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HARLINGEN — State education officials are giving the school district a grade of “C” stemming from last year’s financial report, citing the budget’s fund balance’s plunge to a level far below what its takes to run operations for a standard 90-day period.

As part of its annual review, the Texas Education Agency’s Financial Integrity Rating System, or FIRST, gave the district a score of 72 based on a scale rating school districts from grades “A” to “F.”

Since the state created the rating system in 1999, the district had posted “superior” marks, or A’s, scoring 90 to 100 points.

This year, the TEA gave the school district a “C,” with a score of 72 points on a scale from 70 to 79 points, indicating the district “meets standards.”

While the system’s rating scale doesn’t offer a grade of “D,” its “F” rating, its lowest, with scores falling below 70 points, indicates “substandard” performance.

This year, the TEA gave the district a “C” based on last year’s financial report showing former Superintendent J.A. Gonzalez’s administration’s withdrawal of $23.2 million from a $215 million budget’s fund balance plunged cash reserves from about $40 million to $17.7 million to cover operational costs including unbudgeted expenses.

During a meeting, school board members reviewed the state’s findings based on 21 financial indicators, each offering scoring points determining school districts’ annual grades.

“The goal is to keep all of our Texas school districts accountable for the quality of our financial management practices for us to continue to improve those strategies,” Ida Ambriz, the district’s assistant superintendent of business services, told board members during a public hearing Tuesday.

Since September 2024, district officials, under Superintendent Veronica Kortan’s new fiscal plan, have been working to slash costs while “right-sizing” staffing levels, cutting about 100 positions.

“Administration has already implemented strategies and an action plan to continue to improve the FIRST rating for the near future,” Ambriz told board members.

During the public hearing, board members reviewed the school district’s scores across the rating system’s 21 indicators, showing the district fell short on four indicators.

A PowerPoint presentation showed the district “failed” Indicator No. 6, which questioned whether the district was maintaining its fund balance, asking officials “was the average change in (assigned and unassigned) fund balances over three years less than a 25% decrease or did the current year’s assigned and unassigned fund balances exceed 75 days of operational expenditures?”

In response, officials replied the district’s fund balance had undergone “a negative 25% change,” Ambriz told board members.

Meanwhile, Indicator No. 7 questioned whether the district had held its fund balance at the state’s standard level, maintaining cash reserves capable of running operations for a 90-day period.

In response, officials replied cash reserves were limited to funding 28.35 days of operation, Ambriz said, adding the system didn’t award points based on the district’s response.

Under Indicator No. 8, the state questioned, “was the measure of current assets to current liabilities ratio for the school district sufficient to cover short-term debt?”

While the district’s ratio was standing at 1.4359, the TEA’s standard aimed for a ratio greater or equal to a ratio of 3, Ambriz said, adding the system awarded two points based on the district’s response.

On Indicator No. 9, the state questioned, “did the district’s general fund revenues equal or exceed expenditures (excluding facilities acquisitions and construction)? If not, was the school district’s number of days of cash on hand greater than or equal to 60 days?”

With the district replying “No,” the TEA did not award points.

A year after working through the district’s deepest financial crisis in decades, officials are following the new fiscal plan into its second year, planning to rebuild Harlingen’s strong standing.

Now, officials are working to restore the district’s A rating in two years, Ambriz told board members during a meeting.

“We should be back up to an A or very close to that A,” she said.

By the end of August, the district’s overall fund balance was standing at $24.38 million, Ambriz told board members.

The district’s overall fund balance reflected officials’ move to combine the general fund’s fund balance with the food service operation’s fund balance, based on a recommendation under the TEA’s Financial Accountability System Resource Guide, she said.

In the last month, the district’s cash reserves slipped from an overall fund balance of $37.2 million reported at the end of July, with officials attributing the dip to a pause in state funding along with bond payments.

At the end of July, the district’s overall fund balance was at $37.2 million, of which about $9.17 million made up the food service fund balance, board member Ricky Leal said in an interview said at the time.

Calculations showed the general fund’s fund balance was standing at about $28.03 million at the end of the July.

During the month of August, the state, based on its payment schedule, didn’t fund the district about $12 million, Ambriz told board members.

Meanwhile, officials also made bond payments during the month, she said.

“I like where we are now, with the district leadership that we have and the transparency that we have at the top, directing expenditures in the right way, not directing expenditures outside of our budget, also right-sizing our budget based on actual enrollment and revenues and, of course, making expenditures that were budgeted for,” board President Dr. Nolan Perez said during a meeting, adding, “and it’s going to take us time to build up that fund balance.”

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