State Fiscal Highlights

STATE FUND	FY 2001	FY 2002			FUTURE YEARS
General Revenue Fund
Revenues	- 0 -		- 0 -	- 0 -
Expenditures	- 0 -		-0 -	- 0 -
Other State Funds
Revenues	- 0 -		- 0 -	- 0 -
Expenditures	- 0 -		- 0 -	- 0 -

Note: The state fiscal year is July 1 through June 30. For example, FY 2002 is July 1, 2001 – June 30, 2002.

· Offsetting fiscal effects.

· The softening of the fourth grade guarantee may reduce remediation costs. On the other hand, the increase in the number of grades where remediation is required could lead to increased costs.

· One time costs to develop news tests and diagnostic instruments. Appropriations are provided in the executive budget proposal.

· One time costs to develop new state standards. Appropriations are provided in the executive budget proposal.

· Saving of $17 million per year from eliminating the stipend for passing the 12^th grade test.

Local Fiscal Highlights

LOCAL GOVERNMENT		FY 2001		FY 2002		FUTURE YEARS
Counties
Revenues	- 0 -		- 0 -		- 0 -
Expenditures	- 0 -		- 0 -		- 0 -
Other Local Governments
Revenues	- 0 -		- 0 -		- 0 -
Expenditures	- 0 -		- 0 -		- 0 -

Note: For most local governments, the fiscal year is the calendar year. The school district fiscal year is July 1 through June 30.

· Offsetting fiscal effects on school districts. By softening the fourth grade guarantee, and allowing students to advance under special conditions, costs associated with remediation might be offset.

· Increase in the number of grades where remediation is required could lead to increased costs.

Detailed Fiscal Analysis

New Standards, Diagnostic Assessment, and Test Development

This bill alters existing legislation dealing with school standards, accountability, testing, and requirements in a number of key ways. For one, it eliminates the requirement that school districts implement competency-based education programs, and directs the Department of Education to develop statewide academic standards for each of the grades kindergarten through twelve in reading, writing, math, science, and social studies. This change effectively transfers responsibility and costs away from school districts to the Department of Education. Thus there will be costs associated with the Department of Education’s development of standards, new tests, and diagnostics. Some of these costs will extend to the next biennium. Developing tests and diagnostic instruments are one time costs in addition to on-going costs. The Department of Education estimates that these would amount to about $400,000 per section. With 15 sections in total, this amounts to about $6 million. The bill creates a timeline for the adoption of standards, model curricula and tests. Standards and model curriculum begin in December 2000 and continue through July 2004. Tests are to be administered between 2003 and 2007. In order to bring Ohio in compliance with federal Chapter I requirements, all children will be given some type of assessment.

Even with these changes, on-going costs of the tests, however, could be about the same as the current system, or possibly higher, depending upon choices made for assessments and grading methods. Current tests, especially writing, are fairly inexpensively administered. Today, writing tests have been criticized for being scored by non-teachers out of state. Scoring in state by actual teachers will cost more. Likewise, the more short answers questions on a test, the higher the costs will be. The Department of Education estimates that costs will be about $25 per student for the new tenth grade test (all 5 sections), or about $5 per section. Assuming this estimate applies to other tests, if student enrollment in each grade was between 110,000-130,000, then this would add up to about $2.75M-$3.25M for every 5 sections (annually). Assuming 15 compatible sections, the on-going cost would be between $8.25M-$9.75M for all tests annually. This would be similar to current cost levels.

The legislation also phases in the development of 15 achievement tests (total) in third, fourth, fifth, seventh, eighth, and tenth grades to replace 20 proficiency tests currently administered in fourth, sixth, ninth, and twelfth grades. From a fiscal perspective, the change in the number of tests results in only a minimal cost differential. Still there may be some savings resulting from the elimination of the twelfth grade test. The bill completely eliminates the twelfth grade proficiency test and the accompanying $500 scholarship after the current school year. This change will result in savings for the state of about $17 million per year beginning in FY 2002 or FY 2003 depending on how the scholarships from the Spring 2001 test are paid for. In addition, the bill directs the State Board to develop diagnostic assessments aligned with academic standards, and school districts have to administer the diagnostic assessments at least once annually to all students in the appropriate grade levels. With the elimination of the twelfth grade test, costs for these diagnostics would likely be offsetting.

