DALLAS — Nine years after the Texas Legislature last approved tuition revenue bonds, the state House has approved $3.1 billion for construction on college and university campuses across the state.
House Bill 100 by Rep. John Zerwas, R-Richmond, won preliminary approval on a voice vote April 8 without debate.
The Senate is scheduled to consider its version of the bill shortly, as supporters try to avoid the fate the bonds suffered in previous sessions. Despite broad support, tuition revenue bond authorizations have failed to win final approval before the sessions ended.
"This is a huge need that you're addressing here," Rep. Donna Howard, D-Austin, told Zerwas. "We tried to get it passed last time and didn't at the last minute. We've got to get this through this time."
Zerwas noted that $250 million of annual debt service has already been authorized for the TRBs in the budget bill approved by the House.
"The cost of money in terms of bonding is very low now," Zerwas said. "And spread over 20 years, it's a very appropriate way to build facilities that are going to go way beyond that period of time."
The bill assumes a 5% interest rate on the debt, but Zerwas said that the highly rated bonds are likely to earn lower yields than that.
"That's probably a pretty high number," he said.
TRBs are backed by tuition revenue, but require legislative approval. The appropriation does not count against the state's spending cap, Zerwas said.
Higher education officials say the bonds are needed for construction needs, especially at smaller regional campuses that can't rely as much on major donor support.
HB 100 authorizes $927.6 million for the University of Texas System. The Texas A&M University System would be authorized to issue $805.8 million. The systems governing the University of Houston, Texas State University, the University of North Texas and Texas Tech University would be able to issue at least $250 million each.
Opponents of debt have argued that the campus construction should be funded through cash on hand, saving on interest cost. But Zerwas said that using the general fund or rainy day fund would count toward the constitutional spending cap, reducing appropriations for other programs.
"There are some reasons to choose to do it through bonds," Zerwas said. "Part of it has to do with the spending limit."
