LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE 75th Regular Session March 27, 1997 TO: Honorable Bill Ratliff, Chair IN RE: House Joint Resolution No. 8, As Engrossed Committee on Finance By: Stiles Senate Austin, Texas FROM: John Keel, Director In response to your request for a Fiscal Note on HJR8 ( proposing a constitutional amendment to extend the full faith and credit of the state to support the Texas tomorrow fund) this office has detemined the following: Biennial Net Impact to General Revenue Funds by HJR8-As Engrossed No fiscal implication to the State is anticipated, other than the cost of publication. The cost to the state for publication of the resolution is $71,000. The resolution would propose a constitutional amendment to establish the Texas Tomorrow Fund (fund) as a constitutional trust fund, extend the full faith and credit of Texas to the fund, and allow fund assets to be invested in accordance with the prudent person rule. The fund would be dedicated to the prepayment of tuition and fees for higher education under the prepaid higher education tuition program. In the event there was not enough money in the fund to pay the tuition and fees for a beneficiary, the resolution would require the first money that came into the State Treasury that was not appropriated by the Constitution to be transferred to the fund to pay the tuition and required fees. By extending the full faith and credit guarantee, the resolution would provide an additional degree of financial assurance to contract purchasers. The Texas Veterans Land Board loan programs and the Hinson-Hazelwood student loan programs have the full faith and credit guarantee of the state. These guarantees have never been used. The fund was designed to be and is operating in a self-supporting manner as a trust fund. By establishing the Texas Tomorrow Fund and allowing contracts to be written the Legislature has, in effect, created an implied state guarantee. Almost all successful and effective trust funds manage their assets under the prudent person rule. The rule would allow the fund to, over the long term, provide superior investment returns and, thus, lower payments to contract purchasers of a fund plan. The proposed constitutional amendment would be submitted to the voters at an election to be held November 4, 1997. No fiscal implication to units of local government is anticipated. Source: Agencies: 781 Higher Education Coordinating Board 304 Comptroller of Public Accounts LBB Staff: JK ,RR ,PE ,LD