Issue 16: Week of May 28, 2007

That Was Then …

Stick a Fork in It

After baking longer than usually required, the 2008-09 state budget finally came out of the oven Sunday totaling $152.5 billion -- $80.1 billion of which is general revenue (GR) -- excluding $14.2 billion in school property tax relief previously committed. According to Senate Finance Chair Steve Ogden (Bryan), the conference committee report (CCR) for HB 1 increases Medicaid spending 7.5 percent; makes state pension plans actuarially sound; repays the Economic Stabilization (“Rainy Day”) Fund $2.5 billion; and allocates $2 billion for future property tax relief. State agency employees, excluding higher education, will get 2 percent ($50 monthly minimum) salary increases in each year of the biennium. HB 1 appropriates $243 million in GR ($390 million, all funds) for the raises, contingent upon comptroller certification.
 
Ogden attributed half of the Medicaid appropriation to the settlement agreement in the Frew Medicaid case, which is addressed in the supplemental appropriations bill (HB 15). It states legislative intent to appropriate $706.7 million in GR and almost $1.8 billion in all funds for the agreement. Gone are the two across-the-board reductions that had been in the Senate version of HB 1, along with the $200 million full-time equivalent reduction.

The House began consideration of the final budget late Sunday afternoon and did not approve it until about two hours before the midnight deadline, by a vote of 114-35. The Senate followed about an hour later amid speculation of one or more filibusters that reportedly had delayed the vote. Earlier in the day, Sen. Rodney Ellis (Houston) had the plastic mat removed from beneath his desk, according to news accounts, indicating that he might try to talk the budget to death. The presence of a leather overnight bag and a pair of black tennis shoes lent credence to the rumors. Ellis never exercised the option reserved solely for senators, however, nor did Sen. Kyle Janek (Houston), though he did speak and vote against the budget (see “Healthy …” below). Had the budget bill not passed the Senate Sunday night, a four-fifths majority would have had to agree to debate it Monday, rather than the usual two thirds. The Senate tally was 25-6.

 

We’re Number One

Remember all that talk when the session began about the importance of higher education and the need to spend more money on the state’s colleges and universities? Well, after five months it turns out, by all accounts, that apparently this was the case, and that higher ed (as usual) was the last and, perhaps, most contentious part of the budget to be funded. The state will spend an additional $1.5 billion above current levels on higher ed, according to Ogden, a 14 percent increase, which he termed the largest in Texas history. Included are new spending on student financial aid; performance incentive funding and scholarships for students admitted through the “top 10 percent” law; more money for the Higher Education Assistance Fund (HEAF); and full funding of the Research Development Fund (RDF). Distributions from the Available University Fund, which must be appropriated although they are income from the Permanent University Fund, also will increase.

Among the higher ed increases are (all amounts biennial):

• $69.1 million overall for Higher Education Employees Group Insurance
  
  
• $313 million to fully fund debt service on new tuition revenue bonds authorized in 2006 by the 79th Legislature
  
  
• $175 million for the HEAF
  
  
• $145.5 million for student financial aid
  
  
• $49.2 million for enrollment growth at general academic and health-related institutions
  
  
• $261.4 million for formula funding enrichment
  
  
• $100 million for the Higher Education Performance Incentive Initiative (along with other appropriations that comprise the initiative)
  
  
• $40 million for the RDF
  
  
• $123 million for new special items added by the conference committee

On Friday afternoon, the conferees adopted the committee report by a 9-0 vote (one absent).  There was very little discussion of its contents and no mention of higher education, including the massive infusion of special item funding. Contrary to previous reports that new special items might become part of general provisions (Article 9), they were placed among the special provisions of the higher ed section (Article 3). These projects and programs are itemized, unlike the bulk of higher ed funding which is appropriated in lump sums, which makes them vulnerable to gubernatorial veto.

