School officials across the state have mostly expressed appreciation for the budget increases state lawmakers passed in the recently closed session.
The much-needed infusion helps, but for Denton ISD, the 2025-26 school year is still shaping up to deliver a deficit budget that is $15 million in the red.
Jennifer Stewart, the district’s executive budget director, said her team had prepared for the coming year’s budget based on what they’ve been calling “old law,” because the team knew lawmakers were considering property tax relief again.
“We knew that there were some moving parts, that we knew we were going to have to evaluate, come back, change and see how that was going to affect the general fund budget,” Stewart said. “Those changes that came through in the form of two Senate bills, Senate Bill 4 and Senate Bill 23.”
Senate Bills 4 and 23: What they do
Texans have paid some of the highest property taxes in the country — which property owners pay because Texans don’t pay a state income tax. After the 88th Texas Legislature, voters acted on an increased homestead exemption delivered by their representatives in Austin. The 89th Legislature just closed with another tax break. If the voters approve Proposition 13 in November, they’ll be able to increase their homestead exemption from $100,000 to $140,000.
Senate Bill 23 bumps a separate homestead exemption for disabled Texans and Texans aged 65 or older from $10,000 to $60,000.
When combined with the across-the-board $140,000 homestead exemption proposed in Senate Bill 4, and combined with the Senate joint resolution to amend the Texas Constitution, seniors and disabled Texans could receive have a total of $200,000 of their homestead’s property valuation exempt from taxes.
Lt. Gov. Dan Patrick called the bills a win for aging Texans. Property taxes for Texas homeowners who are 65 or older are already frozen. With the combined $200,000 homestead exemption, school property taxes would be effectively eliminated for the average homeowner over age 65.
“Over the years, I have made increasing the homestead exemption my mission because it is the most effective way to deliver permanent property tax reductions for homeowners,” Patrick said in a statement in April, when the new laws were passed. “When I became Lt. Governor in 2015 the homestead exemption was $15,000 and, today, the exemption is $100,000, and $110,000 for seniors. In 2023, the $100,000 homestead exemption was permanently codified into the Texas Constitution when voters passed Proposition 4 with 83% of voters in support. This made the $100,000 homestead exemption permanent, and homeowners will receive tax relief every single year, forever.
What exemptions could mean for schools
Denton ISD administrators have said it for years: Denton County homeowners have been writing bigger and bigger checks for their property values. As people surge into the state to take advantage of Texas’ galloping commercial and industrial growth, demand for housing has soared. Developers have answered the demand by building tens of thousands of new homes, and in Denton, they’ve also built apartment complexes with astonishing speed.
New housing has recontoured the eastern part of the city, and the school district has seen property development on the east side of U.S. Highway 380 necessitate new school construction as entire neighborhoods have been built in roughly a decade. The building boom coincided with spiking values for existing homes.
But Denton ISD leaders have also reminded the communities around their campuses that those ballooning tax values send the cash to Austin, and that paying higher taxes for an increasingly valuable decades-old home in Idiot’s Hill doesn’t mean that money is coming back to Denton ISD. In fact, it’s probably more likely that those dollars might benefit a district serving around 1,000 students.
As housing values mushroomed in North Texas, lawmakers saw their chance and legislated relief once more
“While that’s a great benefit to our taxpayers, we just need to understand as a district how that affects our values,” Stewart said.
Certified tax roll values for the 2024-25 school year sat at a healthy $30.7 billion. Denton ISD budgeted based on property value growth of 9.5%, expecting to see values at $33.6 billion.
“If there were no changes in the homestead exemption, and the over-65 and disabled exemption, then our values would actually grown right at 6%,” Stewart said.
But the exemptions actually cut the growth to 1.76%.
“The way our funding mechanism works, we have a bucket of entitlement that’s funded with local property taxes and state funding,” Stewart said. “And when our values and tax collections come in less than anticipated, the state picks up that difference, and vice versa. It’s like a seesaw. We don’t get any more money or any less money because of the way our values come in.”
That said, property owners can apply for homestead exemptions. Stewart said the number of properties that were granted a homestead exemption in 2025 went up by 1,214.
“Had the homestead exemption stayed at $100,000, that would have been $4.694 billion worth of value exempted from property tax,” Stewart said. “But because the exemption is now at $140,000, that now is $6.5 billion that comes off of our property values.”
The state will pay the portion that would have come in if they weren’t exempted.
How new funding from the state will work
The state Legislature increased school funding and included some obligations. Lawmakers approved a budget that mandated teacher raises.
Last month, the Denton ISD board adopted a 2025-26 budget with a $19.5 million deficit.
“We are modeling that we’re going to receive $19.2 million in House Bill 2 new funding,” Stewart said. “Part of that has to be met with compensation requirements. Our compensation plan for our raises for our teachers and our support staff is $10.6 million. The state is going to pick up that amount for us and pay for that.”
The state won’t pay for the benefit costs associated with giving raises to teachers and support staff.
“The district has to come up with the funds to pay for that. Once you do that, you meet those obligations,” Stewart said. “You have about $7.3 million left through discretionary funding. Back in June, the compensation plan that was passed also included raises for all the other staff, which that was about $3 million. So that now leaves us with $4.2 million in discretionary funds.”
The costs of providing benefits puts the budget deficit at $15 million.
“New funding that helps support teacher and support pay raises is great, but when you have the mandates that come along with the funding, it just doesn’t move the needle as much as we would like it to,” Stewart said.
School board President Barbara Burns said the public supports raises for teachers.
“I think our public thinks that when [the Legislature] says teacher raises, I would think that they think that means everybody was getting that raise,” she said. “And it truly was teachers. So then that money that they’re giving us, we have to make sure that everybody else gets an increase of pay. Deservedly so. So what can we do to raise more revenue?”
Stewart said Texas schools have two options: Increase enrollment or have a voter-approved tax ratification election, in which voters are asked to decide on raising their own taxes. Voters would decide whether to increase the maintenance and operations portion of the district’s tax rate.
Stewart said early projections show the average property owner would see a decrease in their school district taxes with an increase of 2 cents in the tax rate.
“Ultimately, we can increase the rate, but lower — I keep saying lower the burden — but lower the average home payer’s payment because of the additional [homestead] exemptions that came through this legislative session,” Denton ISD Superintendent Susannah O’Bara said. “Still to be approved, of course, by the voters in November. But I think that’s likely to happen.”
Staying fiscally conservative for an uncertain future
O’Bara said budgeting has been a roller coaster.
“I think the reality is, when you look at that $15 million deficit, that’s for this year,” she said. “You have to keep in mind we’ve cut in excess of 200 positions.”
The district has targeted some areas for automation.
“I talked about [school] registration saving over $100,000,” O’Bara said. “That’s because we automated something. That means someone’s not getting paid that money, right? But it’s a benefit to us as a system. We’ve reduced contracts ... but nothing can be done about the increase in insurance, the loss of charged revenue from the federal government.
“We were really sweating it June 30th, when we got word that our federal [grant] dollars weren’t coming through, because that’s another 25-plus positions for us. We’re relieved to learn in recent days that we will get that this year, but there’s no guarantee we’ll get that next year.”