81(R) HB 3220 - Enrolled version

LEGISLATIVE BUDGET BOARD
Austin, Texas

FISCAL NOTE, 81ST LEGISLATIVE REGULAR SESSION


May 28, 2009

TO:	Honorable Joe Straus, Speaker of the House, House of Representatives

FROM:	John S. O'Brien, Director, Legislative Budget Board

IN RE:	HB3220 by Hancock (relating to the applicability of certain laws to open-enrollment charter schools. ), As Passed 2nd House

Estimated Two-year Net Impact to General Revenue Related Funds for HB3220, As Passed 2nd House: a negative impact of ($9,726,035) through the biennium ending August 31, 2011.

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
2010	($3,954,855)
2011	($5,771,180)
2012	($9,078,018)
2013	($12,549,659)
2014	($15,740,646)

All Funds, Five-Year Impact:

Fiscal Year	Probable Savings/(Cost) from General Revenue Fund 1	Probable Savings/(Cost) from Foundation School Fund 193	Change in Number of State Employees from FY 2009
2010	($2,077,680)	($1,877,175)	8.0
2011	($765,380)	($5,005,800)	8.0
2012	($943,593)	($8,134,425)	12.0
2013	($1,286,609)	($11,263,050)	16.0
2014	($1,348,971)	($14,391,675)	17.0

The bill would authorize the State Board of Education to grant up to 10 new charters for open-enrollment charter schools each year and would allow certain charter holders to establish new campuses without applying for authorization from the State Board of Education. The bill would authorize an unlimited number of new charters to be granted for open-enrollment charter schools intended primarily to serve students with disabilities, including autism. The bill would provide for automatic renewal of a charter for a term of at least 10 years unless a charter is revoked before expiration. The bill would direct the commissioner of education to develop a financial accountability rating system for open enrollment charter schools and would require open enrollment charter schools to prepare and distribute an annual financial management report that is similar to reports required of school districts. The bill would authorize school districts to enter into educational services agreements with charter schools and would entitle districts that provide services to charter school students to state aid entitlement that represents the greater of the amount the charter school would receive for the student or the amount the district would receive.

It is assumed for the purpose of this estimate, that the State Board of Education would grant 20 new charters each year, consisting of the 10 traditional open-enrollment charters authorized under the bill and 10 charters under the unlimited authorization for open-enrollment charter schools intended primarily to serve students with disabilities, including autism. In addition, it is assumed that the approximately 165 existing charter holders who would be authorized to establish new campuses without prior SBOE approval would open an estimated 30 new campuses each year.

To the extent that new open-enrollment charter schools and new campuses opened by existing charter holders may enroll some students who would not otherwise enroll in public school districts or existing open-enrollment charter schools, there would be fiscal implications for increased Foundation School Program (FSP) costs of approximately $5,150 per weighted student. For the purpose of this estimate it is assumed that the average enrollment at each new charter school and each new campus opened by existing charter holders would be 200 students and that 5 percent of new enrollment would represent students who would otherwise not have enrolled in public schools or existing charter schools. Assuming that newly granted charters would most likely begin operations in FY11, FSP costs for FY10 for students who would not otherwise have enrolled in public schools or existing charters is limited to the estimated 30 expansion campuses. On this basis, an FSP cost of approximately $1.9 million would be anticipated beginning in FY2010. These costs would continue in FY11 and subsequent years and would increase due to new enrollment at an estimated 30 additional expansion campuses and in 20 newly operating charters annually. FSP costs for students who would not otherwise have enrolled in public schools or existing charter schools are estimated to be approximately $5.0 million in FY11, increasing to $14.4 million in FY 14.

The Texas Education Agency would incur significant costs in functional areas associated with various administrative and oversight functions with the additional number of charter holders and campuses anticipated under the bill. Agency functions related to funding and audit/financial technical assistance for charter schools would require an additional 5 FTEs beginning in the first year of implementation. As additional charters are granted and existing charters add campuses, additional staffing increasing to 14 ftes by FY14 would be needed to support a variety of functional areas including funding, audit, accountability, assessment, accreditation, monitoring and interventions. Increased costs for staffing, operating expenses, and systems modifications are anticipated to be $529,000 in FY10, increasing to approximately $1.1 million by FY14.

The Texas Education Agency estimates that technology-related costs of $1,313,100 would be incurred in FY10 to develop and maintain a financial accountability rating system for open enrollment charter schools. The Agency estimates that ongoing functions related to administering the ratings system, providing associated technical assistance to charter holders, and performing fiscal analysis and oversight would require 3.0 additional FTEs. Estimated costs of $235,815 for these functions in FY10 would be somewhat higher due to start-up expenditures for cubicles and office equipment. Costs for FY11 and subsequent years are estimated to be $216,615.

One-time costs for systems modifications totaling $240,000 are anticipated with $90,000 incurred in FY10 and $150,000 in FY11 to accommodate campus level calculation of funding for school districts and that enter into educational services agreements with charter schools and are entitled to state aid that represents the greater of the amount the charter school would receive for the student or the amount the district would receive. Development costs for the charter schools financial accountability ratings system of $1,313,100 would be anticipated in FY10.

Local Government Impact

Fiscal implications for school districts would vary depending upon individual circumstances. School districts that experience reduced enrollment due to increased enrollment in charter schools could experience reduced revenues. School districts entering into educational services agreements with charter schools could receive additional revenue if the entitlement the charter school would receive for the student exceeded the amount to which the district would otherwise have been entitled.