TEA Adopts Revisions to School FIRST

Effective July 18, 2026

What Texas School Districts Need to Know

The Texas Education Agency (TEA) has adopted revisions to the School Financial Integrity Rating System of Texas (School FIRST) under 19 TAC §109.1001, effective July 18, 2026. These revisions update the School FIRST rating worksheets beginning with the 2025–2026 rating year and introduce additional calculation clarifications for 2026–2027 and future rating years.

These changes do not significantly alter the overall accountability framework. Instead, they refine several financial calculations to better reflect current accounting practices and improve equity for districts subject to recapture.

Key Changes

Indicator 1 – Annual Financial Report (AFR) Submission

For the 2025–2026 rating year only, TEA revised the deadline for submitting the Annual Financial Report (AFR) and financial data due to the delayed release of the 2025 Federal Compliance Supplement.

This is a one-time transition adjustment and does not permanently change reporting deadlines.

Indicator 5 – Adjusted Net Position

TEA revised the calculation of Adjusted Net Position by including:

• Premiums on Capital Appreciation Bonds (CABs)

• Accreted interest on Capital Appreciation Bonds

This change provides a more complete representation of a district's financial position by recognizing additional debt-related components.

Recapture Adjustments (Chapter 49 Districts)

The most significant technical revisions affect school districts subject to Chapter 49 recapture.

TEA revised multiple indicators to remove the impact of recapture payments that could otherwise distort financial solvency and liquidity measurements.

The revised worksheets:

• Remove recapture expenditures from total expenditures for applicable calculations.

• Adjust revenues to exclude recaptured amounts where appropriate.

• For June 30 fiscal year districts, remove recapture-related amounts from cash and current liabilities for selected indicators.

These revisions affect Indicators 6, 7, 8, 9, 11, and 13 and are intended to provide a more accurate picture of a district's underlying financial condition.

Indicators 13 & 15 – ADA Range Clarifications

TEA clarified the Average Daily Attendance (ADA) ranges used to determine administrative cost thresholds.

These revisions improve consistency but do not change the overall scoring methodology.

Indicator 15 – Administrative Cost Ratio

The terminology used in the administrative cost ratio calculation has been updated to better align with current financial reporting and the underlying data used to calculate the indicator.

This is a clarification rather than a substantive change to the calculation.

What Didn't Change?

School FIRST continues to use the same overall accountability framework:

• 15 financial accountability indicators

• Existing scoring methodology

• Existing rating categories

• Existing critical indicators

• Existing administrative cost thresholds

Recommended Actions

District finance teams should:

✔ Review the revised School FIRST worksheets before preparing FY2026 financial reports.

✔ Evaluate the impact of the revised recapture calculations if the district is subject to Chapter 49.

✔ Verify reporting of Capital Appreciation Bonds and related premiums.

✔ Continue monitoring administrative cost ratios using the clarified ADA ranges.

✔ Ensure timely submission of the Annual Financial Report under the revised timeline.

The Bottom Line

The July 18, 2026 School FIRST revisions are primarily technical updates that improve the accuracy of financial accountability calculations rather than introducing new accountability measures.

For most districts, implementation will require only minor adjustments. However, Chapter 49 (recapture) districts should carefully review the revised calculations, as the updated methodology more accurately reflects their financial condition by removing the impact of recapture payments from several key financial indicators.

Need assistance?

Questions? Contact DeAnna Clavell l dclavell@theinschools.com