Date Requested: February 17, 2021
Time Requested: 10:28 AM
Agency: Legislative Auditor
CBD Number: Version: Bill Number: Resolution Number:
2560 Introduced HB2013
CBD Subject: Education (K12)


General Fund, Special Fund

Sources of Revenue:

General Fund

Legislation creates:

Creates New Expense, Decreases Existing Expenses, Creates New Fund: West

Fiscal Note Summary

Effect this measure will have on costs and revenues of state government.

House Bill 2013 would create a new special fund, the West Virginia Hope Scholarship Program Expense Fund, for the purpose of providing parents of children enrolled in West Virginia public schools the opportunity to seek alternative education arrangements and receive Hope scholarship funds to cover associated qualifying education-related expenses. The amount of funds each student’s individual account receives annually is equal to 100 percent of the prior year’s statewide average net state aid share allotted per pupil based on net enrollment adjusted for state aid purposes. These funds are transferred from the Department of Education to a special revenue fund in the State Treasury. In total, the amount transferred each year equals the greater of an amount not less than two percent of net public-school enrollment adjusted for state aid purposes or the total number of eligible Hope Scholarship applicants received by the Treasurer, if available, multiplied by the prior year’s statewide average net state aid allotted per pupil. Initially, students become eligible for the program by being enrolled full-time and attending a public elementary or secondary school program in the state for at least 45 days during an instructional term at the time of application and until an award letter is issued by the board. Alternatively, the child could be eligible by having been enrolled full-time in a public elementary or secondary school program in the state for the entire instructional term in the previous year or, finally, be eligible at the time of application to enroll in a kindergarten program in this state. However, should the participation rate on July 1, 2024 of the combined number of students in the Hope Scholarship Program and students eligible who have applied to participate in the Hope Scholarship program during the previous school year is less than five percent of net public school enrollment adjusted for state aid purposes for the previous school year, then all children eligible to enroll in a kindergarten, public elementary, or public secondary school at the time of application are deemed eligible effective July 1, 2026.

Fiscal Note Detail

Effect of Proposal Fiscal Year
Fiscal Year
(Upon Full
1. Estmated Total Cost 0 30,271,452 103,564,073
Personal Services 0 0 0
Current Expenses 0 30,271,452 103,564,073
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 0 0 0
2. Estimated Total Revenues 0 0 0

Explanation of above estimates (including long-range effect):

To be clear, this Fiscal Note references the costs associated with the Engrossed Committee Substitute version of House Bill 2013 with the adopted strike and replace amendment from the House Finance Committee. In practice, the strike and replace amendment would not change our projected fiscal cost per fiscal year upon full implementation for House Bill 2013, but it does change when we expect those effects to occur. There are two primary factors which drive the fiscal costs associated with this bill. The first is the “startup” cost associated with the program. When the program begins at the start of FY 2023, it will require an amount to be transferred equal to 2 percent of net public-school enrollment adjusted for state aid purposes multiplied by 100 percent of the current statewide average net state aid allotted per pupil. This is done to establish the fund for the initial cohort of recipients. However, because the initial cohort of Hope scholarship students would have been enrolled in the public-school system in the previous year, and because FY 2023’s school funding is based on the prior year’s enrollment (on the 1st of October, to be precise), there will be an effective double counting of these students. That is, the students counted twice are those who were in a public school in 2021-2022 but intend to utilize the Hope Scholarship Program in 2022-2023. To estimate what this cost will be, we take current 2020-2021 school enrollment (252,357) and project a 1.5 percent per year decline based on recent historical trends. Thus, our expected enrollment in 2023-2024 is 241,172. From there, we take 2 percent of that number (4,823.44) and multiply that by the current statewide average net state aid allotted per pupil ($4,624.29) to yield a total cost of $22,304,985.36. The second is the growing cost over time as more of the total private school and homeschool populations become eligible through being kindergartners and “cycling” through the education system. To be more precise, students are eligible for the Hope Scholarship if they are eligible to enroll in kindergarten, providing a path for students to receive the Hope Scholarship without needing to enroll in the public school system first. To calculate these costs, we make three assumptions. First, we assume full take-up of the program by eligible students. Next, we assume that there are 11,395.67 private-school students and 11,000 homeschool students. The first number comes from data provided by the Department of Education on private-school enrollment in West Virginia for school years 2014-2015 through 2019-2020. That figure represents the average enrollment over those School Years and represents our estimate of private school enrollment in subsequent years as we observe no clear pattern of increase or decrease over time. For homeschool students, we see approximately 11,000 homeschool students in the early years of the provided data before a decline in school years 2018-2019 and 2019-2020, but we are told this is due to a change in how the data is collected and that 11,000 is a reasonable estimate. That gives us a total private and homeschool student enrollment of 22,395.67. Finally, we assume that these students are evenly distributed across school grades, such that 1/13th of them are in kindergarten, 1/13th in 1st grade, up to 1/13th in 12th grade. From this, we can see that (1/13)*(22,395.67) = 1,722.74 private and homeschool students will be eligible for Hope Scholarships in FY 2023 as a result of beginning kindergarten. Multiplying this by the $4,624.29 current statewide average net state aid allotted per pupil yields a total cost of these new entrants as $7,966,467.14. Adding this figure to the one at the end of the preceding paragraph yields the figure in the above table of $30,271,452.50 for FY 2023. If this pattern were to continue, the full implementation of the bill would arrive in FY 2035 when all 13 cohorts of students (K through 12) in the state would have had a chance to enroll in the Hope Scholarship program without ever having to enroll in public schools. Under this scenario, we would project the fiscal costs of this bill to increase by $7,966,467.14 per fiscal year (subtracting off the one-time startup cost in FY 2024) until FY 2035. However, another provision in this version of the bill, by our estimations, would be triggered. Specifically, we estimate based on our scenario describe in the preceding paragraph, that participation in the program would be approximately 3.4 percent on July 1, 2024. As a result, beginning in FY 2027, all 22,395.67 private and homeschool students will be eligible, generating a per fiscal year cost of (22,395.67*$4624.29) = $103,564,072.82.


