H.B. No. 1595
 
 
 
 
AN ACT
  relating to the administration and investment of, and distribution
  and use of money from, certain constitutional and statutory funds
  to support general academic teaching institutions in achieving
  national prominence as major research universities and driving the
  state economy.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  Section 51.406(c), Education Code, is amended to
  read as follows:
         (c)  A rule or policy of a state agency, including the Texas
  Higher Education Coordinating Board, in effect on June 1, 2011,
  that requires reporting by a university system or an institution of
  higher education has no effect on or after September 1, 2013, unless
  the rule or policy is affirmatively and formally readopted before
  that date by formal administrative rule published in the Texas
  Register and adopted in compliance with Chapter 2001, Government
  Code.  This subsection does not apply to:
               (1)  a rule or policy for which the authorizing statute
  is listed in Subsection (b);
               (2)  a rule or policy for which the authorizing statute
  is repealed on or before September 1, 2013, by legislation enacted
  by the legislature that becomes law; or
               (3)  a report required under any of the following
  provisions:
                     (A)  Article 59.06(g)(1), Code of Criminal
  Procedure;
                     (B)  Section 51.005;
                     (C)  Section 51.0051;
                     (D)  Subchapter F-1 of this chapter;
                     (E)  Section 51.402;
                     (F)  Section 56.039;
                     (G)  Section 61.059;
                     (H)  [Section 62.095(b);
                     [(I)]  Section 62.098;
                     (I) [(J)]  Section 411.187(b), Government Code;
                     (J) [(K)]  Subchapter C, Chapter 606, Government
  Code;
                     (K) [(L)]  Subchapter E, Chapter 815, Government
  Code; or
                     (L) [(M)]  Chapter 1551, Insurance Code.
         SECTION 2.  Section 62.092(2), Education Code, is amended to
  read as follows:
               (2)  "Eligible institution" means a general academic
  teaching institution as defined by Section 61.003, other than:
                     (A)  The University of Texas at Austin or Texas
  A&M University; or
                     (B)  an institution of higher education described
  by Section 62.132(2) or 62.145.
         SECTION 3.  Section 62.095, Education Code, is amended to
  read as follows:
         Sec. 62.095.  APPROPRIATION OF FUND TO ELIGIBLE
  INSTITUTIONS.  [(a)]  In each state fiscal year, amounts shall be
  appropriated to eligible institutions in the same manner that
  research performance funding is appropriated to institutions
  eligible to receive funding from the Texas University Fund under
  Section 62.1482(a) [based on the average amount of restricted
  research funds expended by each institution per year for the three
  preceding state fiscal years].
         [(b)  For purposes of Subsection (a), the amount of
  restricted research funds expended by an institution in a 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
  under Section 62.096.]
         SECTION 4.  The heading to Subchapter F-1, Chapter 62,
  Education Code, is amended to read as follows:
  SUBCHAPTER F-1. NATIONAL [CORE] RESEARCH SUPPORT FUND
         SECTION 5.  Section 62.131, Education Code, is amended to
  read as follows:
         Sec. 62.131.  PURPOSE. The national [core] research support
  fund is established to provide funding to promote increased
  research capacity at certain institutions of higher education
  eligible to participate in the available university fund [emerging
  research universities].
         SECTION 6.  Section 62.132, Education Code, is amended by
  amending Subdivisions (2) and (3) and adding Subdivision (4) to
  read as follows:
               (2)  "Eligible institution" means a general academic
  teaching [an] institution [of higher education] that:
                     (A)  is entitled to participate in the funding
  provided by Section 18, Article VII, Texas Constitution; 
                     (B)  spent on average at least the following
  amount in federal and private research funds per state fiscal year
  during the preceding three state fiscal years:
                           (i)  for the state fiscal year beginning
  September 1, 2023, $20 million; or
                           (ii)  for a state fiscal year beginning on or
  after September 1, 2024, the amount determined under this paragraph
  for the preceding state fiscal year adjusted by the increase, if
  any, in the general price level during the preceding state fiscal
  year, as determined by the coordinating board on the basis of
  changes in the consumer price index published by the Bureau of Labor
  Statistics of the United States Department of Labor or a successor
  agency; and
                     (C)  awarded on average at least 45 research
  doctoral degrees per academic year during the preceding three
  academic years [is designated as an emerging research university
  under the coordinating board's accountability system].
               (3)  "Fund" means the national [core] research support
  fund.
               (4)  "General academic teaching institution" has the
  meaning assigned by Section 61.003.
         SECTION 7.  Section 62.133, Education Code, is amended to
  read as follows:
         Sec. 62.133.  FUNDING. The national [core] research support
  fund consists of money appropriated by the legislature to eligible
  institutions for the purposes of this subchapter.
         SECTION 8.  Subchapter F-1, Chapter 62, Education Code, is
  amended by adding Section 62.1335 to read as follows:
         Sec. 62.1335.  ELIGIBILITY TO RECEIVE DISTRIBUTIONS FROM
