KATY, Texas (Covering Katy News) — Katy ISD trustees approved a $1.17 billion operating budget Monday for the 2026-27 school year, including employee pay increases and a projected $25.7 million deficit that district officials say could shrink substantially or disappear as the year progresses.
The operating budget is part of a $1.48 billion total district budget that also covers food service and payments on district debt. Katy ISD is budgeting for about 95,000 students.
The budget includes an ongoing employee pay increase calculated at 1% of the midpoint salary for each employee's pay grade, rather than 1% of each employee's individual salary. Employees will also receive two separate 1% lump-sum payments. The first is scheduled for Aug. 31 from the 2025-26 budget and the second for Dec. 15.
Trustees also reviewed a proposed total property tax rate of $1.1171 per $100 of taxable value, unchanged from last year. The board is scheduled to formally adopt the tax rate in September.
For homeowners, the proposed rate can be illustrated with a $400,000 home. After the state's $140,000 school homestead exemption, Katy ISD would tax $260,000 of that value before any other exemptions. At the proposed rate, the district tax bill would be about $2,904 for the year.
Keeping the tax rate unchanged does not necessarily mean Katy ISD will collect the same amount in property taxes. The district's taxable property base grew 1.5%, so the same rate applied to more taxable property can generate more tax revenue. Exemptions and state school-funding formulas also affect how much money the district ultimately receives.
“We remain committed to being responsible with our resources, ensuring students continue to receive the high-quality education our community expects and supporting our dedicated teachers and staff,” Board President Lance Redmon said in a district press release.
What the budget numbers show beyond the press release
Katy ISD's budget comes as a long-running trend is changing. Chief Financial Officer Christopher Smith told trustees during the Aug. 17 work-study meeting that enrollment declined during the 2025-26 school year, reducing state funding after decades of enrollment growth.
At Monday's meeting, Smith said the 2026-27 budget assumes essentially flat enrollment, with about 20 fewer students projected.
For a district that has spent decades managing rapid residential growth, rising enrollment and frequent school construction, the shift is significant. Katy ISD opened this school year without a new campus for the first time in quite some time, Smith said. Elementary School No. 49 is expected to open next summer.
Property values are also growing more slowly. The total value of taxable property in Katy ISD increased 1.5%, which Smith described as the district's lowest growth rate in quite some time.
The $25.7 million deficit tells only part of the story
Smith told trustees Monday that this will be the fifth consecutive year Katy ISD has adopted a budget that plans to spend more than it expects to receive. District officials, however, say that does not mean Katy ISD will actually finish the year $25.7 million in the red.
One major unknown is additional state funding. None of the potential revenue from Katy ISD's pending property-value reviews is included in the new budget, even though a previous review produced more than $30 million in unexpected state revenue — more than the entire $25.7 million deficit projected for the coming year.
Smith said the district recently submitted a review involving 2022 property values to the Texas Comptroller's Office and plans another involving 2024 values this winter. The district does not know whether those reviews will produce additional state revenue or how much, so it budgeted no money from them.
The previous review, involving county appraisal districts and the comptroller's office, helped Katy ISD turn a large projected 2025-26 deficit into a projected surplus, even as declining enrollment reduced state funding.
Part of the deficit is planned. About $7.5 million is money the district already has set aside and plans to use for the second 1% employee lump-sum payment in December. After accounting for that payment, roughly $18 million of the projected deficit remains.
The district also typically spends less than the maximum amount authorized in its budget.
“I can't stand in front of you today and say that we will have underspending,” Smith told trustees Monday. “But I've seen underspending in my entire time in Katy and in this business. We don't spend our budgets.”
Katy ISD has about $374 million in reserves, giving the district a substantial financial cushion. Even if the full $25.7 million deficit materializes, more than $348 million would remain.
He also explained to board members that some underspending is already built into the budget, but cutting those budget lines further could limit administrators' ability to respond when needs arise:
“What the risk is, is when we do that, we kind of tie the hands of the administrations or the budget managers. If they need something, then we have to be at the mercy of coming to the board for a budget amendment,” Smith said.
Most operating costs are tied to employees
Smith said salaries and benefits account for approximately 89% of district spending, leaving a comparatively small share of the budget available for reductions that do not eventually affect employees or classrooms. The district says 83% of expenditures are directed toward instruction, classroom operations and student support.
“The only way that we can create room to give things in those areas is through more efficiencies or doing more with less,” Smith told trustees Monday.
The district's fiscal year begins Sept. 1.
Go beyond the headlines
The basic numbers tell you what was approved. Our reporting goes further — digging into public meetings, financial details and local data to explain what those numbers actually mean for Katy-area families. Subscribe to Covering Katy News for deeper local reporting you won't find in a press release. SUBSCRIBE HERE