Honorable Joe Straus, Speaker of the House, House of Representatives
FROM:
John S. O'Brien, Director, Legislative Budget Board
IN RE:
HR2925 by Branch (Suspending limitations on conference committee jurisdiction, H.B. No. 51.)
Estimated Two-year Net Impact to General Revenue Related Funds for HR2925, As Introduced: a negative impact of ($22,951,846) through the biennium ending August 31, 2011.
The bill would make no appropriation but could provide the legal basis for an appropriation of funds to implement the provisions of the bill.
Fiscal Year
Probable Net Positive/(Negative) Impact to General Revenue Related Funds
2010
($9,435,923)
2011
($13,515,923)
2012
($13,515,923)
2013
($13,515,923)
2014
($13,515,923)
Fiscal Year
Probable Savings/(Cost) from General Revenue Fund 1
2010
($9,435,923)
2011
($13,515,923)
2012
($13,515,923)
2013
($13,515,923)
2014
($13,515,923)
Fiscal Analysis
The provisions of the bill would amend the Education Code to grant additional authority to the Board of Regents of the Texas A&M University System to issue additional tuition revenue bonds for Texas A&M University at Galveston in an amount not to exceed $5,000,000 to acquire, purchase, construct, improve, renovate, enlarge, or equip property, buildings, structures, facilities, roads or related infrastructure, for an erosion control breakwater, a dock, or other related purpose reasonably necessary to assist the institution to recover from any damage or other impact caused by Hurricane Ike. This authority would include the irrevocable pledging of revenue for the payment for bonds and transfer of funds from other institutions within the Texas A&M University System.
The provisions of the bill would amend the Education Code to grant authority to the Board of Regents of the University of Texas System to issue additional tuition revenue bonds for the recovery and reconstruction of the University of Texas Medical Branch at Galveston (UTMB) in an amount not to exceed $150,000,000. This authority would include the irrevocable pledging of revenue for the payment for bonds and transfer of funds, subject to Legislative Budget Board (LBB) approval, from other institutions within The UT System. In determining approval, the LBB must consider whether the commissioners’ court in the county in which UTMB is located has entered into an agreement with UTMB for costs to provide unreimbursed healthcare or whether the county has imposed an ad valorem tax for healthcare purposes. According to The UT System, The UT Board of Regents has already approved Hurricane Ike Recovery projects and the John Sealy Hospital Modernization project.
Although tuition income is pledged against the bonds, historically the Legislature has appropriated General Revenue to reimburse institutions for the tuition used to pay the debt service.This note assumes the Legislature would continue this policy. The provisions of the bill would exempt these bonds from oversight of the Texas Higher Education Coordinating Board.
Methodology
The cost to issue bonds for Texas A&M University at Galveston is based on an assumed 20-year level debt service amortization with a 6 percent interest rate. Included in the table above, the debt service payment would be $435,923 per year beginning in fiscal year 2010.
The cost to issue bonds for The University of Texas Medical Branch at Galveston is based on an assumed 20-year level debt service amortization with a 6 percent interest rate. Included in the table above, the debt service payment for fiscal year 2010 would be $9,000,000. Beginning in fiscal year 2011 the debt service would increase to $13,080,000. UT anticipates the entire $150 million to be issued during fiscal year 2010; however, they do not expect to make principal payments in fiscal year 2010. As a result, it is assumed interest-only debt service payments in fiscal year 2010.
Local Government Impact
No fiscal implication to units of local government is anticipated.