  FUND. (a)  A general academic teaching institution becomes
  eligible to receive an initial distribution of money appropriated
  under this subchapter for a state fiscal year if the institution:
               (1)  is entitled to participate in the funding provided
  by Section 18, Article VII, Texas Constitution;
               (2)  spent on average at least $20 million in federal
  and private research funds per state fiscal year during the
  preceding three state fiscal years; and
               (3)  awarded on average at least 45 research doctoral
  degrees per academic year during the preceding three academic
  years.
         (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.
         SECTION 9.  Section 62.134, Education Code, is amended to
  read as follows:
         Sec. 62.134.  APPROPRIATION OF FUND TO ELIGIBLE
  INSTITUTIONS.  In each state fiscal year, amounts shall be
  appropriated to eligible institutions in the same manner that
  research performance funding is appropriated to institutions
  eligible to receive funding from the Texas University Fund under
  Section 62.1482 [as follows:
               [(1)  50 percent based on the average amount of
  restricted research funds expended by each institution per year for
  the three preceding state fiscal years, determined in the manner
  described by Section 62.095(b); and
               [(2)  50 percent based on the average amount of total
  research funds expended by each institution per year for the three
  preceding state fiscal years, determined in the manner described by
  Section 62.053(b)].
         SECTION 10.  The heading to Subchapter G, Chapter 62,
  Education Code, is amended to read as follows:
  SUBCHAPTER G. TEXAS [NATIONAL RESEARCH] UNIVERSITY FUND
         SECTION 11.  Section 62.141, Education Code, is amended to
  read as follows:
         Sec. 62.141.  PURPOSE. The purpose of this subchapter is to
  allocate appropriations from the Texas University Fund [national
  research university fund] to provide a dedicated, independent, and
  equitable source of funding to enable certain general academic
  teaching institutions [emerging research universities in this
  state] to achieve national prominence as major research
  universities and drive the state economy.
         SECTION 12.  Section 62.142, Education Code, is amended by
  amending Subdivision (3) and adding Subdivision (5) to read as
  follows:
               (3)  "Fund" means the Texas University Fund [national
  research university fund].
               (5)  "Trust company" means the Texas Treasury
  Safekeeping Trust Company.
         SECTION 13.  Section 62.143, Education Code, is amended to
  read as follows:
         Sec. 62.143.  ADMINISTRATION AND INVESTMENT OF FUND. (a)
  The Texas University Fund [national research university fund] is a
  fund outside the state treasury held by [in the custody of] the
  comptroller and administered by the trust company.
         (b)  The trust company [comptroller] shall administer and
  invest the fund in accordance with Section 20, Article VII, Texas
  Constitution.
         (c)  The trust company shall determine the amount available
  for distribution from the fund in accordance with a distribution
  policy adopted by the comptroller that is designed to:
               (1)  preserve the purchasing power of the fund's assets
  over an economic cycle, subject to the liquidity needs of the fund;
  and
               (2)  provide as nearly as practicable a stable and
  predictable stream of annual distributions.
         SECTION 14.  Section 62.144, Education Code, is amended to
  read as follows:
         Sec. 62.144.  FUNDING. (a) The fund consists of:
               (1)  money [any amounts] appropriated or transferred to
  the credit of the fund;
               (2)  gifts and grants contributed to the fund; and
               (3)  the interest and other earnings attributable to
  the investment of money in 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 solicit and accept gifts or grants
  from any public or private source for the fund.
         SECTION 15.  Section 62.145, Education Code, is amended to
  read as follows:
         Sec. 62.145.  ELIGIBILITY TO RECEIVE DISTRIBUTIONS FROM
  FUND.  (a)  The following general academic teaching institutions
  are eligible to receive distributions under this subchapter for
  each state fiscal year:
               (1)  Texas State University;
               (2)  Texas Tech University;
               (3)  the University of Houston; and
               (4)  the University of North Texas.
         (b)  A general academic teaching institution not listed in
  Subsection (a) becomes eligible to receive an initial distribution
  of money appropriated under this subchapter for a state fiscal year
  if:
               (1)  the institution:
                     (A)  is not entitled to participate in the funding
  provided by Section 18, Article VII, Texas Constitution;
                     (B)  spent on average at least the following
  amount in federal and private research funds per state fiscal year
  during the preceding three state fiscal years:
                           (i)  for the state fiscal year beginning
  September 1, 2023, $20 million; or
                           (ii)  for a state fiscal year beginning on or
  after September 1, 2024, the amount determined under this paragraph
  for the preceding state fiscal year adjusted by the increase, if
  any, in the general price level during the preceding state fiscal
  year, as determined by the coordinating board on the basis of
  changes in the consumer price index published by the Bureau of Labor
  Statistics of the United States Department of Labor or a successor
  agency; and
                     (C)  awarded on average at least 45 research
