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ED 6
Increase Incentives for Students and Schools to Participate in the Early Graduation Scholarship Program

Summary

Students who graduate from high school early or with college credit save money for themselves, their parents and taxpayers. Students who graduate from high school within 36 months can receive a $1,000 tuition scholarship through Texas’ Early Graduation Scholarship Program, yet few take advantage of this option. Increasing the tuition scholarship amount and extending it to include required fees would make it more valuable to students. Extending the program to include seniors who graduate early and students who earn college credit in high school would make the program even more attractive, while expanding the state’s savings. Including a rebate for schools to replace lost revenue would also improve outcomes.

Background

To graduate from a Texas public high school, students must accrue 22 to 24 state-approved credits, depending on their graduation plan.[1] Most Texas high schools provide schedules that allow students to accrue at least seven or eight credits per year.[2] This allows students who attend high school for four years to earn 28 (seven classes per year) or 32 credits (eight classes per year). In addition, some students also earn high school credits in middle school and summer school, through correspondence or Internet-based courses and by examination.

Because most high schools offer seven or eight periods per day, many students can earn enough credits to graduate in three years, yet few of the state’s more than 200,000 annual graduates do so.[3] Instead, most graduate in four years, taking extra elective courses, concentrating on earning college credit in high school or working part-time during the school day. Courses usually taken sequentially, particularly the four years of English, also can contribute to fewer early graduates.

The state began encouraging students to graduate a year early in 1995 by establishing the Early Graduation Scholarship Program, which provides a $1,000 tuition scholarship for students that graduate or are eligible to graduate within 36 months. The program requires a matching $1,000 tuition scholarship from private institutions that choose to participate. The scholarships are funded entirely by the state savings generated by students who graduate early. [4]

The program has attracted only about 4,000 graduates annually in recent years, however—a participation rate indicating that the program has problems that reduce its effectiveness.[5]

Flaws in the program

First, the program applies only to students eligible to graduate within three years. Utah, by contrast, prorates a similar graduation scholarship program to include seniors who graduate early in their fourth year of high school.[6]

Secondly, the scholarship only applies to tuition, which limits its usefulness to students who have other tuition scholarships or who cannot afford the fees required for college, which often are as high as tuition costs.[7] The savings that fund the scholarship program also are used to provide scholarships that include both tuition and required fees, but these more generous scholarships are available only to teachers’ aides and the children of welfare recipients.[8]

Furthermore, the program does not acknowledge recent trends toward the accumulation of college credit in high school. In recognition of this trend, Utah recently established a scholarship to pay 75 percent of tuition for two additional years of college for students who graduate from high school within 48 months with 60 semester hours of college.[9]

Another problem is that schools have little incentive to promote the Early Graduation Scholarship, since districts lose state funding whenever students graduate a year early. In recognition of this problem, Utah pays school districts half of the student’s scholarship amount the year following his or her early graduation.[10]

The Early Graduation Scholarship Program has no time limit by which a student recipient must use or lose the scholarship; in effect, the awarding of a scholarship under the program encumbers these funds for the student’s life. In contrast, the Toward Excellence, Access and Success (TEXAS) Grants, the state’s largest need-based scholarship program, requires students to use their scholarships within six years or lose them.[11] Texas has accumulated encumbrances of at least $20 million in general revenue for the Early Graduation Scholarship Program to date and will continue to accumulate more each year.

Current statutory language regarding eligibility for the program requires only that students be eligible to graduate within three years; it does not actually require them to do so. Students can acquire the scholarship only to attend a fourth year of high school, thereby nullifying the savings in state education funding upon which the program is based. The Texas Higher Education Coordinating Board has developed rules in an attempt to clarify this situation, but there has been no accompanying change in state law.

Recommendations

A. State law should be amended to increase the Early Graduation Scholarship from $1,000 to $2,000; add a $500 scholarship for students graduating within 41 months; and add an additional $1,000 scholarship for students graduating within 36 months and with 15 or more hours of college credit or graduating within 45 months with 30 or more hours of college credit.

The increase in the scholarship amount and the additional scholarships would provide new incentives for students to participate and would recognize the achievement of students receiving college credits in high school. As in current law, the scholarships would apply only to Texas public institutions of higher education and to participating Texas private institutions that match the scholarship amounts.

B. State law should be amended to pay school districts $1,000 for each student graduating within 36 months of entering ninth grade and $250 for each student graduating within 41 months of entering ninth grade.

This would help compensate districts for some of the revenue they lose when students graduate early and should provide an incentive for districts to promote the program.

C. State law should be amended to extend the Early Graduation Scholarship Program to include required fees.

This would extend the same benefits currently enjoyed by teachers’ aides and the children of welfare recipients to the early graduates who generated the savings that fund the scholarships. This would significantly increase the value and the attractiveness of the scholarship.

D. State law should be amended to stipulate that recipients of Early Graduation Scholarships must use or lose the funds within six years, as is required under the TEXAS Grants Program, and that recipients must actually graduate within the required time frames, rather than simply being eligible to do so.

This would clarify the program’s fiscal outlook, free funds that would otherwise be encumbered and guarantee that the state realizes the projected savings.

Fiscal Impact

These recommendations would result in net savings to General Revenue of $409,000 in fiscal 2004 and $2.5 million in fiscal 2005, increasing to $15.7 million by fiscal 2008. Increased incentives for students to graduate early and for schools to promote these outcomes would generate savings beyond their costs.

The recommendations would require two additional full-time equivalent employees (FTEs) in fiscal 2004 and one FTE in fiscal 2005 and beyond for the Texas Higher Education Coordinating Board and another 0.5 FTE in fiscal 2004 and beyond for the Texas Education Agency, to address the additional administrative tasks involved in modifying the program and maintaining the additional scholarships and rebates.

Recommendations A, B and C would mean an estimated 4,000 new scholarships for students in fiscal 2004 and more than 10,000 in fiscal 2005, increasing to nearly 13,000 by fiscal 2008. The increase in early graduates would mean gross savings of $1.2 million in fiscal 2004 and $19.5 million in fiscal 2005 with net savings of $409,000 in fiscal 2004 and $2.5 million in fiscal 2005 after deducting the cost of scholarships and rebates to schools. The gross savings would increase to $37.8 million in fiscal 2008 with net savings of $15.7 million after scholarships and rebates.

Recommendation D would allow the state to cease encumbering general revenue for unused scholarships indefinitely. Recommendations D and E would entail negligible administrative costs. Administrative costs for the FTEs would amount to $116,000 in fiscal 2004 and $69,000 in fiscal 2005.

To pay for the administrative costs, the appropriations for the Texas Higher Education Coordinating Board should be increased by $74,000 in fiscal 2004 and $37,000 in fiscal 2005, and the appropriations for the Texas Education Agency should be increased by $19,000 in each year of the biennium. To pay for the retirement and insurance costs for the additional employees, the appropriations for the Employees Retirement System should be increased by $17,000 in fiscal 2004 and $10,000 in fiscal 2005. To pay for the employer Social Security match, the appropriations for the Comptroller of Public Accounts should be increased by $6,000 in fiscal 2004 and $4,000 in fiscal 2005. (Totals may not add due to rounding.)

Fiscal Year Gross Savings to General Revenue Cost to General Revenue Savings to General Revenue Change in FTEs
2004 $1,188,000 ($779,000) $409,000 +2.5
2005 $19,456,000 ($16,981,000) $2,475,000 +1.5
2006 $26,258,000 ($19,449,000) $6,809,000 +1.5
2007 $32,408,000 ($20,834,000) $11,574,000 +1.5
2008 $37,786,000 ($22,078,000) $15,708,000 +1.5


Endnotes

[1]Tex. Admin. Code, Title 19, §74.41-§74.44.

[2]Texas Education Agency, Block Scheduling in Texas Public High Schools, Report Number 13 (Austin, Texas, September 1999), pp. 29, 33. (In 1999, 584 high schools offered traditional seven-period or eight-period schedules, while 59 high schools offered traditional six-period schedules. In addition, 439 high schools offered various block schedules. Schools offering block scheduling can offer six, seven or eight periods per semester, although most schools turn to block scheduling to offer more than six periods.)

[3]Texas Higher Education Coordinating Board, “Grants for Students at Public and Independent Institutions of Higher Education, FY 2000,” Austin, Texas, available in pdf format at http://www.thecb.state.tx.us/cfbin/ArchFetch.cfm?DocID=0376&Format=HTML. (Last visited October 19, 2002); and Texas Education Agency, “Graduates and College Admissions, Graduates (Class of 2000),” http://www.tea.state.tx.us/perfreport/pocked/2001/panel5.html. (Last visited October 19, 2002.) (Only about 4,000 graduates claim the scholarship each year.)

[4]Tex. Educ. Code Ann. §56.201-§56.209.

[5]Texas Higher Education Coordinating Board, “Grants for Students at Public and Independent Institutions of Higher Education FY 2000.”

[6]Utah Admin. Code R277-703.

[7]Texas Tomorrow Fund, “Survey of College Costs,” (Austin, Texas), 2002. (Excel spreadsheet.)

[8]Tex. Educ. Code Ann. §54.212 and §54.214.

[9]Utah Admin. Code R765-604.

[10]Utah Admin. Code R277-703.

[11]Tex. Educ. Code Ann. §56.304.