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