LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE, 77th Regular Session February 6, 2001 TO: Honorable Irma Rangel, Chair, House Committee on Higher Education FROM: John Keel, Director, Legislative Budget Board IN RE: HB152 by Brown, Fred (Relating to tuition charged at state institutions of higher education for a summer term or session.), As Introduced ************************************************************************** * Estimated Two-year Net Impact to General Revenue Related Funds for * * HB152, As Introduced: negative impact of $(40,558,880) through * * the biennium ending August 31, 2003. * * * * The bill would make no appropriation but could provide the legal * * basis for an appropriation of funds to implement the provisions of * * the bill. * ************************************************************************** General Revenue-Related Funds, Five-Year Impact: **************************************************** * Fiscal Year Probable Net Positive/(Negative) * * Impact to General Revenue Related * * Funds * * 2002 $(19,784,820) * * 2003 (20,774,060) * * 2004 (19,512,760) * * 2005 (18,303,400) * * 2006 (17,148,580) * **************************************************** All Funds, Five-Year Impact: *************************************************************************** *Fiscal Probable Probable Probable Change in * * Year Savings/(Cost) Savings/(Cost) Revenue Number of State * * from General from General Gain/(Loss) Employees from * * Revenue Fund Revenue Fund from Estimated FY 2001 * * 0001 0001 Other * * Educational and * * General Income * * Account/ * * GR-Dedicated * * 0770 * * 2002 $(19,784,820) $0 $(19,784,820) 0.0 * * 2003 (20,774,060) 0 (20,774,060) 0.0 * * 2004 (21,812,760) 2,300,000 (21,812,760) 0.0 * * 2005 (22,903,400) 4,600,000 (22,903,400) 0.0 * * 2006 (24,048,580) 6,900,000 (24,048,500) 0.0 * *************************************************************************** Fiscal Analysis The bill would reduce tuition rates for summer terms at general academic institutions, effective with the start of summer 2002 terms. Methodology Based on current enrollments, the summer tuition rate reduction results in an initial tuition revenue loss of $19.8 million a year. It is assumed that reduced tuition rates would cause an increase in summer enrollment of 5 percent each year for 5 years. Therefore, the tuition revenue reductions would also grow by 5% a year to over $24 million in fiscal year 2006. An equivalent amount of general revenue funds would be needed to reimburse universities for the loss of tuition revenue. It is assumed that the increase in students attending the summer terms would be made up of students who were formerly attending the fall and spring semesters. Therefore, overall enrollment for the full year would remain the same. However, the distribution of students attending summer or fall/spring semesters would change and result in a more efficient use of classroom space. Based on information from the Texas Higher Education Coordinating Board, it is estimated that this efficiency might result in a reduction in physical plant costs of 1 percent each year for four years or $2.3 million increasing to $6.9 million. The cost savings would not be realized until Fiscal Year 2004, when new formula amounts would be generated. However, it is possible that these cost savings could be offset by increases in utilities costs for the summer terms. Universities would also realize a reduction in non-appropriated tuition revenue. These amounts are estimated to be initially $30.7 million per year increasing to $61.3 million. However, these amounts would not impact State appropriations. Local Government Impact No fiscal implication to units of local government is anticipated. Source Agencies: 781 Texas Higher Education Coordinating Board LBB Staff: JK, CT, DB