Austin, Texas
                    FISCAL NOTE, 76th Regular Session
                              March 19, 1999
          TO:  Honorable Robert Junell, Chair, House Committee on
        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), Committee Report 1st
               House, Substituted
*  Estimated Two-Year Net Impact to General Revenue Related Fundsfor     *
*  HB1945, Committee Report 1st House, Substituted:  $0 through 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   Change in    *
* Year     Revenue     Revenue     Revenue     Revenue    Number of    *
*        Gain/(Loss) Gain/(Loss) Gain/(Loss) Gain/(Loss)    State      *
*            from    from Higher     from        from     Employees    *
*         Dedicated   Education   Permanent   Permanent  from FY 1998  *
*         Account -    Funds -    Funds for    Fund for                *
*          Tobacco    Permanent       12      Higher Ed                *
*         Settlement Health Fund Institutio-  Nursing &                *
*          Receipts   - Outside       ns        Allied                 *
*            5040      Treasury  (Consolida-    Health                 *
*                                    ted)      Programs                *
*  1999              $400,000,000$555,000,000 $46,000,000         0.0  *
*          $(977,000,                                                  *
*                000)                                                  *
*  2000             0  16,842,000  23,372,000   1,937,000         0.0  *
*  2001             0  17,404,000  24,150,000   2,001,000         0.0  *
*  2002             0  18,058,000  25,059,000   2,077,000         0.0  *
*  2003             0  18,667,000  25,902,000   2,147,000         0.0  *
*  2004             0  19,696,000  27,328,000   2,265,000         0.0  *
Fiscal Analysis
The bill would create three permanent funds.  It would establish the
Permanent Health Fund (Fund), a $400 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.  Sixty percent of Fund earnings would be
distributed in equal amounts to each institution with the remaining 40
percent distributed in equal amounts based on three funding criteria:
instructional expenditures, research expenditures and unsponsored charity

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 also would authorize the Comptroller to establish 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 or allied health education.  Investment returns of
the fund may be appropriated to the Texas Higher Education Coordinating
Board (THECB) to provide grants to eligible institutions.  An institution
that is eligible to receive funding under the Permanent Health Fund or a
separate permanent endowment fund is not eligible to receive a grant
under this fund.

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.  All three 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.
The Comptroller of Public Accounts has assumed that transfers will be
made from the General Revenue Account 5040 - Tobacco Settlement Temporary
Hold, which holds payments to the state as a result of the January 1999
lawsuit settlement; transfers to the funds would occur in fiscal 1999.
The Comptroller also assumes 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 and Allied Health
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:   
LBB Staff:         JK, BB, CF