BILL ANALYSIS

C.S.H.B. 42

By: Wilson

Higher Education

Committee Report (Substituted)

BACKGROUND AND PURPOSE

Under current law, public institutions of higher education receive state funding for construction and other capital purposes from either the permanent university fund or the higher education fund, with the latter established for the purpose of providing appropriations to institutions that are not eligible to receive permanent university fund income. The legislature updates higher education fund appropriation levels and allocation methodology on a regular basis and can make allocation adjustments. The bill author has informed the committee that the Texas Higher Education Coordinating Board, in conjunction with representatives of higher education fund-eligible institutions, are seeking the appropriation of an increased amount over the current appropriation to compensate for the institutions' growth and reduced purchasing power due to inflation. C.S.H.B. 42 seeks to provide for that increase by revising the annual allotment amounts allocated to applicable institutions of higher education from the higher education fund, applicable to each state fiscal year beginning with the 2026 fiscal year, and providing for different versions of the allotment schedule depending on voter approval or disapproval of the constitutional amendment proposed by the 89th Legislature relating to a permanent fund to support the capital needs of educational programs offered by the Texas State Technical College System.

CRIMINAL JUSTICE IMPACT

It is the committee's opinion that this bill does not expressly create a criminal offense, increase the punishment for an existing criminal offense or category of offenses, or change the eligibility of a person for community supervision, parole, or mandatory supervision.

RULEMAKING AUTHORITY

It is the committee's opinion that this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency, or institution.

ANALYSIS

Higher Education Fund: Annual Constitutional Appropriation

C.S.H.B. 42 amends the Education Code to increase from $393.75 million to $787.5 million the amount of the annual constitutional appropriation from the higher education fund to support eligible agencies and public institutions of higher education that are not supported by the available university fund. The bill establishes that this increase constitutes an increase, in accordance with the applicable constitutional provision, that the legislature considers appropriate for the five-year period beginning September 1, 2025. The amounts allocated under the bill's provisions apply beginning with the 2026 state fiscal year and these provisions take effect on September 1, 2025, contingent on the bill receiving the necessary two-thirds vote as required by the Texas Constitution.

Amounts Allocated by Equitable Allocation Formula

Except as otherwise provided, C.S.H.B. 42 provides that the applicable amounts allocated, as subsequently described, under the bill's provisions apply to each state fiscal year beginning with the 2026 state fiscal year.

Provision Applicable If Constitutional Amendment Is Approved

The following provisions apply only if the constitutional amendment proposed by the 89th Legislature relating to a permanent fund to support the capital needs of educational programs offered by the Texas State Technical College System is approved by the voters.

C.S.H.B. 42 updates the current statutory schedule of annual allotments to eligible institutions of higher education from the annual constitutional appropriation of the higher education fund, as allocated by the equitable allocation formula, to provide that in each state fiscal year beginning with the 2027 state fiscal year the applicable amounts to be allocated are, subject to the same conditions current law establishes for such allocations regarding distribution and presentation of claims and for equitable allocation of applicable amounts, as follows:

· for component institutions of the University of North Texas System:

o $92,119,685 to the University of North Texas;

o $28,108,950 to the University of North Texas Health Science Center at Fort Worth; and

o $9,088,243 to the University of North Texas at Dallas;

· for component institutions of the Texas State University System:

o $27,789,927 to Lamar University;

o $10,715,169 to the Lamar Institute of Technology;

o $6,430,700 to Lamar State College--Orange;

o $7,552,341 to Lamar State College--Port Arthur;

o $31,983,884 to Sam Houston State University;

o $76,560,292 to Texas State University;

o $5,663,606 to Sul Ross State University; and

o $3,293,540 to Sul Ross State University-Rio Grande College;

· $19,416,816 to Texas Southern University;

· for component institutions of the Texas Tech University System:

o $114,112,643 to Texas Tech University;

o $40,007,231 to Texas Tech University Health Sciences Center;

o $13,533,380 to Angelo State University;

o $14,047,840 to Texas Tech University Health Sciences Center--El Paso; and

o $9,439,836 to Midwestern State University;

