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  By: Branch, et al. (Senate Sponsor - Zaffirini) H.B. No. 51
         (In the Senate - Received from the House April 27, 2009;
  May 4, 2009, read first time and referred to Committee on Higher
  Education; May 25, 2009, reported adversely, with favorable
  Committee Substitute by the following vote: Yeas 4, Nays 0;
  May 25, 2009, sent to printer.)
 
  COMMITTEE SUBSTITUTE FOR H.B. No. 51 By:  Zaffirini
 
 
A BILL TO BE ENTITLED
 
AN ACT
 
  relating to measures to enhance and maintain the quality of state
  universities, including funding and incentives to support emerging
  public research universities in developing and maintaining
  programs of the highest tier, to the abolition of the higher
  education fund, and to the institutional groupings under the Texas
  Higher Education Coordinating Board's accountability system.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  Subchapter G, Chapter 51, Education Code, is
  amended by adding Section 51.358 to read as follows:
         Sec. 51.358.  LONG-TERM STRATEGIC PLAN FOR RESEARCH
  UNIVERSITY OR EMERGING RESEARCH UNIVERSITY. (a)  The governing
  board of each institution of higher education designated as a
  research university or emerging research university under the Texas
  Higher Education Coordinating Board's accountability system shall
  submit to the coordinating board, in the form and manner prescribed
  by the coordinating board, a detailed, long-term strategic plan
  documenting the strategy by which the institution intends to
  achieve recognition as a research university, or enhance the
  university's reputation as a research university, as applicable.
         (b)  The Texas Higher Education Coordinating Board shall
  adopt rules for the administration of this section.
         SECTION 2.  Section 61.059, Education Code, is amended by
  adding Subsection (o) to read as follows:
         (o)  In addition to the other funding recommendations
  required by this section, biennially the board shall determine the
  amount that the board considers appropriate for purposes of
  providing funding under Section 61.0596 in the following state
  fiscal biennium to carry out the purposes of that section and shall
  make recommendations to the governor and the Legislative Budget
  Board for funding those programs in that biennium. To the extent
  the board considers appropriate, the board may include in the
  formulas established under this section the funding to be provided
  under Section 61.0596.
         SECTION 3.  Subchapter C, Chapter 61, Education Code, is
  amended by adding Section 61.0596 to read as follows:
         Sec. 61.0596.  UNIVERSITY FUNDING FOR EXCELLENCE IN SPECIFIC
  PROGRAMS AND FIELDS; INCENTIVE GRANTS. (a)  The board shall
  administer this section to encourage and assist general academic
  teaching institutions, other than public state colleges, that are
  not research universities or emerging research universities
  according to the institutional groupings under the board's higher
  education accountability system to develop and maintain specific
  programs or fields of study of the highest national rank or
  recognition for that type of program or field.
         (b)  To assist the institution in achieving the highest
  national rank or recognition for the applicable degree program and
  from money available for the purpose, the board shall award
  incentive grants to general academic teaching institutions
  described by Subsection (a) that the board considers to have
  demonstrated the greatest commitment to success in developing or
  improving, consistent with the mission of the institution, the
  quality of an existing degree program designated by the
  institution. An institution must use a grant under this subsection
  for faculty recruitment or other faculty support with respect to
  the designated degree program for which the grant is awarded,
  including establishment of endowed faculty positions or
  enhancement of faculty compensation as considered appropriate by
  the institution.
         (c)  An institution may designate only one degree program at
  a time for consideration for new funding under Subsection (b). The
  institution may change its designation with the consent of the
  board. If the board determines that an institution has met all the
  applicable benchmarks for the institution's designated program,
  the institution may designate another degree program for
  consideration for new funding under Subsection (b).
         (d)  The board shall establish a series of benchmarks
  applicable to each degree program designated by an institution
  under this section. The institution becomes eligible for funding
  under Subsection (b) for each benchmark the board determines that
  the institution has met. The board shall establish the amount of
  funding for each benchmark met in a manner that provides an
  effective incentive to assist the institution to continue its
  efforts to meet the remaining benchmarks for its designated
  program.
