HBA-NLM C.S.H.B. 1945 76(R)BILL ANALYSIS


Office of House Bill AnalysisC.S.H.B. 1945
By: Junell
Appropriations
3/18/1999
Committee Report (Substituted)



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  C.S.H.B. 1945 is to
provide for the implementation of these two agreements. 

C.S.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 the
creation, administration, and use of the permanent fund for higher
education nursing and allied health programs. 

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 (Section 63.202, 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 INSITIUTIONS
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. 

(b)  Prohibits the use of the money in the fund for any purpose except as
provided by Subsections (c) and (d).   

(c) Authorizes appropriation of the investment returns of the fund only for
programs that benefit medical research, health education, or treatment
programs at certain public healthrelated 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. 

Sec. 63.003.  DISTRIBUTION OF INVESTMENT RETURNS. Requires the legislature
to appropriate the investment returns of the fund to certain health-related
institutions of higher education.  Requires the amount appropriated to be
distributed as follows: 

(1) requires that 60 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 of investment returns 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.  

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
comptroller to contract with the governing board of any institution or
components for which a fund is established under this subchapter 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 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 the investment returns of the fund established for certain
universities to 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 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. 

SUBCHAPTER C.  PERMANENT FUND FOR HIGHER EDUCATION NURSING
AND ALLIED HEALTH PROGRAMS

Sec.  63.201.  PERMANENT FUND FOR HIGHER EDUCATION NURSING AND ALLIED
HEALTH PROGRAMS.  (a)  Provides that the permanent health 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. 

SECTION 2.  Amends Section 61.092, Education Code, as follows:

Sec. 61.092.  CONTRACTS WITH BAYLOR COLLEGE OF MEDICINE.  Authorizes funds
received by Baylor College of Medicine under Subchapter A, Chapter 63, to
be used only to support programs of the college used for the purposes
described by this section. Makes nonsubstantive changes. 

SECTION 3. (a)  Requires the comptroller, on the effective date of this
Act, to transfer $400  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 $46 million from the general
revenue fund to the permanent fund for higher education nursing and allied
health programs established by Subchapter C, Chapter 63, Education Code, as
added by this Act. 

(d) 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 is 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.  Effective date:  August 31, 1999.

SECTION 4.  Emergency clause.
  

COMPARISON OF ORIGINAL TO SUBSTITUTE

C.S.H.B. 1945 modifies the original in SECTION 1 by changing the chapter
title to read: CHAPTER 63. PERMANENT FUNDS FOR HEALTH-RELATED INSTITUTIONS
OF HIGHER EDUCATION.  This substitute modifies the original in Section
63.001, Education Code, to provide that the permanent health fund for
higher education is a special fund in the treasury outside the general
revenue fund, rather than a separate fund outside the treasury and within
the restricted funds accounts of the board of regents of the University of
Texas System (board).  This substitute provides that the fund is composed
of  money transferred to the fund at the direction of the legislature,
rather than deposited by appropriation or other law.  Provides that the
fund is also composed of returns received from investment of money in the
fund, rather than the earnings of the fund.  

C.S.H.B. 1945 modifies the original in SECTION 1 (Section 63.002, Education
Code), to require the board to invest funds in a manner that preserves the
purchasing power of the fund's assets and the fund's annual distribution,
and adds new Subsection (e) to provide that Sections 403.095 (Use of
Dedicated Revenue) and 404.071 (Disposition of Interest on Investments),
Government Code, do not apply to the fund.  This substitute refers to a
health-related institution of higher education rather than a public
health-related institution of higher education. 

C.S.H.B. 1945 modifies the original in SECTION 1 (Section 63.003, Education
Code), by changing the section title to read DISTRIBUTION OF INVESTMENT
FUND. This substitute requires the legislature to appropriate the
investment returns of the fund to certain health-related institutions of
higher education. This substitute includes a provision to require the
amount of investment returns appropriated under this section to be
distributed quarterly by the comptroller, rather than the board, to each
health-related institution of higher education and to require the
Legislative Budget Board to determine each institutions's portion of
investment and provide that information to the legislature and the
comptroller. This substitute authorizes  Baylor College of Medicine to
receive certain funds under specified conditions. 

C.S.H.B. 1945 modifies the original in SECTION 1 by changing the subchapter
title to read: SUBCHAPTER B.  PERMANENT FUNDS FOR HEALTH-RELATED
INSTITUTIONS. This substitute modifies the original in Section 63.101,
Education Code, by establishing a separate permanent endowment for the
benefit of certain institutions of higher education described by this
section and providing that each permanent endowment fund is a special fund
in the treasury outside the general revenue fund. This substitute provides
that the fund is composed of  money transferred to the fund at the
direction of the legislature,  rather than deposited by appropriation or
other law. Provides that the fund is also composed of gifts and grants
contributed to the fund, and returns received from investment of money in
the fund.  
 
C.S.H.B. 1945 modifies the original in SECTION 1 (Section 63.102, Education
Code), to authorize the comptroller to contract with the governing board of
any institution or components 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, rather than in the same manner as a trustee would manage and
invest the permanent university fund under Chapter 66 (Permanent University
Fund), Education Code,  and under Sections 11 (Permanent University Fund;
Investment; Alternate Sections of Railroad Grant), 11a (Investment of
Permanent University Fund), and 11b (Permanent University Fund; Authorized
Investments), Article VII, Texas Constitution. 

C.S.H.B. 1945 modifies the original in SECTION 1 by adding a new subchapter
(SUBCHAPTER C.  PERMANENT FUND FOR HIGHER EDUCATION NURSING AND ALLIED
HEALTH PROGRAMS) and provides for the creation, administration, and use of
the permanent fund for higher education nursing and allied health programs.

C.S.H.B. 1945 modifies the original in SECTION 2  (Section 61.092,
Education Code), to authorize funds received by Baylor College of Medicine
under Subchapter A, Chapter 63, to be used only to support programs of the
college that benefit medical research, health education, or treatment
programs at the institution. Makes nonsubstantive changes. 

C.S.H.B. 1945 modifies the original in SECTION 3 to add new Subsection (c)
to require the comptroller to transfer $46 million from the general revenue
fund to the permanent fund for higher education nursing and allied health
programs established by Subchapter C, Chapter 63, Education Code, as added
by this Act.  This substitute authorizes, in new Subsection (d),
appropriation of money in the fund to pay any amount of money that the
federal government determines that the state should repay or 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. 

C.S.H.B. 1945 modifies the original by adding a new SECTION 4 to provide
that the effective date of this Act is August 31, 1999. 

C.S.H.B. 1945 modifies the original by redesignating SECTION 4 to SECTION 5.