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June 25, 2008 (512) 463-0300

COMMITTEE CONSIDERS ORGANIZATION, FINANCE OF HIGHER EDUCATION

(AUSTIN) -- The Senate Finance Higher Education Subcommittee looked at the advantages and disadvantages of the system method of university organization. All but four of the state's 35 undergraduate universities are organized into one of seven systems, the two largest being the University of Texas and the Texas A&M University systems. Each system has one main "flagship" institution and several other campuses.

Mike McKinney, chancellor of the A&M system, testified that the system method gives a number of advantages to institutions of higher education. An outside audit of his system showed that economies of scale save the constituent institutions about $24 million per year. The systems also allows institutions to pool resources, offer advanced centralized services and better strategic planning, plus see an increase in bond rating and a decrease in bank services.

Baker Pattillo, president at Stephen F. Austin University in Nacogdoches, testified on behalf of the four independent state universities. He testified that the independent model works well for his university, and he would prefer it stayed by itself. Pattillo said the independent system offers his institution "the best of both worlds". While SFA still collaborates with other universities in the state and implements best-practices polices from other institutions, his university's independence offers more local control for administrators. It also allows regents to work closer with faculty and staff, and gives trustees a "hands-on" understanding of university operations.

The committee was also briefed on the current state of capital funding projects at universities. There are many sources of funds for high-cost university projects, from federal funds to special state-created funds, but recent legislation has permitted institutions to turn more and more to tuition revenue bonds, loans to universities secured by future tuition earnings. First issued in Texas in 1971, a bill passed in the Third Called Session in 2005 permitted the issuance of 63 bonds for a total of $1.86 billion, bringing the overall tuition revenue bonding capacity to just above $4 billion.

The Senate Finance Higher Education Subcommittee is chaired by Senator Judith Zaffirini, and consists of Senators Robert Duncan, Florence Shapiro, Royce West and Steve Ogden.

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

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