ISSUE 6: March 20, 2007

That Was Then...

 

Half and Half

We’ve reached the halfway point of the session (congratulations, everyone), and the budget bill for fiscal 2008-09 essentially is half done. The House Appropriations Committee (HAC), despite having started well after the Senate Finance Committee (SFC), will not meet again on HB 1 until it votes to send it to the full House. This was supposed to have occurred Monday, but it now appears that it will be on Wednesday. The target timeframe for floor debate remains the last week of March. House rules require the committee report to lay out seven days (168 hours) before it is eligible for floor consideration.

Key higher education spending decisions made by the HAC as of March 12 include:

General Academic Institutions (GAIs)
• A new $115.6 million Texas Competitive Knowledge Fund is created. It reallocates $66.2 million from UT Austin, Texas A&M and Texas Tech universities and the University of Houston and adds another $49.4 million in new General Revenue (GR). The fund is to be allocated among all 35 GAIs based on a ratio of $1 million for each $10 million in research over the past three years (2003-05). UT System biennial allocations are:

o UT Arlington.......... $2.6 million
o UT Austin.............. $39.3 million
o UT Dallas.............. $3.5 million
o UT El Paso............ $3.1 million
o UT Pan American... $420,000
o UT Brownsville....... $340,000
o UT Permian Basin.. $139,000
o UT San Antonio..... $1.8 million
o UT Tyler............... $60,000

• Formula “hold-harmless” appropriations of $28.3 million, bringing all institutions to at least 97 percent of current biennial funding levels.

• Exceptional items:

o $3 million at UT Austin for the McDonald Observatory

o $362,500 at UT Austin for the Garner Museum

o $9 million at UT Permian Basin for instructional program support

o $500,000 at UTPB for the performing arts center start-up

• The top three or four exceptional items at all institutions have been left for future consideration in Article 11 of the bill, aka “the wish list.” This means they remain viable if funding becomes available.

Health-related Institutions (HRIs)
• An additional $47 million for the Graduate Medical Education (GME) Formula ($3 million through redirection from the Texas Higher Education Coordinating Board (THECB) and another $44 million in GR), for a total of $72 million for GME overall, or $6,614 per resident per year.

• An increase in the Biomedical Science and Nursing Graduate weights and appropriations of $18.7 million. Qualifying HRIs are ineligible for the Small Enrollment (Class) Supplement.

• An additional $5 million in GR to the Instruction and Operations Formula.

• Special items approved (all others “wish-listed”):

o $1 million for sickle cell treatment at UT Southwestern

o The new mission-specific formula for MD Anderson

o $5 million to UT HSC San Antonio for the Regional Academic Health Center

View a summary of System exceptional item funding requests

Read a summary of the HAC higher ed markup/rider hearing [Source: Council of Public University Presidents and Chancellors (CPUPC)]
Watch archived hearing video (beg. 2:38:55)

The HAC currently has 26 other bills to consider, including supplemental appropriations for the current budget. The HAC has begun working on these bills but will not consider any of them until after reporting HB 1.

Although it is not yet finished, on Wednesday the SFC approved its higher ed workgroups’ recommendations, including for THECB programs. Among the highlights, according to CPUPC:

• An additional $130 million for the TEXAS Grant and B-on-Time Loan programs
• Formula funding increases for universities and community colleges of 3.8 percent, with 97 percent hold-harmless level
• $113 million in additional funding for GAIs and $120 million for community colleges above the base bill

THECB
• An additional $151 million over and above the base bill, including:

o An additional $65 million for TEXAS Grants (another $10 million wish-listed)

o $65 million for B-on-Time Loans ($2 million wish-listed).

o Texas Education Opportunity Grants and College Work Study − an additional $5 million each wish-listed.

o Advanced Research Program − $8.3 million ($8.3 million wish-listed)

o Joint Admissions Medical Program − $3.68 million ($1 million wish-listed)

o Professional Nursing Shortage Reduction Program − $953,284

o Physician Education Loan Repayment Program − $1 million o Another $50 million “wish-listed”

Higher Education Employee Group Insurance (HEEGI)
• $104.3 million for 100 percent funding for all higher ed, including community colleges, and a 1 percent inflation adjustment (to 9 percent)

Higher Education Assistance Fund
• A total of $525 million for the biennium, including an additional $175 million more than FY 2006-07.

The HRIs’ appropriations were left pending. Unlike in the HAC, there was no discussion of an across-the-board employee pay raise yet.