For more details on the entire budget and on UT institutions’ appropriations, see these documents now available online:

• Summary of CCRHB 1 (Legislative Budget Board)
  
  
• CCRHB 1 (LBB)
  
  
• Institutional Summary of UT System GR Funding (OGR)
  
  
• Supplemental appropriations bill, HB 15

Fiscal Nuts and Budget Bolts
The budget-writing committees’ clerks and phone numbers are:

House Appropriations – Cristina Self, 463-1091

Senate Finance – Amy Jeter, 463-0370

From session to session, the two houses alternate writing the initial version of the General Appropriations Act. The starting point this session was HB 1 and will be SB1 in the 81st Legislature. The House and Senate each approved spending plans, and the legislative leadership appointed a 10-member conference committee. It reconciled the differences in the two proposed budgets and presented a compromise bill to both houses that was approved Sunday. The process resumes in about a year when institutions begin preparing legislative appropriations requests (LARs) for the next fiscal biennium.

 
Isn’t That Special?
Although some House members raised it in the narrow context of Speaker politics, one senator brought up the more global issue of special item appropriations during the budget floor debate Sunday. Echoing Gov. Perry’s view, Senate Education Committee Chair Florence Shapiro (Plano) called it “a persistent problem in our process” that made her “heartsick” over the budget bill.

Shapiro said the Senate education budget workgroup had vowed to eliminate special items in favor of more higher ed funding overall. Nevertheless, $133 million worth of them wound up in the conference committee report with little rationale behind them, according to Shapiro. She claimed that the projects are not unique and pit colleges against one another.

“I could go through every one of these special items with you, and I could argue against every single one,” Shapiro said. “They can be done through the general appropriations budget, and they should be. Why should one of us get a special item to the detriment of another for no apparent reason?”

In response to a direct question from Shapiro, Senate Finance Chair Steve Ogden (Bryan) acknowledged that special items should be a thing of the past. He said he would’ve preferred having none but could not get the House conferees to support the bill without them. Ogden reiterated his position that the way to deal with special items is to address formula funding.

“One of the reasons that special items are so difficult to remove is that, in our 35 upper-level institutions …, about two-thirds of them think the formulas are unfair,” Ogden explained, “and that the only way that they can be treated fairly is to stick in a little boost.”

Ogden called for more varied, better crafted, fully funded formulas. Although formula and special item funding eventually are combined in the budgeting process per institution, Ogden said the underlying issue, as it is in public school finance, is equity. “In this bill, I agree with you, we took a step backwards,” Ogden conceded.

Shapiro said higher ed funding is wrong-headed and called for doing it a different way. She urged Lt. Gov. Dewhurst to appoint a panel to undertake a formula review.

Watch the video [beg. 10:30:55]

 

Healthy, Wealthy, Wise?
Sen. Kyle Janek (Houston) eschewed a filibuster Sunday night in favor of speaking and, for the first time, voting against the budget bill. He is displeased with its spending levels for indigent health care in general and the UT Medical Branch at Galveston in particular.

"The dilemma I face is that I'm not sure that I should use the happenstance that the budget is coming up this late, with a deadline looming and turmoil in the House, to help out a few medical institutions in the state," Janek was quoted as saying in a press report earlier in the day.

Defending the “tradition” of state teaching hospitals caring for the destitute and uninsured, Janek called for giving them more available resources so they would not have to deny anyone in need. He called UTMB “the canary in the coal mine” as the first to exhibit what is becoming a growing problem: turning away patients who cannot pay.

Janek described the Shriners Galveston Burn Hospital as a good example but stopped short of calling for free health care, saying poor patients should pay something based on affordability. He urged his colleagues to find more money not only to allow teaching hospitals to care for indigents but to train more professionals and do more research.

Watch the video [beg. 9:48:00]

 

Higher Ed Highlights

Reversal of Fortune
On a night full of surprises, the House abruptly changed course Sunday on automatic admissions and rejected revisions to the so-called “top 10 percent” law aimed at giving UT Austin more enrollment flexibility. The House failed by 11 votes to adopt the conference committee report on SB 101 by Shapiro/Morrison, which had passed the Senate earlier with only two nays.

The bill had come back to the House looking much like the Senate version that the House had heavily amended a few days earlier. Noticeably absent was the higher two-thirds limitation on top 10 percent admissions of resident high school graduates to entering classes at public general academic institutions. The conference committee had reinstated a 50 percent “cap,” with the next 10 percent of applicants to be admitted from the top 10 percent pool through holistic review, which also would have applied to the remaining 40 percent. A 2009 implementation date and a 2015 expiration date remained, and a statutory tuition and fees (T&F) “scholarship” removed by the House Higher Education Committee, and later defeated on the House floor, stayed out.

