LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE
75th Regular Session
March 3, 1997
TO: Honorable Irma Rangel, Chair IN RE: House Bill No. 1235, Committee Report 1st House,
as Substituted
Committee on Higher Education By: Junell
House
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-Committee Report 1st House
Implementing the provisions of the bill would result in a net
negative impact of $(22,874,000) 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 $772.11 million
of revenue bonds for the acquisition, purchase, construction,
renovation or equipping of buildings, facilities, and infrastructure:
(1)
Texas Tech University
$ 66 million
(2) Texas Tech University Health
Sciences Center $ 51.2 million
(3) Texas A&M University
System $172.5 million
(4)
University of Texas System
$313.78 million
(5) University of Houston System
$ 8.2 million
(6) Texas
State University System $
78.33 million
(7) University of North Texas
$ 24 million
(8) University
of North Texas Health Science Center $ 23 million
(9)
Texas Woman's University
$ 10.1 million
(10) Midwestern State University
$ 15 million
(11) Stephen
F. Austin State University $ 10
million
The bonds would be payable from pledged revenues,
including student tuition.
The 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 $772.11 million of tax-exempt 20-year bonds
would be issued over a four year period beginning in September
1998. 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 is estimated at $1.4
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 $26 million each year beginning in FY 2001. The projected
total operating and maintenance costs for 20 years would be
$520 million.
Methodolgy
The bill will result in additional costs for both debt service
and operation and maintenance.
It is assumed that the amount
of bonds authorized would be issued over a four year period
beginning in fiscal year 1998 and will remain outstanding for
twenty years. The four bond issues would occur one year apart
each September 1. For each bond issue, the first interest payment
would be made on March 1 and the first principal payment would
be made the following September 1. Following are the estimated
amount of bonds issued over the four year period by year and
the estimated amount of interest rates related to those issues:
Fiscal
Year 1998 $ 120 million 6%
Fiscal
Year 1999 $ 276 million 6.5%
Fiscal
Year 2000 $ 275 million 6.75%
Fiscal
Year 2001 $ 101.11 million 7%
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 $26 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 ($3,600,000)
1998 (19,274,000)
2000 (44,236,850)
2001 (89,553,775)
2002 (95,408,375)
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 ($3,600,000)
1999 (19,274,000)
2000 (44,236,850)
2001 (89,553,775)
2002 (95,408,375)
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: 710 Texas A&M University System
731 Texas Woman's University
781 Higher Education Coordinating Board
752 University of North Texas
352 Bond Review Board
783 University of Houston System Administration
758 Texas State University System
LBB Staff: JK ,LP ,DB