LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE
74th Regular Session
April 25, 1995
TO: Honorable Irma Rangel, Chair IN RE: Committee Substitute
Committee on Higher Education for
House of Representatives HouseBill No.
Austin, Texas 1214
FROM: John Keel, Director
In response to your request for a Fiscal Note on House Bill No.
1214 (Relating to the establishment of a prepaid higher education
tuition program) this office has determined the following:
The bill would make no appropriation but could provide the legal
basis for an appropriation of funds to implement the provisions
of the bill.
The bill would create the Prepaid Higher Education Tuition
Program, to be administered by the Prepaid Higher Education
Tuition Board in the office of the Comptroller of Public
Accounts. The bill would establish the Texas Prepaid Higher
Education Tuition Board, including requirements of appointments;
terms of office; and powers, activities, and duties of the board.
The program would offer three plans for prepaying tuition and fee
charges: one for junior colleges; one for senior colleges; and
one for starting at a junior college and then transferring to a
senior college to complete a baccalaureate degree. Through the
program, purchasers would be able to enter into a prepaid tuition
contract with the board under which the purchaser would agree to
prepay tuition and fee charges for a beneficiary to take a
specified number of semester credit hours at a specified public
institution of higher education. If the beneficiary of a prepaid
tuition contract chooses to attend a private institution, the
board would provide the amount which would have gone to the
public institution specified in the original contract and the
purchaser would have to pay any additional amount needed to meet
the private institution's tuition and fee charges.
The bill would give the Comptroller the authority to notify the
Governor and the Legislature if it is determined that the program
is financially unfeasible and to recommend its termination. If
the program is terminated, the State would be obligated to
continue to meet the terms of tuition contracts for beneficiaries
enrolled or accepted into institutions of higher education. In
addition, the State would be required to meet the terms of any
contracts for beneficiaries projected to enroll in college by the
third anniversary date of the program termination.
The program would require the purchaser of a tuition contract to
pay an amount based on an analysis of tuition growth rates,
expected investment returns, and estimated administrative costs.
Contract payments would be made in either lump sum or
installments.
The bill would also establish the Texas Tomorrow Fund outside the
State Treasury, administered by the board above, that would
consist of state appropriations, money acquired from other
governmental or private sources, payments by purchasers, and
earnings on deposits in the fund. If funds are available, the
board could award prepaid tuition scholarships. Assets of the
trust fund would be used to pay administrative expenses, make
payments to institutions in keeping with contracts, and make
refunds to purchasers according to program rules and regulations.
The program is intended to be self-supporting with administrative
costs paid from purchase fees and earnings on investments. It is
anticipated that the bill would have no fiscal implications to
the State. However, the State would be liable for all existing
contracts if the program were terminated or if insufficient funds
were available to honor prepaid contracts.
The fiscal implications to the Comptroller of Public Accounts for
administrative expenses cannot be determined.
No significant fiscal implication to the State or units of local
government is anticipated.
Source: Higher Education Coordinating Board, Comptroller of
Public Accounts
LBB Staff: JK, MK, WRR