Chair Steve Ogden (Bryan) encouraged SFC members to consider the overall amount being appropriated (including what’s pending). He noted that higher ed’s total fiscal growth would be $16.75 billion, a 15 percent increase over the current biennium, compared to the LBB’s adopted growth rate for the state economy, and the next budget, of 13.1 percent for 2008-09.

View the SFC markup summary
Watch archived hearing video (beg. 1:12)

The SFC has moved its higher ed “rider day” to Thursday, when it will also consider higher ed pending items and all “wish list” items. Sen. Ogden hopes to vote out the committee substitute for SB 1 before April 8th. Currently, the SFC has scheduled no more hearings after Thursday.

Fiscal Nuts and Budget Bolts
The budget-writing committees’ regular meeting times and places, clerks and phone numbers are:

House Appropriations – 8 a.m. daily (usually, and upon House adjournment as needed) E1.030 (HAC Hearing Room, Capitol Extension 1st floor) Cristina Self, 463-1091

Senate Finance – 8 a.m. daily (usually, and upon Senate adjournment as needed) E1.036 (SFC Hearing Room, Capitol Extension 1st floor) Amy Jeter, 463-0370

From session to session, the two houses alternate writing the initial version of the appropriations bill. The starting point this session is HB 1, but both the SFC and HAC, or the SFC workgroups and HAC subcommittees, have met almost daily. Once both the Senate and the House have approved spending plans, the legislative leadership will appoint a 10-member conference committee to reconcile differences in the two proposed budgets. Conferee workgroups will formulate recommendations to the committee, which will present a compromise bill to each house for approval.

A New Wrinkle

Speaker Tom Craddick (Midland) announced Friday the creation of the House Select Committee on Higher and Public Education Finance. The panel will work to improve college and workforce readiness by coordinating public and higher education finance policy toward this end.

"In the face of rising expectations, improving college and workforce readiness for our students is immensely important for increasing Texas' competitiveness in the global market," Craddick said. "I'm very pleased that these representatives have agreed to serve Texas in this capacity."

Chairing the select committee is Rep. Dan Branch (Dallas), a member of the House Appropriations Committee (HAC) Education Subcommittee, with Rep. Scott Hochberg (Houston) as vice chairman. The other members are Rep. Harold Dutton (Houston); Rep. Rob Eissler (The Woodlands), who chairs the House Public Education Committee; Rep. Helen Giddings (Dallas), a member of the House Higher Education Committee; Rep. Ryan Guillen (Rio Grande City), who is HAC vice chair; Rep. Lois Kolkhorst (Brenham), who chairs the HAC Education Subcommittee; Rep. Geanie Morrison (Victoria), who chairs the House Higher Education Committee; and Rep. John Otto (Dayton), who is on the HAC Education Subcommittee. Hochberg and Dutton are Public Ed members.

According to an announcement, the select committee will focus on several aspects of higher and public education, including examining the efficiency and effectiveness of state programs to increase student achievement and aligning formula- and non-formula-funded programs with the state's educational goals. The committee also will develop strategies to more effectively leverage and allocate federal funds and meet state obligations under the Texas Guaranteed Tuition Plan.

"It's critical that we get this right,” Branch said. “We must continue to supply an educated workforce, so employers will keep relocating to Texas."

Higher Ed Highlights

 

A Textbook Case

The House Higher Education Committee heard a nearly four-hour litany of woe on Monday, March 12, mostly from students, about high-priced college textbooks. Complaints included superfluous new editions, lack of resale and used book markets, and no-return “bundling,” the practice of grouping unbound texts with extraneous materials that cannot be resold once opened.

Rep. Scott Hochberg (Houston) said that several bills had been filed in the past to address what has become a nationwide problem facing many state legislatures. He added that numerous student government organizations in Texas are calling for action.

Texas college students spend almost $1 billion a year on textbooks, Hochberg said − typically $500-$1,000 per student. Some community college students’ book bills exceed their tuition costs, according to testimony.

Hochberg’s solution is HB 956. If it passes, faculty would have to consider less expensive materials, and textbooks would have to be available (but not necessarily assigned) for at least three years, unless significant changes required updating. If so, faculty would have to submit to department chairs their justification for using books with shorter “lifespans.” Trustees, administrators or faculty would commit a class B misdemeanor if they received commissions or rebates on any textbooks used, or if they accepted a gift, favor, or service that might tend to influence textbook selection.

Each institution of higher education would have to compile lists of required textbooks for each course and make the lists available to students on line. University-affiliated bookstores (UABs) could not require "bundling" of books and other learning materials unless certain criteria were met. Extensions of credit and other practices offered solely through UABs, including advertising, would have to be offered at independent bookstores, within reason. The Texas Higher Education Coordinating Board (THECB) would be required to work with the institutions to facilitate the development and availability of open-access publications.

