HBA-NMO, NLM H.B. 1945 76(R)BILL ANALYSIS Office of House Bill AnalysisH.B. 1945 By: Junell Appropriations 10/29/1999 Enrolled BACKGROUND AND PURPOSE On March 28, 1996, the attorney general filed suit against the tobacco industry on behalf of the State of Texas which resulted in a settlement agreement in which the industry agreed to pay the state $15 billion over the next 25 years. Subsequent to the settlement, several legal challenges were filed, including one to ensure the deposit of the settlement proceeds into the state treasury and to preserve the authority of the legislature to appropriate the funds, and one to ensure the allocation of some of the proceeds to counties and hospital districts with indigent care responsibilities. On February 3, 1998, an agreement was reached between the attorney general and Representative Robert Junell, chairman of the House Appropriations Committee, and Senator Bill Ratliff, chairman of the Senate Finance Committee, to deposit the proceeds into the treasury for appropriation by the legislature. On July 24, 1998, an agreement was reached between the attorney general and certain counties and hospital districts to preserve the entire amount of the original $15 billion for the benefit of the State of Texas. Under this agreement, the parties also agreed that the additional payments of $2.275 billion received under the "Most Favored Nation" provision of the settlement agreement would be used for the benefit of counties and hospital districts. The purpose of H.B. 1945 is to provide for the implementation of these two agreements. H.B. 1945 creates a permanent health fund for higher education and sets forth a formula for distributing the funds to certain health-related institutions of higher education. In addition, separate permanent funds are created for these institutions. This bill also provides for a permanent fund for higher education nursing, allied health, and other health-related programs, and a permanent fund for minority health research and education. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that rulemaking authority is expressly delegated to the Texas Higher Education Coordinating Board in SECTION 1 (Sections 63.202 and 63.302, Education Code) in this bill. SECTION BY SECTION ANALYSIS SECTION 1. Amends Subtitle B, Title 3, Education Code, by adding Chapter 63, as follows: CHAPTER 63. PERMANENT FUNDS FOR HEALTH-RELATED INSTITUTIONS OF HIGHER EDUCATION SUBCHAPTER A. PERMANENT HEALTH FUND FOR HIGHER EDUCATION Sec. 63.001. PERMANENT HEALTH FUND FOR HIGHER EDUCATION. Provides that the permanent health fund for higher education is a special fund in the treasury outside the general revenue fund. Provides that the fund is composed of money transferred to the fund at the direction of the legislature, gifts and grants contributed to the fund, and returns received from investment of money in the fund. Sec. 63.002. ADMINISTRATION AND USE OF FUND. (a) Requires the board of regents of the University of Texas System (board) to administer the fund. Authorizes the board to manage and invest the money in the fund in the same manner as investments of permanent endowments. Requires the board to invest funds in a manner that preserves the purchasing power of the fund's assets and the fund's annual distribution. Requires the board to determine the amount available for distribution from the fund in a manner consistent with the board's procedures for making distributions to other endowment beneficiaries. Requires that the amount available for distribution be determined by the investment and distribution policy for the fund's assets adopted by the board. Requires that expenses of managing the fund's assets be paid from the fund. (b) Prohibits the use of the money in the fund for any purpose except as provided by Subsections (c), (d), and (f). (c) Authorizes appropriation of the amount available for distribution from the fund only for programs that benefit medical research, health education, or treatment programs at certain public health-related institutions of higher education described by this subsection. (d) Authorizes the governing board of a health-related institution of higher education entitled to receive money under this subchapter to solicit and accept gifts and grants to the fund. Requires a gift or grant to the fund to be distributed and be used in the same manner as the earnings of the fund, subject to the discretion of the donor or granting entity. (e) Provides that Sections 403.095 (Use of Dedicated Revenue) and 404.071 (Disposition of Interest on Investments), Government Code, do not apply to the fund. Provides that Section 404.094(d) (relating to funds to be deposited in the treasury), Government Code, applies to the code. (f) Authorizes an institution of higher education that has accepted a gift under Subchapter I (Texas Eminent Scholars Program), Chapter 51 (Provisions Generally Applicable to Higher Education), that was conditioned on the receipt by the institution of state matching funds from the eminent scholars fund to use money the institution receives under this subchapter to provide the state matching funds, treating that amount as if it were a distribution to the institution from the eminent scholars fund for purposes of Subchapter I, Chapter 51. Sec. 63.003. ALLOCATION OF DISTRIBUTION. Requires the legislature to appropriate the amount available for distribution from the fund to certain health-related institutions of higher education. Requires the amount appropriated to be distributed as follows: (1) requires that 70 percent be distributed in equal amounts to each institution; and (2) requires the remaining amount to be distributed in equal amounts according to the conditions set forth in this section for each of the following categories: _instructional expenditures _research expenditures; and _unsponsored charity care. Requires the amount appropriated under this section to be distributed quarterly by the comptroller to each health-related institution of higher education. Requires the