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ED 2
Improve Accountability for Dropouts and At-Risk Students


Dropouts have a significant effect on the state’s economy as well as the students themselves. Texas’ method of reporting dropouts has obscured the state’s dropout problem, generating legislative and public concern and resulting in the loss of federal grants for some school districts. The Texas Education Agency (TEA) should conform to national standards for dropout reporting and receive additional oversight for its dropout data collection and reporting. Also, neither TEA nor most local school districts thoroughly evaluate the effectiveness of compensatory education programs targeting students at risk of dropping out of school. The Legislature should require TEA and local districts to do so.


School dropouts have a significant effect on Texas’ economy, decreasing not only the state’s future tax revenues but also its ability to attract new business.[1] The Intercultural Development Research Association (IDRA), a nonprofit education advocacy group, has estimated the cumulative economic impact of Texas school dropouts from 1987-88 to 2001-02 to total $488 billion in lost wages, decreased revenues and increases in job training, welfare, unemployment and incarceration costs.[2] These are staggering financial losses that Texas cannot continue to tolerate if it is to remain economically healthy.[3]

Researchers at the University of Texas at El Paso have examined the relationship between education and earnings at the county level. These researchers collected data for years of education, types of degrees held and income for all 254 counties in the state. The data include the percentage of high school dropouts aged 25 or older in each county; high school graduates aged 25 or older with some college; and college graduates aged 25 or older. The study shows that lower dropout rates result in an improved local economy, especially for the state’s Border counties. The largest potential gain from a reduction in dropouts—$5,760 annually per individual—was found in Starr County in the Rio Grande Valley. If this county could increase its high school graduation rate to the state average, it would more than double its per capita income, producing a total countywide gain of more than $210 million per year.[4]

Dropout statistics and reporting

To identify dropouts, Texas school districts use a complex system of codes to describe the reason(s) why each individual student leaves school. These “school leaver codes” are difficult to understand and use, which can contribute to inaccurate dropout counts.[5] Several Texas school districts have been cited for flawed dropout data, and the Austin Independent School District has faced criminal charges for misreporting its dropout rate.[6]

Since 1989, the Texas Education Agency (TEA) has used a variety of methods to calculate and report dropout rates, with varying and highly questionable results. A recent report from the U.S. Department of Education’s National Center for Education Statistics (NCES) highlighted major discrepancies between TEA and the federal government in dropout reporting: TEA reported a 1.3 percent annual state dropout rate for 1999-2000, in contrast to a federally calculated annual dropout rate for Texas of 5 percent.[7] This difference can be attributed to the grade spans covered in the rates (grades 9-12 for the federal rate and 7-12 for the state rate) and how individuals are counted who drop out but report that they plan to enroll in a GED program (counted as dropouts in the federal rate; not counted as dropouts in the state rate).[8]

IDRA has compared the Texas (TEA) and national dropout definitions (Exhibit 1).[9]

Exhibit 1
Texas versus National Dropout Accounting

Characteristics of Students Considered Dropouts Considered a Dropout?
Texas Education Agency National Center for Education Statistics
Graduates No No
Transfers to, withdraws with intent to transfer to, a public or private school No No
Is being home schooled No No
Enrolls in college No No
Dies No No
Receives a GED certificate by March 1 of the following year No Yes
Receives a GED certificate by the last Friday in October of the following year Yes No
Enrolls in an approved adult education GED preparation program No Yes
Meets all graduation requirements but does not pass the exit-level Texas Assessment of Academic Skills No Yes
Is previously counted as a dropout No Yes
Is not eligible for state funding No Yes
Is reported as a dropout by more than one district and whose last district of attendance cannot be determined No Yes
Enrolls at any time before the third week of January of the next school year (returning students) No Yes
Except for migrant students, enrolled on the last Friday in October of the next school year (returning students) Yes No
Summer dropouts are added to the counts of the school years and grade levels completed (summer dropouts) Yes No
Summer dropouts are added to the counts of the school years and grade levels in which they fail to enroll (summer dropouts) No Yes
Cumulative enrollment is used as the denominator in dropout rate calculations Yes No
Fall enrollment is used as the denominator in dropout calculations No Yes

