| TO: | Honorable Florence Shapiro, Chair, Senate Committee on Education |
| FROM: | John S. O'Brien, Deputy Director, Legislative Budget Board |
| IN RE: | SB2 by Shapiro (Relating to public education and public school finance matters; making an appropriation; imposing criminal penalties. ), Committee Report 1st House, Substituted |
| Fiscal Year | Appropriation out of GENERAL REVENUE FUND 1 |
Appropriation out of AVAILABLE SCHOOL FUND 2 |
Appropriation out of STATE TEXTBOOK FUND 3 |
Appropriation out of FOUNDATION SCHOOL FUND 193 |
|---|---|---|---|---|
| 2006 | $523,690,734 | $1,271,000,000 | $184,057,832 | $8,556,398,505 |
| 2007 | $524,368,466 | $1,622,000,000 | $1,971,597 | $7,979,015,981 |
| Fiscal Year | Appropriation out of CERTIF & ASSESSMENT FEES 751 |
Appropriation out of GR MOE FOR TANF 759 |
Appropriation out of LOTTERY PROCEEDS 902 |
Appropriation out of TELECOMMUNICATIONS INFRA FUND 8345 |
|---|---|---|---|---|
| 2006 | $18,359,121 | $2,000,000 | $1,045,000,000 | $115,000,000 |
| 2007 | $18,378,121 | $2,000,000 | $1,046,000,000 | $115,000,000 |
| Fiscal Year | Appropriation out of READ TO SUCCEED 5027 |
Appropriation out of FEDERAL FUNDS 555 |
Appropriation out of FED HEALTH ED WELF FD 148 |
Appropriation out of FEDERAL SCHOOL LUNCH FUND 171 |
|---|---|---|---|---|
| 2006 | $42,960 | $13,153,500 | $2,939,024,866 | $1,058,000,000 |
| 2007 | $42,960 | $13,153,500 | $2,938,215,169 | $1,104,000,000 |
| Fiscal Year | Appropriation out of APPROPRIATED RECEIPTS 666 |
Appropriation out of STATE HIGHWAY FUND 6 |
Appropriation out of PERMANENT SCHOOL FUND 44 |
Appropriation out of INTERAGENCY CONTRACTS 777 |
|---|---|---|---|---|
| 2006 | $1,133,000,000 | $50,000,000 | $6,851,389 | $451,636 |
| 2007 | $1,284,000,000 | $50,000,000 | $6,914,804 | $448,905 |
| Fiscal Year | Probable Net Positive/(Negative) Impact to General Revenue Related Funds |
|---|---|
| 2006 | ($15,729,695,014) |
| 2007 | ($16,840,901,594) |
| 2008 | ($6,411,896,058) |
| 2009 | ($7,483,781,780) |
| 2010 | ($7,637,757,609) |
| Fiscal Year | Probable Savings/(Cost) from GENERAL REVENUE FUND 1 |
Probable Savings/(Cost) from FOUNDATION SCHOOL FUND 193 |
Probable Savings/(Cost) from STATE TEXTBOOK FUND 3 |
Probable Revenue (Loss) from School Districts |
|---|---|---|---|---|
| 2006 | ($388,229,031) | ($12,821,398,505) | ($183,708,357) | ($3,318,400,000) |
| 2007 | ($499,485,370) | ($13,651,415,981) | ($1,622,122) | ($3,653,400,000) |
| 2008 | $30,751,467 | ($6,434,200,000) | ($8,447,525) | ($3,497,900,000) |
| 2009 | $34,665,745 | ($6,983,400,000) | ($535,047,525) | ($3,637,400,000) |
| 2010 | $35,789,916 | ($7,661,500,000) | ($12,047,525) | ($3,458,000,000) |
| Fiscal Year | Probable Savings/(Cost) from AVAILABLE SCHOOL FUND 2 |
Probable Savings/(Cost) from CERTIF & ASSESSMENT FEES 751 |
Probable Savings/(Cost) from GR MOE FOR TANF 759 |
Probable Savings/(Cost) from LOTTERY PROCEEDS 902 |
|---|---|---|---|---|
| 2006 | ($1,271,000,000) | ($18,359,121) | ($2,000,000) | ($1,045,000,000) |
| 2007 | ($1,622,000,000) | ($18,378,121) | ($2,000,000) | ($1,046,000,000) |
| 2008 | $0 | $0 | $0 | $0 |
| 2009 | $0 | $0 | $0 | $0 |
| 2010 | $0 | $0 | $0 | $0 |
| Fiscal Year | Probable Savings/(Cost) from TELECOMMUNICATIONS INFRA FUND 8345 |
Probable Savings/(Cost) from READ TO SUCCEED 5027 |
Probable Savings/(Cost) from Federal Funds |
Probable Savings/(Cost) from Other Funds |
|---|---|---|---|---|
| 2006 | ($115,000,000) | ($42,960) | ($4,010,178,366) | ($1,190,303,025) |
| 2007 | ($115,000,000) | ($42,960) | ($4,055,368,669) | ($1,341,363,709) |
| 2008 | $0 | $0 | $0 | $0 |