         (e)  Unless the board determines that a different number of
  benchmarks is appropriate, the board shall establish three
  benchmarks for each designated degree program. The board shall
  identify one or more persons who have relevant expertise and do not
  reside in this state to assist the board in establishing the
  benchmarks and associated funding levels for each type of degree
  program designated by an institution under this section.
         (f)  An institution that designates a degree program to
  receive funding under Subsection (b) shall reimburse the board for
  the costs incurred by the board in administering this section with
  respect to the institution's designated program.
         (g)  In addition to supporting the programs designated by
  institutions for consideration to receive incentive grants under
  Subsection (b), from money available for the purpose, the board
  shall provide additional money as the board determines appropriate
  to assist the institutions described by Subsection (a) in
  maintaining the excellence of programs or fields of study that have
  achieved the highest national ranking or recognition for that type
  of program or field.
         (h)  The legislature may not appropriate money for grants or
  other financial assistance to general academic teaching
  institutions under this section before the board certifies that one
  or more institutions have met at least one of the benchmarks
  established by the board for the institutions' designated degree
  programs under Subsection (d).
         SECTION 4.  Subchapter C, Chapter 61, Education Code, is
  amended by adding Section 61.0904 to read as follows:
         Sec. 61.0904.  REVIEW OF INSTITUTIONAL GROUPINGS.  At least
  once every 10 years, the board shall conduct a review of the
  institutional groupings under the board's accountability system,
  including a review of the criteria for and definitions assigned to
  those groupings.
         SECTION 5.  The heading to Chapter 62, Education Code, is
  amended to read as follows:
  CHAPTER 62.  CONSTITUTIONAL AND STATUTORY [DIVISION OF
  CONSTITUTIONALLY APPROPRIATED] FUNDS TO SUPPORT [AMONG CERTAIN]
  INSTITUTIONS OF HIGHER EDUCATION[; RESEARCH DEVELOPMENT FUND]
         SECTION 6.  Section 62.003(1), Education Code, is amended to
  read as follows:
               (1)  Except as otherwise provided by Subchapters C, D,
  F, and G, "eligible  ["Eligible] institution" means the eligible
  agencies and institutions of higher education listed in Article
  VII, Section 17(b), of the Constitution of Texas, and any
  institution or agency of higher education that is later made
  eligible to participate in the disbursement of funds pursuant to
  Article VII, Section 17(c), of the Constitution of Texas.
         SECTION 7.  Chapter 62, Education Code, is amended by adding
  Subchapters C, D, and F to read as follows:
  SUBCHAPTER C.  RESEARCH UNIVERSITY DEVELOPMENT FUND
         Sec. 62.051.  DEFINITIONS.  In this subchapter:
               (1)  "Eligible institution" means an institution of
  higher education designated as a research university or emerging
  research university under the coordinating board's accountability
  system.
               (2)  "Institution of higher education" has the meaning
  assigned by Section 61.003.
         Sec. 62.052.  PURPOSE. The purpose of this subchapter is to
  provide funding to research universities and emerging research
  universities for the recruitment and retention of highly qualified
  faculty and the enhancement of research productivity at those
  universities.
         Sec. 62.053.  FUNDING. (a)  For each state fiscal year, the
  coordinating board shall distribute any funds appropriated by the
  legislature for the purposes of this subchapter, and any other
  funds made available for the purposes of this subchapter, to
  eligible institutions based on the average amount of total research
  funds expended by each institution annually during the three most
  recent state fiscal years, according to the following rates:
               (1)  at least $1 million for every $10 million of the
  average annual amount of those research funds expended by the
  institution, if that average amount for the institution is $50
  million or more; and
               (2)  at least $500,000 for every $10 million of the
  average annual amount of those research funds expended by the
  institution, if that average amount for the institution is less
  than $50 million.
