LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE 75th Regular Session April 6, 1997 TO: Honorable Bill Ratliff, Chair IN RE: Senate Bill No. 1485 Committee on Finance By: Bivins Senate 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 Introduced Implementing the provisions of the bill would result in a net positive impact of $8,200,000 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 amend the Education Code to allow the governing board of an institution of higher education to charge 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 take effect with the 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 six 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 for students who earned an undergraduate degree with no more than six additional hours over the minimum requirements for the program would go into effect with students completing a degree program on or after September 1, 1997. 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 funding beginning with 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 130,000, or 4,333 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 $16,500,000 as indicated in the table below. 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. Using an alternative method, the Texas Performance Review estimated the general revenue the savings to be $7,556,000 for the 1998-99 biennium. From FY2000 and beyond these savings were adjusted to $4,640,000 to reflect the increased efficiency of institutions to graduate more students in a timely manner. Institutions could charge these students tuition at the higher nonresident rate to offset the loss of general revenue formula funding. 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 32 percent of these students would be eligible for the tuition rebate in 1998. Therefore 17,600 students would be eligible for the tuition rebate in FY 1998, increasing up to 19,800 by FY2002. The Coordinating Board also estimates that because of the rebate students would take fewer semester credit hours. This would result in 1,467 fewer full time student equivalents enrolling in FY1998, increase up to 4,583 in FY2002. The Coordinating Board estimates the net impact of this provision would be a cost to general revenue of $12.0 million in FY1998, decreasing to $2.3 million in FY2002. The Texas Performance Review did not estimate the fiscal impact related to the tuition rebate. 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 estimated that the initial cost of establishing the necessary record keeping system to be approximately $4 per student in FY1998. There are approximately 400,000 students enrolled at public universities. 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 Probable Probable Savings/(Cost) Savings/(Cost) Savings/(Cost) from General from General from General Revenue Fund for Revenue Fund for Revenue Fund for 170 Semester Tuition Rebates Administrative Credit Hour Cap Costs 0001 0001 0001 1998 $16,500,000 ($12,000,000) ($1,600,000) 1998 16,500,000 (11,200,000) 2000 16,500,000 (8,200,000) 2001 16,500,000 (5,300,000) 2002 16,500,000 (2,300,000) 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 $2,900,000 1999 5,300,000 2000 8,300,000 2001 11,200,000 2002 14,200,000 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 ,RR ,LD