| 2009 | $0 | $0 | $0 | $0 |
| 2010 | $0 | $0 | $0 | $0 |
| Fiscal Year | Change in Number of State Employees from FY 2005 |
|---|---|
| 2006 | 13.0 |
| 2007 | 13.0 |
| 2008 | 13.0 |
| 2009 | 13.0 |
| 2010 | 13.0 |
The bill would make substantive changes to the method of funding public education. The bill would amend current law regarding the calculation of entitlements under the Foundation School Program, would amend the method by which the state finances the Foundation School Program and would also make changes to various public education programs. Additionally, the bill would appropriate current law levels of funding for the operation of the Texas Education Agency for the 2006-07 biennium.
Article I of the bill relates to public school finance, including formula funding and property tax reduction.
The bill limits the district local fund assignment tax rate to $1.20 in 2006 and to $1.15 in 2007. The current law funding formulas are modified, creating an Accreditation Allotment of $4600 per pupil and replacing the current law system of funding weights with dollar values to fund various supplemental programs. The Cost of Education Index is updated to reflect the Teacher Fixed Effects model, and these new values are phased in over four years. The adjustment to small and mid-size districts is also increased over an 8-year period. Districts are guaranteed a 3% revenue gain relative to current law in 2006. Total gains by districts are limited to 108% for 2006, 116% in 2007, and 124% in 2008. Additional district equalization is provided by limiting local revenue to the amount of the entitlement; to the extent that local revenue exceeds the calculated entitlement, a district is subject to consolidation or may purchase attendance credits from the state under a formula described by Subchapter D, Chapter 41.
Subchapter G authorizes districts to levy an additional tax limited to $0.15 to enrich the basic program. Access to enrichment is limited to $0.05 in 2007 and to $0.10 in 2008 and 2009. The state equalizes enrichment to the 92nd percentile of wealth in 2007 and 2008, to the 93rd percentile of wealth in 2009 and 2010, and increasing to the 97th percentile of wealth by 2014.
The bill would create a career and technology education allotment pilot project in the 2006-07 and 2007-08 school years.
Subchapter H directs districts to provide salary increases to all categories of employees except administrators in an amount that averages $500 for the 2005-06 school year. In addition to this amount, section 2A.05 would amend Section 21.402, Education Code regarding the minimum salary schedule (MSS) and would require that existing employees subject to the MSS be provided a salary that is at least $250 greater per month ($2,500 annual increase for 10-month contract) beginning in 2005-2006. The employee would be entitled to retain this increase for the duration of employment with the district. The bill provides no direct formula allocation for the cost of the increase. Districts are provided supplemental revenue to the extent necessary to provide for the $500 in employee salary increases and $2,000 of the MSS salary increases.
The bill would direct the Legislative Budget Board to conduct biennial analyses on public education expenditures, the formula funding elements, and the cost of education index, and also directs that the LBB and TEA conduct a study of school facilities and of targeted technology programs. The LBB and TEA are further directed to contract for a cost-outcome analysis of at-risk programs and report the findings annually.
