LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE 75th Regular Session May 31, 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 SB1907 ( Relating to tuition and fees charged by public institutions of higher education, including the redesignation of certain fees as tuition.) this office has detemined the following: Biennial Net Impact to General Revenue Funds by SB1907-Conference Committee Report FN Revision 1 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 Tuition and Fees The bill would amend the Education Code to reclassify the building use fee as tuition; would specify maximum charges; would exclude it from the Texas Public Education Grants. The bill would increase the tuition at a law school from $75 per semester credit hour to $80 per semester credit hour. The bill would authorize a governing board to waive fees under certain circumstances including for students enrolled only in distance learning courses and for students that cannot reasonably be expected to use the services, provided that waiver of the fees will still enable the institution to provide the service or facility and meet any debt obligations. Undergraduate Cap The bill would require the Texas Higher Education Coordinating Board to exclude, for formula funding purposes, the semester credit hours of resident undergraduate students that had previously attempted 170 or more credit hours. The bill would provide certain exemptions. This section would apply to funding for the 1999 Fall semester. The bill would allow the institutions to charge an increased tuition, without exceeding the out-of-state tuition rate, for students who had attempted 170 or more credit hours, beginning with the fall semester 1999. The bill would authorize tuition rebates of up to $1,000 for Texas resident students who earned an undergraduate degree by attempting no more than three hours above the minimum credit hours required for that program. The bill would require the institutions to pay the tuition rebates from their local funds and would authorize institutions to receive general revenue reimbursements during the appropriations process, effective for students who enter a baccalaureate degree program on or after September 1, 1997. Fees Increases The bill would authorize the Board of Regents of The University of Texas System to increase the international education fee charged to students enrolled at The University of Texas at Austin and the student union fee charged to students enrolled at The University of Texas at San Antonio. Methodolgy Tuition and Fees Because the bill reclassifies the building use fee as tuition but does not authorize an increase in the total tuition that an institution could charge as compared to the amount that an institution could previously have charged for tuition and fees, there would be no impact on the amount of designated funds for institutions of higher education. The bill would increase the amount of tuition charged at a law school by $5 per semester credit hour, or an increase of $547,325 in Other Educational and General Income. This increase in Other E&G would result in a redistribution of general revenue from the law schools under the all funds methodology. The institutions with law schools are UT Austin, University of Houston, Texas Southern University, and Texas Tech University. It is assumed that the fee waivers for distance learning courses and for students that cannot use the facility or services would not have a significant fiscal impact on the institutions. Undergraduate Semester Credit Hour Cap It is estimated that approximately 4,167 full-time equivalent students that would be eliminated from formula funding each year. The savings associated with this provision is estimated to be $15.9 million beginning in fiscal years 2000 and 2001 as indicated in the table below. Savings in the subsequent biennia would probably be less as students change their behavior regarding their degree plan. Not all of the 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. 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 20 percent of these students would be eligible for the tuition rebate in 2001. The Coordinating Board estimates the net impact of this provision would be a savings to general revenue of $2.6 million in FY2001. Aministrative Costs There would be administrative costs associated with the undergraduate cap and the tuition rebate program. It is assumed that institutions would modify their systems over the next biennia at no cost to the state. Ongoing costs are not estimated to be significant. Fee Increases It is estimated that the increased international education fee at UT-Austin would generate approximately $111,000 a year in institutional funds beginning in fiscal year 1998, and that the student union fee increase at UT San Antonio would generate approximately $349,800 in institutional funds beginning in Fiscal Year 1998, increasing to $430,230 in Fiscal Year 1999 when the fee is estimated to increase an additional 10 percent. These fees are auxiliary in nature and do not affect the state supported educational and general operations of the university. 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 Revenue Probable Probable Gain/(Loss) from Savings/(Cost) Savings/(Cost) Other from General from General Educational and Revenue Fund for Revenue Fund for General Income/ Undergraduate Tuition Rebate GR-Dedicated for Semester Credit Increases in Law Hour Cap School Tuition 8022 0001 0001 1998 $547,325 $0 $0 1998 547,325 0 0 2000 547,325 15,900,000 0 2001 547,325 15,900,000 2,600,000 2002 547,325 13,900,000 2,600,000 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 $0 1999 0 2000 15,900,000 2001 18,500,000 2002 16,500,000 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: LBB Staff: JK ,LP ,LD