By: Huffman S.B. No. 19
(In the Senate - Filed March 10, 2023; March 13, 2023, read
first time and referred to Committee on Finance; April 4, 2023,
reported adversely, with favorable Committee Substitute by the
following vote: Yeas 17, Nays 0; April 4, 2023, sent to printer.)
Click here to see the committee vote
COMMITTEE SUBSTITUTE FOR S.B. No. 19 By: Nichols
A BILL TO BE ENTITLED
AN ACT
relating to the administration and investment of, and distribution
and use of money from, certain constitutional and statutory funds
to support general academic teaching institutions in achieving
national prominence as major research universities and driving the
state economy; redesignating the national research university fund
as the Texas University Fund.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 51.406(c), Education Code, is amended to
read as follows:
(c) A rule or policy of a state agency, including the Texas
Higher Education Coordinating Board, in effect on June 1, 2011,
that requires reporting by a university system or an institution of
higher education has no effect on or after September 1, 2013, unless
the rule or policy is affirmatively and formally readopted before
that date by formal administrative rule published in the Texas
Register and adopted in compliance with Chapter 2001, Government
Code. This subsection does not apply to:
(1) a rule or policy for which the authorizing statute
is listed in Subsection (b);
(2) a rule or policy for which the authorizing statute
is repealed on or before September 1, 2013, by legislation enacted
by the legislature that becomes law; or
(3) a report required under any of the following
provisions:
(A) Article 59.06(g)(1), Code of Criminal
Procedure;
(B) Section 51.005;
(C) Section 51.0051;
(D) Subchapter F-1 of this chapter;
(E) Section 51.402;
(F) Section 56.039;
(G) Section 61.059;
(H) [Section 62.095(b);
[(I)] Section 62.098;
(I) [(J)] Section 411.187(b), Government Code;
(J) [(K)] Subchapter C, Chapter 606, Government
Code;
(K) [(L)] Subchapter E, Chapter 815, Government
Code; or
(L) [(M)] Chapter 1551, Insurance Code.
SECTION 2. Section 62.092(2), Education Code, is amended to
read as follows:
(2) "Eligible institution" means a general academic
teaching institution as defined by Section 61.003, other than:
(A) The University of Texas at Austin or Texas
A&M University; or
(B) an institution of higher education described
by Section 62.132(2) or 62.145.
SECTION 3. Section 62.095, Education Code, is amended to
read as follows:
Sec. 62.095. APPROPRIATION OF FUND TO ELIGIBLE
INSTITUTIONS. [(a)] In each state fiscal year, amounts shall be
appropriated to eligible institutions in the same manner that
research performance funding is appropriated to institutions
eligible to receive funding from the Texas University Fund under
Section 62.1482(a) [based on the average amount of restricted
research funds expended by each institution per year for the three
preceding state fiscal years].
[(b) For purposes of Subsection (a), the amount of
restricted research funds expended by an institution in a fiscal
year is the amount of those funds as reported to the coordinating
board by the institution for that fiscal year, subject to any
adjustment by the coordinating board in accordance with the
standards and accounting methods the coordinating board prescribes
under Section 62.096.]
SECTION 4. The heading to Subchapter F-1, Chapter 62,
Education Code, is amended to read as follows:
SUBCHAPTER F-1. NATIONAL [CORE] RESEARCH SUPPORT FUND
SECTION 5. Section 62.131, Education Code, is amended to
read as follows:
Sec. 62.131. PURPOSE. The national [core] research support
fund is established to provide funding to promote increased
research capacity at certain institutions of higher education
eligible to participate in the available university fund [emerging
research universities].
SECTION 6. Section 62.132, Education Code, is amended by
amending Subdivisions (2) and (3) and adding Subdivision (4) to
read as follows:
(2) "Eligible institution" means a general academic
teaching [an] institution [of higher education] that:
(A) is entitled to participate in the funding
provided by Section 18, Article VII, Texas Constitution;
(B) spent on average at least $20 million in
federal and private research funds per state fiscal year during the
preceding three state fiscal years; and
(C) awarded on average at least 45 research
doctoral degrees per academic year during the preceding three
academic years [is designated as an emerging research university
under the coordinating board's accountability system].
(3) "Fund" means the national [core] research support
fund.
