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.

The LFC is only preparing FIRs on bills referred to the Senate Finance Committee, the Senate Ways and Means Committee, the House Appropriations and Finance Committee and the House Taxation and Revenue Committee. The chief clerks are responsible for preparing and issuing all other bill analyses.

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(Parenthesis ( ) Indicate Expenditure Decreases)

Duplicates/Conflicts with/Companion to/Relates to

SOURCES OF INFORMATION

State Department of Education

LFC

SUMMARY

Synopsis of Bill

The bill amends the Public School Finance Act to require school districts to forfeit their respective program units for each student who has dropped out of school after forty days. The bill creates the Dropout Prevention Fund to be administered by the State Department of Education (SDE) who will determine and distribute an amount equal to the program units generated by the district's dropouts to each school district. The bill requires school districts to use funds for alternative education programs and to provide an evaluation of the programs to SDE.

Significant Issues

SDE reports that the most recent dropout data available for NM indicates that the state's overall dropout rate for grades nine through twelve was 7.8 percent (7,230 students). This figure represents a .7 percent decrease from the previous year.

SDE indicates that count dates for calculation of program units for distribution of State Equalization Guarantee (SEG) has been the subject of discussion for years. Some school officials have noted that by determining the count dates for calculation of program by enrollment on the 40^th day of school

(with December 1 adjustment) may contribute to the dropout rate. The reason being that districts have no incentives to keep children in school once the funding level has been determined.

In this bill, program units are forfeited when the student has dropped out of school and 40 days have elapsed.

SDE survey conducted in the 1998 interim indicated that the districts experience their highest enrollments at the 40^th day and their lowest on the 180^th day.

FISCAL IMPLICATIONS

The provisions of the bill would require SDE to withhold $25,084,693 from the budgets of 89 districts. This number is based on the latest dropout rate (school year 1996-97). Reference is made to attached table.

SDE notes that the administration of the program would require at least one additional FTE at a cost of $47.5.

ADMINISTRATIVE IMPLICATIONS

The bill creates the Dropout Prevention Fund to be administered by the State Department of Education (SDE). The fund contains the monies forfeited by school districts for students who dropped out of school for more than 40 days. The State Superintendent of Public Instruction is required to calculate the amount retained for each school district's dropout adjustment and to distribute those funds to school districts. The bill requires school districts to use funds for alternative education programs and to provide an evaluation of the programs to SDE. SDE is responsible for fiscal and program accountability.

CONFLICT/DUPLICATION/COMPANIONSHIP/RELATIONSHIP

HB125/a changes the statute to require the use of prior year enrollment with a current-year adjustment for exceptional growth.

SB392 establishes the Individual Services Model Act that appropriates $2.0 million to support pilot programs in which community service providers would work closely with individual students and their families to obtain support services for students to graduate.

TECHNICAL ISSUES

The bill contains an apparent contradiction. Language in Section 1 requires school districts to forfeit program units for students who have dropped out of school. On the other hand, language in Section3 requires the State School Superintendent to retain an amount equal to the school district dropout adjustment for each district. Section 1 relates to forfeiture of units; Section 3 relates to retention of funds.

ALTERNATIVES

SDE offers the following alternatives:

Base SEG distribution on an average of prior year membership, which would encourage districts to keep students in school.

Examine issues related to the Individual Services Model based on the Division of Vocational Rehabilitation program.

CF:BD/njw

Attachment