LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE 75th Regular Session April 23, 1997 TO: Honorable Paul Sadler, Chair IN RE: House Bill No. 318, Committee Report 1st House, Substituted Committee on Public Education By: Cuellar House 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-Committee Report 1st House, Substituted Implementing the provisions of the bill would result in a net (negative) impact of $(925,500-9,225,000) to General Revenue Related Funds through the biennium ending August 31, 1999. The bill would make no appropriation but could provide the legal basis for an appropriation of funds to implement the provisions of the bill. Fiscal Analysis The bill significantly changes both the eligibility requirements and the funding mechanism for the Public Education Grant Program (PEG). Changes to Eligibility: This bill significantly increases the number of campuses which meet eligibility criteria. The bill permits a campus to be considered eligible if in any of the last three (3) years more than 50% of the students did not perform satisfactorily on a TAAS test. Current law requires that that level of performance be met in each of the last three years. More than 2,000 campuses would have been identified based on the three most recent years of data, involving more than 1.2 million students. Changes to Funding Mechanism: Section 29.203 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. Sections 29.203 and 42.4101 provide 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. Section 42.157 creates the Public Education Grant Allotment. This allotment is 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. Methodolgy 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 the significantly broader eligibility requirements in the bill, and the financial incentive provided in the bill, this estimate assumes a much higher rate of program participation. This estimate provides two scenarios: in the first, program participation is 0.1% (roughly 1,200 participants) the second scenario estimates a participation rate of 1% (12,000 students). Scenario 1 results in a cost of $320,000 in the first year due to the allotment, plus $130,000 for the excess costs associated with PEG participation in higher wealth districts, for a total first year cost of about $450,000. At a participation rate of 1% (Scenario 2), the cost of the allotment would reach about $3,200,000 in the first year, plus $1,300,000 pursuant to the higher wealth districts for a total first year cost of about $4,500,000. 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 Savings/(Cost) from Foundation School Fund 0193 1998 ($450,000) 1998 (472,500) 2000 (496,125) 2001 (520,931) 2002 (546,977) Fiscal Year Probable Savings/(Cost) from Foundation School Fund 0193 1998 1999 (4,725,000) 2000 (4,961,250) 2001 (5,209,312) 2002 (5,469,778) 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: 701 Texas Education Agency - Administration LBB Staff: JK ,DH ,UP