Interest rates impact KISD
By LESTER MURRAY news2@kilgorenewsherald.com

When the Federal Reserve Board announced a drop in a key interest rate of .75 percent this week, certainly the largest single cut in years, it surprised many, including the Kilgore School District staff.

Revard Pfeffer, business manager for KISD said the school district, going into the 2007/2008 school year, had ten million dollars in fund balances. Some of that money was in investments paying 5.5 percent in interest. "For the 2006/2007 school year the district had $828,000 in earned interest," said Pfeffer.

Without any advanceknowledge, investments could not be changed to extend the current interest rates according to Pfeffer.

"There will be no great impact on the 2007/2008 school year, but the 2008/2009 school yeer, with a fund balance down to $5 million and half the interest rate for investments, the district will see the greatest loss of interest income," said Pfeffer.

Pfeffer said with the funding formula adopted by the Texas Legislature which is based on student population, will also be affecting KISD's funds. "Kilgore is down 96 students on average based on numbers from last year. If the student population is down, based on funds given by the state, then funds allotted KISD the following year will be less," said Pfeffer.

Pfeffer said in the past, income received from property taxes made up the difference in state funding, but with the new formula there is no additional income anywhere.

"If the number of students KISD is down were to remain the same for next year's state funding, it could mean $500,000 less money coming from the state," said Pfeffer.

The only option the district will have left under the current funding formula is to raise the tax rate. The district could raise taxes up to 8 cents, said Pfeffer. "However KISD is at the maximum tax rate without having voter approval to do that," said Pfeffer.

Pfeffer said taking everything in consideration - the funding formula from the state, student population, fund balance and the ever-growing expenses such as pay raises and increased operating costs coupled with the new interest rates - should leave KISD and school districts throughout the State of Texas budget conscious .

Pfeffer said when making up the budget he takes all of these things into consideration and plans - when he can - for each, amending the budget throughout the year as numbers change.