This policy brief presents an in-depth look at the dropout issue in Texas in the context of 1986 state legislation that mandated that the schools and state education agency ensure that at least 95 % of Texas youth complete high school. Findings from a study by the Intercultural Development Research Association (IDRA), using a high school attrition formula and the review and analysis of secondary data, suggested that 86,000 students had not graduated from Texas public high schools that year. By 1998, the estimated cumulative number of dropouts was much higher, at more than 1.2 million, and study findings show that 43% of the 1993-94 freshman class did not graduate in what should have been their senior year. The costs to the state in foregone income, lost tax revenue, and direct costs of the criminal justice and welfare systems have been enormous. The student attrition rate was highest in major urban districts (51%) and lowest in rural districts (28%). Racial and ethnic minority group students were more likely to be lost from public school enrollment than were White nonHispanic students. The Texas Education Agency has reported much lower dropout rates, suggesting that in 1996-97, only 9.1% (estimated longitudinal rate) did not graduate. One of the recommendations coming from this study is that state and district dropout reporting be made more accurate. Other recommendations center on modifying definitions and policy requirements to reflect the realities of the situation, and establishing monitoring, reporting, and prevention activities at the local school district level. (Contains 17 references.) (SLD)