Austin Independent School District (AISD) is now anticipating a staggering $49 million deficit by the end of the current school year, a figure that has more than doubled from the shortfall initially approved by board members just a few months ago. This development has intensified the challenges facing the district, which is grappling with declining enrollment and escalating operational costs.
During a board meeting on Thursday night, Superintendent Matias Segura unveiled the revised financial forecast, citing several factors contributing to the bleak outlook. These include a drop in student enrollment, increasing operational expenses, diminishing property values, and lower-than-expected revenue from property sales. This update follows the trustees’ decision to close ten schools and implement a hiring freeze for central office positions in an effort to manage costs.
AISD officials indicated that the $49 million deficit projection is based on the assumption that the district can achieve $39 million in spending cuts by June. However, if these reductions do not materialize, the financial shortfall could worsen. The target for cuts is also linked to the district’s policy of maintaining a minimum fund balance.
According to AISD policy, the district is required to retain at least 20% of its operating expenditures in its general fund. However, board members had previously voted to temporarily lower this threshold to 15% for the fiscal years 2024-25 through 2026-27.
Segura expressed optimism about the district’s financial trajectory, stating, “I feel very confident that with what we have done already, on our current trajectory, we will make up the majority of it.”
Katrina Montgomery, the district’s chief financial officer, informed trustees that AISD had successfully cut spending by $29 million between July and December 2025. She noted that the remaining $39 million represents the savings needed from January through June 2026 and does not necessarily imply that cuts are unavoidable.
This year, AISD’s enrollment stands at 69,207 students, significantly below the 72,303 projected at the time the budget was adopted last June. Last year, enrollment reached 72,702. Segura has previously linked the decline in student numbers to rising living costs, housing affordability issues, demographic shifts, school choice vouchers, immigration enforcement, and changes in federal funding.
In Texas, school funding is primarily allocated on a per-student basis, meaning that declining enrollment directly impacts the district’s state revenue. The projected $49 million gap includes $23 million attributed to funding losses and adjustments from the recapture system, which redistributes property tax revenue from wealthier districts to those with lower property values.
Furthermore, the forecast accounts for $15 million in additional funding requests and $28 million from anticipated property sales that the district was unable to finalize within this fiscal year.
AISD administrators estimate that they will have $823 million available for operating expenses against a total of $989 million in costs. Planned and ongoing strategies to address the deficit include spending reductions, policy adjustments, and future property sales.
Segura emphasized the need for prudent financial management, stating, “We can become more efficient, we can make hard decisions, we can grow enrollment. But at the end of the day, we have to be really, really thoughtful about every dollar we spend.”
