7. Federal funds, debt and other money flows¶
Federal funding and the ESSER cliff¶
| Audited | FY2018 | FY2019 | FY2020 | FY2021 | FY2022 | FY2023 | FY2024 | FY2025 |
|---|---|---|---|---|---|---|---|---|
| Total federal spending | $345.2M | $325.9M | $347.7M | $332.9M | $699.4M | $836.6M | $736.7M | $389.6M |
| ESSER (COVID relief) | $0 | $0 | $76.4M | $21.5M | $374.2M | $441.4M | $316.9M | $40.9M |
| Title I | $106.4M | $100.0M | $81.8M | $92.2M | $102.8M | $127.8M | $167.2M | $126.6M |
| Child nutrition | $121.0M | $132.2M | $96.7M | $102.3M | $143.6M | $142.9M | $135.2M | $129.8M |
| Special education (IDEA-B, incl. preschool) | $39.2M | $40.8M | $41.3M | $39.1M | $37.4M | $43.9M | $59.6M | $42.5M |
| Hurricane Harvey education recovery | $29.8M | $0.2M | $0.7M | $0.6M | $0.8M | −$10.7M | $0 | $0 |
Source: HISD's single-audit Schedule of Expenditures of Federal Awards, FY2018-FY2025, from the Federal Audit Clearinghouse. Child nutrition is the school breakfast, lunch, child-care food, summer food and fresh fruit and vegetable programs. In FY2021 most meal reimbursement was reported under the summer food program ($75.0M), which USDA waivers allowed during COVID-19. Data: sources/federal_debt/fac_sefa_summary_FY2018-2025.txt.
FY2026 and FY2027 (not audited). The FY2026 single audit is part of the FY2026 ACFR, not yet published. HISD's budget materials give only planning amounts for federal grants: $190.4 million for FY2025 (ESSA grants, with $0 of ESSER, against $323.9 million of ESSER in FY2024) and $177.3 million for FY2027 (Title I $112.7 million, special education $37.6 million, Title II $9.9 million, Title IV $7.9 million, Title III $5.8 million, Perkins $2.8 million, preschool special education $0.6 million). No planning total for FY2026 was found. Budgeted federal child-nutrition revenue is $130.9 million for FY2026 (amended, June 2026) and $124.0 million for FY2027 (adopted).
HISD's total ESSER allocation across all three rounds was $1.245 billion (ESSER I $82.0M, II $358.2M, III $804.8M), compared with $347.7 million of total federal spending in FY2020 — a large, temporary expansion of federal money that was always going to end. ESSER I did not add net new money: the state used it to offset HISD's regular state aid, and TEA separately reduced HISD's state aid by $65.9 million to "hold it harmless" for attendance losses under ESSER III. An internal audit in May 2024 (Whitley Penn) tested four ESSER III "learning loss" initiatives totaling $73.8 million in HISD's tracking tool and could trace only $34.7 million to supporting documents. The auditors attributed the gap to initiatives that had changed since the tracker was built, and found "no indication" that HISD was at risk of missing the federal requirement to spend 20% of ESSER III on learning loss. It is a documentation exception, not evidence of missing money.
HISD's FY2025 single audit reported three significant deficiencies:
- Equipment (finding 2025-002): 20 of 25 sampled federally funded assets were "unaccounted for" or excluded from the inventory counts. Six were HVAC units left out of the counts, and about 45% of campuses did not fully take part in the inventory. No questioned costs. The finding does not show that the assets are physically missing.
- TCLAS subscriptions (2025-003): $54,626 of questioned costs for service periods beyond the grant's liquidation period.
- Medicaid school health revenue, SHARS (2025-001, financial reporting): HISD's estimated SHARS revenue and accrual were misstated because the state's 2023 cost-settlement report was not considered.
(FY2025 ACFR, Schedule of Findings and Questioned Costs.)
Debt and liabilities¶
| FY2023 | FY2024 | FY2025 | FY2026 | |
|---|---|---|---|---|
| Basis | Audited | Audited | Audited | HISD bond disclosure, May 2026 (not audited) |
| Bonds and notes outstanding | $2,123.2M | $1,813.6M | $1,513.6M ($8,565 per student) | $1,282.1M, after the Series 2026 refunding |
| Net pension liability (Teacher Retirement System) | $709.9M | $985.3M | $768.0M | not reported |
| Net retiree-health (OPEB) liability | $355.8M | $382.6M | $502.5M | not reported |
Sources: HISD's audited ACFR, FY2023-FY2025; Official Statement for HISD's Series 2026 Limited Tax Refunding Bonds (May 2026), Table 1: $1,040.3 million payable from debt-service taxes plus $241.9 million from maintenance taxes, excluding $22.0 million of lease-revenue obligations. HISD's June 2026 tax-rate notice gives $1,305.2 million of outstanding bonded principal.
| Debt service | FY2025 | FY2026 | FY2027 | FY2028 |
|---|---|---|---|---|
| Scheduled total debt service, after the 2026 refunding (May 2026 bond disclosure) | — | $389.6M | $438.5M | $200.9M |
| Debt Service Fund budget (appropriations) | $374.4M (adopted) | $394.3M (amended, June 2026) | $444.4M (adopted) | — |
Sources: Series 2026 Official Statement, Table 8; HISD's adopted Debt Service Fund budgets FY2025 and FY2027, and its June 2026 Debt Service Fund amendment.