· $27,307,881 to component institutions of the Texas Woman's University System, allocated as determined by the board of regents of the system;

· for component institutions of the University of Houston System:

o $104,551,313 to the University of Houston;

o $8,075,487 to the University of Houston--Victoria;

o $13,952,505 to the University of Houston--Clear Lake; and

o $20,375,683 to the University of Houston--Downtown;

· for component institutions of The Texas A&M University System:

o $20,929,500 to Texas A&M University--Corpus Christi;

o $15,959,500 to Texas A&M International University;

o $13,801,892 to Texas A&M University--Kingsville;

o $15,713,370 to West Texas A&M University;

o $18,034,440 to East Texas A&M University; and

o $5,716,872 to Texas A&M University--Texarkana.

The bill makes the following additional changes to the current schedule and makes them applicable beginning with the 2026 state fiscal year:

· clarifies that the allotment in the schedule to the University of North Texas includes its branch campus, the University of North Texas at Frisco, allocated as determined by the board of regents of the University of North Texas System;

· adds the following new allotments to the schedule:

o $7,323,033 to Sam Houston State University College of Osteopathic Medicine; and

o $5,894,311 to the University of Houston College of Medicine; and

· removes the separate allocation for the Texas State Technical College System Administration as an element of the equitable allocation formula and removes the allotment amount for the applicable component campuses of the system.

Temporary Provisions Applicable If Constitutional Amendment Is Approved

The following provisions relating to the annual allotment schedule for the 2026 state fiscal year expire September 1, 2027, and apply only if the constitutional amendment proposed by the 89th Legislature relating to a permanent fund to support the capital needs of educational programs offered by the Texas State Technical College System is approved by the voters.

C.S.H.B. 42 sets the annual allotment schedule for the 2026 state fiscal year, subject to the same conditions current law establishes for such allocations from the higher education fund regarding distribution and presentation of claims and for equitable allocation of applicable amounts, as follows:

· to the following component institutions of the University of North Texas System:

o $89,980,939 to the University of North Texas and its branch campus, the University of North Texas at Frisco, allocated as determined by the board of regents of the system;

o $27,502,778 to the University of North Texas Health Science Center at Fort Worth; and

o $8,923,675 to the University of North Texas at Dallas;

· to the following component institutions of the Texas State University System:

o $27,154,265 to Lamar University;

o $10,512,021 to the Lamar Institute of Technology;

o $6,327,832 to Lamar State College--Orange;

o $7,423,432 to Lamar State College--Port Arthur;

o $31,241,313 to Sam Houston State University;

o $7,199,448 to Sam Houston State University College of Osteopathic Medicine;

o $74,782,789 to Texas State University;

o $5,578,548 to Sul Ross State University; and

o $3,263,508 to Sul Ross State University-Rio Grande College;

· $19,001,710 to Texas Southern University;

· to the following component institutions of the Texas Tech University System:

o $111,463,286 to Texas Tech University;

o $39,124,816 to Texas Tech University Health Sciences Center;

o $13,247,392 to Angelo State University;

o $13,768,124 to Texas Tech University Health Sciences Center--El Paso; and

o $9,266,572 to Midwestern State University;

· $26,688,793 to the component institutions of the Texas Woman's University System, allocated as determined by the board of regents of the system;

· to the following component institutions of the University of Houston System:

o $102,123,941 to the University of Houston;

o $7,934,433 to the University of Houston--Victoria;

o $13,665,066 to the University of Houston--Clear Lake;

o $19,920,869 to the University of Houston--Downtown; and

o $5,803,896 to the University of Houston College of Medicine;

· to the following component institutions of The Texas A&M University System:

o $20,472,015 to Texas A&M University--Corpus Christi;

o $15,625,322 to Texas A&M International University;

o $13,523,079 to Texas A&M University--Kingsville;

o $15,382,514 to West Texas A&M University;

o $17,642,046 to East Texas A&M University; and

o $5,630,578 to Texas A&M University--Texarkana; and

· $17,325,000 to the applicable component campuses of the Texas State Technical College System Administration, including Texas State Technical College--East Williamson County, but not its extension centers or programs.

