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F I S C A L I M P A C T R E P O R T

SPONSOR Saavedra

ORIGINAL DATE

LAST UPDATED

02/04/07

HB 292

SHORT TITLE Faculty Endowment Fund Distributions

SB

ANALYST Williams

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY07

FY08

See Narrative

General Fund

See Narrative

Faculty Endowment

Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

REVENUE (dollars in thousands)

Estimated Revenue

Recurring

or Non-Rec

Fund

Affected

FY07

FY08

FY09

See Narrative

Faculty

Endowment

Fund

(Parenthesis ( ) Indicate Revenue Decreases)

Duplicates SB 260

Relates to SB 645

Relates to LFC budget recommendation of $25 million in non-recurring in FY07 to the faculty

endowment fund.

Relates to Executive budget recommendation of $12 million in nonrecurring in FY08 to the

faculty endowment fund

SOURCES OF INFORMATION

LFC Files

Responses Received From

Higher Education Department (HED)

House Bill 292 – Page

2

SUMMARY

Synopsis of Bill

House Bill 292 changes the nature and distribution of the faculty endowment program.

First, under the provisions of this bill, four-year public higher education institutions would be

able to utilize appropriations made to the faculty endowment fund. In contrast, under current

law, appropriations to the endowment fund must be kept as an endowment by the institution,

once certain management and private match criteria are met. These institutions must then invest

the funds and may utilize only interest earnings to support faculty chairs, professorships and

faculty endowment programs.

Second, the bill authorizes the Governor to identify priority areas of interest for recruitment and

retention of faculty at public, four-year institutions. The bill specifies the name of each type of

chair as follows:

o

Governor’s chair in ______

o

Governor’s professorship in _____

o

Governor’s distinguished faculty member in ______

Third, the bill requires private matching funds as follows:

o

At least $500.0 thousand for Governor’s chair

o

At least $125.0 thousand for Governor’s professorship

o

At least $50.0 thousand for Governor’s distinguished faculty member

FISCAL IMPLICATIONS

The bill does not contain an appropriation.

SIGNIFICANT ISSUES

Under current law, the three research institutions and the UNM School of Medicine are eligible

to participate in the endowed chair program, while six of the state’s universities are eligible to

participate in endowed professorships and endowed faculty development programs. Half of the

disbursements are to be for endowed chairs, 35 percent are designated for endowed

professorships and 15 percent are for endowed faculty development programs.

According to Volume II of the LFC budget recommendation: “The committee recommends

consideration of nonrecurring funding of up to $25 million for endowed chairs at the state’s four-

year and two-year postsecondary institutions. The endowed-chair funding achieves several

legislative objectives. The funding provides a mechanism for partnering with noninstitutional

funding organizations, attracting, retaining, and creating incentives for enhanced student

learning, scholarship, and research as well as supporting the multi-faceted missions of the state’s

institutions.

The surplus of nonrecurring general fund monies provides an opportunity to invest in this

initiative because the distributions from the endowment are used for operating purposes of the

endowed faculty positions.

House Bill 292 – Page

3

Expansion of the program to two-year institutions will require changes to 21-1-27.1 NMSA 1978

to reward enhanced student learning activities of faculty at those institutions."

According to the Executive Budget in Brief “Path to Progress, Expanding Opportunity", January

2007: the executive proposal is to “retain and attract high-caliber faculty to the State’s higher

education institutions by creating endowed chairs, particularly in specialized, high-need fields.

Institutions must provide matching funds from private sources, which helps engage the private

sector and alumni."

OTHER SUBSTANTIVE ISSUES

In determining prior-year institutional draw downs from the faculty endowment fund, the HED

has required the university to provide a letter signed by the chair of the board of regents, the

president, and the chief financial officer declaring:

1)

that an endowment account has been established for receipt both of the monies from

the Fund and the non-governmental matching monies;

2)

which kind of endowment is being established (i.e., a chair, professorship, or faculty

development program);

3)

administration of the Fund meets the requirements of Section 21-1-38 NMSA 1978;

and

4)

identification of the source of the non-governmental monies and their permanent

commitment to the endowment.

Faculty endowment funds at institutions are contributing to strong bond ratings for those

institutions.

TECHNICAL ISSUES

The legislature may wish to consider a time limit for qualifying institutions to be able to

drawdown the funding.

The legislature may wish to consider requiring reporting to LFC and the Department of Finance

and Administration on disbursements to each institution, the amount of matching funds and their

source and the purpose of the endowments.

ALTERNATIVES

House Bill 338/Senate Bill 240 from 2006 legislative session.

POSSIBLE QUESTIONS

1.

What is the most effective level of private contribution match to maximize non-state

matching funds, while enabling effective participation in the faculty endowment program

by various institutions.

AW/nt