(4) "General academic teaching institution" has the
meaning assigned by Section 61.003.
SECTION 7. Section 62.133, Education Code, is amended to
read as follows:
Sec. 62.133. FUNDING. The national [core] research support
fund consists of money appropriated by the legislature to eligible
institutions for the purposes of this subchapter.
SECTION 8. Section 62.134, Education Code, is amended to
read as follows:
Sec. 62.134. APPROPRIATION OF FUND TO ELIGIBLE
INSTITUTIONS. In each state fiscal year, amounts shall be
appropriated to eligible institutions in the same manner that
research performance funding is appropriated to institutions
eligible to receive funding from the Texas University Fund under
Section 62.1482 [as follows:
[(1) 50 percent based on the average amount of
restricted research funds expended by each institution per year for
the three preceding state fiscal years, determined in the manner
described by Section 62.095(b); and
[(2) 50 percent based on the average amount of total
research funds expended by each institution per year for the three
preceding state fiscal years, determined in the manner described by
Section 62.053(b)].
SECTION 9. The heading to Subchapter G, Chapter 62,
Education Code, is amended to read as follows:
SUBCHAPTER G. TEXAS [NATIONAL RESEARCH] UNIVERSITY FUND
SECTION 10. Section 62.141, Education Code, is amended to
read as follows:
Sec. 62.141. PURPOSE. The purpose of this subchapter is to
allocate appropriations from the Texas University Fund [national
research university fund] to provide a dedicated, independent, and
equitable source of funding to enable certain general academic
teaching institutions [emerging research universities in this
state] to achieve national prominence as major research
universities and drive the state economy.
SECTION 11. Subchapter G, Chapter 62, Education Code, is
amended by adding Section 62.1415 to read as follows:
Sec. 62.1415. REFERENCES TO TEXAS UNIVERSITY FUND. (a) In
this subchapter, a reference to the Texas University Fund means the
national research university fund.
(b) In other law, the national research university fund may
be referred to as the Texas University Fund.
SECTION 12. Section 62.142, Education Code, is amended by
amending Subdivision (3) and adding Subdivision (5) to read as
follows:
(3) "Fund" means the Texas University Fund [national
research university fund].
(5) "Trust company" means the Texas Treasury
Safekeeping Trust Company.
SECTION 13. Section 62.143, Education Code, is amended to
read as follows:
Sec. 62.143. ADMINISTRATION AND INVESTMENT OF FUND. (a)
The Texas University Fund [national research university fund] is a
fund outside the state treasury held by [in the custody of] the
comptroller and administered by the trust company.
(b) The trust company [comptroller] shall administer and
invest the fund in accordance with Section 20, Article VII, Texas
Constitution.
(c) The trust company shall determine the amount available
for distribution from the fund in accordance with a distribution
policy adopted by the comptroller that is designed to:
(1) preserve the purchasing power of the fund's assets
over a rolling 10-year period, subject to the liquidity needs of the
fund; and
(2) provide a stable and predictable stream of annual
distributions.
SECTION 14. Section 62.144, Education Code, is amended to
read as follows:
Sec. 62.144. FUNDING. (a) The fund consists of:
(1) money [any amounts] appropriated or transferred to
the credit of the fund;
(2) gifts and grants contributed to the fund; and
(3) the interest and other earnings attributable to
the investment of money in the fund [under the Texas Constitution or
otherwise appropriated or transferred to the credit of the fund
under this section or another law].
(b) [The comptroller shall deposit to the credit of the fund
all interest, dividends, and other income earned from investment of
the fund.
[(c)] The comptroller may solicit and accept gifts or grants
from any public or private source for the fund.
SECTION 15. Section 62.145, Education Code, is amended to
read as follows:
Sec. 62.145. ELIGIBILITY TO RECEIVE DISTRIBUTIONS FROM
FUND. (a) The following general academic teaching institutions
are eligible to receive distributions under this subchapter for
each state fiscal year:
(1) Texas State University;
(2) Texas Tech University;
(3) the University of Houston; and
(4) the University of North Texas.
