Overview of the 79th Regular Session »

One of the oft-repeated platitudes in the Capitol is “each session has its own personality.” Perhaps that is because the issues of priority to the electorate change, and because each new session welcomes another class of freshly elected members with their new personalities and pledges to take the place of the departing ones. And so it was that the context and personality of the Regular Session of the 79th Legislature were primarily defined around the twin issues of public education reform and property tax relief/shift. And since both of these are by definition “district defined” issues, Members found little room to maneuver. Just as the $10 billion funding shortfall dominated the 78th Legislative Session, these two themes framed the policy, appropriative, and political considerations of the 79th Legislative Session…and both remain unresolved at this writing.

Appropriations Overview

Another Capitol cliché goes “every session is 90% about the budget…and the other 10% is poetry,” and though clearly that is an exaggeration, it still serves to indicate how important this bill is. Therefore, the first subject addressed in this overview section will be the budget bill, first as related to higher education in general, and secondly with special reference to the institutions and agencies of The Texas A&M System. A more detailed analysis of the appropriations bill, including data, may be found within the body of this report.

While the demands of all sessions are severe enough, the appropriations process brings its own acute level of intensity, first because of the tight request-response cycle and multiple opportunities for miscommunication under its highly compressed calendar, but more so because the stakes are so high—every institution’s well-being for the next two years rests heavily on its appropriations. The appropriations process begins several months after the end of a previous session, usually in the spring of the even numbered year when the state’s Big Three elected officers set the budget parameters, and the Legislative Budget Board (LBB) and Governor’s Office send out the Legislative Appropriations Request (LAR) instructions. And it ends only when the House and Senate finally pass the conference committee report and the Governor signs it; usually this process is concluded in June, but on occasion not until the end of a, or several, called sessions.
Leading in to the 79th Session, early projections of a small surplus for the 2006-07 biennium allowed some hope that the reductions of the 78th might be restored. However, when Governor Perry, Lt. Governor Dewhurst and Speaker Craddick set forth the parameters for the budget, they instructed all state agencies to limit their appropriation requests to not more than 95 percent of their then-current (i.e., 2004-05 biennial) spending level. Accordingly, when the 79th Session opened in January 2005, the “base bill” proposed by the LBB for the 2006-07 biennium reflected for almost all agencies the mandated 5 percent reduction to each institution’s 2004-05 funding (important exceptions: the A&M research and service agencies and higher education’s formula funding). However, the 5 percent reductions applied to all non-formula items, and additionally, the universities and health related institutions were told to cover increases in debt service for their already authorized and issued tuition revenue bonds (TRBs). The effect was a greater than 5 percent, an in many cases significantly greater, cut in funding for non-formula programs at the academic and health related institutions in order to cover TRB debt service requirements. In short, the Session opened with higher education well behind the funding curve.

Successes

By the end of the session, the funding picture for all higher education had changed, and for the better. In summary:

  • The legislature added $160 million for the universities and $58 million for the health related institutions in new General Revenue (GR) to cover statewide enrollment growth and strengthen the formula funding for all;
  • New GR funding of $94 million was added to cover debt service for outstanding TRBs, both principal and interest;
  • Increased funding of $141 in General Revenue was added to cover the health insurance premiums for higher education employees;
  • The full 5% reduction to non-formula items (including special items) was restored for the health-related institutions; and,
  • All but ½ of one percent of the five percent reduction was restored for the universities.

Especially important to the A&M System, its research and service agencies were spared the mandated 5 percent reductions faced by most state agencies and were largely included in the statewide employee pay raise.

In addition, the Legislature adopted two structural changes that put the funding formulas on sounder footing, and, for the most part, benefited A&M System academic institutions. The changes provided for: 1) a uniform and fairer method of calculating the state’s/institutions’ split of the cost of employee benefit costs; and 2) an empirical cost-study-based methodology for establishing relative formula funding rates among the academic disciplines.