Provisions Effective If Constitutional Amendment Is Not Approved

C.S.H.B. 42 updates the current statutory schedule of annual allotments to eligible institutions of higher education from the annual constitutional appropriation of the higher education fund, as allocated by the equitable allocation formula, to provide that in each state fiscal year beginning with the 2026 state fiscal year, the applicable amounts to be allocated are, subject to the same conditions current law establishes for such allocations regarding distribution and presentation of claims and for equitable allocation of applicable amounts, as follows:

· to the following component institutions of the University of North Texas System:

o $89,980,939 to the University of North Texas;

o $27,502,778 to the University of North Texas Health Science Center at Fort Worth; and

o $8,923,675 to the University of North Texas at Dallas;

· to the following component institutions of the Texas State University System:

o $27,154,265 to Lamar University;

o $10,512,021 to the Lamar Institute of Technology;

o $6,327,832 to Lamar State College--Orange;

o $7,423,432 to Lamar State College--Port Arthur;

o $31,241,313 to Sam Houston State University;

o $74,782,789 to Texas State University;

o $5,578,548 to Sul Ross State University; and

o $3,263,508 to Sul Ross State University-Rio Grande College;

· $19,001,710 to Texas Southern University;

· to the following component institutions of the Texas Tech University System:

o $111,463,286 to Texas Tech University;

o $39,124,816 to Texas Tech University Health Sciences Center;

o $13,247,392 to Angelo State University;

o $13,768,124 to Texas Tech University Health Sciences Center--El Paso; and

o $9,266,572 to Midwestern State University;

· $26,688,793 to the component institutions of the Texas Woman's University System, allocated as determined by the board of regents of the system;

· to the following component institutions of the University of Houston System:

o $102,123,941 to the University of Houston;

o $7,934,433 to the University of Houston--Victoria;

o $13,665,066 to the University of Houston--Clear Lake; and

o $19,920,869 to the University of Houston--Downtown;

· to the following component institutions of The Texas A&M University System:

o $20,472,015 to Texas A&M University--Corpus Christi;

o $15,625,322 to Texas A&M International University;

o $13,523,079 to Texas A&M University--Kingsville;

o $15,382,514 to West Texas A&M University;

o $17,642,046 to East Texas A&M University; and

o $5,630,578 to Texas A&M University--Texarkana; and

· $17,325,000 to the applicable component campuses of the Texas State Technical College System Administration, but not its extension centers or programs.

The bill makes the following additional changes to the current schedule and makes them applicable beginning with the 2026 state fiscal year:

· adds the following new allotments to the schedule:

o $7,199,448 to Sam Houston State University College of Osteopathic Medicine; and

o $5,803,896 to the University of Houston College of Medicine; and

· includes in the schedule Texas State Technical College--East Williamson County as a component campus of the Texas State Technical College System Administration.

Bond Authority

C.S.H.B. 42 authorizes each governing board of an entity participating in the distribution of the applicably allocated funds to, in its sole discretion, use the funds to pay the principal and interest of bonds, notes, or credit agreements issued under statutory provisions relating to financing permanent improvement, and the proceeds of which were spent for a purpose described in the Texas Constitution for the higher education fund.

Obsolete Provision Repealed

C.S.H.B. 42 repeals Section 62.021(e-2), Education Code.

Procedural Provision

C.S.H.B. 42 establishes that, contingent on the passage and becoming law of S.B. 2361 or similar legislation of the 89th Legislature, Regular Session, 2025, relating to the transfer of the University of Houston--Victoria to The Texas A&M University System, the amounts allocated to the University of Houston--Victoria under the bill's provisions are allocated to the university as transferred to The Texas A&M University System.

