LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE, 77th Regular Session May 11, 2001 TO: Honorable Teel Bivins, Chair, Senate Committee on Education FROM: John Keel, Director, Legislative Budget Board IN RE: HB6 by Dunnam (Relating to open-enrollment charter schools.), Committee Report 2nd House, Substituted ************************************************************************** * Estimated Two-year Net Impact to General Revenue Related Funds for * * HB6, Committee Report 2nd House, Substituted: negative impact of * * $(696,048) through the biennium ending August 31, 2003. * * * * The bill would make no appropriation but could provide the legal * * basis for an appropriation of funds to implement the provisions of * * the bill. * ************************************************************************** General Revenue-Related Funds, Five-Year Impact: **************************************************** * Fiscal Year Probable Net Positive/(Negative) * * Impact to General Revenue Related * * Funds * * 2002 $0 * * 2003 (696,048) * * 2004 (1,044,072) * * 2005 (1,392,096) * * 2006 (1,740,120) * **************************************************** All Funds, Five-Year Impact: ************************************************************************** *Fiscal Probable Probable Change in Number of * * Year Savings/(Cost) from Savings/(Cost) from State Employees from * * General Revenue Fund Federal Funds - FY 2001 * * 0001 Federal * * 0555 * * 2002 $0 $0 0.0 * * 2003 (696,048) (481,100) 17.0 * * 2004 (1,044,072) (721,650) 25.5 * * 2005 (1,392,096) (962,200) 34.0 * * 2006 (1,740,120) (1,202,750) 42.5 * ************************************************************************** Fiscal Analysis The bill as substituted adds a new subchapter E to Chapter 12 of the Education Code. This subchapter authorizes governing boards of public senior colleges or universities and the governing bodies of municipalities or counties to grant open-enrollment charters. The charters would be required to forward three percent of their revenues to the creating entity for administration of the subchapter. The Texas Education Agency (TEA) would remain the agent responsible for funding, compliance monitoring and auditing of these charters. It is estimated that, as a result of this bill, approximately 170 new charter schools will open in the 2002-03 school year. TEA would need an additional 17 professional staff, $696,048 in supporting general revenue, and $481,100 in federal funds to perform the funding administration, compliance monitoring, and auditing of these new charter schools. These full-time equivalent employees (FTE's) and the accompanying costs are estimated to increase steadily each year thereafter. Methodology TEA estimates that, for every ten additional charters in operation, approximately one additional staff member is needed, spread across several functional areas of the agency, including compliance monitoring, school funding, and charter support. For the purposes of this fiscal note, it is estimated that each of the state's 35 public general academic institutions would start one charter, in each biennium. It is assumed that that about ten percent of the 1,194 incorporated municipalities and five percent of the 254 counties would authorize one charter each during each biennium. Under these assumptions, the total new charters available for operation in the 2002-03 school year is 170. The 170 new charter schools would entail 17 additional professional staff at TEA at an average pay grade of B12 for fiscal year 2003. Approximately 46 percent of the funding needed to support these FTE's is expected to be available from federal sources related to compliance monitoring for the use of federal funds. Therefore, the 2003 general revenue cost of the additional staff, including travel, is $696,048, and the cost to federal funds is $481,100. It is expected that 170 new charters would open each biennium after the 2002-2003 biennium (between 80 and 90 a year), and TEA FTE's needs would increase correspondingly. Fiscal implications to TEA would likely continue beyond 2006 and increase as the number of charters authorized increases. Local Government Impact School districts that lose student population to open-enrollment and college/university, municipal, or county charter schools would experience a loss of revenue as a result. It could generally be expected that there may be some savings in costs to those districts as the service population decreases in size. Source Agencies: 701 Texas Education Agency LBB Staff: JK, CT, PF, JM