Major appropriations actions related to A&M System institutions and agencies as a group include the following:

  • an 8 percent increase in funding for the A&M System universities, compared to an 8.9 percent increase for all public universities (note: since the enrollment of System universities grew less than that of all universities statewide, and formula funding is based on enrollment, our universities were treated equitably);
  • a 9.6 percent increase for the Health Science Center, compared to 9.2 percent for all health-related institutions;
  • a 5 percent reduction to the A&M System Office appropriation due to the mandatory LAR reduction; and,
  • in addition to restoring the 5% cuts, $5.6 million in new funding was appropriated to cover partially the maintenance and operation costs of our research and extension facilities located throughout the state.

With respect to actions taken in behalf of specific A&M System institutions, the legislature approved the following: another $20 million for the second installment of Texas A&M University's Faculty Reinvestment initiative; $3 million in carry-over funding for Prairie View A&M University's Office of Civil Rights (OCR) related programs; $0.5 million for the King Ranch Institute for Ranch Management at Texas A&M University -Kingsville; $1.7 million to the Texas Transportation Institute for an International Transportation Studies Center; and, $0.4 million to the Texas Engineering Experiment Station for the Energy Systems Laboratory. Two other key non-funding changes included expanding the OCR related priority program list to include the Undergraduate Medical Academy at Prairie View A&M, and assigning the Texas Higher Education Coordinating Board to study and make recommendations regarding extra funding for Texas A&M University at Galveston as a special purpose institution.

Separately and importantly, the legislature approved 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 action was taken to change or reduce health insurance benefits for A&M System employees, although this is sure to be an on-going concern.

Unfinished Business

As to disappointments, two items stand out: first, we were unsuccessful in earning legislative support for start-up and operating funding to open Texas A&M-Kingsville's new pharmacy school this fall; and secondly, the Legislature did not authorize capital construction funding, i.e., new tuition revenue bonds, for any institutions of higher education. For the A&M System, this means no bonds were authorized for the construction of new campuses in San Antonio, Central Texas and Texarkana, nor to fund numerous urgently needed capital projects among our existing institutions.

One other disappointment related to cleaning up a “loose end” of the decision made in the 78th Session regarding indirect cost recovery. Language was included in HB 2233, by Jim Keffer, that would have deleted “indirect cost recovery” as one of the elements of the statutorily defined “educational and general” fund group. This, along with the decision to no longer include indirect cost recovery in the bill pattern method of finance for the academic and health related institutions, would have completed the implementation of the policy decision made in the 78th Legislature to exclude indirect cost recovery as a method of financing the formulas. However, the conference committee report on HB 2233 was killed on a technicality at the end of the session.

In summary, the bottom line regarding appropriations is that the 79th Legislature treated the Texas A&M System and all of higher education well considering the major funding demands posed by public education and health and human services.

Overview of Other Issues

A number of major policy issues other than the budget were addressed by the 79th Legislature. However, two major issues, school finance and property tax relief, were so complex and highly charged that they remained unresolved, despite intense efforts on the part of the leadership and broad agreement as to the importance of resolving them. Nonetheless, the 79th did successfully address a number of major policy issues.

The purpose of this section of the report is to summarize some of these major issues, with special attention to those of importance to The Texas A&M University System. Since the programs and services of system members literally “cover Texas,” and beyond, the range of legislative issues that affect the A&M System is extensive. In addition, some issues that failed to be resolved this session will be noted because they remain as priorities.

Higher Education Issues

In addition to undivided attention to the appropriations bill, several higher education policy issues were addressed by the 79th Legislature. A brief overview of some of the key ones is provided below; further details relating to individual bills may be found within the body of this report.

Tuition Deregulation

Amid debate and notwithstanding some reservations, the 78th Legislature granted university and system boards of regents new authority to set tuition. However, some legislators, particularly in the Senate, continued to hold reservations regarding the implementation of that decision. The full Senate added an amendment to SB 1228 that would have returned tuition-setting authority to the Legislature in 2008. However, this bill was never scheduled for a hearing in the House. The Senate action was widely believed to have been intended to express its concern over the size of tuition increases authorized by a few of the boards.

