LEGISLATIVE BUDGET BOARD
                                   Austin, Texas
         
                                   FISCAL NOTE
                               75th Regular Session
         
                                  May 31, 1997
         
         
      TO: Honorable Bob Bullock            Honorable James E. "Pete" Laney
          Lieutenant Governor                Speaker of the House
          Senate
          Austin, Texas
         
         
         
         
         FROM:  John Keel, Director    
         
In response to your request for a Fiscal Note on HB318 ( Relating 
to the public education grant program.) this office has detemined 
the following:
         
         Biennial Net Impact to General Revenue Funds by HB318-Conference Committee Report
         
Implementing the provisions of the bill would result in a net 
(NEGATIVE) impact of $(773,266-6,196,072) to General Revenue 
Related Funds through the biennium ending August 31, 1999
         

         
 
Fiscal Analysis
 
Section 1 of the bill would add two new categories of open-enrollment 
charter schools.  The State Board of Education would be authorized 
to grant up to 100 charters for open-enrollment charter schools 
that adopt an express policy providing for the admission of 
students eligible for a public education grant.  Also, the Board 
would be authorized to grant an unlimited number of additional 
charters for open-enrollment charter schools for which at least 
75% of the prospective student population will be students who 
have dropped out of school or are at risk of dropping out of 
school as defined by TEC 29.081.

Section 2 of the bill alters 
the existing Public Education Grant Program by altering the 
amount of the grant and by changing the eligibility requirements 
for the program to include campuses at which 50% or more of 
students did not perform satisfactorily on the TAAS in any two 
of the preceding three years.  It would continue grants even 
when the campus from which a student comes is no longer considered 
low performing.


 
Methodolgy
 
Section 1

This analysis assumes that the number of charter 
schools would grow gradually.  Although the provisions of the 
bill would allow up to 100 public education grant charters and 
an unlimited number of dropout prevention charters, this analysis 
assumes that the number of new charters approved for each category 
would be 20 per year for a total growth rate of 40 new charters 
per fiscal year.  It is estimated that the agency would need 
an additional 1 FTE for each group of 40 new charters.  

If 
the students enrolling in the charter schools are currently 
enrolled in public school, they represent no additional cost 
to the state.  Each student enrolling in a charter school who 
is not currently enrolled in a public school represents an additional 
cost of approximately $4,900 to the Foundation School Program. 
  

Section 2

Pursuant to current law, 652 campuses with 
491,005 students were eligible for a PEG grant in 1995-96.  
Of these, 31 students actually requested and received a Public 
Education Grant (.006 percent).    Due to natural growth in 
program participation and the financial incentive provided in 
the bill, this estimate assumes growth in the rate of student 
participation.

The conference committee report broadens the 
eligibility criteria for program participation to include campuses 
at which during any two of the three preceding years 50% or 
more or the students did not perform satisfactorily on a TAAS 
instrument.  A total of 1,153 campuses with approximately 796,846 
students would have been eligible for PEG grants for the current 
school year under this eligibility criteria.   

The bill 
stipulates that Foundation School Program formula funding amounts 
of the receiving (or educating) district are used to calculate 
the grant amount.  These amounts are equivalent to the amounts 
which would be generated for a typical transfer student, and 
are therefore assumed to have no direct fiscal implications 
for the state.

The bill provides additional assistance under 
the facilities program, but only about 26% of districts receive 
that assistance.  It appears that the amount of assistance would 
be about equal to that provided under current law, and therefore 
is expected to have no significant impact.

Districts educating 
students with a PEG are eligible to receive an additional allotment, 
calculated to be equal to 10% of the adjusted basic allotment 
and would likely average about $267 based on the current average 
adjusted basic allotment amount.  This allotment would also 
tend to increase the number of weighted students used in calculating 
the guaranteed yield amounts.

In addition, districts which 
do not receive funding in the second tier guaranteed yield program 
would be eligible for additional funding to the extent that 
actual costs of services exceed the amount of benefit in the 
Foundation School Program.  While this would increase costs 
to the state, it is unclear how much this calculated excess 
cost would be.  The typical amount of extra funding available 
in the guaranteed yield is about $1100 per weighted student, 
although the actual amount is variable, and would apply to approximately 
10% of the participants.   

Given the low participation in 
the first year, this estimate provides two scenarios with different 
rates of participation.  The first scenario assumes 0.1% of 
eligible students would participate, or roughly 797 students. 
 At this level, the additional assistance in the form of the 
extra allotment would cost about $212,799 per year.  In the 
second scenario of a participation rate of 1%, cost of the allotment 
would reach about $2,127,990 each year.  The effect of extra 
allotments in the second tier of funding is approximately 40% 
of the cost in the first tier.  This would raise the financial 
impact to the state to about $297,919 per year for 0.1% participation, 
and to about $2,979,190 for 1% participation.

Both scenarios 
assume an annual growth in participants of 5%.
The probable fiscal implications of implementing the provisions 
of the bill during each of the first five years following passage 
is estimated as follows:
 
Five Year Impact:
 
Fiscal Year Probable           Probable           Change in Number   
            Savings/(Cost)     Savings/(Cost)     of State                                                
            from General       from Foundation    Employees from                                          
            Revenue Fund       School Fund        FY 1997                                                 
            0001               0193                                                                        
       1998         ($56,911)        ($293,919)               1.0                                    
       1998         (113,822)         (308,614)               2.0                                    
       2000         (170,733)         (324,045)               3.0                                    
       2001         (227,644)         (340,247)               4.0                                    
       2002         (284,555)         (357,260)               5.0                                    
 
 
Fiscal Year Probable           Probable           Change in Number   
            Savings/(Cost)     Savings/(Cost)     of State                                                
            from General       from Foundation    Employees from                                          
            Revenue Fund       School Fund        FY 1997                                                 
            0001               0193                                                                        
       1998         ($56,911)      ($2,939,190)               1.0                                    
       1999         (113,822)       (3,086,149)               2.0                                    
       2000         (170,733)       (3,240,456)               3.0                                    
       2001         (227,644)       (3,402,478)               4.0                                    
       2002         (284,555)       (3,572,602)               5.0                                    
 
Similar annual fiscal implications would continue as long as 
the provisions of the bill are in effect.
          
No significant fiscal implication to units of local government 
is anticipated.
          
   Source:            Agencies:   
                                         
                      LBB Staff:   JK ,LP ,UP