EFFECTIVE DATE

Except as otherwise provided, September 1, 2025.

COMPARISON OF INTRODUCED AND SUBSTITUTE

While C.S.H.B. 42 may differ from the introduced in minor or nonsubstantive ways, the following summarizes the substantial differences between the introduced and committee substitute versions of the bill.

Higher Education Fund: Annual Constitutional Appropriation

General Provisions

Both the introduced and the substitute provide that their respective applicable amounts allocated apply to each state fiscal year beginning with the 2026 state fiscal year and both versions do the following:

· increase the amount of the annual constitutional appropriation from the higher education fund for certain eligible entities that are not supported by the available university fund;

· establish that the increase constitutes an increase that the legislature considers appropriate for the five-year period beginning September 1, 2025, and is applicable beginning with the 2026 state fiscal year; and

· establish that these foregoing bulleted provisions take effect contingent on the bill receiving the necessary two-thirds vote as required by the Texas Constitution.

However, the total amounts of the annual constitutional appropriation differ. While the introduced set that amount at $590.625 million, the substitute sets it at $787.5 million. The substitute, but not the introduced, clarifies that those provisions take effect September 1, 2025, contingent on the bill receiving the necessary two-thirds vote.

Additionally, the substitute changes the bill's effective date to September 1, 2025, except as otherwise provided, whereas the introduced provided for the bill to take effect August 31, 2025, except as otherwise provided.

Bond Authority

Both the introduced and the substitute provide for the bonding authority of each governing body participating in the distribution of the appropriated funds but they differ in the manner by which they express that authority as follows:

· the introduced authorized the use of the funds for the payment of bonds, notes, or credit agreements a board is authorized to enter into by applicable state law by virtue of its specific reference to the definition of "bonds" as that term is currently defined for purposes of the systemwide revenue financing program; whereas

· the substitute authorizes the use of the funds to pay the principal and interest of bonds that were issued and references the entirety of the applicable state law governing the program in making that authorization.

Contingency Regarding the University of Houston--Victoria

The substitute sets out a provision that is not included in the introduced regarding the proposed transfer of the University of Houston--Victoria to The Texas A&M University System by S.B. 2361 or similar legislation, specifying that, if such legislation passes, the amounts allocated under the substitute's provisions are allocated to the university as transferred to that system.

Contingency Regarding the Texas State Technical College System Administration

Both the introduced and the substitute provide alternative statutory schedules of annual allotments to eligible institutions of higher education from the annual constitutional appropriation of the higher education fund, as allocated by the equitable allocation formula, whereby the applicable schedule takes effect depending on whether the constitutional amendment proposed by the 89th Legislature providing for the creation of funds to support the capital needs of educational programs offered by the Texas State Technical College System Administration is approved by voters or is not approved by the voters. The contingencies are expressed by different drafting conventions and the applicable schedules, as subsequently described, provide for the following matters:

· if the proposed amendment is approved, the applicable schedules for only the 2026 state fiscal year includes the following additional institutions that are entitled to an applicable allotment:

o the University of North Texas at Frisco, with the allotment allocated as determined by the board of regents of the University of North Texas System;

o Sam Houston State University College of Osteopathic Medicine;

o the University of Houston College of Medicine; and

o Texas State Technical College--East Williamson County;

· if the proposed amendment is approved, in each state fiscal year beginning with the 2027 state fiscal year, the applicable schedule does not include an allotment for the Texas State Technical College System Administration but includes allotments for the institutions in the preceding bulleted provision; and

· if the proposed amendment is not approved, in each state fiscal year beginning with the 2026 state fiscal year, the applicable schedule includes an allotment for the Texas State Technical College System Administration and also includes the institutions in that preceding bulleted provision.

