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March 23, 2006     (512) 463-0300

SUBCOMMITTEE CONSIDERS TUITION REVENUE BONDS                     

The Subcommittee on Capital Funding for Higher Education met today to hear testimony on tuition revenue bonds (TRB), which are the primary means for funding capital improvements on state university campuses. First authorized by the Legislature in 1971, TRBs are bonds secured by tuition, fees, and almost any kind of revenue earned by a university. These bonds can be used for campus construction, repair and renovation of facilities, but cannot be used for housing, food service or athletics. There is some degree of controversy surrounding the issuance of TRBs by the Legislature, as not every issuance requested by a school is granted. Subcommittee Chair Judith Zaffirini of Laredo said at the beginning of today's meeting that she hopes the subcommittee can clear up some of this controversy.

The Legislature issued about $267 million in TRB debt service for the '06-'07 biennium, out of more than $4 billion requested. Seventy-six percent of these funds are slated for facility expansion, with 22 percent earmarked for renovation and repair of existing structures. These bonds are intended to go to schools that have high enrollment increases, but lack sufficient funds for new facilities. Debt service on the bonds is customarily paid for by the Legislature out of general revenue, though the state is not required by law to do so.

Some of the subcommittee members put forward their own ideas for improving the methods that the Legislature uses to determine who can issue bonds. Senator Kyle Janek of Galveston expressed concern over what he calls a "feeding frenzy" whenever a TRB bill comes to the floor. Legislators will often maneuver for more funds for institutions that are in their district. Janek wants the Higher Education Coordinating Board to generate a priority list of TRB requests, and recommend that the Legislature fully fund all the requests as far down the list as funding allows.

Senator Steve Ogden proposed a plan he referred to as "university co-pay", where universities would have to defray some of the cost of a capital funding project with the school's own discretionary budget. He hopes this idea will cause schools to use better judgement in deciding which projects to pursue.

Session video and all other webcast recordings can be accessed from the Senate website's audio and video archive pages.

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