(b) A general academic teaching institution not listed in
Subsection (a) becomes eligible to receive an initial distribution
of money appropriated under this subchapter for a state fiscal year
if:
(1) the institution:
(A) is not entitled to participate in the funding
provided by Section 18, Article VII, Texas Constitution;
(B) spent on average at least $20 million in
federal and private research funds per state fiscal year during the
preceding three state fiscal years; and
(C) awarded on average at least 45 research
doctoral degrees per academic year during the preceding three
academic years; and
(2) the legislature appropriates money to the fund in
an amount sufficient to ensure that, for the first state fiscal year
for which the institution would receive the distribution, the
market value of each other eligible institution's share of the
distribution of money under this subchapter for that fiscal year is
at least the same as the market value of that share for the state
fiscal year immediately preceding the state fiscal year in which
the additional institution becomes eligible for a distribution
under this subsection [is designated as an emerging research
university under the coordinating board's accountability system;
[(2) in each of the two state fiscal years preceding
the state fiscal year for which the appropriation is made, the
institution expended at least $45 million in restricted research
funds; and
[(3) the institution satisfies at least four of the
following criteria:
[(A) the value of the institution's endowment
funds is at least $400 million in each of the two state fiscal years
preceding the state fiscal year for which the appropriation is
made;
[(B) the institution awarded at least 200 doctor
of philosophy degrees during each of the two academic years
preceding the state fiscal year for which the appropriation is
made;
[(C) the entering freshman class of the
institution for each of those two academic years demonstrated high
academic achievement, as determined according to standards
prescribed by the coordinating board by rule, giving consideration
to the future educational needs of the state as articulated in the
coordinating board's "Closing the Gaps" report;
[(D) the institution is designated as a member of
the Association of Research Libraries or has a Phi Beta Kappa
chapter or has received an equivalent recognition of research
capabilities and scholarly attainment as determined according to
standards prescribed by the coordinating board by rule;
[(E) the faculty of the institution for each of
those two academic years was of high quality, as determined
according to coordinating board standards based on the professional
achievement and recognition of the institution's faculty,
including the election of faculty members to national academies;
and
[(F) for each of those two academic years, the
institution has demonstrated a commitment to high-quality graduate
education, as determined according to standards prescribed by the
coordinating board by rule, including standards relating to the
number of graduate-level programs at the institution, the
institution's admission standards for graduate programs, and the
level of institutional support for graduate students].
(c) [(b)] A general academic teaching institution that
becomes eligible to receive a distribution of money under this
subchapter remains eligible to receive a distribution in each
subsequent state fiscal year.
SECTION 16. Sections 62.148(a), (b), and (c), Education
Code, are amended to read as follows:
(a) In each state fiscal year, the comptroller shall
distribute to eligible institutions in accordance with this
subchapter [section] money appropriated from the fund for that
fiscal year.
(b) The total amount appropriated from the fund for any
state fiscal year may not exceed an amount equal to 7.0 [4.5]
percent of the average net market value of the investment assets of
the fund, as determined by the comptroller, for a period set by
comptroller rule [the 12 consecutive state fiscal quarters ending
with the last quarter of the preceding state fiscal year, as
determined by the comptroller].
(c) The [Subject to Subsection (e), of the total] amount
appropriated from the fund for distribution in a state fiscal year
must be allocated as follows:
(1) 75 percent to the permanent endowment for
education and research base funding under Section 62.1481; and
(2) 25 percent to the research performance funding
under Section 62.1482[, each eligible institution is entitled to a
distribution in an amount equal to the sum of:
[(1) one-seventh of the total amount appropriated; and
[(2) an equal share of any amount remaining after
distributions are calculated under Subdivision (1), not to exceed
an amount equal to one-fourth of that remaining amount].
SECTION 17. Subchapter G, Chapter 62, Education Code, is
amended by adding Sections 62.1481 and 62.1482 to read as follows:
Sec. 62.1481. PERMANENT ENDOWMENT FOR EDUCATION AND
RESEARCH BASE FUNDING. (a) For each state fiscal year, an eligible
institution is entitled to a distribution of a portion of the total
amount allocated for the permanent endowment for education and
research base funding under Section 62.148(c)(1) for that fiscal
year. The portion to which an eligible institution is entitled is a
fraction computed as follows:
(1) subject to Subsection (b), for an institution that
spent at least $45 million in federal and private research funds in
each of the preceding two state fiscal years, an amount computed by
dividing two by the sum of:
(A) the number of institutions entitled to
receive a distribution under this subdivision multiplied by two;
and
(B) the number of institutions to which
Subdivision (2) applies; or
(2) for an institution not described by Subdivision
(1), half the amount to which an institution to which Subdivision
(1) applies is entitled.
