Socorro ISD took out a $25.1 million loan to pay employee salaries

EL PASO, Texas (KFOX14/CBS4) — The Socorro Independent School District said they need a $25.1 million loan to pay their employees for the next two months.

Michael Hinojosa, one of two Texas Education Agency trustees who ignore SISD’s budget and board decisions, explained that the loan is because the district chose to pay its employees biweekly rather than a monthly check.

“Socorro has made it a bit more complicated up until now, paying people twice a month, so you have to have cash on hand to make payroll,” Hinojosa said.

SISD will receive the $25.1 million loan with 4 percent interest from PNC Bank.

TEA Conservative Hinojosa said they plan to repay the loan by January, possibly February, with funds they receive from their state and tax revenues.

By the time SISD is expected to repay the loan, its interest will be $166,000.

Hinojosa also added that due to declining enrollment, the district does not have the funds it needs to pay its employees until state and tax revenues are received.

“It’s probably going to be paid off in January. It might flow a little bit in February, but those, those interest rate won’t happen for several months,” Hinojosa said.

The SISD Board of Trustees decided to take out the loan during a special board meeting Thursday night.

You can watch the full special board meeting below:

The last time SISD needed a loan was in 2002.

Hinojosa said the loan was needed then because the district at the time was growing, while now enrollment rates are declining.

“This is happening in many districts. It hasn’t happened in Socorro for over 20 years… You can’t have added employees and added costs with wages and declining enrollment. That’s a recipe for not being successful, and that’s why we need to fix that right now,” Hinojosa said.

The president of the Socorro Education Association (SEA) said there is no need for employees to worry about not getting their next paycheck.

“People thought the district didn’t have any money, but the money is there…Employees don’t have to worry. They will always be paid,” said Angelica Soto, SEA president.

It’s like the bill goes down on the 29th but you get paid on the 31st, that’s the kind of problem.

Soto also said many SISD employees, especially teachers, look forward to being paid monthly rather than weekly.

“I think most of the teachers, just the professional staff will go back to once a month. Everybody was used to having, getting paid once a month,” Soto said.

The Interim Superintendent for SISD released the following letter to both parents and staff:

Dear SISD team,

I am writing to give you an update on our district’s financial situation and the steps we are taking to get through this difficult time. As we move through these challenges, my focus remains on doing everything we can to take care of our employees who have been incredibly supportive, continuing to serve our students and community at the highest level, and remaining transparent as we return at Socorro ISD. the right way.

While we have made progress in reducing costs that will help our long-term position, we are currently facing short-term cash flow timing issues. Due to the timing of when the district receives state and local revenue, usually in the last week of most months, the district is projected to be in the red in mid-November and December.

To ensure there is no disruption to our employee payroll over the holiday period, we are pursuing a Tax and Revenue Advance Note (TRAN) of $25.1 million. While borrowing money is not ideal, it puts us in a position to best serve the needs of our district.

The district is scheduled to receive significant funding in December 2024 and January 2025, and the note will be repaid by February 2025.

Pursuing a TRAN is not without precedent. Many school districts have been in this situation. In fact, this is not the first time Socorro ISD has borrowed money. The district also used a short-term note in 2002 to meet its obligations.

To help remedy this situation for the future, we will need to make a permanent change to the payroll schedule for our salaried employees. Payroll for these employees will revert to once a month at the end of the month as it was before. While this change needs to be made as soon as possible, we did not want to change the employee pay schedule during the holiday season.

Instead, we will make the changeover in February, taking advantage of it being the shortest month and giving employees the opportunity to plan for the changeover. The pay cycle for non-exempt, hourly and substitute employees will not be changed. They will continue to be paid twice a month.

While these actions will help our short-term position, much work remains to improve our long-term financial health. Going forward, we will continue our efforts to reduce expenses and increase revenues. I will continue to update you as we move forward.

I apologize for the inconvenience this payment date change may cause and for the difficult position we are in as a community. Please know that these decisions are not taken lightly. Again, my focus and commitment remains on moving Socorro ISD forward. Thank you, Team SISD, for your patience, dedication and understanding as we manage the challenges ahead. With your continued trust and support, we will succeed in improving our district.

Sincerely,

Jim