  doctoral degrees per academic year during the preceding three
  academic years; and
               (2)  the legislature appropriates money to the fund in
  an amount that is sufficient to ensure as nearly as practicable a
  stable and predictable stream of annual distributions from the fund
  to each eligible institution and may not be less than the difference
  between:
                     (A)  the quotient of:
                           (i)  the market value of the fund on
  September 1 of the state fiscal year in which the institution would
  receive the initial distribution; and
                           (ii)  the difference between one and the
  institution's percentage share of the fund for the state fiscal
  year in which the institution would receive the initial
  distribution, as determined by coordinating board rule; and
                     (B)  the market value of the fund on September 1 of
  the state fiscal year in which the institution would receive the
  initial distribution [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 year for which the appropriation is made, 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 in each of the two state fiscal years
  preceding the state fiscal year for which the appropriation is
  made;
                     [(B)  the institution awarded at least 200 doctor
  of philosophy degrees during each of the two academic years
  preceding the state fiscal year for which the appropriation is
  made;
                     [(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)  for each of those two academic years, the
  institution has demonstrated a commitment to high-quality graduate
  education, as determined according to standards prescribed by the
  coordinating board by rule, including standards relating 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].
         (c) [(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.
         SECTION 16.  Sections 62.148(a), (b), and (c), Education
  Code, are amended to read as follows:
         (a)  In each state fiscal year, the comptroller shall
  distribute to eligible institutions in accordance with this
  subchapter [section] money appropriated from the fund for that
  fiscal year.
         (b)  The total amount appropriated from the fund for any
  state fiscal year may not exceed an amount equal to 7.0 [4.5]
  percent of the average net market value of the investment assets of
  the fund, as determined by the comptroller, for a period set by
  comptroller policy [the 12 consecutive state fiscal quarters ending
  with the last quarter of the preceding state fiscal year, as
  determined by the comptroller].
         (c)  The [Subject to Subsection (e), of the total] amount
  appropriated from the fund for distribution in a state fiscal year
  must be allocated as follows:
               (1)  75 percent to the permanent endowment for
  education and research base funding under Section 62.1481; and
               (2)  25 percent to the research performance funding
  under Section 62.1482[, each eligible institution is entitled to a
  distribution in an amount equal to the sum of:
               [(1)  one-seventh of the total amount appropriated; and
               [(2)  an equal share of any amount remaining after
  distributions are calculated under Subdivision (1), not to exceed
  an amount equal to one-fourth of that remaining amount].
         SECTION 17.  Subchapter G, Chapter 62, Education Code, is
  amended by adding Sections 62.1481 and 62.1482 to read as follows:
         Sec. 62.1481.  PERMANENT ENDOWMENT FOR EDUCATION AND
  RESEARCH BASE FUNDING. (a)  For each state fiscal year, an eligible
  institution is entitled to a distribution of a portion of the total
  amount allocated for the permanent endowment for education and
  research base funding under Section 62.148(c)(1) for that fiscal
  year. The portion to which an eligible institution is entitled is a
  fraction computed as follows:
               (1)  subject to Subsection (c), for an institution that
  spent at least the amount determined under Subsection (b) in
  federal and private research funds in each of the preceding two
  state fiscal years, an amount computed by dividing two by the sum
  of:
                     (A)  the number of institutions entitled to
  receive a distribution under this subdivision multiplied by two;
  and
                     (B)  the number of institutions to which
  Subdivision (2) applies; or
               (2)  for an institution not described by Subdivision
  (1), half the amount to which an institution to which Subdivision
  (1) applies is entitled.
         (b)  For purposes of Subsection (a)(1), the minimum amount in
  federal and private research funds required to be spent in each of
  the preceding two state fiscal years is:
               (1)  for the state fiscal year beginning September 1,
  2023, $45 million; or
               (2)  for a state fiscal year beginning on or after
  September 1, 2024, the amount determined under this subsection for
  the preceding state fiscal year adjusted by the increase, if any, in
  the general price level during the preceding state fiscal year, as
  determined by the coordinating board on the basis of changes in the
  consumer price index published by the Bureau of Labor Statistics of
  the United States Department of Labor or a successor agency.
         (c)  An eligible institution is entitled to receive a
  distribution under Subsection (a)(1) only if:
               (1)  in each of the state fiscal years beginning
  September 1, 2020, and September 1, 2021, the institution spent at
  least the amount in federal and private research funds described by
  that subdivision; or
               (2)  the legislature appropriates money to the fund in
  an amount required by Section 62.145(b)(2).