Source: Intercultural Development Research Association

Texas’ current system of dropout accounting and reporting has become a source of increasing legislative and public concern. Legislators, policymakers and educators believe the state has a substantial dropout problem.[10] Research and policy organizations such as the Annie E. Casey Foundation and IDRA estimate that Texas’ longitudinal or four year school dropout rate is anywhere from 12 percent to 40 percent, based on the number of children who graduate from high school.[11] Researchers also estimate that only 67 percent of Texas ninth graders actually graduate from high school.[12]

Texas’ dropout data often have been omitted from national dropout statistics due to the divergence of the state’s dropout reporting methods from federal data standards.[13] One researcher, in reviewing the current morass of dropout definitions and rates, asserts, “We would not tolerate this confusion if it were money, not children, being counted.”[14]

In summer 2002, the federal government informed all Texas districts that applied for federal dropout reduction grant funds that their dropout data did not conform to national standards, which disqualified them.[15] These grants averaged $400,000 per school district in fiscal 2002.[16] The disqualifications came despite the fact many districts desperately need such funds; IDRA, for instance, estimates that 42 percent of all grade 9-12 students in Bexar County eventually drop out of school.[17]

Dropout reporting in Texas is in a period of flux, since TEA is implementing the state’s new testing series (the Texas Assessment of Knowledge and Skills) and revised accountability system (the Academic Excellence Indicator System, or AEIS). TEA will spend the latter half of calendar 2003 developing the new version of AEIS for 2004, including definitions and data standards for dropout and school completion rates. A longitudinal (grades 9-12) high school completion or graduation rate will become an indicator in the state’s accountability system for public schools in 2004.[18]

Texas educators, legislators and other policymakers need accurate dropout information to develop effective dropout intervention and recovery programs. Education researchers assert that the best dropout definition currently available to state departments of education is the national definition provided by the U.S. Department of Education’s National Center for Education Statistics (NCES).[19] NCES defines a dropout as a person who:

(1) was enrolled in school at some time during the previous school year and was not enrolled on October 1 of the current school year; or
(2) was not enrolled on October 1 of the previous school year although expected to be in membership (i.e., was not reported as a dropout the year before) and
(3) has not graduated from high school or completed a state or district-approved educational program and
(4) does not meet any of the following exclusionary conditions:
i. transfer to another public school district, private school or state or district-approved education program;
ii. temporary school-recognized absence due to suspension or illness; or
iii. death.[20]

TEA and the Texas State Auditor’s Office, in their review of state dropout issues, also recommend the use of the NCES definition in Texas’ data collection strategies.[21]

State compensatory education

The allotment for students at risk of dropping out in the Texas school finance formulas—called state compensatory education or “accelerated instruction” funding—totaled more than $1 billion for the 2001-02 school year.[22] Federal Title I funding for “supplemental educational services for disadvantaged children” totaled more than $850 million in Texas in 2002.[23] These federal and state funds are intended to provide extra funding for programs that serve students at risk of dropping out of school and those that are academically “behind” or economically disadvantaged.

Chapters 29 and 42 of the Texas Education Code indicate that state compensatory education funds should be spent on supplemental programs and services to eliminate the performance gap, as measured by state testing, between students at risk of dropping out and all other students; reduce the difference in dropout rates between these two student groups; provide “accelerated instructional services” to at-risk students to help them perform at grade level; support Federal Title I programs for students on campuses whose student bodies are at least half economically disadvantaged (defined as being eligible for the federal free and reduced-price lunch program); and support alternative education programs.