Nevertheless, a coalition of rural and ethnic minority members argued that the law was accomplishing its purposes and did not need changing. Rep. Jim McReynolds (Lufkin) read a list of rural lawmakers’ districts benefiting from the current statute. Rep. Helen Giddings (Dallas) called the bill a solution in search of a problem, contending that a good merit-based approach should not give way to an attempt at a perfect one. Rep. Roberto Alonzo (Dallas) circulated a list of more than 30 members willing to use their allotted speaking time to try to kill the bill, according to The Quorum Report. He pointed to the dearth of committee witnesses to argue that the bill lacked significant support. When debate was cut off, and with a midnight deadline slightly more than an hour away, a vote ensued and the CCR failed, 75-64-3.

Watch the video [beg. 8:37:05]

"I'm shocked. I'm upset," said a disbelieving Sen. Florence Shapiro (Plano), the Senate Education Committee chair who had been negotiating the bill for six months. She claimed that the data McReynolds cited were inaccurate.

Shapiro co-chaired the conference committee along with House Higher Education Chair Geanie Morrison (Victoria). The other members were Sens. Judith Zaffirini (Laredo), Rodney Ellis (Houston), Kyle Janek (Houston) and Jane Nelson (Lewisville); and Reps. Beverly Woolley (Houston), Dan Branch (Dallas), Mike Villarreal (San Antonio), and Donna Howard (Austin).

SB 101 had an eventful ride in the House from the outset. Unlike the Senate version, the House committee substitute was a minimalist work sans the conditional 60 percent cap, the T&F scholarship for top 10-percenters, and the sunset provision. A week ago, Morrison initially postponed second reading consideration until Tuesday. Several parliamentary challenges failed, then she took almost every amendment, seven of which went on. They included raising the cap to two-thirds of entering classes and reinstating the revisions’ sunset date of 2015.

Rep. Pete Gallego (Alpine) tried to add a variation of Sen. Steve Ogden’s (Bryan) estimated $1,500-per-student T&F scholarship. Referring to the delicate compromise stripped off in House Higher Ed, Gallego doubted that the bill would survive conference without some restoration. Noting that the scholarship (actually an exemption) would only apply to students at schools opting into the cap (i.e., UT Austin), Morrison speculated that most top 10-percenters would not qualify for it. She urged putting any extra financial aid into TEXAS Grants. Gallego countered that the T&F exemption would help middle-class families struggling to pay for college. It failed, 78-68-2, and the House passed the bill on second reading, 80-66-1.

Watch the video [beg. 7:00:00]

On third reading Wednesday, Rep. Sylvester Turner (Houston) quizzed Morrison about the two-thirds cap’s prospects in the Senate. Turner, who voted no on second reading, tried to get a commitment to keep it on, not just so it would pass the House. Morrison was non-committal, calling it a good starting place and noting how close the two bills were on that provision. Claiming that top 10 percent never was intended to admit more than half an entering class, Morrison said she had dissuaded some members from offering repeal amendments. She urged giving UT Austin room to use other criteria that she believes would enhance diversity beyond the gains made under the law.

Giddings, also a House Higher Ed member, claimed that there was a smaller percentage of minorities in the non-top 10-percent portion of UT Austin’s 2006 entering class than in the rest. She said that argues against UT Austin’s position that more flexibility to consider other criteria would increase diversity. Rep. Garnet Coleman (Houston) equated a vote for the bill, and against the current top 10 percent law, with a vote of no confidence in public education, specifically that Texas’s high schools are not up to standards sufficient to prepare students for college. SB 101 passed the House on third reading, 77-67-1.

Watch the video [beg. 3:51:00]

 

Tomorrow Makes a Comeback
A new state plan to help families save for college is on its way to becoming law.

The Texas Tomorrow Fund 2 (TTF2), a variation of the original program that closed to new investors four years ago, will sell “units” representing a portion of annual tuition and redeemable at virtually any college or university in the state. There are three types of units – the highest-priced public university, i.e., UT Austin; the weighted average, for the more moderately priced institutions; and the least expensive, i.e., two-year schools and community colleges.
 
When students redeem units, universities must honor their value. A beneficiary may redeem, after the third anniversary of the date of purchase, any type of tuition unit for attendance at a general academic teaching institution; two-year institution; private or independent institutions; or accredited out-of-state institutions.

