By: Duncan, et al. S.B. No. 1560

A BILL TO BE ENTITLED

AN ACT

relating to university funding, including university funding for excellence, the national research university fund, the abolition of the higher education fund, and the institutional groupings established by the Texas Higher Education Coordinating Board.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. 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 2. 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 3. Subchapter C, Chapter 61, Education Code, is amended by adding Section 61.0904 to read as follows:

Sec. 61.0904. INSTITUTIONAL GROUPINGS. (a) In its accountability system, the board shall establish institutional groupings for classification of institutions of higher education, including groupings for research universities, emerging research universities, doctoral universities, comprehensive universities, and masters universities.

(b) In each state fiscal biennium, the board shall conduct a review of the institutional groupings, including a review of the criteria for and definitions assigned to those groupings.

SECTION 4. 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 5. Chapter 62, Education Code, is amended by adding Subchapter D to read as follows:

SUBCHAPTER D. NATIONAL RESEARCH UNIVERSITY FUND

Sec. 62.071. 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. 62.072. DEFINITIONS. In this subchapter:

(1) "Coordinating board" means the Texas Higher Education Coordinating Board.

(2) "Eligible institution" means a general academic teaching institution that is eligible to receive distributions of money under this subchapter.

(3) "Fund" means the national research university fund.

(4) "General academic teaching institution" has the meaning assigned by Section 61.003.

Sec. 62.073. 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. 62.074. 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. 62.075. 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 reported at least $45 million in restricted research expenditures; and

(3) the institution satisfies at least four of the following criteria:

(A) the aggregate 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, giving consideration to the future educational needs of the state as articulated in the "Closing the Gaps" report of the coordinating board;

(D) the institution is designated as a member of the Association of Research Libraries or has a Phi Beta Kappa chapter or an equivalent recognition of research capabilities and scholarly attainment as determined according to standards prescribed by the coordinating board;

(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 but not limited to the election of faculty members to national academies; or

(F) the institution has demonstrated a commitment to high quality graduate education, as determined according to standards prescribed by the coordinating board, including but not limited to 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 under Subsection (a) to receive a distribution of money under this subchapter remains eligible to receive a distribution of money under this subchapter in each subsequent state fiscal year.

Sec. 62.076. INELIGIBILITY OF CERTAIN 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. 62.077. 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. The coordinating board may make recommendations regarding the equitable formula and may provide assistance regarding the formula as directed by the legislature.

Sec. 62.078. 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.

Sec. 62.079. VERIFICATION OF QUALIFYING CRITERIA. (a) The coordinating board shall prescribe standards and accounting methods for verifying the value of the qualifying criteria to establish the eligibility of an institution to receive a distribution of money under this subchapter in a state fiscal biennium.

(b) The coordinating board, as soon as practicable in each even-numbered year but not later than December 31, shall provide the legislature with verified information relating to the value of the criteria to establish which institutions are eligible to receive a distribution of money under this subchapter.

(c) The coordinating board shall validate the appropriate measures of an eligible institution to verify the reported values of the criteria for purposes of this subchapter.

(d) Upon completion, the methods for verifying the value of the qualifying criteria prescribed in accordance with Subsection (a) shall be sent to the state auditor for review and comment.

(e) Any information submitted by the institutions to the coordinating board and the verification of the information by the coordinating board for the purposes of this subchapter are subject to audit by the state auditor in accordance with Chapter 321, Government Code.

SECTION 6. 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 7. Sections 62.025 and 62.026, Education Code, are repealed.

SECTION 8. (a) Except as provided by Subsection (b) of this section, this Act takes effect January 1, 2010, but only if 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 is approved by the voters. If that constitutional amendment is not approved by the voters, except as provided by Subsection (b) of this section, this Act does not take effect.

(b) This section takes effect September 1, 2009. The sections of this Act adding Subsection (o), Section 61.059, and Section 61.0596, Education Code, take effect September 1, 2009, but only if a specific appropriation for the implementation of those provisions of the Education Code is provided in a general appropriations act of the 81st Legislature.