         (b)  For purposes of Subsection (a), the amount of total
  research funds expended by an eligible institution in a state
  fiscal year is the amount of those funds as reported to the
  coordinating board by the institution for that fiscal year, subject
  to any adjustment by the coordinating board in accordance with the
  standards and accounting methods the coordinating board prescribes
  for purposes of this section. If the funds available for
  distribution for a state fiscal year under Subsection (a) are not
  sufficient to provide the amount specified by Subsection (a) for
  each eligible institution or exceed the amount sufficient for that
  purpose, the available amount shall be distributed in proportion to
  the total amount to which each institution is otherwise entitled
  under Subsection (a).
         Sec. 62.054.  RULES.  The coordinating board shall adopt
  rules for the administration of this subchapter, including any
  rules the coordinating board considers necessary regarding the
  submission to the coordinating board by eligible institutions of
  any student data required for the coordinating board to carry out
  its duties under this subchapter.
  SUBCHAPTER D.  PERFORMANCE INCENTIVE FUNDING
         Sec. 62.071.  DEFINITIONS. In this subchapter:
               (1)  "At-risk student" means an undergraduate student
  of an eligible institution:
                     (A)  whose score on the Scholastic Assessment Test
  (SAT) or the American College Test (ACT) is less than the national
  mean score of students' scores on that test;
                     (B)  who has been awarded a grant under the
  federal Pell Grant program;
                     (C)  who was 20 years of age or older on the date
  the student initially enrolled in the institution;
                     (D)  who is enrolled as a part-time student; or
                     (E)  who did not receive a high school diploma but
  received a high school equivalency certificate within the last six
  years.
               (2)  "Critical field" means:
                     (A)  the field of engineering, computer science,
  mathematics, physical science, allied health, nursing, or teacher
  certification in a field of science or mathematics; and
                     (B)  any other field of study identified as a
  critical field by the coordinating board in "Closing the Gaps," the
  state's master plan for higher education.
               (3)  "Eligible institution" means a general academic
  teaching institution other than a public state college.
               (4)  "General academic teaching institution" and
  "public state college" have the meanings assigned by Section
  61.003.
         Sec. 62.072.  FUNDING.  (a)  For each state fiscal year, the
  coordinating board shall distribute any performance incentive
  funds appropriated by the legislature for purposes of this
  subchapter, and any other funds made available for the purposes of
  this subchapter, to eligible institutions as follows:
               (1)  50 percent to be distributed among eligible
  institutions in proportion to the increase, if any, in the average
  number of degrees awarded annually by each institution in the two
  most recent fiscal years from the average number of degrees awarded
  annually by that institution in the two fiscal years immediately
  preceding those fiscal years, using the weights assigned to each
  degree under the table prescribed by Subsection (b); and
               (2)  the remaining 50 percent to be distributed among
  eligible institutions in proportion to the average number of
  degrees awarded annually by each institution in the three most
  recent fiscal years, using the weights assigned to each degree
  under the table prescribed by Subsection (b).
         (b)  A number of points is assigned for each degree awarded
  by an eligible institution according to the following table:
                                             POINTS
  Noncritical Field/Not At-Risk Student 1.0
  Noncritical Field/At-Risk Student     2.0
  Critical Field/Not At-Risk Student    2.0
  Critical Field/At-Risk Student        3.0
         Sec. 62.073.  RULES.  The coordinating board shall adopt
  rules for the administration of this subchapter, including any
  rules the coordinating board considers necessary regarding the
  submission to the coordinating board by eligible institutions of
  any student data required for the coordinating board to carry out
  its duties under this subchapter.
  SUBCHAPTER F.  TEXAS RESEARCH INCENTIVE PROGRAM (TRIP)
         Sec. 62.121.  DEFINITIONS.  In this subchapter:
               (1)  "Eligible institution" means an institution of
  higher education designated as an emerging research university
  under the coordinating board's accountability system.
               (2)  "Gift" includes cash, cash equivalents,
  marketable securities, closely held securities, money market
  holdings, partnership interests, personal property, real property,
  minerals, and life insurance proceeds.
               (3)  "Institution of higher education" has the meaning
  assigned by Section 61.003.
