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.