LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE
75th Regular Session
May 23, 1997
TO: Honorable Bob Bullock Honorable James E. "Pete" Laney
Lieutenant Governor Speaker of the House
Senate
Austin, Texas
FROM: John Keel, Director
In response to your request for a Fiscal Note on HB1235 ( relating
to authorizing the issuance of revenue bonds for certain public
institutions of higher education) this office has detemined
the following:
Biennial Net Impact to General Revenue Funds by HB1235-Conference Committee Report
Implementing the provisions of the bill would result in a net
negative impact of $(22,345,750) to General Revenue Related
Funds through the biennium ending August 31, 1999.
The bill would make no appropriation but could provide the legal
basis for an appropriation of funds to implement the provisions
of the bill.
Fiscal Analysis
The bill would authorize the following institutions or systems
of institutions of higher education to issue up to $638.45 million
of revenue bonds for the acquisition, purchase, construction,
renovation or equipping of buildings, facilities, and infrastructure:
(1)
Texas Tech University
$ 30.0 million
(2) Texas Tech University Health
Sciences Center $ 32.5 million
(3) Texas A&M University
System $ 145.2 million
(4)
University of Texas System
$ 239.8 million
(5) University of Houston System
$ 29.5 million
(6)
Texas State University System
$ 80.95 million
(7) University of North Texas
$ 20.0 million
(8)
University of North Texas Health Science Center $ 19.0
million
(9) Texas Woman's University
$ 8.5 million
(10) Midwestern
State University $ 9.0
million
(11) Stephen F. Austin State University
$ 6.0 million
(12) Texas Southern
University $ 18.0
million
These bonds would be payable from pledged revenues,
including student tuition.
These bonds would not be general
obligations of the State; however, the issuance of these bonds
would have fiscal implications for the State. Although tuition
income is pledged against the bonds, historically the Legislature
has appropriated general revenue to reimburse institutions of
higher education for tuition used to pay the debt service.
It is assumed that the Legislature would continue this policy.
It
is assumed that $638.45 million of tax-exempt 20-year bonds
would be issued on October 1, 1998 with final maturity in fiscal
year 2018. It is estimated that annual debt service reimbursement
costs would continue for 20 years until the bonds matured.
The total estimated amount of debt service from FY 1998 to fiscal
year 2021 is estimated at $1.2 billion.
Furthermore, it is
assumed that additional costs would be incurred for maintaining
the additional physical facilities. It is estimated that the
additional cost to the State would be $12 million each year
beginning in FY 2001.
Methodolgy
The bill would result in additional costs for both debt service
and operation and maintenance.
It is assumed that the amount
of bonds authorized would be issued on October 1, 1998 and will
remain outstanding for twenty years. The first interest payment
would be made on October 1, 1998 and the estimated amount of
interest rate is 7%.
Total debt service payments through
2021 is estimated to be $1.2 billion.
Operation and maintenance
costs would be provided through formula funding and utility
appropriations. It is assumed that these costs will not be
incurred until fiscal year 2001. It is also assumed that 75
percent of the bonds proceeds would be spent on new construction
at an average building cost of $100 per gross square foot.
The fiscal year 1996 operation and maintenance costs per gross
square foot has been applied to the estimated amount of new
gross square feet to project the annual operation and maintenance
costs. Based on these assumptions, the operations and maintenance
costs from general revenue would be $12 million annually. An
additional 15 to 20 percent would be paid from Other Educational
and General Income funds.
The probable fiscal implications of implementing the provisions
of the bill during each of the first five years following passage
is estimated as follows:
Five Year Impact:
Fiscal Year Probable
Savings/(Cost)
from General
Revenue Fund
0001
1998 $0
1998 (22,345,750)
2000 (59,306,425)
2001 (71,307,775)
2002 (71,309,325)
Net Impact on General Revenue Related Funds:
The probable fiscal implication to General Revenue related funds
during each of the first five years is estimated as follows:
Fiscal Year Probable Net Postive/(Negative)
General Revenue Related Funds
Funds
1998 $0
1999 (22,345,750)
2000 (59,306,425)
2001 (71,307,775)
2002 (71,309,325)
Similar annual fiscal implications would continue as long as
the provisions of the bill are in effect.
No fiscal implication to units of local government is anticipated.
Source: Agencies: 347 Texas Public Finance Authority
781 Higher Education Coordinating Board
LBB Staff: JK ,RR ,DB