However, the substitute increases the allotment amounts in the introduced version's schedules, as subsequently outlined and specified, with respect to the following:

· schedules for the 2026 state fiscal year, contingent on the amendment being approved;

· schedules for each state fiscal year beginning with the 2027 state fiscal year, contingent on the amendment being approved; and

· schedules for each state fiscal year beginning with the 2026 state fiscal year, contingent on the amendment not being approved.

Changes to Allotment Schedules for the 2026 State Fiscal Year: Contingent on Approval of Constitutional Amendment

Both the introduced and the substitute make the 2026 state fiscal year schedules contingent on approval of the constitutional amendment by the voters, but the substitute provides for the express expiration of its schedule, which the introduced did not do, and the substitute changes the amounts allotted for the 2026 fiscal year, as follows:

· for the following component institutions of the University of North Texas System:

o from $66,211,690 in the introduced to $89,980,939 for the University of North Texas and its branch campus the University of North Texas at Frisco, allocated as determined by the board of regents of the system;

o from $20,765,997 in the introduced to $27,502,778 for the University of North Texas Health Science Center at Fort Worth; and

o from $7,094,726 in the introduced to $8,923,675 for the University of North Texas at Dallas;

· for the following component institutions of the Texas State University System:

o from $20,089,746 in the introduced to $27,154,265 for Lamar University;

o from $8,254,303 in the introduced to $10,512,021 for the Lamar Institute of Technology;

o from $5,184,597 in the introduced to $6,327,832 for Lamar State College--Orange;

o from $5,990,785 in the introduced to $7,423,432 for Lamar State College--Port Arthur;

o from $22,988,648 in the introduced to $31,241,313 for Sam Houston State University;

o from $55,028,264 in the introduced to $74,782,789 for Texas State University;

o from $4,633,243 in the introduced to $5,578,548 for Sul Ross State University;

o from $2,929,741 in the introduced to $3,263,508 for Sul Ross State University-Rio Grande College; and

o from $5,825,969 in the introduced to $7,199,448 for Sam Houston State University College of Osteopathic Medicine;

· from $14,388,378 in the introduced to $19,001,710 for Texas Southern University;

· for the following component institutions of the Texas Tech University System:

o from $82,019,289 in the introduced to $111,463,286 for Texas Tech University;

o from $29,317,972 in the introduced to $39,124,816 for Texas Tech University Health Sciences Center;

o from $10,069,019 in the introduced to $13,247,392 for Angelo State University;

o from $10,659,472 in the introduced to $13,768,124 for Texas Tech University Health Sciences Center--El Paso; and

o from $7,340,986 in the introduced to $9,266,572 for Midwestern State University;

· from $19,808,482 in the introduced to $26,688,793 for the component institutions of the Texas Woman's University System, allocated as determined by the board of regents of the system;

· for the following component institutions of the University of Houston System:

o from $75,147,013 in the introduced to $102,123,941 for the University of Houston;

o from $6,366,800 in the introduced to $7,934,433 for the University of Houston‑‑Victoria;

o from $10,470,577 in the introduced to $13,665,066 for the University of Houston--Clear Lake;

o from $14,866,227 in the introduced to $19,920,869 for the University of Houston--Downtown; and

o from $4,799,064 in the introduced to $5,803,896 for the University of Houston College of Medicine;

· for the following component institutions of The Texas A&M University System:

o from $15,386,251 in the introduced to $20,472,015 for Texas A&M University‑‑Corpus Christi;

o from $11,911,395 in the introduced to $15,625,322 for Texas A&M International University;

o from $10,424,459 in the introduced to $13,523,079 for Texas A&M University‑‑Kingsville;

o from $11,705,500 in the introduced to $15,382,514 for West Texas A&M University;

o from $13,281,126 in the introduced to $17,642,046 for East Texas A&M University; and

o from $4,671,529 in the introduced to $5,630,578 for Texas A&M University‑‑Texarkana; and

· from $12,993,750 in the introduced to $17,325,000 for the Texas State Technical College System Administration and the applicable component campuses but not its extension centers or programs.