Section 1A.02 would hold the Texas School for the Blind and Visually Impaired and the Texas School for the Deaf harmless for any decrease in revenue caused by the bill reducing district payments of local revenue to the schools for the education of referred students. From the foundation school fund, the commissioner would allocate to the schools the amount they would have received had current law continued.
Section 1C.01 would require that the state provide assistance to school districts equal to 50 percent of district contributions to social security for all employees whose employee classification was covered by social security by the district prior to January 1, 2005.
Article 2 of the bill relates to various education programs and educator incentives and instructional materials. The provisions in the article with fiscal impact are summarized as follows:
2A.12 would authorize school districts to provide mentors to each classroom teacher with less than two years of teaching experience. The commissioner would be directed to adopt rules and fund mentor training from funds appropriated for those purposes.
2A.13 would establish an educator excellence incentive program. The provisions would require districts to use an amount equal to at least 1% of the districts' total professional staff payroll to provide incentive payments to employees who demonstrate success in adding value to student achievement.
2A.14 directs the agency to provide professional liability insurance for classroom teachers.
2B.01 would allow the creation of no more than three education research centers statewide and would authorize the collection of fees.
2B.02 would continue the functions of the Texas Education Agency until September 1, 2007.
2B.03 would require each school district, charter school and institution of higher education to participate in an electronic student records system approved by the commissioner, beginning in the 2006-07 school year.
2C.07 would require school districts to start school the Tuesday after Labor Day and also would require that school ends no later than June 7.
2B.09 would require implementation of a comprehensive performance-based grant system, with full implementation by the 2009-2010 school year. The agency also is required to identify successful grant programs.
2D.01 would require the agency to contract with one or more third parties to establish a clearinghouse by September 1, 2006 of information relating to district best practices for instruction, resource allocation and business practices.
2D.18 of the bill would require the agency to adopt end-of-course assessments for secondary level courses in Algebra I and Algebra II. These assessments are required to be implemented no later than the 2008-09 school year, with a corresponding phase-out of the current exit-level exam.
2D.19 would require the agency to design its Texas Assessment of Knowledge and Skills (TAKS) exams to be computer-adaptive, with implementation required by March 1, 2006.
2D.22 would direct school districts to annually administer to students in two grades between 7th and 11th grade, and once in either 11th or 12th grade, a nationally normed assessment of college readiness. The agency would be required to pay for the administration of the tests out the Foundation School Program.
2D.34 would create a state incentive program for improving student performance on at-risk campuses. It would establish eligibility criteria, and the commissioner would be directed to begin granting awards September 1, 2006. The bill would require that 75 percent of the awards be used for additional teacher compensation of at least $3,000 per teacher at the campus level. The cost of grant awards would be limited to $100 million annually, except as expressly authorized by the General Appropriations Act.
2D.35-37 would establish an array of sanctions for low-performing campuses as identified under the provisions of the bill, including the assignment of technical assistance and campus intervention teams. Section 2D.38 would require the commissioner to annually review districts and campuses subject to sanction.
2E.14 would require TEA to develop or acquire ongoing, interactive computer-adaptive
diagnostic tools for the Texas Assessment of Knowledge and Skills (TAKS) tests in each subject and grade, and provide them to districts using funds appropriated for that purpose.
2E.20 would create an instructional materials and technology allotment, to start in 2008. The allotment amount would be $150 per ADA, and districts would be required to use $60 of the $150 per ADA for targeted technology programs for selected campuses or grade levels. This section also would provide the allotment to juvenile justice alternative education programs.
2E.38 would expand the technology immersion pilot project to high school.
2F.06 would require the commissioner to establish a dual language pilot project of at least a three-year duration in selected school districts, and to evaluate the program’s impact on graduation success. The agency would give an interim report to the legislature no later than January 1, 2009 and a final report not later than January 1, 2011. The pilot project would expire on August 1, 2011.
