H.B. 1887 78(R)    BILL ANALYSIS


H.B. 1887
By: Morrison
Higher Education
Committee Report (Unamended)



BACKGROUND AND PURPOSE 

Current Texas law permits 50% of a university's indirect cost
reimbursements to be deducted from the institution's state general revenue
appropriations.  By losing half the value of these "overhead" payments on
research grants, Texas universities are placed at a disadvantage when
competing with institutions in other states.  If institutions could retain
100% of the indirect costs, as is the case in most of the large states
with which Texas competes for grants, the money could be reinvested in the
research enterprise to help attract even more external funding. 

The principle costs of most university research projects are for salaries
and benefits for research assistants, graduate students, and other
investigators.  Other costs often include items such as laboratory
supplies, computer time, and travel directly associated with a research
project.  These are the "direct" costs associated with research.  

In addition to those "direct" costs of individual research projects, there
are also "indirect" costs. These include the costs of accounting and
auditing for a grant, providing clerical and administrative support,
providing laboratory and office space, centralized computing facilities
and other capital equipment, utilities, and other campus infrastructure.
(Indirect costs are also referred to as "overhead".)  Indirect costs are
generally associated with centralized functions that serve multiple
research projects, if not, indeed, all of an institution's research
enterprise. 

Many research grants, particularly from federal agencies, recognize the
need to pay for both the direct and the indirect costs of research.  In
addition to the grant itself, which is designed to pay for the direct
costs, grantors provide funds known as "indirect cost reimbursements."
These payments are intended for just that: reimbursement to an institution
for the costs of providing the underlying support facilities and services
that make research possible.   

HB 1887 would initiate a process of phasing-out the current disincentive
and impediment to the ability of research institutions to increase their
research output.  The more of these research awards that can be reinvested
in the research activities and infrastructure of the institutions, the
greater the capacity of the institutions to grow their research programs. 

RULEMAKING AUTHORITY

It is the committee's opinion that this bill does not expressly grant any
additional rulemaking authority to a state officer, department, agency, or
institution. 

ANALYSIS

HB 1887 amends Section 145.001(c), Education Code, to provide that the
designated funds for paying overhead expenses associated with conducting
research by a defined institution may not be accounted for in an
appropriations act in such a way as to reduce the general revenue funds to
be appropriated to a general academic teaching institution or medical or
dental unit.   

EFFECTIVE DATE

This Act takes effect immediately if it receives a vote of two-thirds of
all the members elected to each house, as provided by Section 39, Article
III, Texas Constitution.  If this Act does not receive the vote necessary
for immediate effect, this Act takes effect September 1, 2003.