LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE 75th Regular Session April 22, 1997 TO: Honorable Irma Rangel, Chair IN RE: Senate Bill No. 1485, As Engrossed Committee on Higher Education By: Bivins House Austin, Texas FROM: John Keel, Director In response to your request for a Fiscal Note on SB1485 ( Relating to the tuition charged to certain students at public institutions of higher education and to state funding related to those students.) this office has detemined the following: Biennial Net Impact to General Revenue Funds by SB1485-As Engrossed Implementing the provisions of the bill would result in a net impact of $0 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 amend the Education Code to allow the governing board of an institution of higher education to charge up to the out-of-state tuition rate to resident undergraduate students enrolled in a baccalaureate program who have already earned 170 or more semester credit hours for courses taken as an undergraduate. The bill provides certain exemptions to the 170 hour cap. The authority to charge out-of-state tuition rates for resident undergraduate students who had earned over 170 hours would apply to students who enter as first time freshmen in or after the fall 1997 fall semester. The bill would allow tuition rebates of a portion of the student's undergraduate tuition of up to $1,000 for students who had earned an undergraduate degree with no more than three additional hours above the minimum credit hours required for that program. The bill would require institutions to pay the tuition rebates from their local funds and to receive general revenue reimbursements during the appropriations process. Tuition rebates would go into effect with students who enter as first time freshmen in or after the fall 1997 semester. The bill would require the Texas Higher Education Coordinating Board to exclude, for formula funding purposes, the semester credit hours of resident undergraduate students who had already earned 170 hours and could be charged out-of-state tuition. Eliminating the excessive credit hours from formula funding would apply to students who enter as first time freshmen in or after the 1997 fall semester. Methodolgy Undergraduate Semester Credit Hour Cap The Coordinating Board estimates that the number of semester credit hours in excess of 170 adjusted for the exceptions provided by the bill is 125,000, or 4,167 full time equivalent students that would be eliminated from formula funding each year. The average general revenue contribution for each upper division student is $3,807. Therefore, the savings associated with this provision would be $15,900,000 each year beginning in FY2003. Not all of these savings would be realized by institutions of higher education. Certain savings associated with employee benefits would accrue to the Teacher Retirement System and Comptroller of Public Accounts. Since this provision of the bill is effective for students who first enter in Fall 1997, it is estimated that savings would begin in FY2003. Institutions could charge these students tuition up to the higher nonresident rate to offset the loss of general revenue formula funding; however pursuant to the legislation, these funds would not be counted in the tuition estimate for formula funding purposes. Therefore, there would be no additional impact related to the all funds methodology of higher education funding. Tuition Rebate The Coordinating Board estimates that approximately 55,000 students earn baccalaureate degrees from Texas public universities each year and that about 20 percent of these students would be eligible for the tuition rebate in 1998. Therefore, 11,000 students would be eligible for the tuition rebate in FY2001. The Coordinating Board also estimates that because of the rebate students would take fewer semester credit hours. This would result in 3,667 fewer full time student equivalents enrolling in FY2001. The Coordinating Board estimates the net impact of this provision would be a net savings to general revenue of $3.0 million in FY2001. Administrative Costs To implement the undergraduate cap and the tuition rebate programs there would be certain administrative and record keeping costs at each institution to ensure that the appropriate tuition was charged and rebates provided. It is assumed that institutions would modify their systems over that next four years at no cost to the state. Ongoing costs are not estimated to be significant. 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 0 2000 0 2001 2,600,000 2002 2,600,000 Net Impact on General Revenue Related Funds: Fiscal Year Probable Net Postive/(Negative) General Revenue Related Funds Funds 1998 $0 1999 0 2000 0 2001 2,600,000 2002 2,600,000 In FY2003 savings would increase to $18.5 million. 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: 781 Higher Education Coordinating Board 304 Comptroller of Public Accounts LBB Staff: JK ,LP ,LD