State-mandated school finance changes, fierce competition for good teachers and soaring gas prices are combining to squeeze public education budgets this summer.

The strain is beginning to show throughout the area during the height of school budget-crunching season. Wylie and Arlington schools are building budgets that rely on voters' passage of tax hikes in November. Dallas ISD is cutting central office staff. Richardson schools are trying to raise cash by taking over after-school programs.

The problem comes down to this, school finance officials say: Money flowing into schools is flat, while costs are rising. A past source of income – local property taxes – is tapped out.

"They're not crying wolf. It's a real problem," said Dan Casey, a school finance consultant in Austin. "It would be very difficult to go on much longer like this."

Taxpayer-rights advocates say school districts aren't being asked to do anything more than what the average family is doing: tightening their belts and considering every dollar.

"This is where we need to be. School districts need to be appropriately cautious with their money," said Peggy Venable, the Texas director of the conservative taxpayer group Americans for Prosperity. "This is all a shell game to simply get as much money as they can from the Legislature and taxpayers."

In 2006, state lawmakers approved a property tax cut for homeowners. Before that, school districts could collect up to $1.50 per $100 of taxable property value to pay for day-to-day school operations. The Legislature lowered the amount to $1.

At the same time, lawmakers froze the amount districts receive from the state for each student. Property growth that resulted in more taxable value no longer translated into as much money for the school district.

Southlake Carroll ISD will probably see relatively little benefit from a new development of $1 million homes coming to the city, said Superintendent David Faltys.

"We're getting a third of what we would have gotten if the same developer had built five years ago," he said.

The idea was to keep everything at the status quo, while giving homeowners a break.

But no room was built in for higher labor costs and soaring fuel prices.

Districts were given the option to add 4 cents to the tax rate without voter approval. Most of the state's districts did so to cushion the blow within the first two years.

This summer, they say, there is no such relief.

The hard cap on the property tax rate, coupled with no room for inflation, leaves districts stuck, said Richard Matkin, Plano ISD's associate superintendent for business services.

"This has shoved every school district in the state against a wall," he said.

Plano ISD used $14.7 million from its fund balance – or savings account – to fill a budget shortfall for the coming year.

The political fight to determine just how much money school districts need, who should decide how much they need and where the money should come from probably won't be settled when the Texas Legislature reconvenes in January.

Rep. Dan Branch, R-Dallas, chairman of a special House committee on school finance, said some of the school districts' concerns will be addressed.

"These uncontrollable costs have been a huge issue," he said. "It's really hurt their budgets."

Mr. Branch said the committee is looking at the cost of tweaking some of the changes made in 2006.

"House Bill 1 was a dramatic move in shifting taxes in this state," he said. "But we got the message. We'll see if we can go out and get some of this done."

Officials in some local school districts say that the continuing worry over the future of school finance forced them to take a healthy look at their budgets.

"It was a good exercise for everyone to determine if we're getting the bang for our buck," said Tony Harkelroad, Richardson ISD's assistant superintendent for finance and support services. "But then you get to the place where it's not about efficiency anymore. It's about cuts.

"You have to think about it like a retiree – we're living on a fixed income."

Richardson ISD officials budgeted for modest teacher and staff raises and hope to offset most of an $800,000 deficit by running the district's after-school program.

For some school districts, the financial situation is so dire that they are going to the one group that was meant to benefit from the state-mandated property tax cut: homeowners.

The Legislature built in an option for districts to go back to voters to exceed the statewide cap. The highest tax rate districts can request of voters is $1.17.

Arlington ISD is the only sizable local district to consider the drastic measure. The district faces a $20 million shortfall in a proposed budget that does not include teacher raises.

Wylie ISD also plans to ask voters for the higher tax rate in November.

Ms. Venable, the taxpayer-rights advocate, said she opposes such efforts because they erode the tax relief lawmakers tried to provide.

She said school districts should focus more time on their own spending and less time worrying about sources of funding.

"School districts will not be left high and dry," she said. "The taxpayers and lawmakers will not let schools go bankrupt."

In 2006, the Legislature mandated lower property tax rates for homeowners. This money is collected to pay for the day-to-day operations of public schools. Here are the limits:

$1 Lawmakers set this as the maximum rate per $100 of property valuation. The previous limit was $1.50.

$1.04 School boards were allowed to go this far above the set maximum without voter approval. More than 90 percent of districts did so.

$1.17 Districts may go this high if voters approve. Most local districts have not sought such an election.

SOURCE: Dallas Morning News research