TO:	Honorable Joan Huffman, Chair, Senate Committee on Finance

FROM:	Jerry McGinty, Director, Legislative Budget Board

IN RE:	HJR3 by Bonnen (Proposing a constitutional amendment renaming the national research university fund as the Texas University Fund, providing for the appropriation of certain investment income from the economic stabilization fund to the Texas University Fund, excepting appropriations to and from the Texas University Fund from the constitutional limit on the rate of growth of appropriations, and appropriating money from the general revenue fund to the Texas University Fund for purposes of providing funding to certain public institutions of higher education to achieve national prominence as major research universities and drive the state economy.), As Engrossed

Fiscal Year	Appropriation out of General Revenue Fund 1
2024	$3,500,000,000
2025	$0

Fiscal Year	Probable Net Positive/(Negative) Impact to General Revenue Related Funds
2024	($3,500,204,406)
2025	($315,636,000)
2026	$0
2027	$0
2028	$0

Fiscal Year	Probable Savings/(Cost) from General Revenue Fund 1	Probable Revenue Gain/(Loss) from Texas University Fund 214	Probable (Cost) from Economic Stabilization Fund 599
2024	($3,500,204,406)	$3,600,000,000	($102,691,000)
2025	($315,636,000)	$102,191,000	($110,391,000)
2026	$0	$104,743,000	$203,621,000
2027	$0	$107,222,000	($119,373,000)
2028	$0	$109,577,000	($126,177,000)

The resolution would propose an amendment to Article III (Legislative Department) and Article VII (Education) of the Texas Constitution.

The proposed amendment would redesignate the National Research University Fund as the Texas University Fund.

The proposed amendment would direct the Comptroller, on January 1, 2024, to transfer $3.5 billion from the General Revenue Fund to the Texas University Fund.

The amendment states that, for purposes of the calculation of the constitutional tax spending limit in Article VIII, money in the fund would be dedicated by the constitution and an appropriation of state tax revenues to the fund would be an appropriation of revenues dedicated by the constitution.

The proposed amendment would appropriate from the Economic Stabilization Fund to the Comptroller, for deposit to the credit of the Texas University Fund, an amount equal to the interest, dividends, and investment earnings attributable to the Economic Stabilization Fund for the preceding fiscal year. This amount could not exceed $100.0 million in fiscal 2024, or an amount adjusted for the increase in inflation, if any, thereafter.

The proposed amendment would be submitted to voters at an election to be held November 7, 2023.

The resolution, contingent on enactment and voter approval, would authorize a $3.5 billion transfer from the General Revenue Fund to the Texas University Fund (TUF) in fiscal 2024. The resolution also would provide for an appropriation from the Economic Stabilization Fund (ESF) to the TUF each fiscal year of up to $100.0 million in fiscal 2024, or an amount adjusted for inflation thereafter.

The fiscal impacts in the tables above are based on the 2024-25 Biennial Revenue Estimate and the fiscal implications of Senate Bill 30, as engrossed, as the supplemental appropriations will materially affect the ESF balance, related reserves and transfers of severance tax revenue, and interest and investment earnings.

General Revenue Fund implications in fiscal 2025 represent an increase in the amount of reserves for severance taxes for transfer to the ESF as a result of the appropriation from the ESF for deposit to the TUF. This appropriation would decrease the ESF balance and result in a larger transfer to the ESF in fiscal year 2026 than assumed in the BRE as adjusted for the effects of SB 30 on the ESF balance.

Implications to the ESF represent the net difference between appropriations from the ESF and increased severance taxes transferred to the fund and consequent changes to ESF interest and investment earnings. In fiscal 2026, there is expected to be a net positive impact to the ESF due to the increased severance tax transfer, less the appropriation to the TUF and associated loss in investment earnings.

The maximum amount of appropriation from the ESF for deposit to the TUF after fiscal 2024 would be calculated by increasing the appropriation from the preceding fiscal year according to the increase, if any, in inflation from the previous year. This analysis uses the increase in general price level as a stand-in for inflation to provide more significant adjustments to the maximum amount of appropriation from the ESF.

This analysis only addresses implications for the TUF represented by appropriated amounts into the TUF, either from General Revenue or ESF; any interest or investment earnings on the TUF fund balance are not considered. The fiscal impacts association with any uses of the fund are shown in the fiscal note for the enabling legislation (HB 1595).

Note: This legislation would create or recreate a dedicated account in the General Revenue Fund, create or recreate a fund either in, with, or outside of the Treasury, or dedicate or rededicate a revenue source. The fund, account, or revenue dedication included in this bill would be subject to funds consolidation review by the current Legislature.

LEGISLATIVE BUDGET BOARD
Austin, Texas

FISCAL NOTE, 88TH LEGISLATIVE REGULAR SESSION


May 3, 2023