               (4)  "Program" means the Texas Research Incentive
  Program (TRIP) established under this subchapter.
         Sec. 62.122.  PROGRAM ADMINISTRATION. The coordinating
  board shall develop and administer the Texas Research Incentive
  Program (TRIP) in accordance with this subchapter to provide
  matching funds to assist eligible institutions in leveraging
  private gifts for the enhancement of research productivity and
  faculty recruitment.
         Sec. 62.123.  MATCHING GRANTS.  (a)  An eligible institution
  that receives gifts or endowments from private sources in a state
  fiscal year for the purpose of enhancing research activities at the
  institution, including a gift or endowment for endowed chairs,
  professorships, facilities, equipment, program costs, or graduate
  stipends or fellowships, is entitled to receive, out of funds
  appropriated for the purposes of the program for that fiscal year, a
  matching grant in an amount determined according to the following
  rates:
               (1)  50 percent of the amount of the gifts and
  endowments, if the total amount of gifts and endowments is $100,000
  or more but not more than $999,999;
               (2)  75 percent of the amount of the gifts and
  endowments, if the total amount of gifts and endowments is $1
  million or more but not more than $1,999,999; or
               (3)  100 percent of the amount of the gifts and
  endowments, if the total amount of gifts and endowments is $2
  million or more.
         (b)  An eligible institution is not entitled to matching
  funds under the program for:
               (1)  a gift that has been pledged but has not been
  received by the institution;
               (2)  a gift for undergraduate scholarships or grants;
  or
               (3)  any portion of gifts or endowments received by the
  institution from a single source in a state fiscal year in excess of
  $10 million.
         (c)  The coordinating board shall establish procedures for
  the certification by the coordinating board of an eligible
  institution's receipt of a qualifying gift or endowment.  A cash
  gift or endowment must be certified as of the date the gift or
  endowment was deposited by the institution in a depository bank or
  invested by the institution as authorized by law.  A non-cash gift
  must be certified as of the date the gift is converted to cash, and
  is considered to have been received on that date for purposes of
  this subchapter.
         (d)  If the funds appropriated for the program for a state
  fiscal year are insufficient to provide matching grants in the
  amounts specified by this section for all qualifying private gifts
  and endowments received by eligible institutions during that fiscal
  year, the coordinating board shall provide matching grants for
  those gifts and endowments in order of their certification date,
  and shall provide matching grants for any remaining unmatched gifts
  and endowments in the following fiscal year using funds
  appropriated to the program for that following year, to the extent
  funds are available.
         (e)  Matching grants received by an eligible institution
  under this section may not be considered as a basis to reduce,
  directly or indirectly, the amount of money otherwise appropriated
  to the institution.
         Sec. 62.124.  RULES. The coordinating board shall adopt
  rules for the administration of this subchapter.
         SECTION 8.  Chapter 62, Education Code, is amended by adding
  Subchapter G to read as follows:
  SUBCHAPTER G.  NATIONAL RESEARCH UNIVERSITY FUND
         Sec. 62.141.  PURPOSE. The purpose of this subchapter is to
  allocate appropriations from the national research university fund
  to provide a dedicated, independent, and equitable source of
  funding to enable emerging research universities in this state to
  achieve national prominence as major research universities.
         Sec. 62.142.  DEFINITIONS. In this subchapter:
               (1)  "Eligible institution" means a general academic
  teaching institution that is eligible to receive distributions of
  money under this subchapter.
               (2)  "Endowment funds" means funds treated as endowment
  funds under the coordinating board's accountability system.
               (3)  "Fund" means the national research university
  fund.
               (4)  "General academic teaching institution" has the
  meaning assigned by Section 61.003.
         Sec. 62.143.  ADMINISTRATION AND INVESTMENT OF FUND.  (a)  
  The national research university fund is a fund outside the state
  treasury in the custody of the comptroller.
         (b)  The comptroller shall administer and invest the fund in
  accordance with Section 20, Article VII, Texas Constitution.