(b) An eligible institution is entitled to receive a
distribution under Subsection (a)(1) only if:
(1) in each of the state fiscal years beginning
September 1, 2020, and September 1, 2021, the institution spent at
least the amount in federal and private research funds described by
that subdivision; or
(2) the legislature appropriates money to the fund in
an amount sufficient to ensure that, for the first state fiscal year
for which the institution would receive a distribution under that
subdivision, the market value of each other eligible institution's
share of the distribution under that subdivision for that fiscal
year is at least the same as the market value of that share for the
state fiscal year immediately preceding the state fiscal year in
which the institution becomes eligible for a distribution under
that subdivision.
(c) An eligible institution that becomes eligible to
receive a distribution under Subsection (a)(1) remains eligible to
receive a distribution under that subdivision in each subsequent
state fiscal year.
Sec. 62.1482. RESEARCH PERFORMANCE FUNDING. (a) From 85
percent of the amount allocated for research performance funding
under Section 62.148(c)(2) for a state fiscal year, an eligible
institution is entitled to a distribution for that fiscal year in an
amount proportionate to the average amount of federal and private
research funds the institution spends per state fiscal year during
the preceding three state fiscal years as compared to the average
amount of those funds all eligible institutions spend per state
fiscal year during that period.
(b) From 15 percent of the amount allocated for research
performance funding under Section 62.148(c)(2) for a state fiscal
year, an eligible institution is entitled to a distribution for
that fiscal year in an amount proportionate to the average number of
research doctoral degrees the institution awards per academic year
during the preceding three academic years as compared to the
average number of those degrees all eligible institutions award per
academic year during that period.
(c) The coordinating board by rule shall establish a method
for determining the amounts to which each eligible institution is
entitled under this section.
SECTION 18. Sections 62.149(a) and (b), Education Code, are
amended to read as follows:
(a) An eligible institution may use money received under
this subchapter only for the support and maintenance of educational
and general activities that promote increased research capacity at
the institution in a manner that aligns with the goals of the
state's master plan for higher education developed under Section
61.051.
(b) For purposes of Subsection (a), the use of money shall
be limited to the following permitted activities:
(1) providing faculty support and paying faculty
salaries;
(2) purchasing equipment or library materials;
(3) paying graduate stipends; [and]
(4) supporting research performed at the institution,
including undergraduate research;
(5) increasing technology transfer,
commercialization, and patent development; and
(6) increasing the number of research doctoral
graduates in this state.
SECTION 19. Subchapter G, Chapter 62, Education Code, is
amended by adding Sections 62.150, 62.151, and 62.152 to read as
follows:
Sec. 62.150. INSTITUTIONAL ENDOWMENT REPORTING. (a) In
this section, "institutional endowment fund" means a fund
established to support a general academic teaching institution's
mission in perpetuity.
(b) For purposes of reporting the amount of an institution's
institutional endowment funds, each eligible institution may
include as a true endowment, in accordance with coordinating board
rule, the institution's share of the market value of the fund
corresponding to the share of the permanent endowment for education
and research base funding to which the institution is entitled for a
state fiscal year as provided by Section 62.1481.
Sec. 62.151. DETERMINATION AND REPORT OF AMOUNT OF
DISTRIBUTIONS. For each state fiscal biennium, the Legislative
Budget Board, in consultation with the coordinating board, shall:
(1) determine the amount of each distribution from the
fund to which each eligible institution is entitled as provided by
this subchapter; and
(2) report the determinations made under Subdivision
(1) to the legislature and the comptroller.
Sec. 62.152. RULES. The coordinating board may adopt rules
as necessary to implement this subchapter.
SECTION 20. The following provisions of Chapter 62,
Education Code, are repealed:
(1) Sections 62.096(a), (b), and (e);
(2) Section 62.135(b);
(3) Section 62.142(2);
(4) Sections 62.146 and 62.147; and
(5) Sections 62.148(d), (e), and (f).
SECTION 21. This Act takes effect September 1, 2023.
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