Top 10

Following the 5th Circuit Court’s decision in the Hopwood case, the Texas Legislature in 1997 passed a bill that has been dubbed the “Top 10” law because it provides automatic admission to any public university in Texas to high school students who graduate in the top 10 percent of their class. Numerous proposals were made to relax its provisions in order to allow universities more flexibility in determining the composition of their prospective freshmen classes. Bills to amend the Top 10 law included HB 2330, by Representative Geanie Morrison, SB 320, by Senator Jeff Wentworth, and SB 333, by Senator Royce West. Notwithstanding intense efforts to resolve the differences, none of the bills passed. However, all indications are that this is likely to remain an issue for the 80th Legislative Session.

Tuition Revenue Bonds

Under the “alternating session” pattern that had informally become customary since 1991, the 79th Session was expected to be a tuition revenue bond (TRB) session. In keeping with that expectation, Texas institutions of higher education submitted their requests for new TRBs for capital improvement projects which amounted to $3.2 billion. By the end of the session, the projects that appeared to have gained some traction had been trimmed to about $1.1 billion. During the conference committee process, a miscommunication occurred between the co-chairs of the conference committee report on the legislation, and the bill was allowed to die.

Student Regents

Higher education student government organizations and their leaders had sought representation on university boards of regents for more than 30 years; they succeeded in the 79th Regular Session. Representative Patrick Rose was successful in getting the House to add virtually identical language to both SB 34, by Senator Judith Zaffirini, and SB 1227, by Senator Shapiro; the Senate concurred, thereby adding a student regent to each of the state’s 10 public university governing boards. The student regents will have no vote but can attend and participate in meetings of the board of regents. The Governor will make the appointments with the advice of the chancellors and student government groups.

Emerging Technology Fund

Cited as one of Governor Perry’s top priorities in his State of the State address, the Emerging Technology Fund proposed to help bring thousands of new high-tech jobs to Texas. HB 1765, authored by Representative Morrison and sponsored by Senator Shapiro, creates the $200 million Texas Emerging Technology Fund to promote economic and technological opportunities, and therefore position Texas to become more competitive at a national and global level. This fund is intended to increase research collaboration between the public and private sectors and to develop new Regional Centers of Innovation and Commercialization. The fund will also match federal and private sector research grants and attempt to attract leading researchers from outside the state to Texas institutions of higher education.

Public Education/Property Tax Reform

Because the Governor designated public education finance and reform as an emergency, lawmakers focused on revising the most controversial aspect of school finance, dubbed Robin Hood, from the onset of the session. The consensus was that public opinion compelled any education reform bill to include major restructuring and reduction of local property taxes. However, there was less agreement as to who would pay the taxes that would be required to replace the revenue associated with reducing property taxes and how much they would pay.

Under current law, higher property value districts are required to “share” their tax dollars with poorer districts, pursuant to a ruling of the Texas Supreme Court which mandated every Texan to have equal access to education despite disparity in the amount of taxable wealth per student among Texas’ 1000 plus school districts. A state district court ruling, on appeal to the Texas Supreme Court at this date, found that the existing property tax cap amounted to a state-wide property tax, and therefore was unconstitutional, and that current school spending was neither adequate nor equitable.

Determined to find a legislative solution to public school finance before the high court’s ruling, the leadership sought to create an education funding system fully compliant with the constitution. The goals, embraced in principle and in varying degrees by all, were to reduce local property tax rates by up to 33 percent, increase spending in exchange for improved effectiveness and accountability of public education, and expand pay and benefits to teachers…all the while restructuring revenue sources and keeping the total tax consequence “neutral.”

However, from the outset each chamber pursued a different path toward achieving these goals. The House preferred increased consumption taxes to replace the reduced property tax revenues while the Senate tended toward the concept of a statewide property tax, supplemented by a local tax increment for “Excellence.” Representative Kent Grusendorf and Senator Florence Shapiro, authors of the education reform bills in the House and Senate respectively, sought to implement new, but differing policies relating to funding formulas, standardized testing, teacher pay increases and resource allocations. The House version of both the tax restructuring and education reform bill was passed in mid-March; the Senate version was approved in early May. Time to adjournment itself became a major consideration, ratcheting up the pressure for reaching a solution as legislative process deadlines set in.