“This really isn’t a free market. These are books that the students are assigned to have,” Hochberg observed. “Typically, there is one provider at the campus.” He speculated that the rise of eBay and Internet resellers prompted publishers to make the used textbook market virtually non-existent.

Rather than resort to an administrative enforcement mechanism (i.e., “book police”), Hochberg said he is relying on the honor system and the buying power of the state to bring about desired changes on campus and in the textbook industry.

His bill would have the Texas Building and Procurement Commission (TBPC) negotiate discount pricing with publishers and contracts to sell textbooks at discounted prices to UABs. At least two months in advance of the deadline, the commission would have to list and publicize on line the books subject to discount pricing. Institutions, the THECB and the TBPC would implement the bill within existing resources (i.e., no adverse fiscal note).

Tom Steele of the University Co-op in Austin pointed out that some books cannot be sold apart from bundles. He advocated stronger anti-bundling measures than those in HB 956.

An independent Metroplex bookstore owner and former publishing manager termed “absolutely astonishing” recent marketing trends in the textbook industry. “What this is all about is money,” said Robert Ingram of Addison. “Nothing else but money.”

The former college instructor compared publishers’ ploys such as shrink-wrapping and access-coding to big oil companies’ recent attempts to influence fuel prices. He said this forcing of repeat business on students reflects publishers’ inability to move inventory when new.

Hochberg said he may add a requirement that faculty have textbook prices disclosed to them in advance.

“I’m convinced … that, if the Bible were a textbook, we would have a new version every year,” Hochberg remarked. “That’s the way textbooks are being done.”

Rep. Patrick Rose (Dripping Springs), a committee member, identified publishers, who were not present to testify, as the root cause of the problem. An official of the Dallas County Community College District (DCCCD) said the bill should be aimed at publishers instead of faculty and administrators.

Steve Ledford, DCCCD’s auxiliary services director, pointed out that its bookstore contract with Follett allocates $400,000 for student loans and scholarships. He said the contract generated about $1.56 million in revenue last year.

Rep. Fred Brown (Bryan) said many big schools’ contracts with on-campus booksellers require most financial aid spending on books to be with that retailer. Some schools allow financial aid to be spent on retail items other than books, according to testimony.

Rose presented a related bill, HB 2009, extending some of UABs’ exclusive marketing tactics to off-campus bookstores. He would allow them to advertise on campus during orientation, accept extensions of financial aid credit, and receive lists of approved instructional materials. Rose said the bill would foster more competition that should help lower book prices, decrying arguments from the UT System and community colleges.

Critics said the bill should take a more consumer, rather than provider, approach, noting that the textbook market is controlled by about three large companies.

HB 960 by Herrero would encourage faculty to maintain the use of core curriculum textbooks from one year to the next. It would require a “good cause” to change books or editions as determined by the school’s governing board, which some witnesses termed impractical.

Rose also offered HB 1434 exempting books from sales taxes during the first four weeks of each long semester. He estimated average savings at $100 per student per year. Although 18 states have similar policies, the bill would cost Texas $55-$71 million in general revenue by the end of FY 2009, and cities would lose $12.8 million. Potential changes include rebates to local governments and targeting the exemption to college textbooks only.

All four bills remain pending.

After All, Tomorrow Is Another Fund

Two legislative leaders on education issues are hoping to breathe new life into the moribund Texas Tomorrow Fund by reinventing it as something of a voucher program that also creates incentives for schools to limit tuition increases.

The outline for the Tomorrow Fund II is contained in two identical companion bills, SB 1900 by Sen. Florence Shapiro (Plano) and HB 3900 by Rep. Geanie Morrison (Victoria).

Instead of investment contracts locking in today’s tuition rates, the state would sell tuition units equivalent to a fraction of college costs. Each unit would be worth 1 percent of a year's tuition and fees at current prices. A hundred units would equal a year's worth of college attendance, regardless of future tuition increases.

Three types of units would be offered: one for tuition and fees at the state's most expensive public university (i.e., UT Austin), one for the average cost of tuition and fees at four-year schools, and one for the average costs at community and technical colleges.

Revenue from unit sales would be invested by fund managers. The returns on the investments, plus the proceeds from unit purchases, would be used to pay tuition and fees. Schools would keep the difference if students accumulated more than it cost to enroll. But schools would have to make up any difference if tuition and fees exceeded what students had available to spend.

Committing to fund this potential shortfall is seen as an indirect effect that could act to hold down tuition rates, part of which has been set by regents since 2003.