Changes to Allotment Schedules for Each Fiscal Year Beginning With the 2027 State Fiscal Year: Contingent on Approval of Constitutional Amendment

Both the introduced and the substitute make state fiscal year schedules for each fiscal year beginning with the 2027 state fiscal year contingent on approval of the constitutional amendment by the voters, but the substitute changes the amounts allotted for each fiscal year beginning with the 2027 state fiscal year as follows:

· for the following component institutions of the University of North Texas System:

o from $67,815,750 in the introduced to $92,119,685 for the University of North Texas and its branch campus the University of North Texas at Frisco, allocated as determined by the board of regents of the system;

o from $21,220,626 in the introduced to $28,108,950 for the University of North Texas Health Science Center at Fort Worth; and

o from $7,218,152 in the introduced to $9,088,243 for the University of North Texas at Dallas;

· for the following component institutions of the Texas State University System:

o from $20,566,492 in the introduced to $27,789,927 for Lamar University;

o from $8,406,665 in the introduced to $10,715,169 for the Lamar Institute of Technology;

o from $5,261,748 in the introduced to $6,430,700 for Lamar State College--Orange;

o from $6,087,467 in the introduced to $7,552,341 for Lamar State College--Port Arthur;

o from $23,545,576 in the introduced to $31,983,884 for Sam Houston State University; and

o from $5,918,658 in the introduced to $7,323,033 for Sam Houston State University College of Osteopathic Medicine;

o from $56,361,392 in the introduced to $76,560,292 for Texas State University;

o from $4,697,037 in the introduced to $5,663,606 for Sul Ross State University; and

o from $2,952,266 in the introduced to $3,293,540 for Sul Ross State University-Rio Grande College;

· from $14,699,707 in the introduced to $19,416,816 for Texas Southern University;

· to the following component institutions of the Texas Tech University System:

o from $84,006,307 in the introduced to $114,112,643 for Texas Tech University;

o from $29,979,784 in the introduced to $40,007,231 for Texas Tech University Health Sciences Center;

o from $10,283,510 in the introduced to $13,533,380 for Angelo State University;

o from $10,869,258 in the introduced to $14,047,840 for Texas Tech University Health Sciences Center--El Paso; and

o from $7,470,934 in the introduced to $9,439,836 for Midwestern State University;

· from $20,272,798 in the introduced to $27,307,881 for the component institutions of the Texas Woman's University System, allocated as determined by the board of regents of the system;

· for the following component institutions of the University of Houston System:

o from $76,967,542 in the introduced to $104,551,313 for the University of Houston;

o from $6,472,592 in the introduced to $8,075,487 for the University of Houston‑‑Victoria;

o from $10,686,156 in the introduced to $13,952,505 for the University of Houston--Clear Lake;

o from $15,207,338 in the introduced to $20,375,683 for the University of Houston--Downtown; and

o from $4,866,875 in the introduced to $5,894,311 for the University of Houston College of Medicine; and

· for the following component institutions of The Texas A&M University System:

o from $15,729,462 in the introduced to $20,929,630 for Texas A&M University‑‑Corpus Christi;

o from $12,162,028 in the introduced to $15,959,500 for Texas A&M International University;

o from $10,633,569 in the introduced to $13,801,892 for Texas A&M University‑‑Kingsville;

o from $11,953,642 in the introduced to $15,713,370 for West Texas A&M University;

o from $13,575,421 in the introduced to $18,034,440 for East Texas A&M University; and

o from $4,736,250 in the introduced to $5,716,872 for Texas A&M University--Texarkana.

Changes to Allotment Schedules for Each Fiscal Year Beginning With the 2026 State Fiscal Year: Contingent on Constitutional Amendment Not Approved

Both the introduced and the substitute make state fiscal year schedules for each fiscal year beginning with the 2026 state fiscal year contingent on the constitutional amendment not being approved by the voters, but the substitute changes the amounts allotted for each fiscal year beginning with the 2026 state fiscal year as follows: