LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE, 76th Regular Session March 19, 1999 TO: Honorable Robert Junell, Chair, House Committee on Appropriations 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 care. 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. Methodology 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 returns. 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