HBA-NLM H.J.R. 58 76(R) BILL ANALYSIS Office of House Bill AnalysisH.J.R. 58 By: Junell Appropriations 3/25/1999 Introduced BACKGROUND AND PURPOSE In 1984 the Texas Constitution was amended to include additional institutions to the portion of the Permanent University Fund (PUF) allocated to the University of Texas System. The amendment more than doubled the number of University of Texas institutions that depend on the PUF for capital funds. These additions account for almost one-half of the fund's bond proceeds distributed since 1986. There is concern that despite allocation of these resources to these institutions, a disparity exists between these schools and those that are under the Higher Education Fund (HEF). The purpose of this resolution is to adjust the PUF and HEF by transferring certain schools from the Permanent University Fund to the Higher Education Fund, altering the annual contribution to the HEF, and amending the spending and investing policy of the PUF. As proposed, H.J.R. 58 requires the submission to the voters of a constitutional amendment expanding the number of institutions eligible under the Higher Education Fund to include all academic institutions other than the University of Texas at Austin, Texas A&M University, and Prairie View A&M University. This bill increases the amount appropriated to the Higher Education Fund from $100 million to $250 million. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that this bill does not expressly delegate any additional rulemaking authority to a state officer, department, agency, or institution. SECTION BY SECTION ANALYSIS SECTION 1. Redesignates Sections 11, 11b, 12, and 18, Article VII, Texas Constitution, as Section 18, as follows: Sec. 18. (a) Provides the purpose for the establishment of the permanent university fund and sets forth the composition of that fund. Deletes existing text relating to the requirement for certain proceeds, grants, donations and other appropriations to constitute and become a Permanent University Fund. (b) Provides that the permanent university fund is held in perpetual trust for the people of this state and for the use and benefit of the institutions described by Subsections (e) and (f) of this section. Prohibits spending of the principal of the fund. (c) Redesignated from existing Section 11b. Authorizes the Board of Regents of the University of Texas System (board) to sell, lease, exchange, or otherwise manage the assets of the fund in the manner prescribed by law and requires the board to invest all proceeds. Provides that the authority of the board to acquire, exchange, and otherwise act as described by this section, is subject to general law. Deletes existing Section 12 relating to the selling of land herein set apart to the University fund. Deletes existing Sections 18(a)-(d) relating the Board of Regents of the Texas A&M University System's authority to issue bonds and notes for improvements, repairs, acquisitions and refunding for certain component institutions of the system. Makes nonsubstantive changes. (d) Provides that the available university fund consists of the income, rather than dividends, interest, and other income, from the permanent university fund less administrative expenses and less, rather than including, the net income from grazing leases of permanent university fund land. (e) Requires one-third of the available university fund to annually be appropriated in the manner provided by this subsection, rather than an annual sum sufficient to pay the principal and interest due on certain bonds and notes and the requirement to exercise discretion in making equitable appropriations, to the Texas A&M System and its component institutions. (f) Requires the other two-thirds of the available university fund to annually be appropriated in the manner provided by this subsection, rather than to the University of Texas System and its component institutions. (g) Requires the board of regents of each university system to exercise its discretion with due regard to the criteria the board considers appropriate from year to year. Deletes existing Subsection (g) relating to the requirement that bonds and notes issued be payable solely out of the available university fund. (h) Authorizes the board of regents of specified university systems to issue bonds and notes, and pledge their respective shares of the available university fund for certain purposes described by this subsection. Provides that bonds and notes issued under this subsection shall be for the benefit of the institutions described by Subsections (e) and (f) of this state. Deletes existing Subsection (h) relating to the assurance of efficient use of construction funds. Deletes existing Subsection (i) relating to the prohibition of the state systems and institutions from receiving any funds from the general revenue of the state for certain purposes. Deletes existing Subsection (j) relating to the provision that this section is self-enacting on the issuance of the governor's proclamation. SECTION 2. Amends Section 17, Article VII, Texas Constitution, as follows: Sec. 17. (a) Provides that each fiscal year, rather than the fiscal year beginning September 1, 1985, and thereafter, there is appropriated $250 million to be allocated as provided by law to the state's institutions of higher education other than an institution that benefits from the permanent university fund under Section 18 of this article or a junior college for the purpose set forth in this subsection. Authorizes the legislature to appropriate additional money for that purpose. Deletes the provision relating to money appropriated for the purpose of paying for acquiring, constructing or equipping or for major repairs. Deletes and the authority of the legislature to increase the amount of the constitutional appropriation. (b) Authorizes the governing board of an institution authorized to participate in the distribution of money under this section to issue negotiable bonds or, rather than and, notes for the benefit of the institution payable from the institution's allocations under this section. Prohibits the aggregate principal amount of bonds from exceeding 50 percent of the value of the funds appropriated to the institution under this section. Authorizes the legislature to, by provision in the general appropriations bill, adjust the allocation of the funds for the ensuing biennium but may not adjust the appropriation as provided. Authorizes the bonds and notes to be used for the purposes enumerated in this section. Deletes the provision that provided for the use of funds appropriated under Subsection (a) for certain universities. (c) Authorizes the legislature by general law to provide for and regulate: _the pledge of these funds for bonds or refunding bonds; _the manner of sale and maturities for bonds payable from these funds; _the depository for these funds; _the transfers of these funds by the comptroller to the institutions; and _the incontestability of bonds approved by the attorney general. Deletes existing Subsection (c) relating to the entitlement of certain universities to participate in the funding provided by this section. (d) Redesignated from existing Subsection (f) and makes a nonsubstantive change. Deletes existing Subsection (d) relating to annual appropriations to the governing boards of eligible agencies and institutions of higher education. (e) Redesignated from existing Subsection (i) and prohibits spending the principal of the fund for any purpose except on affirmative vote of two-thirds of the membership of each house of the legislature. Requires the income from the investment of the fund, rather than the higher education fund, to be credited to the fund until the fund balance equals $2 billion. Requires the income from investment of the fund to be expended for certain purposes after the balance of the fund reaches $2 billion. Requires the appropriation required by Subsection (a) to cease at the beginning of the first fiscal year after the fund balance reaches $2 billion. (f) Prohibits an allocation under this section to the Texas State Technical College System and its campuses from exceeding 2.2 percent of the total of all allocations in any fiscal year. Delete Subsections (g), (h), (j), and (l), requiring the comptroller to transfer funds, authorizing the legislature to provide for the construction projects, prohibiting the receipt of additional funds, prohibiting the expense of funds for land and improvements, and providing that this section is self-enacting. SECTION 3. Provides a temporary provision to the Texas Constitution, as follows: TEMPORARY PROVISION. (a) Provides that the amendment of Section 17, Article VII, Texas Constitution, adopted in 1999 does not impair any obligation created by the issuance of bonds or notes in accordance with that section or Section 18 of that article before January 1, 2000, and all outstanding bonds and notes validly issued under those sections remain valid, enforceable, and binding and shall be paid in full, both principal and interest, in accordance with their terms and from the sources pledged to the payment of the bonds. Provides that the changes made in the allocation of the available university fund do not affect the pledges made in connection with bonds or notes. Authorizes the legislature by general law to provide for implementation of this provision. (b) Authorizes the legislature in any fiscal year to reduce the amount of an appropriation made under Section 17, Article VII, Texas Constitution, by the amount an institution receives in that fiscal year from the available university fund in connection with an obligation issued by or for the institution when the institution was entitled to participate in funding from the available university fund. (c) Transfers on January 1, 2000, the money in the higher education fund created under former Section 17(i), Article VII, Texas Constitution, as that section existed on January 1, 1999, to the credit of the fund created under Section 17(a), Article VII, Texas Constitution. (d) Provides that proposed revision of the provisions for funding capital improvements and acquisitions by state colleges and universities, takes effect January 1, 2000. (e) Provides that this section expires January 1, 2030. SECTION 4. Repealer: Section 11a (Investment of Permanent University Fund), Article VII, Texas Constitution. SECTION 5. Requires this proposed constitutional amendment to be submitted to the voters at an election to be held November 2, 1999. Sets forth the required language for the ballot.