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