The fiscal implications of SB 569 indicate a negative financial impact on Texas's General Revenue-Related Funds, estimated at $62.6 million over the biennium ending August 31, 2027. The primary costs stem from the inclusion of virtual and hybrid education programs in the Foundation School Program (FSP), the administrative expenses of managing these programs, and grants to Local Education Agencies (LEAs) to support virtual and hybrid campuses.

The bill requires the Texas Education Agency (TEA) to hire 9 additional full-time employees (FTEs) at an annual cost of $1.2 million to oversee the implementation of the new virtual education framework. Additionally, $5 million per year is allocated for grants and technical assistance to LEAs that establish full-time hybrid or virtual campuses. The bill also mandates IT infrastructure investments, with $1.3 million in 2026 and $3.5 million in 2027, followed by $122,932 annually in subsequent years.

The most significant financial impact arises from funding 3,000 additional Average Daily Attendance (ADA) units per year, adding $22.5 million in 2026 and $22.4 million in 2027 to the Foundation School Program. This increase in funding to school districts also results in reduced recapture payments, with a projected revenue loss of $1 million in 2026 and $0.6 million annually thereafter.

At the local level, school districts implementing virtual learning programs will face costs associated with adjusting their programs to comply with new state requirements. However, districts may charge tuition and fees for non-resident students enrolling in virtual or hybrid courses, which could offset some costs.

Overall, while SB 569 expands virtual education options, it comes with substantial costs for the state due to increased student funding, administrative requirements, and technology investments.

SB 569 represents a significant expansion of virtual and hybrid education in Texas by establishing Chapter 30B, which replaces the Texas Virtual School Network (Chapter 30A) and sets up new rules for public school districts and charter schools to operate full-time virtual and hybrid campuses. The bill aligns with recommendations from the Texas Commission on Virtual Education and introduces funding mechanisms, student eligibility criteria, and accountability measures for online learning providers.

The bill promotes educational choice and flexibility, which aligns with individual liberty and personal responsibility. Families and students will have more control over their learning experience, and schools will have increased adaptability in meeting student needs. However, concerns arise with free enterprise and limited government, particularly regarding government-controlled virtual education potentially limiting private sector competition and increasing state bureaucracy. The bill grants broad regulatory authority to the Texas Commissioner of Education to alter attendance-based funding during emergencies, which may reduce legislative oversight in financial decisions.

From a fiscal standpoint, SB 569 presents a substantial cost to the state, with an estimated $62.6 million negative impact over the 2026-2027 biennium. The increased spending on virtual education, grants to districts, and administrative costs for the Texas Education Agency (TEA) raises concerns about fiscal responsibility. While student access is improved, the financial burden and reduced recapture payments under the school finance system could impact long-term funding stability.

Recommendation for Amendment:

• Clarify Fee Structure & Market Access: Ensure fee transparency for virtual education programs and allow greater private sector participation in virtual course offerings.
• Limit Commissioner’s Emergency Funding Authority: Require legislative or local school board oversight for changes to attendance-based funding formulas.
• Ensure Fiscal Sustainability: Implement cost containment strategies, such as limiting state funding per virtual student to levels that align with in-person education costs.
• Maintain Competitive Balance: Avoid overregulation that could push out private virtual education providers in favor of state-controlled programs.

SB 569 is a well-intended effort to modernize education, but it requires key amendments to ensure it preserves free enterprise, maintains fiscal responsibility, and prevents overreach by the state. As a result, Texas Policy Research recommends that lawmakers vote YES but strongly consider the aforementioned amendments.

• HB 2196 (Same As)