Austin, Texas
                    FISCAL NOTE, 76th Regular Session
                                May 4, 1999
          TO:  Honorable Bill Ratliff, Chair, Senate Committee on Finance
        FROM:  John Keel, Director, Legislative Budget Board
       IN RE:  HB1945 by Junell (relating to the creation of permanent
               funds for certain public health purposes conducted by
               institutions of higher education), As Engrossed
*  Estimated Two-Year Net Impact to General Revenue Related Fundsfor     *
*  HB1945, As Engrossed:  $0 for the biennium ending August 31, 2001.    *
*                                                                        *
*  The bill would make no appropriation but could provide the legal      *
*  basis for an appropriation of funds to implement the provisions of    *
*  the bill.                                                             *
*                                                                        *
*  The bill would transfer $977 million in tobacco settlement            *
*  receipts, anticipated to be deposited to the General Revenue Fund,    *
*  to several permanent higher education funds.                          *
General Revenue-Related Funds, Six-Year Net Impact:
          *  Fiscal Year  Probable Net Positive/(Negative)   *
          *               Impact to General Revenue Related  *
          *                             Funds                *
          *       1999                                   $0  *
          *       2000                                    0  *
          *       2001                                    0  *
          *       2002                                    0  *
          *       2003                                    0  *
          *       2004                                    0  *
All Funds, Six-Year Impact:
*Fiscal      Probable        Probable        Probable        Probable     *
* Year       Revenue         Revenue         Revenue         Revenue      *
*          Gain/(Loss)    Gain/(Loss) to  Gain/(Loss) to  Gain/(Loss) to  *
*         from Dedicated    Permanent    Permanent Funds  Permanent Fund  *
*           Account -    Health Fund for      for 12      for Higher Ed   *
*            Tobacco     Higher EducationInstitutions of     Nursing,     *
*           Settlement                        Higher      Allied Health,  *
*            Receipts                       Education        & Other      *
*              5040                        (Aggregated)   Health-Related  *
*                                                            Programs     *
*  1999    $(977,000,000)    $375,000,000    $555,000,000     $46,000,000 *
*  2000                 0      15,789,000      23,372,000       1,937,000 *
*  2001                 0      16,316,000      24,150,000       2,001,000 *
*  2002                 0      16,929,000      25,059,000       2,077,000 *
*  2003                 0      17,500,000      25,902,000       2,147,000 *
*  2004                 0      18,465,000      27,328,000       2,265,000 *
         * Fiscal Year     Probable Revenue Gain/(Loss) to    *
         *               Permanent Fund for Minority Health   *
         *                      Research & Education          *
         *      1999                              $25,000,000 *
         *      2000                                1,053,000 *
         *      2001                                1,088,000 *
         *      2002                                1,129,000 *
         *      2003                                1,167,000 *
         *      2004                                1,231,000 *
Fiscal Analysis
The bill would create the Permanent Health Fund for Higher Education
(Fund), a $375 million fund, held outside of the State Treasury by the
University of Texas System Board of Regents (Board) and would authorize
the Board to manage the Fund on behalf of 10 health-related institutions.
Seventy-five percent of investment returns to the Fund would be
distributed in equal amounts to each institution, with the remaining 25
percent distributed in equal amounts based on specific funding criteria.

The bill would authorize the Comptroller to establish separate permanent
endowment funds, totaling $555 million, for 12 institutions of higher
education.  Investment returns for each fund would be used only for
research and other programs that are conducted by the institution for
which the fund is established and that benefit the public health.

The bill would authorize a special permanent fund, totaling $46 million,
for institutions of higher education which offer upper-level academic
instruction and training in the field of nursing, allied health, or other
health-related education.  Investment returns of the fund may be
appropriated to the Texas Higher Education Coordinating Board (THECB) to
provide grants to eligible institutions.

A Permanent Fund for Minority Health Research and Education would be
established in the Treasury outside the general revenue fund.  Investment
returns of the fund may be appropriated to the THECB to provide grants
for eligibile institutions of higher education.  Minority health research
and education programs would be funded by a transfer of $25 million from
general revenue.

The Comptroller may contract with the governing board of any institution
for which a separate permanent endowment fund is established, or that is
eligible to receive grants under the special permanent fund, to
administer the fund.  The funds would be composed of money deposited or
transferred to the fund by appropriation, gifts and grants, and the
investment returns of the fund.  If a governing board administers a
fund, the money shall be managed and invested in the same manner as
other permanent endowments.  Institutions receiving distributions from
the permanent funds would be required to report to the Legislative
Budget Board each year the money the institution received and purposes
for which it was used.
The Comptroller of Public Accounts has assumed that transfers will be
made from General Revenue Account 5040 - Tobacco Settlement Temporary
Holding account, and that they would occur in fiscal 1999.  The
Comptroller also assumed that there would be no further transfers of
State Treasury money to the funds, and that no gifts or grants from other
sources would be received by the funds.  A projected rate of return
appropriate to the management criteria established for each fund was
applied to the deposits in the new funds to arrive at annual investment

The Permanent Fund for Higher Education Nursing, Allied Health, and other
health-related programs would be funded by the estimated $46 million in
General Revenue Fund interest earnings from tobacco settlement payments
received in fiscal 1999.

The Comptroller's forecast of General Revenue Fund interest earnings in
the 2000-01 Biennial Revenue Estimate assumed that the tobacco
settlement money would be transferred to other accounts or funds no
later than March 31, 1999, crediting the General Revenue Fund with $22
million in interest earnings to that date.  Therefore, the transfer of
all fiscal 1999 interest earnings would result in a charge against the
General Revenue Fund of $22 million in fiscal 1999.  The remaining
interest earnings of $24 million could be transferred to the nursing
fund without a General Revenue Fund impact.
Local Government Impact
The fiscal implication to units of local government cannot be determined.
Source Agencies:   304   Comptroller of Public Accounts
LBB Staff:         JK, BB, CF