The Spotlight section focuses on a broad topic of interest to A&M System employees and retirees. This month, Dr. Stanton Calvert, vice chancellor for governmental relations, answers questions about the 79th session of the Texas Legislature. For more on the session, go to Texas Legislature Online.

If you’d like to see a specific topic addressed in Spotlight, please send us an e-mail from the About Systemwide section on the main page of the newsletter.

 

Stanton CalvertDr. Stanton Calvert, vice
chancellor for governmental relations

Systemwide:  When the legislative session started, higher education began with some mandated reductions to our formula, debt service and special item funding.  Was this resolved? Where do we stand now?

Calvert: Last summer, Governor Perry, Lt. Governor Dewhurst and Speaker Craddick sent a letter to all state agencies mandating that their appropriations requests not exceed 95 percent of this biennium’s spending level. So when the session opened in January, the budget proposed by the Legislature for the next two years, 2006-2007, was a 5 percent reduction to our current funding. In addition, the universities and health institutions were told that they had to pay for the increases in their tuition revenue bonds' (TRBs) debt service out of this reduced amount, which meant that they would have to make further program cuts to pay for the increases in debt service. TRB proceeds provide the funding for new buildings and other major capital needs of the universities and health related institutions. (The agriculture and engineering agencies are not elibible for TRBs.)

By the end of the session, the formula funding reductions were restored to our universities, new funding was included to cover enrollment growth, plus some enhancement funding was added to the formulas. The full amount required for the TRBs' debt service, principal and interest, was fully covered with new funding; and the non-formula items (including special items) were fully restored for the health-related institutions and all but .5 percent restored for the universities. Especially important to the A&M System, the mandated 5 percent reductions to our agencies were restored.

The bottom line story for A&M System institutions is that the 79th Legislature treated us, and all of higher education, very well, and we should be grateful.

"By the end of the session, the formula reductions were restored, plus new funding was added . . . "

What successes stand out in funding for our 10 universities?  In summary, how did our universities fare in funding compared to other state universities?  What about for our Health Science Center?

In addition to restoring the 5 percent reductions, the legislature added $160 million in new General Revenue (GR) to cover enrollment growth and strengthen the funding formulas for all the state's universities. The legislature also adopted two structural changes to the funding formulas that benefited A&M System universities: it adopted a more uniform method of calculating the state's share of the cost of employee benefit costs, and adopted a new cost-study-based formula.

Actions specific to A&M System institutions included approval of an additional $20 million for Texas A&M's faculty reinvestment program and $3 million in new carry-over funding for Prairie View A&M's Office of Civil Rights funding. The OCR funding was part of an agreement between the State of Texas and the U.S. Office of Civil Rights in response to an OCR and State study of Texas’ past support of Prairie View A&M University and Texas Southern University. A&M-Kingsville received $510,000 for the King Ranch Institute for Ranch Management. Two other key non-funding changes included making the Undergraduate Medical Academy at Prairie View A&M eligible for Office of Civil Rights funding, and assigning the Texas Higher Education Coordinating Board to study and make recommendations regarding the special purpose funding for Texas A&M at Galveston.

In summary, the legislature approved an 8 percent increase in funding for the 10 A&M System universities (Galveston is funded on its own), compared to an 8.9 percent increase for all 35 public universities. However, A&M System universities were treated just as well as other universities, considering that our universities grew less than the state as a whole, and that the formulas are based on enrollment.

Our Health Science Center received $10.2 million in new general revenue funds, or a 9.6 percent increase, compared to 9.2 percent for all health-related institutions. Of special note, new funding was provided for graduate medical education, and the A&M System Health Science Center Institute of Biosciences and Technology in Houston was funded on its own, something we had worked on for several years.

What were the most disappointing outcomes?

