KATY, Texas (Covering Katy News) — Katy Independent School District is projecting a $29 million budget deficit after enrollment fell nearly 1,640 students short of projections, triggering a $17.5 million cut in state funding.
The school board heard the grim financial picture Feb. 16 at a work study meeting, where Chief Financial Officer Chris Smith said the district budgeted for 97,161 students but has only 95,512 enrolled.
"I would've said that's a very conservative enrollment number," Smith said of the original projection. "And so it was shocking that we are falling significantly short of that."
The numbers break down this way:
- The state cut Katy ISD's funding by about $17.6 million because fewer students enrolled than expected.
- Higher than expected local property tax collections — about $13.5 million — made up part of that loss.
- That still left a gap of roughly $4 million.
- Added to an existing $25 million shortfall, the total projected deficit now stands at $29 million.
The budget adjustments were also presented by Esperanza Rios, the district's director of Budget and Treasury.
No layoffs planned
Smith said the district will not terminate employees but will reduce staffing through attrition and reassignment as it "right sizes" to match actual enrollment.
"Nobody's losing their job, but there will be positions that are on campuses now that may not be necessary," he said.
He acknowledged the situation is the first of its kind in the district's recent history.
"I probably wasn't born yet the last time we did not grow," Smith said. "We've been the fastest growing district in the state and that has come to a halt."
The district had added staff to accommodate projected growth that never materialized. Smith said those positions will be rolled back gradually.
The deficit may not be as large as projected
Smith cautioned that the $29 million figure may overstate the actual shortfall. The district is currently spending less than budgeted in several areas. The board will receive updated projections in March once a new staffing plan is finalized.
Where did the students go?
Smith pointed to several factors driving the enrollment decline, including rising homeschooling, private school enrollment, micro-schools, historically low birth rates now reaching kindergarten age, and high interest rates keeping families from moving.
The state's new Education Savings Account program, which allows families to use public funds for private or home schooling, also appears to be a factor. Smith said the district is watching the program but has no way to quantify its impact yet.
Questions Remain About Immigration Enforcement's Impact
Increased federal immigration enforcement since January 2025 has contributed to enrollment declines in some Texas districts, as families — both undocumented and documented — have withdrawn children from school or relocated amid fears of deportation. Katy ISD administrators said they do not know the extent to which immigration enforcement has affected local enrollment. At least one board member, however, suggested it was a significant factor.
"I really think immigration is why we have 1,600 under-enrolled," trustee Morgan Calhoun.
Revenues largely out of the district's control
Smith was blunt about the district's limited ability to address the revenue side of the ledger blaming he Texas Legislature.
"This board, this administration cannot affect our revenues," he said. "We are at the mercy of what happens in that pink building in Austin."
He described the state's school funding formula as a "three-foot ladder" for a "ten-foot hole," noting that while the legislature provided some relief in its last session, it came with strings attached and did not make up for multiple prior sessions with no funding increases.
The district is pursuing a property value audit that could generate additional revenue, though Smith said it could take six weeks to six months for the state comptroller's office to sign off.
Spending cuts underway
With about 90 percent of the district's budget going to salaries and benefits, Smith said there is little room to cut without affecting classrooms or staff.
"It would be easy for Chris Smith to balance the budget, but I would consider that being a butcher," he said. "It takes neurosurgery to balance a budget without hurting student success."
The district is reviewing all of its programs to see which ones can be restructured or run more efficiently. For administrative departments, every budget item must now be justified from scratch rather than automatically carried over from the prior year — a process known as zero-based budgeting. Individual school campuses have not had their budgets reduced.
Superintendent Ken Gregorski and the administration are developing a staffing plan to be presented to the board in March.
How Katy ISD compares
Katy ISD is not alone. Across Texas, declining enrollment are straining school districts of all sizes.
The Austin ISD Board of Trustees voted in November 2025 to close 10 schools and make several major program changes before the 2026-27 school year, a move Superintendent Matias Segura says will save $21.5 million — enough to wipe out the district's $19.7 million budget deficit — and eliminate more than 6,300 empty classroom seats.
Austin's international High School, which serves ninth- and 10th-grade students who recently immigrated to Texas, will also close due to low enrollment. The school helps new arrivals transition into the Texas public school system. Those students will be reassigned to a campus closer to their homes and offered newcomer support services.
Fort Bend ISD's board voted 4-3 in March to close seven elementary schools beginning with the 2026-27 school year, citing declining enrollment and a $34 million budget deficit. The closures are projected to save $5 million to $7 million annually. Some of the affected schools were operating at or below 60 percent capacity.
Smith said the board will receive updated budget numbers in March, with a formal budget recommendation expected in August.