LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE, 76th Regular Session May 6, 1999 TO: Honorable Bill Ratliff, Chair, Senate Committee on Finance FROM: John Keel, Director, Legislative Budget Board IN RE: HJR58 by Junell (proposing a constitutional amendment relating to the investment of the permanent university fund and to distributions from that fund to the available university fund), As Engrossed ************************************************************************** * Estimated Two-year Net Impact to General Revenue Related Funds for * * HJR58, As Engrossed: positive impact of $0 through the biennium * * ending August 31, 2001. * ************************************************************************** General Revenue-Related Funds, Five-Year Impact: **************************************************** * Fiscal Year Probable Net Positive/(Negative) * * Impact to General Revenue Related * * Funds * * 2000 $0 * * 2001 0 * * 2002 0 * * 2003 0 * * 2004 0 * **************************************************** All Funds, Five-Year Impact: ***************************************************** * Fiscal Year Probable Revenue Gain/(Loss) to * * the Available University Fund * * 0011 * * 2000 $33,600,000 * * 2001 37,620,000 * * 2002 41,250,000 * * 2003 47,200,000 * * 2004 49,750,000 * ***************************************************** Fiscal Analysis The constitutional amendment would allow The University of Texas System Board of Regents (board) to determine the amount of investment return from the Permanent University Fund (PUF) that would be distributed to the Available University Fund (AUF). This distribution could be made from the total return on all investment assets of the PUF. When determining the amount to be distributed, the board of regents must: not exceed seven percent of the average net fair market value of PUF investment assets; provide the AUF with a stable and predictable stream of annual distributions; maintain over time the purchasing power of PUF investments and annual distributions; and not increase annual distributions if the purchasing power of PUF investments for any rolling 10-year period is not preserved. The expenses of managing PUF land and investments would continue to be paid by the PUF. Methodology Distributions to the Available University Fund (AUF) are estimated to increase 13.3% over The University of Texas System's (System) most current estimate for Fiscal Year 2000 (8.9% above that estimated in the Appropriations Bill). The increase for Fiscal Year 2001 is 14.8% over the System's most current estimate (10.4% above that estimated in the Appropriations Bill.) As a result, the distribution would equal 4.5% of the most recent 12-quarter average of the corpus. Currently, it is estimated the distribution would equal 3.97% of the most recent 12-quarter average of the corpus. Local Government Impact No fiscal implication to units of local government is anticipated. Source Agencies: 720 The University of Texas System Administration, 781 Higher Education Coordinating Board LBB Staff: JK, BB, PF