The bill deals with students who should have graduated, but who did not because of failing to obtain enough credits or because of failing to pass one or more ninth grade proficiency tests. Students will only be required to obtain the number of credits that he or she needed in the year he or she would have graduated. Students who should have graduated in 2000 or earlier will never have to take the science test to graduate. Students who should have graduated when the ninth grade test was being used will be credited for the tests they have already passed. Furthermore, there will be a two-year window after the tenth grade test is implemented in which students may come back and take the ninth grade test. These changes may result in reduced costs for the state. For one, the number of sections to be scored would be lessened, and repeat testing minimized. Any costs associated with scoring will thereby be minimized.

Grade Guarantees and Intervention Services

A potential area where costs could arise is in those provisions that make school districts provide intervention services to students whose scores on the diagnostic assessments show that they are unlikely to meet the academic standards. Still, it should be noted that remediation services are already required by existing provisions. In a manner similar to current law, the bill requires school districts and public community schools to provide intervention services. The sub bill extends this to students scoring below a specific range on the third, fourth, fifth, seventh, eighth and tenth grade achievement tests as well as the fourth and ninth grade proficiency tests. The types of intervention services remain up to each district. This increase in the number of grades where remediation is required could lead to a different distribution costs among grades. If districts could redeploy existing resources, then costs could be minimized.

Currently, there are a number of state and federal funds for remediation and intervention. The following chart shows amounts committed for such purposes:

Program FY 2002 FY 2003

Reading/Writing Improvement	$ 26.7M	$33.6M
Ohio Reads	$28.8M	$28.8M
DPIA – Class Size Reduction and Safety and Remediation	$240M	$240M
Class Size Reduction (Federal)	$32.2M	$33.9M
Prevention & Intervention – Budget Program Series 6	$426M	$447M
Totals	$753.7M	$783.3M

The amounts in the table represent additional amounts provided by grant programs that are intended to assist students that are having difficulty keeping up with their grade level. Most of the dollars are distributed based on district poverty so that relatively large amounts go to high poverty districts and little goes to low poverty districts. The grant amounts are beyond the normal costs for education that are reflected through state Base Cost funding and educational services delivered by the regular classroom teacher during regular school hours or in after school or before sessions.

In 1997, the 122nd General Assembly enacted legislation concerning the academic accountability of school districts. One of the provisions of that act, commonly known as the fourth grade guarantee, aims at ensuring that students are reading at a fourth grade level before being promoted to fifth grade. Under that act, beginning July 1, 2001, school districts (but not community schools) are prohibited from promoting to fifth grade any student who does not pass the fourth grade reading proficiency test. There are, however, two exceptions that allow a fourth grader to be promoted without passing that test. First, if the student's principal and reading teacher agree that the student is academically prepared for the fifth grade, the student may be promoted. The definition of "academically prepared" is determined by each district in its promotion and retention policy. Second, a student with a disability may be promoted if the student's individualized education program (IEP) excuses the student from taking the test. To give students multiple opportunities to pass the fourth grade reading test, it is administered three times a year beginning in the 2001-2002 school year: once before December 31 (actual administration is in October), once no earlier than the Monday of the week containing March 15, and once during the summer before fifth grade. Students who do not pass the test during the school year must be offered intense summer remediation services before taking the test for the third time. Currently, a student's participation in summer remediation is optional. Since this system has never been fully implemented it is difficult to ascertain what the fiscal consequences of these policies would have been. Also, the results of this legislation are tied to the “cut” scores for the tests, how student perform a second or third time on the test with the passage of time and additional attention, and how many students the teachers and principals would have advanced. Those remain largely unknown factors.