"That's not the intent, but it certainly is one of the ancillary outcomes," Shapiro said, according to the Austin American Statesman.

On the other hand, families either would get refunds or make up any difference if they bought community college units but enrolled their children in four-year schools. Units could be purchased over time but likely would increase in price, which is not set in either bill, though there would be a discount from current rates.

Texas Tomorrow Fund participants would retain their benefits in that plan, in which families paid one price for a weighted average of tuition and fees. Plan returns must cover tuition increases, one reason why it is operating at a deficit.

The program stopped taking new participants in 2003, and it is not expected to reopen soon. The comptroller has estimated it would take $69 million per year to make the program solvent.

Miscellany

 

All Politics Is Global

Today, senators debated whether the state’s two largest pension funds should withdraw investments in companies doing business in Sudan as they considered CSSB 247 by its chair, Sen. Rodney Ellis (Houston).

According to the Quorum Report, Ellis’s bill focuses on divestment from publicly traded companies that are the least willing to revoke their support for the Sudanese government. The Teacher Retirement System (TRS) and Employees Retirement System (ERS) would have 15 months to work with such companies before pursuing divestment.

The committee substitute does not apply to the UT System or the University of Texas Investment Management Company. The bill removes the duty of ERS to adopt a list of scrutinized companies that would apply to other entities, now limited to TRS, and shifts it to the comptroller.

The U.S. government has officially declared genocide to have occurred in Sudan, specifically in the Darfur region. On March 12, before an overflow audience, the committee heard dramatic testimony from one of the first American eyewitnesses to the violence that has killed about 450,000 people – including children – and displaced about 2.5 million others since 2004.

Seven states, including California, and 30 colleges and universities have ceased investing in companies doing business with the Sudanese government, according to Adam Sterling, director of the Sudan Divestment Task Force. Texas is one of 20 states considering following suit, QR reported.

Sudan-related investments comprise about $500 million, or between one-half and 1 percent of the Texas funds’ combined total value. Under Ellis' bill, the pension funds can seek alternative investments to replace the divestments or opt out entirely if unable to do so at similar rates of return. Sterling said that Sudan relies heavily on foreign investment, estimating that up to 80 percent of its oil revenues are spent on weapons used in Darfur.

The task force has identified 29 companies as the worst offenders, mostly Chinese, Malaysian and Indian oil companies but also the French oil consortium Schlumberger and Sudatel, the telephone company accused of deactivating cell phone towers near villages before militia attacks.

Former Marine Brian Steidle served as an observer to the peace treaty signed between the Sudanese government and the country’s southern tribes. While accompanying an African Union team monitoring the cease-fire, Steidle spent six months documenting atrocities and interviewing militia members. He said militiamen told him that they were being supplied and trained by the Sudanese government and held no remorse for their victims.

Steidle was in Austin for the screening of a film based on his experiences in the Sudan and featuring his photographs from Darfur.

The Senate passed Ellis’s bill 29-0 (with two absent). The identical companion, HB 667 by Van Arsdale, awaits a hearing before the House Pensions and Investments Committee. QR quoted Rep. Lon Burnam (Fort Worth) that more than half the panel is committed to a divestment bill.

View archived hearing videotape (beg. 31:10)

 

 

Technical Correction

The State Auditor's Office (SAO) issued a new report March 12 on managed health care funding in the state’s prison system, Gallery Watch reported.

Auditors concluded that the Correctional Managed Health Care Committee's projected deficit for fiscal year 2006, as reported by the UT Medical Branch (UTMB) and the Texas Tech University Health Sciences Center (TTUHSC), did not accurately reflect actual costs of care for FY 06.

The committee initially projected an $8.3 million deficit for FY 06, subsequently revising it to $2.8 million. Based on tests of expenditures, the auditors estimated that the deficit actually was $1.1 million. This figure was derived from UTMB's $859,381 surplus and TTUHSC’s $2 million deficit, according to GW.

The difference between the reported deficit amount and the deficit amount that auditors calculated was attributable to adjustments auditors identified in UTMB’s expenditures for direct hospital costs, capital expenses, moving and relocation, and allowances for torts and other judgments. UTMB generally agreed with the recommendations but disagreed with the SAO’s adjustments for $311,220 in allowances for torts and other judgments and $36,615 in moving and relocation expenditures.

