INTERIM LEGISLATIVE AGENDA
2003-2004
Formula rate : After several years of significant new funding, the Texas Legislature during the last regular legislative session was faced with a funding shortfall of $9.9 billion. Significant cuts included reducing the base formula rate from $56.65 to $51.25. Even during a time of record enrollments around the state this amounted to a 10.5% reduction for public universities. While Texas may continue to face significant budget challenges, it is imperative to restore funding levels for basic educational services. Continued funding reductions could result in increased student/faculty ratios, reduced class offerings, fewer mentoring opportunities, longer time to graduation, faculty losses, fewer graduates and less research.
Formula changes : A Coordinating Board formula advisory committee is currently conducting a formula funding cost study. There is the potential for a significant redistribution of funding depending on various scenarios ranging from $1.7 million to $8 million per year system-wide. University of Houston System concerns include the following:
Methodology : the committee is using only one base year instead of averaging results over three or more years and does not include any national peer comparisons.
Incentives : efficient low cost programs are penalized while inefficient high cost programs are rewarded.
Important programs for Texas’ future : the rate for important disciplines, such as engineering, computer science, teacher education and business, are reduced while agriculture is increased.
Financial Aid : The Coordinating Board’s plan “ Closing the Gaps” calls for increasing Texas’ college going rate by 500,000 students by 2015. To achieve this goal, the increase must come from traditionally underserved populations, especially the lower economic strata. More than 75,000 students qualified for TEXAS grants this year. However, the state appropriated funds to cover only 67,500. The inability to serve almost 10,000 qualified students is alarming. If this trend continues, lower income students will be even less likely to attempt college.
Since the early 1990’s, the Legislature has designated every other regular session as a “tuition revenue bond” session. Assuming the trend continues, the upcoming legislative session in 2005 would be in the cycle for a TRB session. While every university in Texas has unmet capital needs, the TRB process has several shortcomings:
Debt service payments : For the first time in over 35 years the legislature did not fully fund existing debt service in the appropriations bill. This requires each university to absorb unfunded debt payments out of existing revenue streams. Furthermore, last session for the first time the legislature authorized issuance new TRB debt (1) without any new appropriation (Tech medical school in El Paso) and (2) interest only appropriations (UH Tropical Storm Allison). Before new debt is authorized next session full funding of existing debt must be achieved.
Distribution methodology : Even though the legislature used a new review process during the 2001 session, there is no guarantee that the political process will address the most deserving and critical initiatives.
Additionally, the next regular session of the Texas Legislature in 2005 will update and rewrite the formula for the Higher Education Fund (HEF) as charged by the State Constitution. This is a very important process since it will be the basis for HEF distributions for the next 10 years. The Coordinating Board will appoint an advisory committee to review and make recommendations for formula changes early in the spring of 2004.
Recommendation : If additional state resources are available next session after base funding and existing debt service are addressed, the legislature is encouraged to increase the amount of funding allocated to the Higher Education Fund (HEF) rather than authorizing new bonds. An appropriate amount for institutions participating in the Permanent University Fund (PUF) could also be equitably appropriated.
The HEF formula has historically proven to be an equitable methodology to distribute limited capital resources. Furthermore, each institution would then be able to address the highest campus priority--whether it is new construction, major repairs or capital equipment--without concern for producing a politically viable proposal.
