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committees of the NM Legislature. The LFC does not assume responsibility for the accuracy of these reports

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

SPONSOR Altamirano

ORIGINAL DATE

LAST UPDATED

02/17/07

HB

SHORT TITLE Higher Education Faculty Endowment Fund

SB 645

ANALYST Williams

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY07

FY08

$25,000.0 Non-Recurring

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

$25,000.0

Non-Recurring

Faculty

Endowment

Fund

(Parenthesis ( ) Indicate Revenue Decreases)

Relates to SB 260 and HB 292

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)

Senate Bill 645 – Page

2

SUMMARY

Synopsis of Bill

Senate Bill 645 appropriates $25 million from the General Fund to the faculty endowment fund.

FISCAL IMPLICATIONS

The appropriation of $25 million in fiscal year 2008 contained in this bill is a non-recurring

expense to the general fund. Any unexpended or unencumbered balance remaining at the end of

a fiscal year would not revert. This bill provides for continuing appropriations from the faculty

endowment fund.

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. Matching fund

requirements are as follows:

a.

Endowed chair: $500,000

b.

Endowed professorships: $200,000

c.

Endowed faculty programs, to include lectureships, graduate fellowships

and other faculty support programs: $37,500 for each program

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.

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."

Senate Bill 645 – Page

3

OTHER SUBSTANTIVE ISSUES

In past years, in determining prior-year institutional draw downs from the faculty endowment

fund, the Commission on Higher Education, now 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/mt:nt