and 2) to buy furniture, equipment and/or to purchase land. I&S funds cannot be used for operational costs, such as salaries and benefits, nor can these funds be used to construct facilities. They can only be used to pay down outstanding debt. A school district can only take on new debt through a voter-approved bond election.

To relate this to the average community member, this is similar to things like:

• car fuel and routine maintenance
• groceries
• clothing
• cleaning supplies
• and utilities like electricity and water

Compression of the M&O tax rate – or the automatic reduction of the M&O portion of the tax rate introduced as part of HB3 – is meant to limit revenue growth from local property taxes to about 2.5 percent each year. Because of this, an increase in property values does not equal a proportional increase in revenues to the district.

To relate this to the average community member, this is similar to the purchase of big-ticket items like:

• a new home
• house renovations
• kitchen appliances
• new mechanical systems
• or a new car

Revenue generated from this portion of the tax rate is not subject to recapture and is directly linked to property value growth without a cap. Because of this, an increase in property values does equal an increase in total revenues for debt repayment.