This report contains 14 chapters on the following topics, as required by Texas Education Code 39.182 and 39.185: (1) State performance on the academic excellence indicators; (2) student performance on state assessments and correlation of course grades with state assessments; (3) students in alternative education settings; (4) performance of students at risk of dropping out of school; (5) student dropouts; (6) grade-level retention of students; (7) district and campus performance in meeting state accountability standards; (8) status of the curriculum; (9) waivers and deregulation; (10) administrative cost ratios of school districts; (11) district reporting requirements; (12) funds and expenditures of the Texas Education Agency; (13) comparison of open-enrollment charter schools and school districts on the academic excellence indicators, accountability measures, and student performance; and (14) character education programs. Highlights include rising scores on the Texas Assessment of Academic Skills (TAAS) tests, declining dropout rates, significant student advances in mathematics, and improvement on the reading TAAS assessment. In the 1999-2000 school year, 171,511 students were retained in grade. As of July 2001, the State Board of Education had awarded 223 open-enrollment charters, and 181 were in operation. In 2000-01, 55.7 percent of charter-school students participating in the English-version TAAS passed all tests taken. Statewide, 93.1 percent of the class of 2001 passed the exit-level TAAS. (Author/RT)