Legislative Budget Board to determine each institutions's portion of investment returns and provide that information to the legislature and the comptroller. Authorizes Baylor College of Medicine to receive certain funds under specified conditions. Sec. 63.004. REPORTING REQUIREMENT. Requires an institution receiving a distribution from the permanent fund established under this subchapter to provide a report to the Legislative Budget Board no later than November 1 of each year. Requires that the report include the total amount of money the institution received from the fund, the purpose for which the money was used, and any additional information that may be requested by the Legislative Budget Board. SUBCHAPTER B. PERMANENT FUNDS FOR HEALTH-RELATED INSTITUTIONS Sec. 63.101. CREATION OF FUNDS. Establishes a separate permanent endowment for the benefit of certain institutions of higher education described by this section. Provides that each permanent endowment fund is a special fund in the treasury outside the general revenue fund. Provides that the fund is composed of money transferred to the fund at the direction of the legislature, gifts and grants contributed to the fund, and the returns received from investment of money in the fund. Sec. 63.102. ADMINISTRATION AND USE OF FUNDS. (a) Authorizes the governing board of an institution or component for which a fund is established under this subchapter to administer the fund of that institution. Requires the comptroller, if a governing board elects not to administer the fund, to administer the fund. Sets forth additional procedures for the administration and use of funds. (b) Prohibits the use of the money in the fund for any purpose except as provided by Subsections (c), (d), and (f). (c) Authorizes that the amount available for distribution from each fund be appropriated only for research and other programs that are conducted by the institution or components for which the fund is established and that benefit the public health. Requires the comptroller or governing board to report to the legislature the amount of funds that are eligible for appropriation. Authorizes that the amount appropriated from the fund established for certain universities be used according to the provisions set forth in this section. (d) Authorizes the comptroller or the governing board of each institution or component to solicit and accept gifts and grants to the institution or component's fund. Authorizes that a gift or grant to the fund be expended and used according to the provisions of this section and subject to the discretion of the donor or granting entity. (e) Provides that Sections 403.095 and 404.071, Government Code, do not apply to a fund established under this subchapter. Provides that Section 404.094(d), Government Code, applies to the fund. (f) Authorizes an institution of higher education that has accepted a gift under Subchapter I, Chapter 51, that was conditioned on the receipt by the institution of state matching funds from the eminent scholars fund to use money the institution receives under this subchapter to provide the state matching funds, treating that amount as if it were a distribution to the institution from the eminent scholars fund for the purposes of Subchapter I, Chapter 51. Sec. 63.103. REPORTING REQUIREMENT. Requires each institution listed in Section 63.101 to provide a report on the permanent fund established under this subchapter for the benefit of the institution to the Legislative Budget Board no later than November 1 of each year. Requires the report to include the total amount of money the institution received from the fund, the purpose for which the money was used, and any additional information that may be requested by the Legislative Budget Board. SUBCHAPTER C. PERMANENT FUND FOR HIGHER EDUCATION NURSING, ALLIED HEALTH, AND OTHER HEALTH-RELATED PROGRAMS Sec. 63.201. PERMANENT FUND FOR HIGHER EDUCATION NURSING, ALLIED HEALTH, AND OTHER HEALTH RELATED PROGRAMS. (a) Provides that the permanent fund for higher education nursing and allied health programs is a special fund in the treasury outside the general revenue fund. Provides that the fund is composed of money transferred to the fund at the direction of the legislature, gifts and grants contributed to the fund, and returns received from investment of money in the fund. Sec. 63.202. ADMINISTRATION AND USE OF FUND. (a) Authorizes the comptroller to contract with the governing board of any institution or component for which a fund is established under this section to administer any fund. Authorizes the governing board to manage and invest the money in the fund, if the governing board administers a fund, in the same manner as the board manages and invests other permanent endowments. Requires the administrator of the fund to invest any fund in the specified manner. (b) Prohibits the use of the money in the fund for any purpose except as provided by Subsections (c) and (d). (c) Authorizes the investment returns of each fund to be appropriated to the Texas Higher Education Coordinating Board for the purpose of providing grants to public institutions of higher education that offer upper-level academic instruction and training in the field of nursing or allied health education. Requires the coordinating board to adopt rules relating to the award of grants under this subchapter. Provides that an institution or component receiving funds under Subchapter A or B is not eligible to receive a grant under this subchapter. Requires the comptroller or governing board to report to the legislature the amount of funds that are available for appropriation. (d) Authorizes the comptroller or the governing board of the fund to solicit and accept gifts and grants for the benefit of the fund. Authorizes a gift or grant to the fund to be expended and to be used according to the provisions of this section and subject to the discretion of the donor or granting entity. (e) Provides that Sections 403.095 and 404.071, Government Code, do not apply to a fund