School districts located in the Eagle Ford Shale region of South Texas are facing the double whammy of reduced revenues in addition to having to pay back state funds.
Related: Are Eagle Ford Schools in Jeopardy?
During the boom, the drilling frenzy brought $1.5 billion in property tax revenue for local Eagle Ford schools and another $676 million for the Permanent School Fund, the state’s education endowment for school districts. But as the oil and gas activity dried up, so did the tax revenues that fund local school districts.
One example is the Cuero ISD, whose revenues increased from about $6 million in 2009 to $22 million in 2013. Thanks to the downturn, the district is now looking at revenues of about $16 million over the next few years. This represents a 30% decrease and will force the district to cut personnel and services.
To add insult to injury for these struggling districts, the Texas Education Agency (TEA) now wants its money back. As part of the way Texas finances public schools, districts that are designated as 'property wealthy' must give back some or all of the state funds they received in the prior fiscal year. This means that the districts that enjoyed additional funds due to the boom, must now give that money back at a time when their revenues are shrinking due to the downturn. Following are a few of the recaptured funds from 2015.
- Carizzo Springs: $49 million
- Karnes City: $51 million
- Cuero: $4.3 million
- Yorktown:$19 million
- Cotulla: $53 million
- Gonzales: $844K
Moody’s Investment Services recently placed the Normangee Independent School District in Eagle Ford's Leon County under review for possible downgrade, according to FuelFix. Moody's looks at an entities ability to adjust to the downturn as well as its debt burden and management strategy.
“Certain issuers in the Eagle Ford and Permian regions benefited from rapid tax base expansions during the boom in oil production between 2010 and 2014,” Moody’s said. “Those that expanded services and debt issuance face a stressed operating environment as assessed values contract and local operators slash capital spending and cut workforces.”