Austin, Texas
                    FISCAL NOTE, 77th Regular Session
                               May 10, 2001
          TO:  Honorable Paul Sadler, Chair, House Committee on Public
        FROM:  John Keel, Director, Legislative Budget Board
       IN RE:  SB385  by Bivins (Relating to the curriculum requirements
               for high school graduation and for admission general
               academic teaching institutions.), Committee Report 2nd
               House, Substituted
*  Estimated Two-year Net Impact to General Revenue Related Funds for    *
*  SB385, Committee Report 2nd House, Substituted:  positive impact      *
*  of $0 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                                    0  *
          *       2004                          (4,112,908)  *
          *       2005                          (5,080,634)  *
          *       2006                            (741,676)  *
All Funds, Five-Year Impact:
*Fiscal        Probable             Probable             Probable        *
* Year    Savings/(Cost) from  Savings/(Cost) from  Savings/(Cost) from  *
*         State Textbook Fund   Foundation School  General Revenue Fund  *
*                0003                 Fund               TRS costs       *
*                                     0193                 0001          *
*  2002                     $0                   $0                   $0 *
*  2003                      0                    0                    0 *
*  2004            (4,212,908)            1,150,000          (1,050,000) *
*  2005            (5,130,634)            2,400,000          (2,350,000) *
*  2006            (4,631,676)            7,400,000          (3,510,000) *
Technology Impact
This bill would have no identifiable effect on state technology costs.
Fiscal Analysis
The bill as substituted would require school districts to ensure that
each student enrolls in courses necessary to complete the curriculum
requirements identified by the State Board of Education for the
recommended or advanced high school program.  A student would be allowed
to take courses under the minimum high school program only if the
student, the student's parent, a school counselor, and a school
administrator agree that the student should be permitted to do so.
Students receiving special education would continue to have the option of
graduating through the completion of an individualized education program
(IEP).  This bill applies to students entering the ninth grade in the
2003-2004 school year and thereafter.

Beginning with the 2005-06 academic year, students would have to complete
the recommended or advanced program to qualify for automatic admission
under Section 51.803 of the Education Code (top 10 percent).  Students
graduating after January 1, 2007 would also have to complete the
recommended or advanced program to be admitted to a general academic
teaching institution of higher education directly following graduation
from high school.  Students graduating after January 1, 2007 who do not
complete either the recommended or advanced high school program would be
required to earn at least 24 hours of credit at a junior college before
being admitted to a general academic teaching institution of higher

While the bill has no fiscal implications for the state in the next
biennium, the state may incur three types of costs during the
implementation period of the recommended high school program

1.  Instructional materials associated with required courses.  Providing
a textbook for the additional students in each new required course would
cost approximately $15,500,000, which would be spread out over the
implementation period beginning in 2004.

2.  Teacher Retirement System (TRS) contributions related to the expected
increase in teachers needed under this bill.  At full implementation,
state TRS costs would be approximately $3,900,000 annually, but would
begin lower and be phased-in over the implementation period.

3.  The regional education service centers (ESC's) would be called upon
to support capacity development activities aimed at retraining teachers.
The Texas Education Agency estimates that this would require
approximately $2,000,000 ($100,000 for each of the 20 ESCs).  However, a
TEA rider in the appropriations bill adopted by the Conference Committee
(rider #81, House version) directs ESC's to spend from their current
allocation whatever funds necessary to provide support to districts for
the recommended high school program.

It is estimated that the bill would entail a savings to General Revenue
as well:

1.  The Texas Education Agency (TEA) estimates a savings to the
Foundation School Program due to an assumed enrollment decrease in
elective career and technology education courses.  These savings are
estimated at $1,150,000 in 2004, $2,400,000 in 2005, and increasing
significantly in each successive year until full implementation has been

The Higher Education Coordinating Board (THECB) estimates that requiring
the recommended high school program would decrease the amount of
state-funded developmental education courses needed at universities,
community and technical colleges.  However, it is assumed that this
decrease would be offset by these students enrolling in courses for
This fiscal note makes the following assumptions:

1.  Of a student class cohort of 300,000, 30 percent would "opt-out" of
the recommended high school program using the provisions of the bill
regarding students with IEP's and agreements between parents, students
and school officials.  This would leave 70 percent, or 210,000,
participating in the program at full implementation.

