LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE, 76th Regular Session
March 11, 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), As Introduced
**************************************************************************
* Estimated Two-year Net Impact to General Revenue Related Funds for *
* HB1945, As Introduced: $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 $955 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 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 Change in *
* Year Revenue Revenue Revenue Number of State *
* Gain/(Loss) Gain/(Loss) Gain/(Loss) Employees from *
* from Dedicated from Higher from Permanent FY 1998 *
* Acount 5040 in Education Funds Funds for 12 *
* the General - Permanent Institutions *
* Revenue Fund Health Fund - (Consolidated) *
* 0001 Outside Treasury *
* 5040 *
* 1999 $(955,000,000) $400,000,000 $555,000,000 0.0 *
* 2000 0 14,733,000 20,636,000 0.0 *
* 2001 0 15,116,000 21,168,000 0.0 *
* 2002 0 15,509,000 21,725,000 0.0 *
* 2003 0 15,913,000 21,490,000 0.0 *
* 2004 0 16,326,000 22,650,000 0.0 *
***************************************************************************
Fiscal Analysis
The bill would create two 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 health fund would consist of money deposited or transferred
to theFund by appropriation or other law, gifts and grants contributed to
the Fund, and the earnings of the Fund. On the effective date of this
bill, the Comptroller would transfer $400 million from the General
Revenue Fund 0001 to the Fund.
The bill also would authorize the comptroller to establish separate
permanent funds, totaling $555 million, for 12 institutions of higher
education. The governing board of each institution or component for
which a fund is established would administer the fund. Earnings of each
fund would be used 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. Each fund would consist
of money deposited or transferred to the fund by appropriation, gifts and
grants and the fund's earnings.
The bill authorizes the governing boards to manage and invest both funds
in the same manner as the Permanent University Fund is administered.
Methodology
The Comptroller of Public Account has assumed that money to be
transferred to the new funds would come from General Revenue Account 5040
- Tobacco Settlement Temporary Hold, which holds payments to the state
as a result of the January 1998 tobacco lawsuit settlement. The $955
million in transfers would occur in fiscal year 1999. The analysis
assumes no further transfers of state money, no gifts or grants from
other sources. A projected rate of return appropriate to the management
criteria established by this bill was applied to the deposits in the new
funds to arrive at annual earnings.
This analysis also assumes that because the bill would take effect 90
days following adjournment, the amount of interest gains and losses to
the funds in the transfer would be insignificant. If the bill were to
have immediate effect, the new funds would receive additional interest in
fiscal year 1999. There would be no significant loss in General Revenue
Fund interest earnings in fiscal year 2000 and no interest earning loss
after 2001 because the 2000-2001 Biennial Revenue Estimate assumes that
the transfer or expenditure of the tobacco settlement funds would take
place on September 1, 1999.
It is assumed that the 12 institutions of higher education would develop
programs to fully expend the interest earnings in the separate permanent
funds. The Comptroller has estimated earnings for the separate
permanent funds from 2000 to 2004.
Local Government Impact
The fiscal implication to units of local government cannot be determined.
Source Agencies:
LBB Staff: JK, BB, CF