Fiscal Notes, July 1999, Page 2

July 1999

On this page:
Economic climate

A fresh start for troubled schools

Reconstituted schools' performance improves

On Page 1:
A Texas Blast-off

From the Comptroller: A Bold New Course

From Our Readers

Comptroller News

God Bless Bob Bullock

Growing Grants

Texas stats -- Fiscal and economic data

Services, telecom, manufacturing
charge ahead, other sectors ease up
Economic Climate
Texas gross state product growth in 1999 will remain on par with 1998's strong showing, but statewide job growth will slow.
Those key measures indicate that the Texas economy will grow at a slower, but still healthy pace through the rest of the year, according to the Texas Economic Update from the Texas Comptroller's office. Services, telecommunications and durable goods manufacturing will continue to lead in job growth.
The high rates of growth of the past two years are hard to maintain even as the national economy is in its eighth year of expansion. Weaker export markets have slowed the economy as well.
In the first half of 1999, the number of Texas jobs grew 2.8 percent, down from 3.8 percent in 1998 and 4.2 percent in 1997. The real gross state product is expected to grow by 5.4 percent, nearly matching 1998's 5.5 percent. That steadiness is a result of the lowest sustained inflation rate since the 1960s and productivity gains brought on by increased use of technology.
Here are the Update's looks at the major sectors of the Texas economy:
Oil: Lukewarm
Texas employment in mining (primarily oil and gas production) will fall in 1999 and remain flat or weak in 2000 and 2001. Industry analysts expect Texas oil and gas production to continue declining.

Over the next 20 years, the industry's contribution to the state economy, as measured by the gross state product, should erode from 12 percent today to around 8 percent.
Construction:
Cooling off
Builders have benefited from Texas' recent boom. Construction employment rose to about 524,000 in April 1999 from about 376,000 in April 1994, an increase of nearly 40 percent. Housing starts topped 164,000 in 1998--the highest since 1985--fueled by low mortgage rates, strong in-migration, high consumer confidence and strong growth in personal income.
Nonresidential construction exceeded 157 million square feet in 1998, the highest level since 1985.
The Comptroller's office, however, is forecasting slowed growth for the construction industry. Strong levels of activity will continue, but construction job growth will fall to below 2 percent a year by 2001.
Manufacturing:
Mixed
Durable goods will continue to lead Texas' manufacturing sector over the short term. For the next two years, the most rapid employment growth will be in fabricated metals (3.7 percent annually). Computer manufacturing--among the stronger performers in the long-term forecast--faces domestic and international competition that will slow its growth through 2001. By contrast, semiconductor and other electronic component manufacturing will remain fairly strong, benefitting from improving economic conditions in Asia and Latin America.
Nondurable manufacturing continues to be held back by losses in apparel, leather and textiles due to worldwide competition as well as in petroleum refining and petrochemicals. These sectors will lose more jobs over the next couple of years, but in all, nondurable manufacturing will have small employment gains in 2000 and 2001.
Communications:
Still strong
The number of communications jobs is rapidly expanding. Over the next two years, communications will continue to benefit from worldwide growth in cellular phone applications and Internet-related activity. Communications employment growth will exceed 5 percent annually because of lower prices, improved products and the growth of export markets.
Transportation job growth will be slower, averaging about 3 percent a year. Utilities may see small job gains in 2000 and 2001, following eight years of declining numbers. Electric utility deregulation, to be completed in 2002, should lower the cost of producing electricity.
Trade: A charge
from electronics
Much of the recent increase in Texas' wholesale trade is tied to computers, electronics and medical technology manufacturing. Texas' wholesalers increased their workforces by 4.4 percent in both 1997 and 1998, with most new jobs added by wholesalers of computers and electronic products. In contrast, retail trade grew more slowly in those years, at about 2.5 percent annually.
Trade-related businesses can expect slower growth through 2001, with employment rising about half as fast as in the past two years. The most successful retail operations are likely to be those related to communications and Internet services, variety stores and miscellaneous furnishings. Expected construction slowdowns will bring slower growth for retailers of building materials and hardware.
Financials:
Slowing down
The Comptroller's economic forecast predicts a marked slowdown in job growth for the state's finance, insurance and real estate industries.
While bank profits should remain high, employment growth will taper off due to continuing mergers, productivity gains from improved technology and a likely increase in short-term interest rates. Texas bank and savings institution employment will grow by 3.9 percent in 1999, but will decline by about 1 percent in 2000 and remain flat for 2001.
Texas real estate and finance companies, such as investment firms, also had exceptionally strong years in 1997 and 1998. Continued growth depends on mortgage interest rates and the stock market.
Insurance, relying principally on simple population growth, will remain relatively stable, with employment growth averaging 1.2 percent annually through 2001.
Services: More jobs
Services will prove to be the biggest engine of Texas job growth in 1999, with major gains in business, repair and engineering services. Such companies added 77,000 jobs in 1998, nearly a quarter of the state total, and will do almost as well over each of the next three years, growing at about 6 percent to 7 percent annually. This resilient combination of industries, including such dynamic sectors as temporary employment services, is well poised to continue to prosper through shifts in the economy.
Health services will lag behind business, repair and engineering due to cost-containment measures, but will add jobs at a rate of about 3 percent annually. This is due to continued advances in medical technology and the demand for health services by the fast-growing elderly segment of the state's population.
Government:
Shrinking
Federal civilian employment declined for the eighth straight year in 1998, due to defense cutbacks and budget constraints. Nevertheless, federal employment will grow slightly in 1999 led by hiring for the 2000 census. State government,with cuts at state colleges and universities and the continuing outsourcing of state services, will see job losses in 1999 and 2000, after a 1.3-percent decline in 1998.
Local government employment will rise over the next two years, but probably at a slower rate than the overall state economy. The Comptroller's office expects local government job growth of about 2 percent annually, in keeping with population an school enrollment growth.

