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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.
The future of higher education is
uncertain due in large part to the overwhelming cost and the extraordinary debt
that many students leave school with. 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.