LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE, 77th Regular Session
February 28, 2001
TO: Honorable Rodney Ellis, Chair, Senate Committee on Finance
FROM: John Keel, Director, Legislative Budget Board
IN RE: SB737 by Ellis, Rodney (Relating to the creation of the
Texas excellence fund to promote research and excellence
at certain institutions of higher education.), As
Introduced
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* Estimated Two-year Net Impact to General Revenue Related Funds for *
* SB737, As Introduced: impact of $0 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. *
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General Revenue-Related Funds, Five-Year Net Impact:
****************************************************
* Fiscal Year Probable Net Positive/(Negative) *
* Impact to General Revenue Related *
* Funds *
* 2002 $0 *
* 2003 0 *
* 2004 0 *
* 2005 0 *
* 2006 0 *
****************************************************
All Funds, Five-Year Impact:
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*Fiscal Probable Revenue Gain/(Loss) Probable Revenue Gain/(Loss) *
* Year from Permanent Higher Education from New *
* Fund Texas Excellence Fund outside *
* 0346 Treasury *
* 2002 $(9,198,000) $8,400,000 *
* 2003 (10,072,000) 9,198,000 *
* 2004 (35,490,000) 32,411,000 *
* 2005 (41,355,000) 37,767,000 *
* 2006 (47,602,000) 43,472,000 *
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Fiscal Analysis
The bill would amend Chapter 62 of the Education Code to create the Texas
Excellence Fund outside the State Treasury, in the custody of the
Comptroller. The Comptroller would be responsible for administering and
investing the fund. The Comptroller would be required to deposit all
interest, dividends, and other income earned from investment of the
Excellence Fund to the credit of the fund and would be permitted to
accept gifts or grants from any source for deposit in the Excellence
Fund.
The bill would require that an institution use money appropriated from
the Excellence Fund only for the support and maintenance of educational
and general activities (including research and student services) that
promote research capacity and develop institutional excellence.
The bill would require that 80 percent of the amount appropriated go to
comprehensive research universities and that the remaining 20 percent be
appropriated to other eligible institutions. The allocation formulas for
specific universities or institutions would not be used in the 2002-03
biennium; for that biennium, the funds would be appropriated to eligible
institutions as provided by the General Appropriations Act.
The bill would require that each year, from the first undedicated $50
million that comes to the state, the Comptroller deposit to the credit of
the Excellence Fund an amount equal to the income earned from the
investment of the Permanent Higher Education Fund (PHEF) in the preceding
state fiscal year. The remainder would be deposited to the credit of
the PHEF.
After the PHEF reached $2 billion, the bill would require that the
Comptroller continue to deposit to the credit of the Excellence Fund each
year an amount equal to the investment income earned by the PHEF, up to
a maximum of $50 million. The bill would require that the Comptroller,
in consultation with the presiding officers of the governing boards of
the institutions eligible to benefit from the income from the investment
of the PHEF, invest the fund in a manner that maximized the amount of
income earned and gains realized.
This bill would take effect September 1, 2001.
Methodology
Losses to the PHEF occur for 2 reasons: (1) the decrease in total
expected income earned for the fund and (2) the decrease due to the shift
to the Excellence Fund of an amount equal to the previous year's
investment income. In addition, losses to the PHEF would be greater than
the gains to the Excellence Fund because the anticipated shift in asset
allocation away from equities and toward fixed-income securities would
result in lower overall returns to state funds.
The estimate of the PHEF is based on projected total returns, as
calculated over the next five years by the Comptroller's Office,
considering the expected change in asset allocation beginning in 2003.
An allowance was made for the annual deposit to the Excellence Fund
based on income earned from the PHEF as required by the bill. Further,
it is assumed that the entire amount in the Excellence Fund is
appropriated each year. Potential gifts or grants, from public or
private sources, into the newly-created fund are not included.
Local Government Impact
No fiscal implication to units of local government is anticipated.
Source Agencies: 781 Texas Higher Education Coordinating Board, 304
Comptroller of Public Accounts
LBB Staff: JK, SD, DC, DB