Reconstitution brings in
new people and ideas
A Fresh Start for
Troubled Schools
Sometimes, when things just aren't working, you wipe the slate clean and start over.
It happens in business and it happens in sports. Managers--in the office and on the field--get the heave-ho when they don't deliver the desired results.
A similar process is being used at schools where failure is costing students their chance at a good education.
Administrators and teachers who aren't measuring up to increasingly high standards are being replaced with new faces, sporting new ideas and fresh energy.
The replacement process--known as reconstitution--has helped improve student performance in districts across the country, including several in Texas. Reconstitution is one of several approaches being used to shake up low-performing schools.
It is, however, a shock-to-the-system process that is usually used as a last resort. It can be expensive and time-consuming and the results may not be known for several years.
But once used in a district, reconstitution gets the attention of faculty and staff at other borderline schools and encourages them to get in gear or face being replaced.
Breaking the cycle
The idea behind reconstituting schools is that new people can break the cycle of failure that can be pervasive in low-performing schools.
When a school is targeted for reconstitution, the staff and faculty are asked to turn in their resignations. They can re-apply for their jobs, but the most qualified employees are hand-picked to create a "dream team" to address the needs of the students at that campus.
The replaced faculty and staff can be assigned to other schools or other jobs. If a shift to another campus or job does not improve their skills, additional training or even termination may be necessary.
A successful reconstitution requires more than simply moving staff. The school's new staff must agree on what the students need and how the new faculty and administrators are going to meet those needs. Even after the new staff is in place, it may take several years before its efforts show up in improved test scores and other measures of student performance.
In Texas, a bill requiring reconstitution of low-performing schools didn't make it out of committee consideration. The bill, proposed by Sen. Florence Shapiro, R-Plano, and Sen. Eliot Shapleigh, D-El Paso, would have shut down a school or reassigned its educators if the school had been low-performing for three consecutive years.
The proposal was one of Comptroller Carole Keeton Rylander's Texas Performance Review recommendations for improving schools. "No child should be held hostage in a failing school," Rylander says. "An entire high school education could be lost if teachers and administrators fail in their most fundamental mission: the intellectual development of Texas school children."
In the Texas reconstitutions, the Commissioner of Education acted to reconstitute several San Antonio schools under his power to close low-performing schools. In Corpus Christi and Houston, the school boards acted on their own.
No quick fix
Reconstituting a school is not a quick fix. It takes several months to advertise positions and interview applicants to ensure the new staff is capable of turning the school around.
Reconstitution can be a painful process, says Gary A. Orfield, a Harvard University professor who has studied reconstitution efforts in San Francisco.
"Reconstituting schools is an uphill, difficult battle," he says. "It can be successful, but it is not a panacea for poor schools that can be accomplished on the cheap. For reconstitution to work, a district must be willing to devote substantial financial resources and administrative support not only at the implementation stage, but also over the long haul."
Payoffs
Despite the investment required to reconstitute a school, evidence from across the nation indicates that students--regardless of their ethnicity or economic status--can succeed when a school finds the right mix of inspiring administrators, motivated teachers and academic strategies.
The reconstitution of seven Chicago high schools in 1997 has had two results, officials say. First, students are no longer moved to the next grade until they can pass the work at each grade level. Second, each student follows a core curriculum and receives preparation for employment after graduation. It is still too early to tell from test scores what other impact reconstitution has had.
In San Francisco, the city's unified school district reports significant improvement in test scores at reconstituted schools. An example is Vistacion Valley Middle School, which was reconstituted in 1994. Between 1993 and 1997, reading scores rose from the 38th to 44th national percentile and math scores rose from the 40th to the 44th.
The district has revamped 10 schools since 1994, with the most recent in 1997 when the district reconstituted one high school and one elementary school.
Reconstitution is a radical approach to fixing schools. It can be time consuming and costly, but, from the reports around the country, it can be effective.
Contributing to this article:
Betty Ressel