The new plan takes into account many of the shortfalls that came into play with the original Texas Tomorrow Fund, according to Sen. Florence Shapiro (Plano). These shortfalls have been addressed to protect the actuarial soundness of the new fund by shifting the burden from the state to schools and families. But schools can realize gains if tuition and fees remain lower than the purchase price plus return on investment.

Investors would purchase one or more of three types of “units,” each equivalent to 1 percent of the annual cost of enrollment. Investors purchasing 100 units, equal to 100 percent of costs, would be guaranteed to have tuition paid in full upon redemption. They would have to make up the difference, however, if they purchased fewer than 100 units or purchased units for a lesser of one of the three tiers of institutions. Investors also could “cash out” unused units.

Institutions would receive the original purchase price plus the return on investment (ROI), with a minimum ROI of 5 percent, up to 101 percent of tuition and mandatory fees. They would have to make up any difference between tuition and fees at the time of redemption and the value of 100 units if costs have risen faster than the ROI on the purchased units. If tuition and fees have increased at rates less than the rate of return, on the other hand, schools actually could keep the 1 percent, with the additional ROI going back into the fund.

The plan, shepherded through the legislature by Shapiro and Rep. Geanie Morrison (Victoria), is aimed at giving families more certainty about the cost of a college education while making it more affordable.

The Prepaid Higher Education Tuition Board is responsible for investing funds with investment managers and may contract with the UT Board of Regents to have The University of Texas Investment Management Co. (UTIMCO) manage TTF2’s assets. The board is to annually evaluate prices and adjust future contracts as necessary to retain the fund’s actuarial soundness, the issue that closed the original fund.

 

Miscellany

The Senate elected Sen. John Carona (Dallas) Monday as president pro tempore. He succeeds Sen. Mario Gallegos (Houston), who served in that post during the session. At the beginning and end of each session, the Senate traditionally chooses one of its members for this largely ceremonial position. The president pro tem acts as the state’s chief executive officer when the governor and lieutenant governor both are out of the state. Like his predecessors, Carona will be honored as Governor for a Day sometime during the interim between regular legislative sessions.

 

…This Is Now

 

If It’s This Monday, It’s All Over

The final day of the session has become largely ceremonial and perfunctory, with substantive floor action reduced to correcting “technical” errors in bills, and that practice held true for the most part Monday in the Senate. But it had to wait until dark-thirty to finish its legislative agenda because of a logjam in the House, which resorted to seldom-used rules suspensions to dispose of several stranded bills. The House found itself in the predicament after spending much of the last three days embroiled in a rules fight and a putative speaker’s race. Consequently, final adjournment there did not come until midnight, at which point Rep. Harold Dutton (Houston) led some members in a benediction he titled “A Legislator’s Prayer.”

As for higher ed, the lump-sum appropriation for institutions remains intact, as does tuition flexibility and the automatic “top 10 percent” admissions law (see “Reversal …” above). Debt service on tuition revenue bonds is fully funded, the Teacher Retirement System is being shored up, and there will be a student representative on the Texas Higher Education Coordinating Board (THECB).

 

Your Hit Parade

Bills of interest not previously discussed that passed both houses include:

• HB 3851 by Morrison/Shapiro directing the THECB to develop standardized grade point averages for college admission and requiring general academic teaching institutions to adopt written policies promoting the admission of undergraduate transfer students. The bill as passed does not contain two other important bills that were added as Senate amendments at the last moment because they failed to be adopted on their own (see “End of the Line” below)

• HB 1188 by Morrison/Shapiro revising the structure and administration of the Texas Emerging Technology Fund.

• SB 1234 by Zaffirini/Rose directing the THECB to develop a five-year master plan for higher education including a re-examination of its purposes, needs, and goals; methods for defining the roles and missions of institutions of higher education; more effective funding methods; methods for establishing a coherent long-term student financial aid strategy; recommendations for strengthening collaboration between two-year and four-year institutions; and recommendations for developing and reinforcing long-term collaboration between and among primary, secondary, and post-secondary educational institutions. The bill also requires consideration of graduate medical education needs; the need for new faculty; identification of appropriate incentives and requirements to facilitate seamless student transitions between and among schools and universities; consideration of concerns regarding enrollment at UT Austin and Texas A&M University and their competitiveness with other flagship universities; consideration of the value of creating additional four-year flagship public research institutions of higher education; analysis of alternative methods of funding higher education with emphasis on the research components; and consideration of whether to add new components to the TEXAS Grants and other state financial aid programs. 