Read the full report

 

…This Is Now

 

If It’s Monday, It’s Higher Ed

At least three committees considered bills on Monday (March 19) affecting higher ed and/or the UT System. Notable among them:

House Higher Education
• Night courses – HB 120 (F. Brown) applies only to UT Austin, Texas A&M University, and Texas Tech University and provides formula funding incentives to offer classes during off-peak hours. It authorizes the setting of resident and non-resident tuition rates lower than the otherwise applicable rates for course offerings on evenings, weekends, or at other under-utilized times. The purposes are to ensure that student course demand is met, to encourage efficient use of existing instructional facilities, and to reduce the need for new ones. Current formulas include funding to cover institutions' revenue loss resulting from tuition rate reductions for off-peak-hour courses. The Texas Higher Education Coordinating Board (THECB) also may include additional funding representing a portion of the savings to the state resulting from schools’ efficient use of resources.

• Tuition revenue bonds (TRBs)
New spending – HB 1173 (Coleman) authorizes issuance of TRBs for Texas Southern University: $29.5 million for the School of Science and Technology and $17 million for deferred maintenance debt. HB 1775 (Christian) authorizes $13 million in TRBs for nursing facilities at Stephen F. Austin State University.

New criteria – HB 1668 (Aycock) changes the relevant enrollment threshold for bond issuance for Texas A&M – Central Texas System Center in Killeen from 1,500 at that campus to 1,000 full-time student equivalents at Tarleton State University System Center – Central Texas in Killeen.

Read hearing agenda ll Watch hearing video

 

Senate Higher Education Subcommittee
• Assault leave – SB 51 (Zaffirini) would entitle employees of junior colleges and institutions of higher education (except medical and dental units) who are physically assaulted while performing their official duties to take paid "assault leave" to recuperate from injuries. This leave would be in addition to other paid leaves and could not be deducted from any accrued time for other types of leave. Because the regular pay rate would be reduced by any workers' compensation received, the fiscal impact is expected to be minimal.

• Academic advising – SB 1053 (Zaffirini) requires the THECB to devise an assessment of academic advising to be performed at each college campus.

• UT El Paso student rec fee – As of fall 2007, SB 963 (Shapleigh) would raise the $12 cap on UTEP’s recreational facility fee to not more than $70 for a term or semester of at least 10 weeks, or $50 for any other term or semester. However, for a term or semester prior to fall 2009, the fee could not exceed $20 for a semester or summer session. Increases would require approval in a student referendum.

Other bills dealt with academic freedom, projected faculty needs, and international joint degree programs

Read hearing agenda ll Watch hearing video

Senate Government Organization Committee

 

• Green building – SB 445 (Hinojosa, West) would require all newly constructed state facilities, including those at institutions of higher education, that are financed to any extent by revenue bonds to meet the "silver standard" of the U.S. Green Building Council, under the Leadership in Energy and Environmental Design (LEED) rating system, or achieve a "two-globe rating" under the Green Globes USA environmental assessment and rating system. This requirement would affect about 80 percent of System projects.

SB 899 (Ellis) requires facilities at institutions of higher education to be designed and constructed so they meet the council’s "silver standard" under the LEED rating system. The bill also requires the THECB to adopt rules to administer the section, including identifying buildings that can be deemed exempt. The bill also mandates that the THECB monitor compliance and any operating savings from the requirements until 2016, and report the findings to the legislature and the governor biennially. The Texas Building and Procurement Commission would have to establish a committee to recommend changes to the design and construction specifications required by the bill before September 1, 2009. The state auditor would be required to report on implementation and its effects to the Legislature by January 15, 2011.

Both bills would impact project costs and could increase the total project costs (due to design fee increases and construction cost increases) by 4-8 percent. As current knowledge of this process grows, however, the project costs for this feature should decrease as it becomes more commonplace, and operational and utility costs savings should accrue.

Read hearing agenda ll Watch hearing video

Session Snapshot

 

Week	11
Days Remaining	70
Bills/Joint Resolutions Filed*	6,097
Bills/Joint Resolutions Passed**
>House	52
>Senate	78
Bills Enacted*	2
Legislation Tracked	1,842
High Priority Bills	468

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

The bill filing deadline was March 9, the 60th day of the session. The giant sucking sound you’ve been hearing is the force of the 831 bills (including nine concurrent resolutions) filed on that good Friday pushing the air out of the Capitol dome. To file a bill now requires a four-fifths vote of the members present in either house. Legislative deadlines and other important dates may be found at Key Legislative Dates.

House Committees’ permanent meeting schedules

Senate Committees’ permanent meeting schedules

 

Duly Noted

 

On March 12, the House Higher Education Committee heard four textbook-related bills, primarily HB 956 by Hochberg (see “A Textbook Case” above). In complimenting a witness on his written testimony and supporting material, Rep. Fred Brown (Bryan) remarked, “You’re smoother than a gravy sandwich.”