This bill changes the fourth grade reading guarantee to provide school districts with three specific options for students who receive a below basic score on the fourth grade reading proficiency test: 1) promotion to fifth grade if the principal and reading teacher agree that other evaluations of the student's work indicate the student is academically prepared for fifth grade, 2) promotion to fifth grade with "intensive intervention" in that grade, or 3) retention in fourth grade. This amounts to a softening of the fourth grade guarantee because it allows districts to advance students without having to go through the complicated process of getting both the teacher and the principal to sign off on the student. Under this bill, the school districts have more options in dealing with students who do poorly on the tests. Theoretically, therefore, it seems likely that fewer students would be retained as compared to those that would be retained under preexisting law. As a result, costs associated with remediation and retention in the fourth grade might actually be reduced. As with the original legislation, costs are partially dependent upon the relative difficulty of the tests and “cut” scores selected for the various levels. This is not known at this time.

The bill replaces the fourth grade reading guarantee with a third grade reading guarantee beginning July 1, 2003, and provides school districts with three options for students who receive a below basic score on the third grade reading achievement test in the third or fourth grade: 1) promotion to the next grade if the principal and reading teacher agree that other evaluations of the student's work indicate the student is academically prepared for the next grade, 2) promotion to the next grade with "intensive intervention" in that grade, or 3) retention in the current grade. Once again, there will be costs associated with any type of intervention, but if existing resources can be utilized, these can be minimized.

There is some potential, however, for increased costs, in that districts now can only advance students who get a below basic score if: 1) intensive remediation is undertaken in that grade, or 2) if the principal and teacher agree the student is at the appropriate academic level. It is likely that most districts would use the first method to advance students, as it is easier to implement than a review process involving teachers and principals. The process could also involve parental input and agreement on remediation efforts; this would be important for a successful eventual outcome. As with the fourth grade guarantee, fewer students are likely to be retained under the new provisions than the preexisting ones.

Report Cards

Also, the bill requires the Department of Education to issue report cards for individual school buildings in addition to school districts, and requires them to establish a standard unit of improvement for individual school buildings and requires school districts to develop continuous improvement plans for buildings within the district that are not effective. The bill mandates that the Department of Education recommend an intervention plan to the General Assembly for consistently failing districts and schools, and also requires the Department to identify research on the effective use of instructional time and to disseminate such studies through the Ohio SchoolNet Commission. Since schools already receive report cards, there will be little change other than the official codification of existing practices, and thus no major fiscal effect.

The bill requires that there be at least 17 criterion to be used in report card, to be evaluated according to the categories “excellent,” “effective,” “continuous improvement,” “academic watch,” and “academic emergency.” Furthermore, the bill requires the collection and the disaggregation of data. There may be additional costs associated with the redesign of the report cards, relevant market testing, and the disaggregation process, but this is likely to be under $1M.

Conclusions

In the final analysis, in can be concluded that most costs are offsetting compared with current law. For example this bill notes that remedial efforts should be taken in order to get a student’s “score in the proficient range.” This language replaces prior language associated with students reaching fourth grade levels of literacy and basic competency. Likewise, the provisions requiring remediation specifically for the fourth grade guarantee is offset by language dealing with all achievement tests. Another area where costs are offsetting is in the number of tests themselves. While it is true that a number of new tests are being created and spread out over a large number of grades, the absolute number of tests (15) is about the same or less.

The costs associated with many of the provisions of this bill can be characterized as minimal or offsetting because the bill is designed to reform, rearrange, and/or soften existing legislation. While there are substantive changes in functionality, agencies responsible for action, etc., as well as attempts at addressing problems associated with the alignment of curriculum and testing, the bill does not create new costs.

q LSC fiscal staff: Matthew Wells, Ph.D., Budget Analyst

\\Budget_office\isis_vol1.lbo\FN124\SB0001IN.doc

BILL:	Sub. S.B. 1		DATE:	March 28, 2001
STATUS:	As Reported by Senate Education		SPONSOR:	Sen. R. A. Gardner
LOCAL IMPACT STATEMENT REQUIRED:		No	Offsetting savings