2G.01 would establish Texas governor’s schools as summer residential programs of at least 3 weeks duration for high-achieving high school students administered by public senior colleges and universities.
2L.01 would direct the commissioner to create a school safety training program.
Article 3 of the bill lays out conforming amendments.
Article 4 of the bill is related to charter schools. Various provisions of current law are codified, and new requirements on the operation of charters are established:
The section would establish a $1,000 per ADA facilities allotment for charters meeting certain eligibility requirements.
Section 4.02 also directs charter schools that operated as open-enrollment charter schools and participated in the ActiveCare group health insurance program administered by TRS as of January 1, 2005 to provide a salary increase of $1,000 to full-time teachers, nurses, librarians, and counselors employed by the charter. State aid equal to $1,000 per full-time teacher, nurse, librarian, or counselor is stipulated for this purpose in this same section.
Articles 5 and 6 are reserved for expansion.
Article 7 of the bill would abolish the State Board for Educator Certification and move its functions to the Texas Education Agency. It would establish the Educator Professional Practices Board to oversee the standards of conduct of public school educators and would grant the commissioner rulemaking authority over educator certification.
Article 8 provides appropriations for the 2006-07 biennium to the Texas Education Agency.
Article 9 lays out repealer provisions.
Article I
The school finance provisions of the bill result in a net revenue increase to local school districts and a cost to the state.
In FY 2006, the net state cost of the formula provisions described above is $4.3 billion. Of that amount, $946 million represents an increase in total revenue to school districts.
In FY 2007, the net state cost of the single-tier provisions described above is $5.4 billion. Of that amount, $1.4 billion represents an increase in total revenue to school districts.
Due to the provisions of the bill that shift over time, including the phase-in of the new Cost of Education Index, and the gradual elimination of restrictions on net gain, the costs in the out years are expected to increase by about $400 million per year, with 2010 reflecting net state cost of $6.6 billion.
The provisions for equalized enrichment also result in increased state cost and local revenue generation over time. In 2007 the state cost per penny of enrichment is $117 million. Assuming that school districts statewide access the equivalent of half the $0.05 maximum, state cost associated with enrichment is estimated to be $293 million in 2007. In 2010 (the last year of the five-year period of this analysis) enrichment is estimated to cost the state $1.0 billion. If all pennies were accessed, the cost in 2010 would be $2.1 billion.
It is estimated that completing the analyses required by the various provisions would cost the Legislative Budget Board $750,000 each biennium. In addition, the facilities study is estimated to cost the LBB $500,000 in 2006.
1C 01: State costs for providing 50 percent of district social security contributions is estimated to be $33.6 million in 2006, $34.9 million in 2007, and increasing gradually each year thereafter.
Article 2
2A.05: The changes proposed to the minimum salary structure for classroom teachers and full-time librarians have no effect on formulas generating aid under the Foundation School Program. Because the bill neither results in additional state aid nor specifies a contingency appropriation, for the purpose of this estimate it is assumed that additional salary costs would be borne solely by local school districts.
Increases in teacher pay have an impact on the state’s contributions to the Teacher Retirement System. At a constitutional minimum contribution rate of 6 percent, the cost to the state associated with the $500 average salary increase and the $2,500 MSS salary increase would likely range from at least $56.3 million in FY06 to $60.5 million in FY10.
2A.12, Mentor Programs: For the mentoring program, in 2006 there will be an estimated 40,200 teachers with less than two years experience. For the purpose of this fiscal note, it is assumed that the commissioner would adopt rules assigning one mentor teacher to no less than three teachers. It is also assumed that the cost per mentor teacher for teacher stipends, mentoring time, and mentor training would be approximately $1,500 annually. Under these assumptions, one mentor teacher per three teachers would require approximately 13,400 mentors; at $1,500 per mentor, this would give an initial cost of $20.1 million annually. However, it is estimated that federal funds available for this purpose could be used to defray the cost to general revenue, lowering the annual cost to $14.1 million. Assuming a growth rate in new teachers of 2 percent, program costs would increase by approximately two percent each year thereafter.