established under this subchapter. Sec. 63.203. REPORTING REQUIREMENT. Requires the Texas Higher Education Coordinating Board to provide a report on the permanent fund established under this subchapter to the Legislative Budget Board no later than November 1 of each year. Requires that the report include the total amount of money distributed from the fund, names of institutions receiving grants, the purpose for which the grants were used, and any additional information that may be requested by the Legislative Budget Board. SUBCHAPTER D. PERMANENT FUND FOR MINORITY HEALTH RESEARCH AND EDUCATION Sec. 63.301. PERMANENT FUND FOR MINORITY HEALTH RESEARCH AND EDUCATION. Provides that the permanent fund for minority health research and education is a special fund in the treasury outside the general revenue fund. Sets forth the composition of the fund. Sec. 63.302. ADMINISTRATION AND USE OF FUND. (a) Authorizes the comptroller to contract with the governing board of any institution or component that is eligible to receive a grant under Subsection (c) to administer the fund. Authorizes the governing board, if it manages the fund, to manage and invest the money in the same manner as the board manages and invests other permanent funds. Requires the administrator of the fund to invest any fund in a manner that preserves the purchasing power of the fund's assets and the fund's annual distributions. (b) Prohibits money in the fund established under this subchapter, except as provided by Subsections (c) and (e), from being used for any purpose. (c) Authorizes the appropriation of the investment returns of the fund to the Texas Higher Education Coordinating Board for the purpose of providing grants to institutions of higher education that conduct research or educational programs that address minority health issues or form partnerships with minority organizations, colleges, or universities to conduct research and educational programs that address minority health issues. (d) Requires the Texas Higher Education Coordinating Board to adopt rules relating to the award of grants under this subchapter. (e) Authorizes the comptroller or governing board that administers the fund to solicit and accept gifts and grants for the benefit of the fund. Authorizes that a gift or grant to the fund be expended and used in the same manner as investment returns of the fund under Subsection (c), subject to any limitation or requirement placed on the gift or grant by the donor or granting entity. (f) Requires the Texas Higher Education Coordinating Board to report to the legislature annually the total amount of funds awarded and a brief description of each grant, including the name of the institution receiving the grant, the amount and purpose of the grant, and the partnership formed to conduct the research or educational programs authorized under Subsection (c). (g) Provides that Sections 403.095 and 404.071, Government Code, do not apply to a fund established under this subchapter. SECTION 2. Amends Section 61.092, Education Code, as follows: Sec. 61.092. CONTRACTS WITH BAYLOR COLLEGE OF MEDICINE. Authorizes that funds received by Baylor College of Medicine under Subchapter A or B, Chapter 63, be used only to support programs of the college used for the purposes described by this section. Provides that Baylor College of Medicine and the board, if Baylor College of Medicine elects to administer the fund established for it under Subchapter B, Chapter 63, must enter into a contract that requires Baylor College of Medicine to administer the fund in the same manner and subject to the same regulations as would apply to the comptroller if the comptroller were administering a fund under Subchapter B, Chapter 63. Makes nonsubstantive changes. SECTION 3. (a) Requires the comptroller, on the effective date of this Act, to transfer $350 million from the general revenue fund to the permanent health fund for higher education established by Subchapter A, Chapter 63, Education Code, as added by this Act. (b) Requires the comptroller, on the effective date of this Act, to transfer from the general revenue fund certain amounts to the separate endowment fund established by Subchapter B, Chapter 63, Education Code, as added by this Act, to certain institutions of higher education or components of an institution of higher education as described by this subsection. (c) Requires the comptroller to transfer $45 million from the general revenue fund to the permanent fund for higher education nursing, allied health, and other health related programs established by Subchapter C, Chapter 63, Education Code, as added by this Act. (d) Requires the comptroller, on the effective date of this Act, to transfer $25 million from the general revenue fund to the permanent fund for minority health research and education established by Subchapter D, Chapter 63, Education Code, as added by this Act. (e) Requires the comptroller, on the effective date of this Act, to transfer $1 million from the general revenue fund to the Texas Higher Education Coordinating Board to fund a contract with the Baylor University Medical Center in Dallas for the Institute of Metabolic Disease to study the relationship of maternal smoking and metabolic derangements to the impaired growth rate in low-weight infants, and for the Division of Prevention and Wellness to support an antitobacco task force. Requires the Texas Higher Education Coordinating Board, if it enters into a contract under this subsection, to enter into the contract in the same manner as a contract entered into under Section 67.092, Education Code, as amended by this Act. (f) Authorizes appropriation of money in the fund to pay any amount of money that the federal government determines that the state should repay or that it should recoup from the state in the event of national legislation regarding the case styled The State of Texas v. The American Tobacco Co., et al., No. 5-96CV-91, in the United States District Court, Eastern District of Texas. SECTION 4. Emergency clause.