• HJR 90/HB 14 by Keffer/Nelson reorganizing the Texas Cancer Council into the Cancer Prevention and Research Institute of Texas and authorizing bonds (subject to voters amending the constitution) of up to $300 million a year for grants awarded by two newly created oversight committees.

• HB 3430 by Strama/Hegar requiring online publication of state agency expenditures and a database of major state contracts, drawn from HB 42 by Paxton/Hegar. HB 3430 expressly does not require institutions to expend resources to collect and make electronically readable any information not now collected and reported to the comptroller.

• HCR 159 by Morrison/Shapleigh requesting that the governor, lieutenant governor, and speaker appoint a select commission on higher education and global competitiveness to draft a Texas Compact reflecting a long-term vision and step-by-step plan to attain goals by 2020 and examine issues as specified in the bill.

• HB 3826 by Morrison/Zaffirini requiring applicants to successfully complete curriculum requirements for the recommended or advanced high school programs to be eligible for admission to any general academic teaching institution.

• SB 1138 by Duncan/Smithee requiring colleges and universities to implement mandatory risk management programs for all registered student organizations. Instruction is to be given in issues including possession and use of drugs and alcohol, hazing, sexual abuse and harassment, fire and safety, and conduct at parties and events. The Department of Insurance is to study levels and types of insurance required for and available to fraternities.

• SB 276 by Duncan/Smithee revising the selection process for student members of the board of regents of a university or university system.

• SB 1053 by Zaffirini/Aycock requiring the THECB to develop a method for assessing the quality and effectiveness of academic advising services available to students at each institution of higher education.

End of the Line
Bills of interest that failed to pass include:

• CSSB 2049 by Zaffirini et al., a response to the nationwide financial aid investigation that was added to HB 3851 (see above), largely because it had been filed late in the session.

• SB 1146 by Shapiro/Morrison, which would have directed the THECB to develop and maintain online performance “report cards” containing specific data for each general academic teaching institution, medical and dental unit, and two-year college.

• HB 3828 by Morrison/Shapiro, which would have created a point-based system of performance incentive funding for higher education. The funding was included in the budget, however, and the programming details are to be determined.

• HB 2238 by Eissler/Shapiro, which would have revised the Public Education Information Management System (PEIMS).

• SB 1943 by Patrick/Corte, which would have allowed participation by private school students in University Interscholastic League-sponsored activities.

Session Snapshot

 

Week	21
Days Remaining	0
Bills/Joint Resolutions Filed*	6,363
Bills/Joint Resolutions Passed**
>House	1,348
>Senate	989
Bills Enacted*	1,491
Legislation Tracked	1,904
High Priority Bills	368

*Incl. SCR 20 (constl. spending limit)
**By each house

The Legislature’s first full working weekend of the session was devoted entirely to conference committee reports (CCRs) and amendments placed on bills by the other (non-originating) house. Friday was the last day for the House to either concur or confer. Sunday was supposed to have been the last day for the House to adopt CCRs and for the Senate to concur in House amendments or adopt CCRs. Under the end-of-session rules adopted several years ago, Monday has been reserved for corrections only. But the lateness of the budget adoption and circumstances in the House necessitated rules suspensions in both chambers to enact several bills at the eleventh hour. Other legislative deadlines and important dates may be found at Key Legislative Dates.

Duly Noted

On Monday night, several House members publicly thanked their Capitol staffs for their hard work during the session. As final adjournment approached, a few members opted to have some fun with the impromptu ritual:

 “They could not have done it without me.”
            Rep. Craig Eiland (Galveston)

“Mr. Speaker, could I thank my entire staff? Barbara Crawford.”
            Rep. Delwin Jones (Lubbock), who only has one Capitol employee

“There’s a gentleman sitting alone up there in the top right-hand corner (pointing to the gallery). I’d just like to thank him for coming to see us tonight. Thank you so much.”
            Rep. Edmund Kuempel (Seguin)