2A.13: In implementing the new Educator Excellence Incentive program, the Agency would incur administrative costs estimated to be $160,000 annually and three FTEs associated with the process of approving local plans for educator incentives.
2A.14: Professional liability insurance for classroom teachers. It is assumed for the purpose of this fiscal note that the state of Texas would purchase a policy similar to one currently held by the state of Florida, which has a cost of approximately $5 per teacher covered. For Texas, for an estimated 310,000 classroom teachers in the 2005-06 school year, the cost would be $1,550,000, increasing slightly each year thereafter as the number of teachers grows.
2B.01: Education Research Centers. Based on the size and scope of similar operations, it is assumed that each center would require an annual operating budget of up to $1.0 million to fulfill the duties described in the substitute. It is assumed that these funds would be in addition to any gifts, grants and service fees the centers are authorized to receive.
2B.03: Electronic Student Records System. Based on submitted proposals from vendors, development of the system is estimated to incur a one-time cost of $2 million in 2006, with ongoing maintenance costs of $300,000 each year thereafter.
2B.09: It is estimated that TEA, beginning in 2006, would require one additional management position to direct the implementation of the performance-based grant system, with associated costs of $114,000 annually. Beginning in 2008, it is estimated that the agency would incur a one-time cost for computer systems development and modifications for the comprehensive system of $1.5 million, with $150,000 in maintenance costs thereafter.
2D.01: Best Practices Clearinghouse. For the collection and dissemination of best practices, the agency estimates that systems development costs for the development of the secure form-based site for collecting self-submitted best practices information and the publicly-available site for displaying submitted information would be a one-time amount of approximately $100,000 in 2006. The monitoring system required by this section appears similar to TEA's current performance-based monitoring initiative, and thus this section would have no significant fiscal impact to the agency.
2D.18, replacing the current exit-level TAKS test with a set of end-of-course assessments, 2D.19, requiring computer-adaptive assessment instruments, and Section 2D.22, administering nationally normed college readiness assessments, represents costs that are to be funded either by available federal funds or by a set aside from the Foundation School Program. Thus, these assessment-related costs have a local, but not a state fiscal impact.
2D.34: State Incentive Program. The bill would limit the cost of the state incentive program for improving student performance on at-risk campuses to $100 million annually, beginning with fiscal year 2007. It is assumed that this full amount would be utilized each year.
2E.14: Based on TEA's experience in assessment development, the agency estimates that the cost to develop and maintain a system of updated, interactive diagnostic tools related to the TAKS tests to be approximately $500,000 per test annually. With 27 individual subject area tests across all grades and 4 levels of Reading Proficiency Tests in English (RPTE), the cost to the state would be approximately $15.5 million each year. However, the agency currently is using an ongoing source of state funding, about $4.0 million annually, for a mathematics and a science diagnostic system that would fulfill the requirements of the bill as substituted. Therefore, it is assumed that the net fiscal impact to the state of this section would be approximately $11.5 million a year. For the purposes of the fiscal note, it is also assumed that these diagnostic tools could be modified at negligible costs to create adequate diagnostics for the State-Developed Alternative Assessments.
Although it is anticipated that TEA would contract with a third party for these assessment tools, the agency estimates that additional in-house staff resources would be required for contract management and quality control. According to the agency, similar arrangements in which third parties create curriculum-matching diagnostic tools have required significant agency workload to ensure that the diagnostic tools (1) correctly correlate to the tests, (2) do not duplicate actual test items, (3) contain an appropriate range of difficulty and score accurately, and (4) are free of any other errors. Based on the level of support currently needed for the mathematics diagnostic system, the agency assumes that 10 full-time equivalents (FTEs) would be needed, including: 2 FTEs with subject matter expertise in mathematics and 2 in English language arts/reading; one FTE subject area expert each for social studies and science; two FTEs for reading proficiency in English; and two FTEs for quality control of automated scoring and reporting. Associated costs would be about $636,000 on an annual basis.