- Credit ratings: Moody's Aaa and S&P AA+ on HISD's underlying tax-supported debt in both the FY2024 and FY2025 ACFRs. Moody's rating on HISD's Public Facility Corporation lease-revenue bonds is shown as Aaa in the FY2024 ACFR and Aa1 in the FY2025 ACFR; whether that is a downgrade or a correction was not confirmed.
- Variable-rate debt was eliminated in May 2025, then reintroduced. On May 1, 2025, HISD refunded all its variable-rate bonds into fixed-rate bonds (Series 2025B), and on May 28 it paid off $115.4 million of other bonds early with debt-service cash. In July 2025 it issued $114.4 million of variable-rate maintenance tax notes, at 5% fixed until a 2028 tender.
- A 2026 refinancing (the $342.8 million Series 2026 Limited Tax Refunding Bonds) compresses roughly 12 years of bond repayment into about 4. As a result, total debt service jumps to $438.5 million in FY2027: $418.2 million on bonds paid from the debt-service (I&S) tax and $20.3 million on maintenance-tax notes paid from the General Fund (Series 2026 Official Statement, Table 8). The adopted FY2027 Debt Service Fund budget covers its $444.4 million of spending with $399.5 million of tax and state revenue, $26.1 million of transfers in, a $4.8 million refunding premium, and $14.0 million of fund balance ($187.2 million to $173.2 million). The official statement and the budget schedule differ in scope and timing, and were not reconciled issue by issue.
- The November 2024 bond election failed. Proposition A ($3.96 billion) failed 57.9% to 42.1%; Proposition B ($440 million) failed 58.2% to 41.8%. HISD's own pre-election estimate of total cost including interest, had it passed, was $8.9 billion.
- Borrowing has continued since, without another voter election, using debt instruments that don't require one: $114.4 million of maintenance-tax notes issued in July 2025 (5% interest initially, stepping to 7% if not remarketed by 2028), plus board authorization for up to $182.5 million more in lease-revenue bonds for a career-and-technical-education center.
- Tax rates fell from $1.2067 per $100 of value (FY2017-2019) to $0.8683 (FY2024-2025), driven by the state compression described in Section 4. For FY2026 (tax year 2025), the September 11, 2025 board agenda recommended $0.8489 (M&O $0.6822). On October 15 the board adopted $0.8783 (M&O $0.7116), which adds $0.0294 of one-year "disaster pennies" for Hurricane Beryl repairs. A May 2026 bond disclosure still shows the September rate; see Section 8. For FY2027 (tax year 2026) the board adopted $0.8421 (M&O $0.6754) on October 8, 2026, dropping the disaster pennies (HISD Legistar file 26-346). HISD's taxpayer impact statement estimates the bill on a median-valued homestead falls from $2,608 to $2,519. In HISD's own comparison of 12 Houston-area districts, its 2026 total rate is the lowest; the other eleven range from $0.9471 (Conroe) to $1.1722 (Pasadena), mostly because HISD's debt-service rate ($0.1667) is far below theirs ($0.2152-$0.4800). The debt-service (interest & sinking) portion of the rate has been flat at $0.1667 since FY2018.
Other money flows¶
- Tax Increment Reinvestment Zones (TIRZ). HISD pays part of its property tax into 12 City of Houston tax-increment zones, and the ACFR reports the flow two ways that have not been reconciled. Taxes paid into the zones (ACFR statistical section, line 9000) were $48.4 million in FY2024 and $37.9 million in FY2025. The General Fund's "payments to TIRZ" expenditure line, shown in Section 3, was $75.5 million and $56.1 million. HISD recognized $33.4 million and $54.5 million of TIRZ revenue in the same two years. See Section 8.
- Vendor contract approvals. Vendor agreements with spending ceilings of up to $870 million were put in place without the board approval normally required, and were ratified after the fact in January 2025, according to press reporting. These are approval ceilings, not amounts paid, and the reporting does not establish any loss.
- School closures. The board voted in February 2026 to close 12 schools. HISD's May 2026 budget workshop projects a $15 million saving from "consolidate schools" in FY2027; it has not published a school-by-school estimate, transition costs or realized savings.
- State vouchers. 1,207 HISD students received Texas Education Freedom Account vouchers under the state's new program, an estimated $9.7 million in per-student funding that would otherwise have gone to HISD, according to advocacy-group estimates citing state Comptroller data. This is an unverified estimate: it assumes every voucher student would otherwise have attended HISD.