Two key issues stand out. First, the Legislature did not provide the start-up and operating funds for A&M-Kingsville's new pharmacy school. Second, it did not authorize new TRBs for any institutions of higher education. For us, this means no bonds are available to fund the construction of new campuses in San Antonio, Central Texas and Texarkana, or to fund numerous badly needed projects elsewhere.

What are some of the funding highlights for the System’s agricultural and engineering agencies?

First, it was hugely important to get the 5 percent mandated reduction restored.  Many other state agencies that are funded similarly did not have their reductions restored, and in some cases, were cut more than 5 percent. In addition, the legislature appropriated $5.6 million in new funding to partially cover maintenance and operation costs of our research and extension facilities throughout the state. This is the first time the legislature has directly funded these costs for these facilities. The Texas Transportation Institute was appropriated $1.7 million in new funding for an International Transportation Studies Center and the Texas Engineering Experiment Station received $400,000 in new funding for the Energy Systems Laboratory.

What changes were made in funding of employees' health insurance? How were the major changes made in retirement benefits?

The legislature provided a 10.6 percent increase in funding of the state's share of employees' group health insurance costs for the A&M System-managed Health Insurance Plan. Given the continuing rapid increase in health care costs, it is significant that no legislation was passed to change or reduce health insurance benefits for A&M System employees.

Three major changes were made to the Teacher Retirement System (TRS):

  • The basis for calculating retirement benefits was changed from the three highest salary years to the five highest, resulting in a lower retirement benefit for most future retirees.
  • The current subsidy for TRS employees who retire with 20 years of service but do not meet the Rule of 80 (i.e., age plus years of service equals 80) was eliminated.
  • An employee’s age plus years of service must equal 90 or more for the employee to be eligible to receive a partial lump-sum pension payment. The Legislature also eliminated the 90-day waiting period for benefits, but did not provide institutions of higher education the funding to cover the cost of benefits during this 90-day period.

The Legislature also made changes to Optional Retirement Program/Employees Retirement System of Texas service transfers and to the rules for retirees returning to work. The System Human Resources Office website or your HR Office will have more information.

Did the legislature fund pay raises for faculty and staff?

In general, the Legislature did not provide this funding for institutions of higher education. However, the key exception is that for our System's agriculture and engineering agencies, the Legislature funded the state's share of a 4 percent salary increase in 2006 and a 3 percent increase in 2007 for agency-only employees with an annual salary of less than $75,000. The funding also covers 100 percent of the salary increase for eligible county agents who earn less than $75,000, so the counties would not have an additional salary burden.

In addition, the Legislature authorized an increase in longevity pay (from $20 per month for every three years of service to $20 per month for every two years of service) and hazardous duty pay (from $7 to $10 per month for each year of service). However, it did not provide new funding to pay for these increases.

What were the major policy bills?

The key higher education policy bill was House Bill 3001(sponsored by Reps. Morrison and Duncan), which provides for the updated 10-year reauthorization of the Higher Education Fund (HEF) among the institutions that are not eligible to participate in the Permanent University Fund (PUF). Even more important, the bill allocates an additional $87.5 million to the current annual $175 million for HEF institutions. Six A&M System institutions are eligible for these allocations: Texas A&M International University, Texas A&M University-Commerce, Texas A&M University-Corpus Christi, Texas A&M University-Kingsville, Texas A&M University-Texarkana and West Texas A&M University,     

In addition, Senate Bills 34 and 1227 authorize the governor to appoint a student regent to the board of regents of each system or institution, effective February 2006. Students apply for the position through their student government. Each student government within the A&M System will submit its nomination to the chancellor, and the chancellor will submit the names of at least two students to the governor. The governor will then appoint one to serve as the student regent in a one-year term from Feb. 1 through Jan. 31.

Finally, Senate Bill 1226 authorizes the Texas Higher Education Coordinating Board and Legislative Budget Board to jointly conduct a study of the reporting requirements for institutions of higher education to determine if any reports are duplicative or unnecessary and to submit their findings and recommendations to the Legislature in November 2006.