         Sec. 62.144.  FUNDING.  (a)  The fund consists of any amounts
  appropriated or transferred to the credit of the fund under the
  Texas Constitution or otherwise appropriated or transferred to the
  credit of the fund under this section or another law.
         (b)  The comptroller shall deposit to the credit of the fund
  all interest, dividends, and other income earned from investment of
  the fund.
         (c)  The comptroller may accept gifts or grants from any
  public or private source for the fund.
         Sec. 62.145.  ELIGIBILITY TO RECEIVE DISTRIBUTIONS FROM
  FUND. (a) A general academic teaching institution is eligible to
  receive a distribution of money under this subchapter for each year
  of a state fiscal biennium if:
               (1)  the institution is designated as an emerging
  research university under the coordinating board's accountability
  system;
               (2)  in each of the two state fiscal years preceding the
  state fiscal biennium, the institution expended at least $45
  million in restricted research funds; and
               (3)  the institution satisfies at least four of the
  following criteria:
                     (A)  the value of the institution's endowment
  funds is at least $400 million;
                     (B)  the institution awarded at least 200 doctor
  of philosophy degrees during each of the two academic years
  preceding the state fiscal biennium;
                     (C)  the entering freshman class of the
  institution for each of those two academic years demonstrated high
  academic achievement, as determined according to standards
  prescribed by the coordinating board by rule, giving consideration
  to the future educational needs of the state as articulated in the
  coordinating board's "Closing the Gaps" report;
                     (D)  the institution is designated as a member of
  the Association of Research Libraries or has a Phi Beta Kappa
  chapter or has received an equivalent recognition of research
  capabilities and scholarly attainment as determined according to
  standards prescribed by the coordinating board by rule;
                     (E)  the faculty of the institution for each of
  those two academic years was of high quality, as determined
  according to coordinating board standards based on the professional
  achievement and recognition of the institution's faculty,
  including the election of faculty members to national academies;
  and
                     (F)  the institution has demonstrated a
  commitment to high-quality graduate education, as determined
  according to standards prescribed by the coordinating board by
  rule, including the number of graduate-level programs at the
  institution, the institution's admission standards for graduate
  programs, and the level of institutional support for graduate
  students.
         (b)  A general academic teaching institution that becomes
  eligible to receive a distribution of money under this subchapter
  remains eligible to receive a distribution in each subsequent state
  fiscal year.
         Sec. 62.146.  ACCOUNTING STANDARDS; VERIFICATION OF
  INFORMATION. (a) The coordinating board by rule shall prescribe
  standard methods of accounting and standard methods of reporting
  information for the purpose of determining the eligibility of
  institutions under Section 62.145.
         (b)  As soon as practicable in each even-numbered year, based
  on information submitted by the institutions to the coordinating
  board as required by the coordinating board, the coordinating board
  shall certify to the legislature verified information relating to
  the criteria established by Section 62.145 to be used to determine
  which institutions are initially eligible for distributions of
  money from the fund.  Information submitted to the coordinating
  board by institutions for purposes of this subchapter and the
  coordinating board's certification of that information under this
  subsection are subject to audit by the state auditor in accordance
  with Chapter 321, Government Code.
         Sec. 62.147.  INELIGIBILITY OF INSTITUTIONS RECEIVING
  PERMANENT UNIVERSITY FUND SUPPORT AND MAINTENANCE. The University
  of Texas at Austin and Texas A&M University are ineligible to
  receive money under this subchapter.
         Sec. 62.148.  ALLOCATION OF APPROPRIATED FUNDS TO ELIGIBLE
  INSTITUTIONS. In each state fiscal year, the comptroller shall
  distribute to eligible institutions the total amount appropriated
  from the fund for that fiscal year. The amount shall be allocated
  to the eligible institutions based on an equitable formula adopted
  by the legislature to carry out the purposes of the fund as
  established by Section 20, Article VII, Texas Constitution. In
  adopting the allocation formula, the legislature may consider the
  recommendations of the coordinating board, including
  recommendations on the appropriate elements and relative weights of
  elements of the formula.