Evaluating effectiveness

TEA’s Financial Accountability System Resource Guide (FASRG) reports in Section 9.2.7, “Evaluation of State Compensatory Education Programs,” that school districts must evaluate the effectiveness of their state compensatory education programs and include the results in their district improvement plans. Districts are instructed to evaluate their compensatory programs through the examination of the test performance and high school completion rates of at-risk versus other students. This section of the FASRG also notes that TEA is “required by law to evaluate state compensatory education statewide.”[24] But districts are not required to perform a program-by-program analysis to determine the effectiveness of each program or strategy.

Most local evaluations of state compensatory education programs are simply statistical compilations of at-risk student test performance. For example, the April 2002 Texas School Performance Review (TSPR) review of Lyford ISD found that the district did not evaluate the effectiveness of programs funded by state compensatory education dollars and had no compensatory education program evaluation at the middle or high school level.[25] Other school districts that TSPR has recently found to lack effective evaluation procedures for state compensatory education programs include North Forest, Raymondville and Wilmer-Hutchins ISDs.[26]

TSPR has found that, in fact, few districts thoroughly study the effectiveness of programs funded with state compensatory education funds.[27] Similarly, TEA has made few efforts in the past, beyond the accountability requirements of the Texas Education Code, to systematically evaluate these programs.[28]

Recently, TEA has made some progress toward such analysis. In 2001, the commissioner of Education changed the requirements for local school district annual audit reports to include a provision that the external auditor “determine whether the district evaluated the effectiveness of strategies involving students at risk of dropping out of school.”[29] Also, TEA’s District Effectiveness and Compliance (DEC) system—intended to evaluate district efforts to improve student performance in special programs—now includes provisions requiring districts to “[d]escribe the effectiveness of [each state compensatory education] program as measured through evaluations and supporting data.”[30]

Audit exemptions

The 1997 Legislature required TEA to create an auditing and reporting system to ensure that funds targeting at-risk students are spent only to supplement the regular educational program. 2001 legislation modified the definition of “at risk” and also expanded the allowable uses of state compensatory education dollars.

The new statutory language also allowed the commissioner of Education to exempt any district from the audit requirement whose students meet certain performance standards on standardized state tests. The commissioner has yet to develop these standards, however, because the 2001-2002 school year is the first year of the audit implementation.


A. The Texas Education Agency (TEA) should collect and report dropout and school completion data according to the National Center for Education Statistics’ reporting standards.

Texas’ adoption of national data collection and reporting standards would eliminate the need for “school leaver codes,” simplifying dropout data collection and reporting at the local and state levels. It also should increase public confidence in the state’s data.

B. State law should be amended to create a state education data oversight committee including representatives from the public and private sector and the offices of the State Auditor and Legislative Budget Board.

This committee should review TEA’s standards and definitions of dropouts and school completers before they are implemented in the new state accountability system.

C. State law should be amended to require local districts to thoroughly evaluate each of their accelerated instruction programs.

To maximize the efficiency of scarce instructional dollars, school districts should analyze, on a program-by-program basis, each of their strategies designed for at-risk students.

D. The commissioner of Education should direct TEA to systematically evaluate data gleaned from annual audit reports, DEC visits and other sources to fulfill the statutory mandate of TEC 42.152(d) that the agency evaluate the effectiveness of compensatory education programs.

TEA should evaluate, organize and share the wealth of information it collects on the effectiveness of compensatory education programs to ensure that districts use their supplemental funds as effectively as possible. If TEA cannot perform this evaluation with its existing resources, state law should be amended to authorize the commissioner of Education to set aside additional compensatory education dollars for this purpose.

E. State law should be amended to ensure that the criteria for exemption from audits related to state compensatory education reflect the broader statutory purposes of the funds: to reduce the disparity in performance between at risk students and all other students—and reduce the dropout rate.

Improved test performance—while extremely important—is not an appropriate single criteria by which to exempt districts from the audit. Statute should be amended to only allow exemptions for districts that have demonstrated both exemplary progress in reducing dropouts and significant reductions in the performance gap between at-risk and all other students. Compensatory education funds are intended to improve student performance and reduce dropout rates.

Fiscal Impact

These recommendations would have no direct fiscal impact on the state. If federal dropout reduction grant funds are made available, in the future, local school districts could realize additional federal funds, but the total amount of these funds cannot be estimated.

