LEGISLATIVE BUDGET BOARD
                                   Austin, Texas
         
                                   FISCAL NOTE
                               75th Regular Session
         
                                  March 19, 1997
         
         
      TO: Honorable Teel Bivins, Chair            IN RE:  Senate Bill No. 1206
          Committee on Education                              By: Bivins
          Senate
          Austin, Texas
         
         
         
         
         FROM:  John Keel, Director    
         
In response to your request for a Fiscal Note on SB1206 ( Relating 
to creation of a public education scholarship pilot program 
for children assigned to attend certain low-performing public 
schools.) this office has detemined the following:
         
         Biennial Net Impact to General Revenue Funds by SB1206-As Introduced
         
Implementing the provisions of the bill would result in a net 
negative impact of ($8,160,600 - $16,160,600) 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 would add subchapter J to Chapter 29 of the Texas Education 
Code(TEC), creating a pilot program to allow students in certain 
circumstances to receive a public education scholarship.  These 
scholarships could be used by the student to attend a "free 
school,"  defined as a nongovernmental educational establishment 
for elementary and secondary students that accepts funding from 
state and local sources in lieu of tuition for some or all of 
its students.

To be eligible for a scholarship (section 29.352), 
the child must have sought to attend a different public school 
district under the Public Education Grant (PEG) criteria in 
section 29.201.  If the district selected under that section 
rejects the child, the child is then eligible for the scholarship 
program set out in the bill.  

A child eligible to attend 
school in a school district (section 25.001) but who attends 
a free school shall be considered in determining the district's 
average daily attendance(ADA).  The commissioner shall adopt 
a procedure  by which free schools shall report the attendance 
of scholarship students attending the school.      

The scholarship 
is the amount of state and local funding per student for the 
district in which the child resides.  Section 29.355 (b) defines 
the state portion as the district's textbook funding, the basic 
allotment (TEC chapter 42) , the special program allotments 
(excluding the transportation allotment)  guaranteed yield funding 
and facilities assistance.  The local funding calculation depends 
on the special education classification of the student.  For 
special education students, the local funding amount is the 
average expenditure of local and federal funds received for 
students with disabilities (other than students in residential 
care arrangements).  For non-special education students, the 
local portion is equal to the average expenditure of local funds 
per student, minus the amounts used to calculate the funding 
for special education students.  

An eligible child attending 
a free school is entitled to 80% of the scholarship amount as 
defined above.  

The free school must develop an Individual 
Education Plan (IEP) for special education students in attendance. 
 If a parent objects to IEP, the free school must submit the 
plan for review by  the Commissioner of Education.

Each free 
school shall submit information under the Academic Excellence 
Indicator System to the Commissioner.  Each free school  shall 
administer the TAAS , and the Commissioner shall report the 
results of the assessment in such a way as to allow comparisons 
between the performance of students in the free school and the 
performance of students in public schools.  

The State Board 
of Education shall designate an impartial organization with 
experience in school choice programs to conduct an annual evaluation 
of this pilot program.        
 
Methodolgy
 
In the 1996-97 school year, 382 campuses, enrolling 238,000 
students,  met the low-performance criteria set out in chapter 
29, subsection G (Public Education Grant Program).  This estimate 
assumes that 20% of PEG program students would be rejected by 
public school districts based on survey data from the 1995-96 
school year.   The total potential population is therefore assumed 
to be about 47,600 students.

Certain ambiguities in the bill 
yield two separate state cost scenarios and a situation of overlapping 
funding for the same child.  The first scenario (table 1) results 
in a funding level of $4,200 per ADA, based on an interpretation 
of section 29.355 that state assistance includes textbook funding 
and the formula cost of the Foundation School Program per child 
but not the transportation allotment or any of the district 
adjustments.  The second scenario (table 2) yields an amount 
of $2,100 per ADA, based on an interpretation of section 29.355 
(b) that only a portion of the state funding to the district 
is applicable.

Section 29.354 funds the child in the school 
district of residence.  Section 29.355 establishes an amount 
to be paid to the free school by the Comptroller under section 
29.367, in addition to the funding which flows through the Foundation 
School Program to the school district.  The additional cost 
to the state of each child receiving a scholarship is therefore 
80% of either $2,100 or $4,200, depending on the interpretation 
of the scenarios outlined above.  The total potential cost to 
the state is therefore $80 to $160 million, again depending 
on interpretation of the state portion of the scholarship.
 
 
Local expenditures are estimated to be $3,837 for each special 
education student and $2,700 for each regular program student.

The 
cost associated with the program in this estimate is less than 
the maximum potential cost.  The program is new, and therefore 
it will likely take time both for free schools to begin participating 
in the program and for parents to take advantage of the program. 
 Therefore, this estimate assumes that only approximately 10% 
of the eligible population would choose to participate in the 
first year, and that the population will grow at the rate of 
10% in each subsequent year.

There is the possibility that 
a student currently in a private school could briefly enroll 
in a public school in order to become eligible for the scholarship 
program.  While this could result in a significant cost to the 
state, it is impossible to determine the extent of that potential 
cost.

The bill represents certain administrative costs to 
the Texas Education Agency.  The provision requiring the Commissioner 
to review IEPs to which a parent objects would likely result 
in the case being referred to an independent hearing examiner, 
as Federal law is ambiguous as to whether the Commissioner can 
approve IEPs.  The cost of each hearing is $3,000.  If the parents 
of 5% of the special education students participating in the 
program object to the IEP, the cost would be $85,500. 

The 
cost of the evaluation of the program is estimated to be $75,000. 
   
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           
            Savings/(Cost)     Savings/(Cost)                                                             
            from Foundation    from General                                                               
            School Fund        Revenue Fund                                                               
            0193               0001                                                                        
       1998                                                                                          
       1998      (16,000,000)         (160,600)                                                      
       2000      (32,000,000)         (171,200)                                                      
       2001      (48,000,000)         (256,800)                                                      
       2002      (64,000,000)         (342,400)                                                      
 
 
Fiscal Year Probable           Probable           
            Savings/(Cost)     Savings/(Cost)                                                             
            from Foundation    from General                                                               
            School Fund        Revenue Fund                                                               
            0193               0001                                                                        
       1998                                                                                          
       1999       (8,000,000)         (160,600)                                                      
       2000      (16,000,000)         (171,200)                                                      
       2001      (24,000,000)         (256,800)                                                      
       2002      (32,000,000)         (342,400)                                                      
 
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 ,LP ,UP