| TO: | Honorable Kent Grusendorf, Chair, House Committee on Public Education |
| FROM: | John S. O'Brien, Deputy Director, Legislative Budget Board |
| IN RE: | HB1263 by Harper-Brown (Relating to an urban school choice pilot program for certain public school students.), As Introduced |
| Fiscal Year | Probable Net Positive/(Negative) Impact to General Revenue Related Funds |
|---|---|
| 2006 | $1,968,211 |
| 2007 | $268,211 |
| 2008 | ($4,231,789) |
| 2009 | ($8,631,789) |
| 2010 | ($13,031,789) |
| Fiscal Year | Probable (Cost) from GENERAL REVENUE FUND 1 |
Probable Savings/(Cost) from FOUNDATION SCHOOL FUND 193 |
Change in Number of State Employees from FY 2005 |
|---|---|---|---|
| 2006 | ($931,789) | $2,900,000 | 8.0 |
| 2007 | ($431,789) | $700,000 | 8.0 |
| 2008 | ($431,789) | ($3,800,000) | 8.0 |
| 2009 | ($431,789) | ($8,200,000) | 8.0 |
| 2010 | ($431,789) | ($12,600,000) | 8.0 |
The bill would establish a pilot scholarship program for eligible students in certain school districts located in the five largest counties of the state. Eligible districts must be in a county with at least 800,000 population, be the largest district in the county with more than 50 percent low income students, or have more than 90 percent low income students. Participation would be limited to 5 percent of an eligible district's prior year enrollment (excluding victims of assault) through the 2007-08 school year.
Students residing in eligible districts must meet one of the following criteria to participate: (1) has dropped out of school; (2) is identified as at-risk of dropping out; (3) is a victim or the sibling of a victim of assault by another student; (4) eligible for special education or bilingual services; (5) have a household income less than 200 percent of the threshold for free or reduced-price lunch.
Eligible students may receive a scholarship to attend a qualifying school. A qualifying school must hold a commissioner-recognized accreditation or have applied to be accredited, and must not foster unlawful behavior. A qualifying school accepting a scholarship must administer the appropriate Texas Assessment of Knowledge and Skills (TAKS) exams or an approved national, norm-referenced assessment.
An eligible student attending a qualifying school would receive a scholarship in an amount equal to the lesser of 90 percent of the previous year's statewide average annual cost per student or the qualifying school's average actual annual cost per student; students receiving special education or bilingual education receive additional funding.
After an application review process by a schools of choice resource center, the Texas Education Agency (TEA) would issue scholarship certificates to the parent of an eligible student. The parent would then endorse it to the selected school, and the agency would be directed to pay the scholarship to the school on a monthly pro rata basis upon receipt of documentation of the child's attendance.
The agency is directed to conduct a program evaluation from a funding source other than state funds.
Effective August 1, 2010, any district in the state would be able to participate in the program if approved by the board of trustees, and student eligibility criteria would be eased.
Based on the most recent data, there are five counties with at least 800,000 population: Bexar, Dallas, Harris, Tarrant and Travis. The largest districts in each county with more than 50 percent low income students are San Antonio, Dallas, Houston, Ft. Worth, and Austin. In addition, Edgewood in Bexar County and North Forest in Harris County each have more than 90 percent low income. These districts have a combined enrollment of 605,899 for 2004-05. Largely due to the income criterion, the number of students eligible for the scholarship program from these districts would be likely in excess of 70 percent of the total enrollment, however, the the 5 percent cap on student participation would limit scholarships to approximately 30,000 for 2006 through 2008.
The bill is somewhat ambiguous as to what expenditures are to be included in determining the "statewide average annual cost per student." For the purposes of this fiscal note, it is assumed that the amount would be the state and local M&O revenue in the Foundation School Program per student in only the regular program. This assumption yields an amount of $4,434 per student enrolled. Special education and bilingual education students would realize amounts in excess of this amount.
In determining the cost or savings to the state, two types of eligible students must be considered. First, there are students who would leave public school for a private school; these students would represent a savings to the state, given the bill's provision that the scholarship be 90 percent of the statewide average cost. Second, there are students in kindergarten or first grade who would have enrolled in private school anyway, but are eligible through the household income criterion and would participate in the scholarship program. These students represent a new and additional cost to the state.
The portion of the private school population that is in kindergarten is approximately 10,000. For purposes of this fiscal note, it is assumed that 5 percent of this cohort would be eligible and request a scholarship in 2006 and 2007, with the percentage increasing to 10 percent for 2008 and thereafter. This translates to 500 students in 2006, 1000 in 2007 (two years of 500), and increasing by 1000 each year for several subsequent years. The state cost that would not have been expected for the Foundation School Program for these students is approximately $2.2 million in 2006, $4.4 million in 2007, $8.9 million in 2008, $13.3 million in 2009 and $17.7 million in 2010.
It should be noted that there exists the potential for larger state costs than estimated in this fiscal note. It is possible that an undetermined number of students -- across all grades -- who otherwise would be enrolled in private school anyway would enroll for one semester in public school to qualify for a scholarship for the rest of their school careers, and then return to private school. To the extent this behavior takes place, it would represent a significant cost to the state not included in this fiscal note's estimates.
As noted earlier, the 5 percent limitation would restrict participating students to a maximum of 30,000 through 2008. However, the availability and interest of private schools in accepting these students also would be a limiting factor. The total private school enrollment is estimated to be about 148,000 at accredited schools in the five counties in which the six largest districts are located. If these schools are operating at 85% of maximum capacity, there would be room for only about 26,000 new students. The acceptability of the scholarship amount to the school, and location of the school to the student's home are also likely to be factors limiting participation. For purposes of this fiscal note, it is assumed that approximately 15,000 students currently in public schools would choose and be accepted to enroll in a private school. For these students, the state would save the difference between their actual district per pupil funding level and 90 percent of the statewide average; because the actual funding in urban districts is generally somewhat less than the statewide average, the difference is estimated to be approximately $340 per student. For 15,000 students, this yields a state savings of $5.1 million annually.
TEA would face some administrative expenses due to the provisions of the bill. The agency anticipates the need for 3 additional full-time equivalent (FTE) positions to handle the processing of scholarship applications, which could exceed 20,000. The agency also would be responsible for making monthly payments to private schools and verifying their services; based on similar work done for charter schools, the agency estimates that it would need 5 FTEs for payment processing, with $269,868 in supporting administrative costs, as well as a one-time amount of $500,000 to develop an electronic payment processing system.
School districts would be expected to lose funding as a result of transfers to private schools as a result of the scholarship program. At an estimated 15,000 students transferring, it is estimated that the seven districts will lose about $69.3 million per year in revenue. It is unclear whether school districts would be able to reduce costs by a comparable amount of money given the small numbers of students estimated to leave each district, although some savings are likely.
After August 1, 2010 when the statutory restrictions on district and student participation expire, scholarship use and the accompanying fiscal impact on districts statewide could increase significantly.
| Source Agencies: | 360 State Office of Administrative Hearings, 701 Central Education Agency
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| LBB Staff: | JOB, CT, UP, JGM
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