Recommendations A and B reflect a restructuring of and oversight for the current manner in which Texas school dropout data are collected, but no new data collection requirements are added. TEA reports that it has calculated a 5 percent annual state dropout rate for 1999-2000, so the agency already has the capacity to generate these data.[31]

Recommendation C increases the emphasis within TEA’s District Effectiveness and Compliance process on monitoring local school district evaluations of accelerated instruction programs; this could be accomplished with existing state and local resources simply by modifying DEC priorities.

Recommendation D, improving TEA’s evaluation of the effectiveness of various types of accelerated instruction programs, could be accomplished with existing resources or, if necessary, augmented with new federal funds from the No Child Left Behind Act of 2001 or increased set-asides from the state’s Foundation School Program compensatory education allotment.[32] In the latter case, compensatory education allotments would be slightly reduced for most Texas school districts.

Recommendation E, changing state law regarding compensatory audit exemptions, has no state or local impact since all school districts are already subject to the audit.


[1]Dallas Commission on Children and Youth, Student Dropout Summary Report and Recommendations (Dallas, Texas, April 2000), pp. 1-3.

[2]Intercultural Development Research Association, “Texas Schools Have Weak Holding Power: Cost of School Dropouts Escalates to $488 Billion,” (Last visited December 4, 2002).

[3]Texas Comptroller of Public Accounts, internal calculations by Strategic Research staff based on statistics from the U.S. Census Bureau and Texas Department of Criminal Justice, May 2002.

[4]Federal Reserve Bank of Dallas, Secondary Education: Its Impact on Border Income, by Thomas M. Fullerton (Dallas, Texas, June 2001), p. 10.

[5]Barbara Clements, Glynn Ligon and Vicente Paredes, “Flaws and Remedies: Improving Local, State and Federal Dropout Reporting,” paper prepared at the 2000 annual meeting of the American Educational Research Association, (Last visited May 14, 2002.)

[6]Barbara Clements, Glynn Ligon and Vicente Paredes, “Flaws and Remedies: Improving Local, State and Federal Dropout Reporting,” paper prepared for the 2000 annual meeting of the American Educational Research Association, (last visited October 9, 2002); and Debra Viadero, “The Dropout Dilemma,” Education Week (February 7, 2001), (Last visited May 13, 2002.)

[7]U.S. Department of Education, National Center for Education Statistics, “Data File: Local Education Agency (School District) Universe Dropout Data 1999-2000,” Appendix E, Data Tables, Percentage of Dropouts in Each Grade, by State: School Year 1999-2000, (last visited September 17, 2002); and Texas Education Agency, “Rising Scores, Declining Dropout Rate Means Texas Reaches Recognized Level,” August 16, 2001, (Last visited September 17, 2002.)

[8]Joshua Benton, “Bleaker Dropout Picture Painted,” Dallas Morning News (August 21, 2002), News Section, p. 1A.

[9]Intercultural Development Research Association, “Texas Needs Diplomas, Not Delusions,” IDRA Newsletter (San Antonio, Texas, September 2002). p. 4.

[10]Margaret Downing, “But Who’s Counting? Thousands of Students Disappear from Our Schools Yearly, but the TEA Insists They’re Not Dropouts,” Houston Press (October 18, 2001); and Janet Elliott, “Numbers Central to Dropout Fight, Critics Say State Jiggers Data to ‘Define Away’ the Problem,” Houston Chronicle (September 13, 2002), Section A, p. 37.

[11]Intercultural Development Research Association, “Attrition Rates in Texas Public Schools By Race-Ethnicity, 2000-01,” (Last visited May 29, 2002); and Annie E. Casey Foundation, “2002 Kids Count Data Book Online, Profile for Texas,” (Last visited May 24, 2002.)

[12]Manhattan Institute, Public School Graduation Rates in the United States, by Jay Greene and Marcus Winters (Washington, D.C., November 2002).

