LEGISLATIVE BUDGET BOARD
                          Austin, Texas

                           FISCAL NOTE
                       74th Regular Session

                          April 3, 1995



 TO:     Honorable Irma Rangel, Chair           IN RE:  House Bill No. 1214
         Committee on Higher Education                  By:  Kamel, Raymond
         House of Representatives
         Austin, Texas







FROM: John Keel, Director

In response to your request for a Fiscal Note on House Bill No.
1214 (Relating to the Texas prepaid postsecondary education
expense 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 Texas Prepaid Postsecondary Expense
Program, through which individuals could purchase an academic
year's worth of tuition and fees at a public institution of
higher education at current costs, plus a fee for administrative
expenses.  The beneficiary of a contract would be able redeem the
contract at any time between the fourth and 30th anniversary of
the contract purchase date.   Income from purchased contracts
would be deposited into the State Treasury and would accrue
interest.  The Coordinating Board would be responsible for
ensuring that earnings of the fund, plus fees paid by contract
purchasers would be sufficient to cover the contracts redeemed by
individuals once they entered college. 

Fund earnings are expected to cover the costs of making payments
to institutions on behalf of beneficiaries, make refunds for
terminated contracts, and to pay administrative expenses. 
However, the program would require administrative costs upon
implementation as contracts are sold, payments are received and
processed, and contracts are redeemed. The estimates below
reflect those costs associated with start-up.  It is assumed that
the program would be self-supporting by the fifth year of    




operation.
 
The probable fiscal implication of implementing the provisions of
the bill during each of the first  five years following passage
is estimated as follows:
     



            Fiscal  Probable Cost Out      Change in   
             Year      of  General      Number of State
                     Revenue Fund 001   Employees from 
                                            FY 1995    
                                                       
          1996                $180,878              3.0
          1997                 248,127              5.0
                                                       
          1998                 234,627              5.0
                                                       
          1999                 234,627              5.0
          2000                 187,701              5.0
                                                       
                                                       
                                                       



No significant fiscal implication to the State after the first
five years is anticipated.

No fiscal implication to units of local government is
anticipated.


Source:   Higher Education Coordinating Board
          LBB Staff: JK, MK, WRR