LEGISLATIVE BUDGET BOARD
                              Austin, Texas
                                     
                    FISCAL NOTE, 77th Regular Session
  
                               May 23, 2001
  
  
          TO:  Honorable James E. "Pete" Laney, Speaker of the House,
               House of Representatives
  
        FROM:  John Keel, Director, Legislative Budget Board
  
       IN RE:  HB1839  by Junell (Relating to research and excellence
               funding at certain institutions of higher education.), As
               Passed 2nd House
  
**************************************************************************
*  Estimated Two-year Net Impact to General Revenue Related Funds for    *
*  HB1839, As Passed 2nd House:  negative impact of $(33,774,000)        *
*  through the biennium ending August 31, 2003.                          *
*                                                                        *
*  The Committee Substitute for Senate Bill 1 as adopted by the          *
*  conferees includes an appropriation of $33.774 million to             *
*  implement the provisions of the bill.                                 *
**************************************************************************
  
General Revenue-Related Funds, Five-Year Net Impact:
  
          ****************************************************
          *  Fiscal Year  Probable Net Positive/(Negative)   *
          *               Impact to General Revenue Related  *
          *                             Funds                *
          *       2002                        $(15,337,000)  *
          *       2003                         (18,437,000)  *
          *       2004                         (22,438,000)  *
          *       2005                         (26,820,000)  *
          *       2006                         (31,618,000)  *
          ****************************************************
  
All Funds, Five-Year Impact:
  
***************************************************************************
*Fiscal      Probable        Probable        Probable        Probable     *
* Year       Revenue         Revenue         Revenue      Savings/(Cost)  *
*          Gain/(Loss)     Gain/(Loss)     Gain/(Loss)     from General   *
*        from New Higher  from Permanent     from New      Revenue Fund   *
*         Education Fund      Higher        University         0001       *
*            outside      Education Fund  Research Fund                   *
*           Treasury -         0346                                       *
*             Texas                                                       *
*        Excellence Fund                                                  *
*  2002       $15,337,000   $(16,794,000)     $15,337,000   $(15,337,000) *
*  2003        18,437,000    (21,784,000)      18,437,000    (18,437,000) *
*  2004        22,438,000    (28,235,000)      22,438,000    (22,438,000) *
*  2005        26,820,000    (35,715,000)      26,820,000    (26,820,000) *
*  2006        31,618,000    (44,361,000)      31,618,000    (31,618,000) *
***************************************************************************
  
Fiscal Analysis
  
The bill would amend Chapter 62 of the Education Code to create two new
funds, the Texas Excellence Fund and University Research Fund.  The Texas
Excellence Fund (TEF) and University Research Fund (URF) would promote
research and provide excellence funds for certain comprehensive research
universities as defined by the bill.

The bill creates the TEF outside the state Treasury in the custody of the
Comptroller who would be responsible for administering and investing the
fund.  A portion of the annual $50 million deposit from general revenue
to the Permanent Higher Education Fund (PHEF) will instead be deposited
into the TEF.  That portion is in an amount equal to the portion of the
total return on investment assets of the higher education fund in the
preceding state fiscal year computed by multiplying that total return by
the percentage of the total return on all investment assets of the
permanent fund for tobacco education and enforcement that constitutes
available earnings as determined by the Comptroller.  The remaining
amount is deposited to the Permanent Higher Education Fund.

The bill would also create the URF outside the state Treasury in the
custody of the Comptroller.  In each fiscal year the bill would require
the Legislature to appropriate or provide an amount into the URF equal
to the amount deposited in the Texas Excellence Fund in that fiscal
year.
  
  
Methodology
  
The estimate is based on the Comptroller's projections which assume a
return of 4.5% for the Texas Excellence Fund consistent with the
anticipated return on the Permanent Fund for Tobacco Education and
Enforcement as provided by the bill.  The cost to General Revenue to
provide the same level of funding for the University Research Fund and
the gain to the URF would be equal to the amount deposited to the credit
of the TEF.  However, losses to the Permanent Higher Education Fund would
be greater than the gains to the TEF due to lost investment revenues
that would not be earned each year on the cumulative amounts of deposits
made to the TEF instead of the Permanent Higher Education Fund.

  
  
Local Government Impact
  
No fiscal implication to units of local government is anticipated.
  
  
Source Agencies:   304   Comptroller of Public Accounts
LBB Staff:         JK, SD, DC