HBA-NLM H.B. 1945 76(R) BILL ANALYSIS Office of House Bill AnalysisH.B. 1945 By: Junell Appropriations 3/10/1999 Introduced 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 and Senator Bill Ratliff 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, along with H.B. 1161, and H.B.1676 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 endowment funds are created for these institutions. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that this bill does not expressly delegate any additional rulemaking authority to a state officer, department, agency, or institution. SECTION BY SECTION ANALYSIS SECTION 1. Amends Subtitle B, Title 3, Education Code, by adding Chapter 63, as follows: CHAPTER 63. TRUST 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 separate fund outside the treasury and within the restricted funds accounts of the board of regents of the University of Texas System (board). Authorizes the fund to be expended without appropriation by the board for the benefit of beneficiary institutions under this subchapter. Provides that the fund is composed of money deposited or transferred to the fund by appropriation or under other law, gifts and grants contributed to the fund, and earnings of the fund. Sec. 63.002. ADMINISTRATION AND USE OF FUND. (a) Requires the 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 or the permanent university fund. (b) Prohibits the use of the money in the fund for any purpose except as provided by Subsections (c) and (d). (c) Authorizes the use of earnings of 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 any public 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. Sec. 63.003. DISTRIBUTION OF EARNINGS. Requires the earnings of the fund to be distributed to the public health-related institutions of higher education set forth in Section 63.002(c), Education Code, as follows: (1) requires that 60 percent of the earnings be distributed in equal amounts to each institution; and (2) requires the remaining earnings 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 earnings of the fund to be distributed quarterly by the board to each public health-related institution of higher education. SUBCHAPTER B. ENDOWMENT FUNDS FOR HEALTH-RELATED INSTITUTIONS Sec. 63.101. CREATION OF FUNDS. Establishes a separate permanent endowment trust fund with the comptroller for the benefit of certain institutions of higher education described by this section. Provides that the fund is composed of money deposited or transferred to the fund by appropriation or under other law, gifts and grants contributed to the fund, and earnings of the fund. Sec. 63.102. ADMINISTRATION AND USE OF FUNDS. (a) Authorizes the governing board of each institution or components for which a fund is established under this subchapter to administer that fund as trustee for the institution or components in the same manner as 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. (b) Prohibits the use of the money in the fund for any purpose except as provided by Subsections (c) and (d). (c) Authorizes the earnings of each fund to be expended without appropriation by the governing board that administers the fund 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. Authorizes the earnings of the fund established for certain universities to be used according to the provisions set forth in this section. (d) Authorizes 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 (Use of Dedicated Revenue) and 404.071 (Disposition of Interest on Investments), 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. SECTION 4. Emergency clause. Effective date: upon passage.