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