2.  Based on analysis by TEA and the State Board for Educator
Certification (SBEC), the total number of additional enrollments in the
required courses identified as having teacher shortages at full
implementation would be 259,500.  The number of teachers needed to serve
these additional enrollments at full implementation, (assuming 100
percent reallocation of teachers that are currently teaching a related,
non-required course but are certified to teach a required course) would
be 1,680.

3.  State costs for textbooks and TRS contributions (as well as local
teacher salary costs) would be phased-in over a four year implementation
period.  The costs are phased-in based on an analysis of the grade levels
at which students are currently taking the recommended courses and
assumptions concerning district hardship exemptions; in other words,
school districts would hire staff on an as-needed basis, rather than
hiring teachers in 2004 for recommended courses that would not be taken
by students until 2006 or 2007.

Textbook Costs:  It is assumed that each additional enrollment in the
required courses will need a textbook for that course.  Assuming an
average cost of $60 per textbook, the cost approaches $15,500,000,
distributed over the four-year implementation period.  This cost likely
would not persist past the implementation period, because there would be
some offsetting reductions in the cost of textbook purchases for elective
subjects as student demand shifts away from them to the required
courses.  However, these potential savings will not begin to be realized
for several years beyond the initial implementation because of the
current textbook adoption and purchase cycles.  For example, by 2010,
there may be sufficient decrease in demand to allow the state to purchase
fewer fine arts textbooks, but no textbook savings from decreased
enrollments in fine arts courses would be attainable until that year
since books have already been purchased and will remain in circulation
until then.

Teacher Retirement System (TRS) Contribution Costs: The state contributes
six percent of every teacher's salary, up to the minimum salary, for TRS
costs, along with 0.5 percent of all salary for TRS-Care.

Foundation School Program Savings:  Because the requirement to take
specific courses will reduce current student course selection
flexibility, it is possible that there may be impacts on other courses
and programs.  However, the is no consensus on which courses students
would choose to exclude from their schedules.  It has been speculated
that some of the courses students would choose not to take would be
career and technology courses, which are funded at a 37 percent higher
rate in the Foundation School Program than the new course requirements.
Because of this, a change in course enrollment patterns away from career
and technology courses could lead to noticeable savings in the cost of
the Foundation School Program.  However, the full impact of these savings
would not materialize until the initial class of students covered by the
new requirement reaches its senior year.
Local Government Impact
School districts would incur costs in providing the recommended high
school program to all students.  Districts would likely experience a
shortage of teachers in subject areas key to the recommended high school
program: sciences, mathematics, and foreign languages.  Even if it is
assumed that all instructors currently teaching related, non-required
courses were certified/capable of teaching the required courses and were
reallocated to teach them, districts would still need to hire
approximately 1,680 full-time teachers statewide for full implementation
(if none were reallocated, the number of needed teachers would be 2,465).

Based on phase-in assumptions and assumed variations due to hardship
exemptions, it is expected that about 498 additional teachers would be
needed in 2004, followed by an additional 560 in 2005, 459 in 2006, and
161 in 2007.  The respective annual costs would be $21 million in 2004,
$44 million in 2005, $63 million in 2006, and $70 million in 2007.

It is also likely that most districts would incur costs to construct or
expand facilities to accommodate the additional staff/courses. The
average cost per classroom is assumed to range from $120,000 to $150,000
(based on averages of $100 per square feet and 1,200 square feet).  With
these assumptions, new classroom costs are estimated to range from
$200,000,000 to $250,000,000.  Construction costs would likely be funded
through long-term bonded indebtedness in most districts.

It should be noted that annual payments on $200,000,000 in new debt
issued as thirty-year bonds would probably be about $13,000,000 under
current market conditions.  The state has existing mechanisms to
equalize the tax burdens to school districts that issue debt that may
further defray the costs to the school districts.  The current state
share in the Instructional Facilities Allotment is approximately 50%, so
school districts might experience annual costs of about $6,500,000 if
the state appropriates sufficient funding to offset local costs for new
Source Agencies:   701   Texas Education Agency, 781   Texas Higher
                   Education Coordinating Board
LBB Staff:         JK, CT, JM