Further complicating the issue was that neither version of the proposed education reforms enjoyed the full support of the three major elements of the public education community – teachers, administrators and school boards. Similarly, none of the tax reform, i.e. “tax swap,” proposals was embraced by the major affected constituencies – business, consumers, and non-corporate business groups. Despite round-the-clock efforts late in the session seeking a compromise on the restructure of major facets of public education and the funding of property tax reform, the issues remained unresolved at the end of the regular session.

Lawsuit Reform

The two primary pieces of lawsuit reform legislation addressed during the 79th Legislature dealt with asbestos litigation and workers’ compensation reform. According to a frequently cited study by the Rand Institute, the cost of asbestos litigation has exceeded $70 billion nationally, with forty percent of all claims arising from Texas. SB 15, authored by Senator Janek, and sponsored by Representative Joe Nixon, narrowed substantially the requirements for filing asbestos and silica related lawsuits. Now, only claimants with serious illnesses caused by inhaling asbestos and silica are eligible to sue companies making products containing such materials, and doctors making such diagnoses must have an established relationship with the patient when examinations are conducted for litigation purposes. SB 15 also contains a provision expanding time-to-file suit limitations that will allow claimants who have been exposed to asbestos or silica, but are not yet sick, to file suit if becoming ill in the future. As enacted, SB 15 requires all cases to be filed individually and gives preference to hearings and trials where the claimant has been diagnosed with serious asbestos or silica related diseases.

Governor Perry called on legislators to relieve Texas employers from some of the highest workers’ compensation costs in the nation during his State of the State address. HB 7, by Representative Burt Solomons, and SB 5, by Senator Todd Staples, though considered competing and conflicting bills, both sought aggressive and comprehensive changes to the Texas workers’ compensation system. Toward the end of the session, an agreement was finally reached, and HB 7 was enacted as the compromise vehicle. HB 7 abolishes the Texas Workers’ Compensation Commission and transfers regulatory authority to a single, governor-appointed commissioner housed in the Texas Department of Insurance while creating the Office of Injured Employee Counsel to serve as an advocate for injured workers. The bill also creates physician networks similar to those in commercial health plans and provides a small increase in benefits paid to injured workers.

Transportation

The 78th Legislature passed major transportation legislation creating the “Trans-Texas Corridor,” a $184 billion plan to construct four-thousand plus miles of toll ways, railways and utility lines. HB 2702, by Representative Krusee, Chairman of the House Transportation committee, modified last session’s legislation by establishing stricter guidelines for toll roads while specifying no tax-funded highways may be converted to toll roads without voter approval. The bill also gives more rights to property owners affected by the construction of the Corridor. If a new toll road bisects a landowner’s property, the state must offer to buy any remaining land left with little or no value to the owner. Additionally, if construction of the corridor diminishes the value of property, the state must compensate the owner for the lost value. Current law only requires landowners participating in the project to be offered a lump sum payment or long-term royalties on the land.

Social Issues

The 79th Legislature addressed a number of polarizing social issues, including a proposed amendment to the Texas Constitution defining marriage, parental consent for certain abortions, and Adult and Child Protective Services reform. The 78th Legislature enacted the Defense of Marriage Act defining marriage as a relationship between one man and one woman. Thirty-nine other states have enacted similar legislation; however, since lawsuits have arisen challenging some Defense of Marriage Acts, some states have proposed to amend their constitution in order to provide “clarity.” HJR 6, by Representative Warren Chisum, proposed an amendment to the Texas Constitution defining marriage as the union of only one man and one woman, and prohibiting the recognition by the state, or any political subdivision of the state, of any legal status identical or similar to marriage. The resolution passed both houses and will go to the voters in November.

