LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE, 77th Regular Session May 10, 2001 TO: Honorable Paul Sadler, Chair, House Committee on Public Education 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 education. 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 requirements: 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 reached. 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 credit. Methodology 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 debt. Source Agencies: 701 Texas Education Agency, 781 Texas Higher Education Coordinating Board LBB Staff: JK, CT, JM