         Sec. 62.149.  USE OF ALLOCATED AMOUNTS.  (a)  An eligible
  institution may use money received under this subchapter only for
  the support and maintenance of educational and general activities
  that promote increased research capacity at the institution.
         (b)  For purposes of Subsection (a), permitted activities
  include the use of the money to:
               (1)  provide faculty support and pay faculty salaries;
               (2)  purchase equipment or library materials;
               (3)  pay graduate stipends; and
               (4)  support research performed at the institution,
  including undergraduate research.
         (c)  Money received in a fiscal year by an institution under
  this subchapter that is not used in that fiscal year by the
  institution may be held and used by the institution in subsequent
  fiscal years for the purposes prescribed by this section.
         SECTION 9.  Section 62.094, Education Code, is amended to
  read as follows:
         Sec. 62.094.  FUNDING.  (a)  The research development fund
  consists of the [amount deposited to the credit of the fund under
  Section 62.025 in each state fiscal year, the amount appropriated
  or transferred to the credit of the fund by the legislature under
  Subsection (b), and any other] amounts appropriated or transferred
  to the credit of the fund under this section or other law.
         (b)  [In each state fiscal year, the legislature may
  appropriate or provide for the transfer to the credit of the
  research development fund of an amount not less than the amount
  deposited to the credit of the fund under Section 62.025 in that
  fiscal year.
         [(c)]  The comptroller shall deposit all interest,
  dividends, and other income earned from investment of the research
  development fund to the credit of the fund.
         (c) [(d)]  The comptroller may accept gifts or grants from
  any public or private source for the research development fund.
         SECTION 10.  Sections 62.025 and 62.026, Education Code, are
  repealed.
         SECTION 11.  (a)  The Texas Higher Education Coordinating
  Board, in consultation with institutions of higher education that
  are eligible institutions under Subchapter C, Chapter 62, Education
  Code, as added by this Act, shall study and make recommendations
  regarding the appropriate definitions and categories of research
  expenditures to be included and applied in determining an
  institution's eligibility for and distributions from the Research
  University Development Fund.
         (b)  Not later than December 1, 2010, the coordinating board
  shall report its study and deliver its recommendations to the:
               (1)  governor;
               (2)  lieutenant governor;
               (3)  speaker of the house of representatives;
               (4)  chair of the Senate Committee on Finance;
               (5)  chair of the Senate Committee on Higher Education;
               (6)  chair of the House Committee on Appropriations;
  and
               (7)  chair of the House Committee on Higher Education.
         (c)  At the request of an institution of higher education
  that consults with the coordinating board under this section, the
  coordinating board shall include with its recommendations the
  written response of the institution to those recommendations.
         SECTION 12.  The Texas Higher Education Coordinating Board
  shall adopt rules relating to the administration of Subchapters C,
  D, F, and G, Chapter 62, Education Code, as added by this Act, as
  soon as practicable after the effective date of this Act.
         SECTION 13.  (a) Except as provided by Subsections (b), (c),
  and (d) of this section, this Act takes effect September 1, 2009.
         (b)  Money may not be appropriated to or distributed from the
  research university development fund under Subchapter C, Chapter
  62, Education Code, as added by this Act, or the national research
  university fund under Subchapter G, Chapter 62, Education Code, as
  added by this Act, before the state fiscal biennium that begins
  September 1, 2011.
         (c)  The funding for Section 8 of this Act is contingent on
  the approval by the voters of the constitutional amendment proposed
  by the 81st Legislature, Regular Session, 2009, establishing the
  national research university fund to enable emerging research
  universities in this state to achieve national prominence as major
  research universities and transferring the balance of the higher
  education fund to the national research university fund. If that
  constitutional amendment is not approved by the voters, Sections 9
  and 10 of this Act do not take effect.
         (d)  This Act does not make an appropriation.  This Act takes
  effect only if a specific appropriation for the implementation of
  this Act is provided in a general appropriations act of the 81st
  Legislature.
 
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