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TEA has incorporated estimated state values (T2), based on districts’ LPVS submissions of 2026 certified values, into the updated 2026–2027 Summary of Finances reports.
Although districts likely anticipated that higher taxable values would reduce state aid, they may not have anticipated a resulting change in payment class. A payment-class change can alter the timing of Foundation School Program payments and create an immediate cash-flow challenge, even when annual revenue projections remain on target.
Districts should review their updated SOF reports and payment schedules and revise their monthly cash-flow projections accordingly. Those heavily dependent on local property-tax collections may need to retain more cash at fiscal year-end to sustain operations until collections begin arriving in the following fiscal year.
This development also underscores the importance of maintaining a healthy fund balance. A commonly used benchmark is approximately three months, or 90 days, of operating expenditures in unassigned fund balance. These reserves provide critical liquidity when the timing of state payments and local tax collections does not align with payroll and other operating obligations.
Before using fund balance, districts should develop at least a three-year projection showing the effects on both fund balance and cash flow. This analysis should help leaders determine whether the proposed use supports a one-time need or contributes to a structural imbalance that will require future revenue increases or expenditure reductions.
District leaders may also want to evaluate whether available fund balance will provide sufficient cash to meet payroll and other operating obligations until state payments and local tax collections arrive. If projections indicate a potential cash shortfall, districts could consider strategies such as adjusting the timing of expenditures, reducing discretionary spending, delaying planned purchases, or evaluating short-term financing options to bridge the temporary gap.
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