Another highly charged issue related to the requirement of parental consent for minors to obtain an abortion. Current law states that girls under the age of eighteen must notify their parents of their intent to have an abortion. HB 1212, by Representative Phil King, tightened the rules and made it more difficult for a court to grant permission for such an abortion without the parents’ knowledge. The bill was considered to be dead in the House until Representative Will Hartnett attached it as an amendment to the Sunset Bill extending the Texas Board of Medical Examiners, following which it was passed by both chambers. The amendment also included provisions to revoke a physician’s license if he or she performs a third-trimester abortion on a woman, unless the procedure is necessary to save the life of the mother or if carrying the fetus to term would cause severe mental damage or paralysis to the fetus.

After documented and widespread problems in the state’s Adult and Child Protective Services programs, Governor Perry declared reform of the programs an emergency at the outset of the session. In the House of Representatives, discussions of Child Protective Services reforms sparked hours of debate. Particularly heated controversy ensued when Representative Robert Talton proposed an amendment to the reform legislation that, if adopted, would have barred homosexuals from serving as foster parents and would have removed children who were currently living in homes with homosexual foster parents. The Senate’s companion bill, SB 6, by Senator Jane Nelson, did not include the most controversial provisions and was ultimately passed by both chambers. SB 6 makes system-wide changes to strengthen the effectiveness of the Department of Family and Protective Services by privatizing direct foster care services while retaining authority over safety-focused services. It also requires coordination between the Higher Education Coordinating Board, Texas Education Agency and the Department of Family and Protective Services to develop outreach programs for foster children and makes it a state felony to report false accusations of abuse with malicious intent.

Other Key Issues

During the 79th Regular Session of the Legislature several other major policy bills were filed, some of which passed and most of which did not. Examples of the higher profile bills include telecommunications reform, life without parole, and judicial pay raises.

One of the most far-reaching business issues addressed by lawmakers in the regular session was telecommunications reform. HB 3179 by Representative King, Chairman of House Regulated Industries Committee, would have made it easier for telephone companies such as SBC and Verizon to compete in offering cable television services. The bill would have allowed phone companies to obtain statewide cable franchises rather than city-by-city franchises as cable companies must. Currently cities must require cable companies to offer the same services to all homes, but HB 3179 would have allowed the phone companies to offer cable service only in areas they chose to serve-dubbed “cherry picking” by detractors. Ultimately, negotiations between the House and Senate stalled on the legislation, prompting its author to declare it dead for the session.

Spurred by the U.S. Supreme Court’s recent decision to ban the execution of convicts who committed their crimes before they turned eighteen, legislation offering juries the option to sentence convicts in capital murder cases to life without the possibility for parole was introduced again and this time easily passed the 79th Texas Legislature. SB 60, by Senator Eddie Lucio, removed the possibility of a convicted offender being granted parole after serving forty years of a life sentence for capital murder. Before passage of this bill, Texas was one of only two, among the 38 states that execute capital offenders, that does not allow jurors the sentencing option of life-without-parole.

One of the most public disagreements involved SB 368, the judicial pay raise bill authored by Senator Duncan, sponsored by Representative Keel. The bill would have increased state district court judges’ salaries up to $125,000 in an attempt to make judgeships more competitive with private sector jobs. Since existing state law ties lawmakers’ pensions to the salaries paid to state district judges, members were sharply divided on this matter. Critics objected to legislators’ boosting their own retirement pensions, and all the more so after failing to come up with a solution for public school finance which effectively denied a raise to public school teachers. However, Representative Keel, who authored his own version of the legislation, killed the bill on a technicality on the last day of the regular legislative session.

Vetoes

Once legislation passes both the House and the Senate, it is sent to the Governor; the governor then has the option to sign a bill, allow it to become law without his signature, or veto it. At the conclusion of the 79th Legislative Session, Governor Perry vetoed 19 pieces of legislation. However, the most significant veto occurred over public education finance. To encourage legislators to solve the education and property tax conundrum in the upcoming special session, the Governor vetoed the entire $33.6 billion public school funding section of the appropriations bill.