NOTE: As provided in LFC policy, this report is intended for use by the standing finance committees of the legislature.  The Legislative Finance Committee does not assume responsibility for the accuracy of the information in this report when used in any other situation.

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(Parenthesis ( ) Indicate Expenditure Decreases)

Relates to HB125

SOURCES OF INFORMATION

State Department of Public Education (SDE)

SUMMARY

Synopsis of Bill

House Bill 597 amends the Public School Code to require districts to use either the average daily attendance report from the prior year or the average daily attendance report from the prior school year plus the average annual percentage MEM increase for the previous five school years in the calculation of program units for distribution of State Equalization Guarantee (SEG) funds. This bill also requires districts to submit class size and membership reports on the 40^th, 100^th, and 140^th days of the school year.

Significant Issues

This bill proposes to change the current method of funding public schools from an enrollment based system that uses current year membership to a system based on prior year attendance. Units will no longer be determined by a single 40^th day and December 1 count but will be determined on the basis of the average of three counts adjusted by a December 1 special education count.

During the 1998 interim, the State Department of Education examined student count issues in order to determine the most appropriate mechanism to count students for funding purposes. The department conducted a voluntary survey of school districts, requesting 20 day membership and attendance reports for the 1997-98 school year, twenty-seven districts responded. The results indicate that enrollment peaks at the 40^th day and is the lowest on the 180^th day which is also the last day of school for most districts. Averaging 20 day reports throughout the year resulted in an average enrollment slightly above half-way between enrollment fro the 40^th and 180^th days.

The major difference between enrollment based and attendance based systems is that attendance based systems account for student presence in the classroom thus student accountability is year-round. Enrollment based systems provide a snapshot of one or multiple count dates and recognize only enrollment status.

FISCAL IMPLICATIONS

The fiscal impact cannot be determined for an attendance based system since data is not available.

ADMINISTRATIVE IMPLICATIONS

SDE indicates that the Accountability Data System could be redesigned to handle the change; however, the audit staff would not be able to handle the additional workload.

CONFLICT/DUPLICATION/COMPANIONSHIP/RELATIONSHIP

House Bill 597 relates to House Bill 125. House Bill 125 amends the Public School Finance Act to require the use of prior year 40^th day and December 1 membership for calculation of program units for distribution of State Equalization Guarantee (SEG) funds.

TECHNICAL ISSUES

See attached analysis by SDE for technical issues.

OTHER SUBSTANTIVE ISSUES

One of the issues receiving a great deal of attention by parents, educators, and legislators is the relationship between student dropouts to the current student count mechanism for funding public schools in New Mexico. Recent discussion has centered around concerns that once school districts receive funding based on the 40^th day and December 1^st count dates, there is no incentive built into the formula for districts to retain students. Many states such as Missouri, Texas, Illinois, Kentucky, and New York have moved to attendance based systems. States that have implemented Average Daily Attendance (ADA) based allocation systems, report that student attendance has risen and that the system also serves as a positive incentive to school districts for funding. ADA is calculated by taking the total number of students in attendance during a specified reporting period, divided by the number of days school is in session during the period. In some states, a number of special adjustments that recognize various student and district characteristics such as growth are also included in the calculation.

The Legislative Finance Committee recommended that SDE require school districts to report student daily attendance data via the Accountability Data System, and that the department collect and compile attendance data from school districts and report during the interim to the committee, the feasibility of implementing an attendance based allocation system that provides positive incentives for retaining students for the 2000-2001 school year.

CTF/njw