Reconstituted schools'
performance improves
Texas school districts that have tried reconstituting low-performing schools report that it has paid off.
In 1995, the Texas Education Agency (TEA) recommended wiping the slate clean at three low-performing San Antonio Independent School District schools: Fox Technical High School, King Middle School and Gates Elementary School.
The district declared all positions vacant and rebuilt the school staffs. Limited changes also occurred at the district's Douglass Elementary School, which hired a new teaching staff, and at Lanier High School, where new administrators and counselors went to work.
Since the overhaul, the schools have met increasingly higher standards in the Texas Assessment of Academic Skills, commonly known as the TAAS test. Collectively, their TAAS scores have risen 181 percent, and none are rated low-performing.
Although improvements occurred on a few campuses, problems within the district persist and Comptroller Carole Keeton Rylander announced in May that she will conduct a School Performance Review of the San Antonio ISD. Rylander cited unstable academic performance and financial disarray in announcing the review. It is the first audit the Comptroller's office will conduct without a request from the district.
In 1993, the Houston Independent School District reconstituted Rusk Elementary School. The district was responding to a negative report from a TEA accreditation team, complaints from parents and years of low scores on standardized tests.
Within a year, test scores and staff morale had improved, according to the district.
The district used the lessons it learned to formalize the procedures at Rusk to help other schools improve. In the years since, HISD has moved principals and teachers from other low performing schools, but has not made complete reconstitutions.
In 1995, the Corpus Christi Independent School District acted on its own to reconstitute Wynn Seale Middle School. With the cooperation of the Texas Federation of Teachers and other employee groups, the district asked all of the school's staff to re-apply for their jobs or be assigned to other positions in the district.
Under new leadership, the school's TAAS scores improved from 22 percent passing in 1994 to 71 percent in 1998.
Those staff members considered marginal received mentoring from more successful teachers, and many performed well in other schools.
Contributing to this article:
Betty Ressel

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