Bill Caption

Relating to the creation of a campus of the Texas State Technical College System in Ellis County.  

Fiscal Notes

Fiscal Note (March 28, 2015)

Estimated 2 year Net Impact to General Revenue Related Funds is a negative impact of $6,714,696 through the biennium ending August 31, 2017.

Based on information provided by the TSTCs, the analysis estimates that General Revenue funding for special items, formula funding, and tuition revenue bond debt service would be required to implement the provisions of the bill in the amounts of $3.4 million annually from fiscal years 2016 through 2020. According to TSTC System, no additional full-time equivalent positions would be needed moving from an extension center to a campus.

It is assumed that the TSTCs would be appropriated a special item for transition funding of $2.3 million in General Revenue in fiscal year 2016, $2.3 million in 2017, $1.8 million in fiscal year 2018 and $1.8 million in fiscal year 2019, and $1.8 million in fiscal year 2020.

It is assumed that there would be a cost to General Revenue from an estimated increase in formula funding for the TSTCs due to the extension center becoming a campus. This estimate assumes the new campus would begin generating formula funding from the General Academic Institutions, Lamar State Colleges, and Texas State Technical Colleges Infrastructure Formula beginning in the 2018-19 biennium, estimated to be $400,985 per year in General Revenue in fiscal years 2018 and 2019, and $488,156 in fiscal year 2020. This estimate assumes current returned-value formula funding methodology for the TSTC Instruction and Operations formula. The TSTC extension center in Ellis County began serving students in fiscal year 2014. Accordingly, this estimate assumes the new campus would not generate Instruction and Operations formula funding until the 2022-23 biennium, as students complete courses at the new campus and then generate five years worth of post TSTC wage history for the returned-value model.

Based on information provided by TSTCs, it is assumed that the the campus would require a tuition revenue bond of $13.8 million to be authorized by the Legislature. It is assumed that tuition revenue bond debt service would be appropriated to the institution beginning in fiscal year 2016. Based on information provided by the TSTCs, it is estimated that the annual debt service would be $1,107,348 beginning in fiscal year 2016.

Based on information provided by TSTCs, it is assumed that there will be an increase in statutory tuition, General Revenue-Dedicated Fund 770, in the amount of $500,680 in fiscal year 2016, $789,962 in fiscal year 2017, and $1,068,118 in fiscal years 2018 through 2020.

Based on information provided by the TSTCs, it is assumed that there will be an increase in institutional funds (designated tuition and fees) in the amount of $275,903 in fiscal year 2016, $430,536 in fiscal year 2017, and $578,260 in fiscal years 2018 through 2020.

It is assumed that any increases in statutory tuition, General Revenue-Dedicated Fund 770, and institutional funds would be offset by the expenditure of these funds on other institutional operations associated with the establishment of the campus.

No significant fiscal implication to local government.

Bill Analysis

SB 420 would amend the Education Code to change the Texas State Technical College System (TSTCS) extension located in Red Oak in Ellis County to a campus. The new designation would open the door to significant new funding as described in the fiscal note above.

Vote Recommendation Notes

05/08/2015 We remain neutral on this bill in the second chamber. Second chamber sponsor is Senator Birdwell.

The future of higher education is uncertain due in large part to the overwhelming cost and the extraordinary debt that many students must pay after leaving college. The economic impact of student debt is felt in every sector of the economy as money that could otherwise be spent on buying a first house, traveling, or providing for daily family needs is instead dedicated to repayment of loans for degrees that may have less market value than the cost to repay them. This has left many students wondering if the traditional model of a four year university degree, even at a more reasonably priced state school, is right for them.

Due to these factors there is a resurgence of interest by many students in going to technical and trade schools where they can learn highly marketable skills and receive valuable certifications. The return on value of these types of schools is, in many cases, much greater than that of a four-year degree.

As more students look at alternative higher education options, institutions such as TSTC will continue to grow to meet the demand from both students and employers. In our modern economy, alternative options such as trade and technical schools will continue to garner a growing share of the higher education market.

While we would prefer that the demand generally be met by the private sector, we also acknowledge the reality that TSTC is an existing and growing institution that serves its students well and provides exactly the kind of alternatives that many students are looking for. Broadly speaking, we support the direction that institutions such as TSTC are taking higher education.

Still, we are concerned about the costs associated with designating the extension in Red Oak as a campus. This designation would allow the issuance of tuition revenue bonds to fund the campus which would in turn likely lead to appropriations to pay the debt service on the bonds. While we support the alternative education concepts as outlined above, we remain concerned about the growing problem of revenue bond debt across Texas.

Balancing our support for moving higher education in a direction that affords students greater opportunity to take responsibility for their educational and economic futures against our concern about the growing cost of bond debt in our state, we are neutral on this legislation.