2E.36: The $150 per ADA instructional materials and technology allotment is estimated to cost the state $523 million in 2008 and $534 million in 2009. However, given that the state would appropriate funds for instructional materials in the 2008-09 biennium – estimated to be $515 million for the biennium – the net increase in state costs for the 2008-09 biennium is $542 million. Costs in future biennia are likely to grow with increases in student enrollment.
Extending the instructional materials allotment to juvenile justice alternative education programs is estimated to cost $597,000 annually, beginning in 2008.
2E.38: Statute forbids state General Revenue from being expended on the technology immersion pilot, and so it is assumed that any expansion would be paid for from nonstate sources.
2F.06: Dual Language Pilot Project. The bill would limit biennial expenditures for this project to $13 million, with planning grants in 2006 limited to $260,000.
2G.01: Texas Governor’s Schools. The schools would be supported by grants, limited to $750,000 each, made from funds appropriated for that purpose. The commissioner would be granted rule-making authority. Assuming 2 schools are approved each year, the annual cost is estimated to be $1.5 million.
2L.01: The agency estimates a one-time cost of $50,000 to develop a school safety training program.
Article 4
Article 4: Charter Schools: For the facilities allotment for charters, the agency estimates that the charters that have been rated exemplary or recognized and meet the other requirements of the section represent approximately 6,000 students in ADA. At $1,000 per ADA, the annual cost of this allotment is estimated to be $6 million.
The estimated cost of providing additional state aid to qualifying charter schools for the stipulated salary increases assumes that all employees are appropriately certified. Data on certification status of charter school employees is not available. Under this assumption, the increases of $1,000 for full-time teachers, nurses, librarians, and counselors would be $4.1 million in fiscal year 2006 and $4.4 million in fiscal year 2007.
Increases to salaries of employees of charter schools that are TRS participants has an impact on contributions to TRS. Based on a 6 percent contribution rate, the increased state contribution to TRS related to increases in charter school employee salaries would be an estimated $243,000 in fiscal year 2006 and $265,000 in fiscal year 2007.
Various provisions in Article 4 of the bill would repeal provisions that relate to a state-funded supplement, distributed by the Teacher Retirement System, currently provided to most types of school district employees for the purpose of offsetting out-of-pocket costs for health insurance. The repeal of this program would yield savings of an estimated $273 million in FY 2006 and $275 million in FY 2007.
Article 7: It is assumed that the cost of new educator certificates would be offset by fee revenue.
School districts would see a decrease in local revenue and an increase to state aid commensurate with the funding formula changes described above.
The bill requires school districts to use an amount equal to at least 1% of the districts' total professional staff payroll, estimated to be approximately $200 million annually, to provide incentive payments to employees who demonstrate success in adding value to student achievement. School districts that elect to provide teacher mentoring programs would also be allowed to use a portion of the local incentive set-aside for the purpose of providing stipends to teachers who serve as mentors.
The bill contains two distinct adjustments to salaries for school district employees subject to the minimum salary schedule. Article 1, Subchapter H directs districts to provide $500 on average in additional compensation to district employees excluding administrators. Section 2A.05 would entitle each district employee subject to the minimum salary schedule to an annual total of $2,500 in increased compensation. The local cost for providing the $3,000 total additional annual compensation is an estimated $939 million in FY 2006, increasing to $1 billion by FY 2010.
Since the provision in Article 1, Subchapter H is not located in the Education Code chapter identified as compensation for the purposes of state contributions to the Teacher Retirement System pension fund, it is assumed for the purposes of this estimate that all retirement contributions on this portion of the salary provisions would be local costs. Assuming a contribution rate of 6 percent, the local cost would range from $9 million in FY 2006 to $10 million in FY 2010. School districts contribute 0.55 percent of payroll to support TRS-Care in the 2004-05 biennium. Assuming the same 0.55 percent rate would be applied in 2006-2010, the increased school district TRS-Care contribution associated with this provision would range from $0.8 million in FY 2006 to $0.9 million in FY 2010.
| Source Agencies: |
| LBB Staff: | JOB, CT, JGM
|