There are a few elements to House Bill 2013 that, although they cannot be directly estimated, should be mentioned. One is that the statewide average net state aid allotted per pupil remains constant. Increases or decreases in this figure will directly affect these estimates. This figure has declined slightly over the past two years. Next, House Bill 2013 sets the amount of the Hope Scholarship fund transfer to be the greater of 2 percent of net public-school enrollment adjusted for state aid purposes or the total number of eligible Hope Scholarship applicants received by the Hope Scholarship Board. Thus, in relation to the startup costs noted in the first paragraph of the above section, if the actual number of Hope Scholarship applicants is 2 percent of net enrollment or below, the figure remains accurate. If it is greater, the startup cost would be an additional $4,624.29 per pupil. A 1 to 3 percent participation rate would be consistent with the take-up rates of the established Education Savings Account programs elsewhere in the United States. At the top end (3 percent), the startup cost would equal $33,457,478.04. Higher amounts would be possible if the actual take-up in the first year exceeds this range. Additionally, the startup costs are presumed to only occur in the first year, as we assume all interested parents will immediately switch their children into the Hope Scholarship program. However, it is possible that additional students apply for a Hope Scholarship in future years. If this occurs, each such student will be counted twice in the same manner described above. Thus, costs will incur to the state each time an additional student moves from the public school system to a Hope Scholarship in the same way as described above, albeit on (likely) a smaller scale. There could be some cost savings associated with the bill if declines in public-school enrollment triggered a decline in state aid to the public-school system. As enrollment declines, fewer staff and resources would be calculated in many of the Steps in the funding formula, tending to put downwards pressure on the statewide average net state aid allotted per pupil. At our estimate of 241,172 students in SY 2023-2024, this would incur a loss per public school (2% of 241,172 divided by 685 public schools) of approximately 7.04 students per school. This may decrease funding in many Steps, but others are tied to factors independent (at least in the short run) from enrollment and some that are unrelated to enrollment entirely (e.g. fuel prices for transportation of students). Furthermore, to calculate how such enrollments would change both the state funding formula as well as overall expenses to the state, we would further need to know where the students who elect to switch reside. Given that students need a private school within a reasonable distance to attend, it is not clear that this would impact the more rural areas of the state the same as the less rural or urban areas. At the same time, parents in those areas may be more inclined to homeschool, leaving the overall effects of the Hope Scholarship Program across different portions of the state ambiguous. Thus, we do not see a straightforward approach for projecting where such enrollment declines would be most likely to occur. As we would need to either model or assume all these factors to predict what cost savings may occur, and we believe such analysis to be beyond the scope of this Fiscal Note, we assume that the amount will remain constant. The bill allows up to 5 percent of the fund to be used to cover the annual administrative costs of the Hope Scholarship Program. Should the administrative costs exceed this amount ($1,513,572.63 based on our first-year allocations calculated above), an additional appropriation in an amount equal to the administrative costs associated with the increase in Hope Scholarship accounts may be requested. Most federal funding for public schools is based on Census and other population data, specifically Title I and Title II. Because of this, these funds would not be affected by an enrollment shift from public schools to private or homeschooling. Some other programs, such as Child Nutrition, may be affected by the passage of House Bill 2013 and subsequent enrollment shifts out of the public school system. This would incur a decline in receipt of federal funds by the Department of Education. Our participation estimates of 1 to 3 percent are based on other Education Savings Account programs that exist in other states, namely Arizona, Florida, Mississippi, North Carolina, and Tennessee. However, these programs tend to focus on students with Individualized Education Plans (IEPs) or have special needs. Because the Hope Scholarship Program does not have such requirements and is much more universal in nature, the take-up rate may be quite different. If it is substantially higher, the first-year startup costs may be understated. The estimates above assume full take-up by all eligible private and homeschool students as the cohorts “cycle” through and are able to utilize the Hope Scholarship program. If take-up is, for example, 50 percent, the costs will be halved. We believe this represents a realistic lower-bound on costs, as we assume all private school students will utilize the program. However, some homeschool parents may not elect to choose to participate due to the conditions laid out by the bill to receive funds and, as a result, their nonparticipation could lower the costs by as much as half if none participated. However, our interpretation of the additional requirements of the Hope Scholarship appears to be rather small when compared to the amount of funds received as a result. The largest additional hurdle we see, aside from the application and renewal process itself, is that homeschool parents must report a standardized test score each year for their child each year, rather than four times at grade levels three, five, eight, and eleven as current code stipulates. We assume that parents will spend all funds they receive on qualifying education-related expenses for their child. Should a parent not spend all such funds and the student graduates or turns 21 years of age, the unused funds would be returned to the state and reduce the overall cost of the program. Finally, this Fiscal Note does not account for the committee amendment capping the amount per student at $3,000 per fiscal year. We would project this stipulation to bind, with costs of $19,638,551.54 in FY 2023 and $67,187,010 per fiscal year upon full implementation; these would in place of the costs in the Breakdown by Fiscal Year table above. In practice, all of the other stipulations, assumptions, etc. remain constant except in every calculation we replace the current $4,624.29 with $3,000. Put another way, the figures shown here can be backed out from the table above by taking those calculations and multiplying them by (3,000/4,624.29).

    Person submitting Fiscal Note: Peter Shirley
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