         (d)  An eligible institution that becomes eligible to
  receive a distribution under Subsection (a)(1) remains eligible to
  receive a distribution under that subdivision in each subsequent
  state fiscal year.
         Sec. 62.1482.  RESEARCH PERFORMANCE FUNDING. (a)  From 85
  percent of the amount allocated for research performance funding
  under Section 62.148(c)(2) for a state fiscal year, an eligible
  institution is entitled to a distribution for that fiscal year in an
  amount proportionate to the average amount of federal and private
  research funds the institution spends per state fiscal year during
  the preceding three state fiscal years as compared to the average
  amount of those funds all eligible institutions spend per state
  fiscal year during that period.
         (b)  From 15 percent of the amount allocated for research
  performance funding under Section 62.148(c)(2) for a state fiscal
  year, an eligible institution is entitled to a distribution for
  that fiscal year in an amount proportionate to the average number of
  research doctoral degrees the institution awards per academic year
  during the preceding three academic years as compared to the
  average number of those degrees all eligible institutions award per
  academic year during that period.
         (c)  The coordinating board by rule shall establish a method
  for determining the amounts to which each eligible institution is
  entitled under this section.
         SECTION 18.  Sections 62.149(a) and (b), Education Code, are
  amended to read as follows:
         (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 in a manner that aligns with the goals of the
  state's master plan for higher education developed under Section
  61.051.
         (b)  For purposes of Subsection (a), the use of money shall
  be limited to the following permitted activities:
               (1)  providing faculty support and paying faculty
  salaries;
               (2)  purchasing equipment or library materials;
               (3)  paying graduate stipends; [and]
               (4)  supporting research performed at the institution,
  including undergraduate research;
               (5)  increasing technology transfer,
  commercialization, and patent development; and
               (6)  increasing the number of research doctoral
  graduates in this state.
         SECTION 19.  Subchapter G, Chapter 62, Education Code, is
  amended by adding Sections 62.150, 62.151, and 62.152 to read as
  follows:
         Sec. 62.150.  INSTITUTIONAL ENDOWMENT REPORTING. (a)  In
  this section, "institutional endowment fund" means a fund
  established to support a general academic teaching institution's
  mission in perpetuity.
         (b)  For purposes of reporting the amount of an institution's
  institutional endowment funds, each eligible institution may
  include as a true endowment, in accordance with coordinating board
  rule, the institution's share of the market value of the fund
  corresponding to the share of the permanent endowment for education
  and research base funding to which the institution is entitled for a
  state fiscal year as provided by Section 62.1481.
         Sec. 62.151.  DETERMINATION AND REPORT OF AMOUNT OF
  DISTRIBUTIONS. For each state fiscal biennium, the Legislative
  Budget Board, in consultation with the coordinating board, shall:
               (1)  determine the amount of each distribution from the
  fund to which each eligible institution is entitled as provided by
  this subchapter; and
               (2)  report the determinations made under Subdivision
  (1) to the legislature and the comptroller.
         Sec. 62.152.  RULES. The coordinating board may adopt rules
  as necessary to implement this subchapter.
         SECTION 20.  The following provisions of Chapter 62,
  Education Code, are repealed:
               (1)  Sections 62.096(a), (b), and (e);
               (2)  Section 62.135(b);
               (3)  Section 62.142(2);
               (4)  Sections 62.146 and 62.147; and
               (5)  Sections 62.148(d), (e), and (f).
         SECTION 21.  This Act takes effect January 1, 2024, but only
  if the constitutional amendment proposed by the 88th Legislature,
  Regular Session, 2023, relating to the Texas University Fund, which
  provides funding to certain institutions of higher education to
  achieve national prominence as major research universities and
  drive the state economy is approved by the voters.  If that
  amendment is not approved by the voters, this Act has no effect.
 
 
  ______________________________ ______________________________
     President of the Senate Speaker of the House     
 
 
         I certify that H.B. No. 1595 was passed by the House on April
  18, 2023, by the following vote:  Yeas 136, Nays 11, 1 present, not
  voting; that the House refused to concur in Senate amendments to
  H.B. No. 1595 on May 23, 2023, and requested the appointment of a
  conference committee to consider the differences between the two
  houses; and that the House adopted the conference committee report
  on H.B. No. 1595 on May 28, 2023, by the following vote:  Yeas 128,
  Nays 12, 2 present, not voting.
 
  ______________________________
  Chief Clerk of the House   
 
         I certify that H.B. No. 1595 was passed by the Senate, with
  amendments, on May 9, 2023, by the following vote:  Yeas 30, Nays 1;
  at the request of the House, the Senate appointed a conference
  committee to consider the differences between the two houses; and
  that the Senate adopted the conference committee report on H.B. No.
  1595 on May 27, 2023, by the following vote:  Yeas 30, Nays 1.
 
  ______________________________
  Secretary of the Senate   
  APPROVED: __________________
                  Date       
   
           __________________
                Governor