FISCAL NOTE
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) |
|---|
|
FUND(S):
General Fund, Special Fund
Sources of Revenue:
General Fund
Legislation creates:
Creates New Expense, Decreases Existing Expenses, Creates New Fund: West Virginia Hope Scholarship Program Trust Fund
Fiscal Note Summary
Effect this measure will have on costs and revenues of state government.
H.B. 2013 would create a new special fund, the West Virginia Hope Scholarship Program Trust 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.
Fiscal Note Detail
| Effect of Proposal |
Fiscal Year |
2021
Increase/Decrease
(use"-") |
2022
Increase/Decrease
(use"-") |
Fiscal Year
(Upon Full
Implementation) |
| 1. Estmated Total Cost |
0 |
22,304,985 |
0 |
| Personal Services |
0 |
0 |
0 |
| Current Expenses |
0 |
22,304,985 |
0 |
| 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):
House Bill 2013 does not introduce new costs per se, as it establishes a transfer of a set amount of funds per student (currently this figure would be $4,624.29 per pupil) into a Hope Scholarship account when that student moves from the public school system to an approved alternative schooling arrangement (e.g. private or homeschooling). In that sense, it is simply a transfer of funds between the Department of Education’s fund and the Hope Scholarship Program Trust Fund.
However, there is a cost in FY 2023 as a result of starting up the program and the timing between enrollment calculations for the public school system. To be more specific, the allocation of funds to the Department of Education is based on the previous year’s enrollment. As a result, after the introduction of the Hope Scholarship Program, there would be a one-year “lag” where students would effectively be counted twice: once in the public school funding formula and again as a Hope Scholarship student. To calculate the specific cost, 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) to generate an estimate of first-year take-up 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.
This number assumes that the statewide average net state aid allotted per pupil remains constant. Furthermore, this number sets the minimum of this cost as the Hope Scholarship fund transfer is based on 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 Treasurer. If the actual number of Hope Scholarship applicants is below 2 percent of net enrollment, this figure is still accurate. If it is greater, the first-year 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 first year 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.
If the number of Hope Scholarship applicants remains constant or declines over time (due primarily to overall declining enrollment) there would be no further fiscal costs associated with House Bill 2013. Should enrollment increase over time, fiscal costs in each year would be incurred based on the amount by which the enrollment figures for the public school system must “catch-up” and the prior year’s statewide average net state aid share allotted per pupil based on net enrollment adjusted for state aid purposes.
Memorandum
There are a few elements to House Bill 2013 that, although they cannot be directly estimated, should be mentioned.
Based on our interpretation of the eligibility criteria, a parent of a student currently in private or homeschooling could enroll their child in a summer public school program, making them eligible to apply for the Hope Scholarship Program. Alternatively, they could enroll their child in the public school system to become eligible. As this would introduce new students into the eligible population, it has the potential to substantially increase costs. Based on data from the National Center for Education Statistics there have been an average of 14,285 private school students in West Virginia from 2003 to 2017, with no clear increase or decrease over time. For homeschooled students we estimate approximately 10,000. Assuming current private and homeschool enrollment is similar, and assuming all of these students use one of these methods for becoming eligible for the Hope Scholarship, this could increase the cost of the program to the state by $112,300,882.65 per fiscal year, again assuming no increase in statewide average net state aid allotted per pupil. Should that figure increase, this cost would proportionally increase and vice versa should it decrease.
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 ($1,115,249.27 based on our first-year allocations calculated above), the Treasurer may request an appropriation in an amount equal to the administrative costs associated with the increase in Hope Scholarship accounts.
The majority of 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 revenue to the Department of Education via lower eligibility for certain federal funds.
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.
Person submitting Fiscal Note: Peter Shirley
Email Address: peter.shirley@wvlegislature.gov