LEGISLATIVE BUDGET BOARD 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 universities. 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) Decline) 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