Austin, Texas

                           FISCAL NOTE
                       74th Regular Session

                          April 24, 1995

 TO:     Honorable John T. Montford, Chair      IN RE:  House BillNo. 1792,
         Committee on Finance                                  as engrossed
         Senate                                         By: Junell
         Austin, Texas

FROM: John Keel, Director

In response to your request for a Fiscal Note on House Bill No.
1792 (Relating to the tuition charged to nonresident students at
certain public institutions of higher education.) this office has
determined the following:

The bill would allow the Coordinating Board to set the
nonresident undergraduate tuition rate at Texas public general
academic institutions, medical units, and dental units at an
amount equal to the average tuition charged Texas residents in
the five most populous states (other than Texas).  In academic
year 1994-95, the average tuition charged a Texas resident taking
30 hours in California, New York, Florida, Pennsylvania, and
Illinois was $222 per hour.  The nonresident tuition rate in
Texas for the 1994-1995 academic year is $171 per hour. 

The estimates of the fiscal implications of the proposed increase
in nonresident undergraduate tuition are based on the following
assumptions. First, that approximately 10 percent of nonresident
students would decide not to attend college in Texas due to
increased nonresident tuition.  The anticipated decline in
students would reduce the demand for general revenue formula
funding.  Additional savings to general revenue are anticipated
due to increased tuition revenue at the institutions.  Assuming
continuation of the current policy of using an "all funds" 
funding methodology for universities,  increases in tuition
income offset general revenue funding.  Thus, as tuition income
from nonresident students increases, less general revenue would
be needed to meet the funding requirements of the public    

The bill would also allow general academic institutions located
not more than 100 miles from the border of an adjacent state to
lower nonresident tuition charges if the Coordinating Board
determines that doing so was in the best interest of the
institutions and would not cause unreasonable harm to other
institutions.  Eighteen Texas public general academic
institutions are within 100 miles of another state and would
qualify for this provision of the bill.  The bill would limit
formula funding for those institutions offering reduced
nonresident tuition by specifying that those institutions would
not receive formula funding for nonresident students in excess of
six percent of the institution's total enrollment..

The estimates of the fiscal implications of the optional reduced
nonresident tuition assume nonresident students from bordering
states would pay Texas resident tuition rates and that the state
would experience a cost to general revenue due to reduced tuition
revenue.  In addition it is assumed additional students from
bordering states would choose to enroll in Texas institutions; an
additional 10 percent in the first year and 5 percent more in
each subsequent year.  The estimated increase in students would
represent an additional cost to general revenue due to increased
demand for formula funding.  It is also assumed that ETSU-
Texarkana, which currently has greater than six percent
nonresident students, would not choose to offer reduced tuition
to students from bordering states.

Finally, the bill would increase the amount of a competitive
academic scholarship needed in order to qualify a nonresident
student for a waiver of nonresident tuition charges.  The current
required amount is $200; the bill would increase this amount to
$1000.  Students awarded a waiver for academic year 1995-1996
based on a $200 scholarship award would be allowed to receive a
waiver for that academic year only; subsequent waivers would be
based on the $1000 requirement.

The estimates of the fiscal implications of the proposed increase
in scholarship awards needed for a nonresident tuition waiver
assume a 25 percent decrease in the number of waivers awarded to
students attending public universities and a 60 percent decrease
in the number of waivers awarded to students attending public
community colleges.  In addition, it is assumed that only 20
percent of those students losing a tuition waiver would continue
to enroll in Texas public institutions.  It is assumed that the
state would save general revenue due to reduced demand for
formula funding and increased nonresident tuition income.

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 Savings   Probable Cost Out    Net Probable    
             Year      to  General         of  General        Savings to     
                     Revenue Fund 001    Revenue Fund 001   General Revenue  
                    (Increased Tuition  (Tuition Loss and      Fund 001      
                           and          Increased Formula                    
                        Enrollment           Funding)                        
          1996             $30,000,000          $6,800,000        $23,200,000
          1997              33,600,000           7,000,000         26,600,000
          1998              33,800,000           7,300,000         26,500,000
          1999              33,900,000           7,700,000         26,200,000
          2000              33,900,000           7,900,000         26,000,000
       Similar annual fiscal implications would continue as long as the
provisions of the bill are in effect.

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