[13]National Center for Education Statistics, A Recommended Approach to Providing High School Dropout and Completion Rates at the State Level, by Marianne Winglee, David Marker, Allison Henderson, Beth Young, and Lee Hoffman (Washington, D.C., February 2000), pp. 8-12.

[14]Harvard School of Education, “Kidding Ourselves About School Dropout Rates,” by Richard Fossey, Harvard Education Letter (Cambridge, Massachusetts, May/June 1996), (Last visited May 15, 2002.)

[15]Peggy Fikac, “Texas May Lose Out on Fed Money,” San Antonio Express News (July 3, 2002),’saen’&xlb=180&xlc=748702. (Last visited July 11, 2002.)

[16]U.S. Department of Education, “Grant Information,” (Last visited September 17, 2002.)

[17]Intercultural Development Research Association, “Attrition Rates in Texas Public Schools By Race-Ethnicity, 2000-01.”

[18]Texas Education Agency, 2003 Accountability Plan (Austin, Texas, July 2002), p. 19; and Texas Education Agency, Secondary School Completion and Dropouts in Texas Public Schools 2000-01 (Austin, Texas, August 2002), p. 44.

[19]Barbara Clements, Glynn Ligon and Vicente Paredes, “Flaws and Remedies: Improving Local, State and Federal Dropout Reporting.”

[20]National Center for Education Statistics, “Frequently Asked Questions of State CCD Data Collectors and Reporters,” (Last visited May 15, 2002.)

[21]Texas Education Agency, Texas State Auditor’s Office, and Legislative Budget Board, Dropout Study: A Report to the 77th Texas Legislature (Austin, Texas, December 2000), p. 1.

[22]Texas Education Agency Foundation School Program Payment System, “Statewide Summary of Finance,” 2001-2002 school year, (Last visited October 11, 2002.)

[23]Legislative Budget Board, Federal Education Funding to Texas (Austin, Texas, June 2002), pp. 1-2, available in pdf format from (Last visited October 11, 2002.)

[24]Texas Education Agency, Financial Accountability System Resource Guide, Section 9.2.7, “Evaluation of State Compensatory Education Programs,” (Last visited October 3, 2002.)

[25]Texas Comptroller of Public Accounts, Texas School Performance Review for Lyford Consolidated Independent School District (Recommendation #16). (Last visited October 10, 2002.)

[26]Texas Comptroller of Public Accounts, Texas School Performance Reviews for North Forest ISD (Recommendation #32), Raymondville ISD (Recommendation #15) and Wilmer Hutchins ISD (Recommendation # 25) All available through (Last visited October 3, 2002.)

[27]For example, almost half (eight out of 17) of the school districts reviewed by TSPR in 2002 were recommended to implement or improve their program evaluation activities. Data supplied by Texas Comptroller of Public Accounts, Texas School Performance Review Division, “TSPR Summary of Cost/Savings by Recommendation,” October 3, 2002. (Computer printout.)

[28]Texas Education Agency, Program Evaluation Report: Compensatory Education (Austin, Texas 1988) and Texas Education Agency, Success Stories: A Case Study of Compensatory Education in Elementary Schools (Austin, Texas 1990).

[29]Texas Education Agency, “9.3.5: Role of the Independent Auditor in Testing for Compliance with Budgeting, Accounting, Operational and Reporting Standards Related to State Compensatory Education” in Financial Accountability System Resource Guide, Update 9.0 - September 2002 at (Last visited August 9, 2002.)

[30]Texas Education Agency, “District Self-Evaluation Document. District Effectiveness and Compliance,” (last visited August 9, 2002); and “District Effectiveness and Compliance Reference Guide, Part I”, Revised May 7, 2002, (Last visited August 9, 2002.)

[31] Telephone interview with Dr. Criss Cloudt, Associate Commissioner, Accountability Reporting and Research, Texas Education Agency, November 7, 2002.

[32]115 Stat. 1425 Public Law 107–110—January 8, 2002. Available at (Last visited August 9, 2002.)