FISCAL NOTE
Date Requested: February 18, 2016
Time Requested: 03:31 PM |
| Agency: |
Higher Education Policy Commission |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 2650 |
Introduced |
HB4611 |
|
|---|
| CBD Subject: |
Education (Higher) |
|---|
|
FUND(S):
0589
Sources of Revenue:
General Fund
Legislation creates:
Neither Program nor Fund
Fiscal Note Summary
Effect this measure will have on costs and revenues of state government.
House Bill 4611 if enacted would abolish the West Virginia Higher Education Policy Commission; transfer the power and duties of the commission to the governing boards of the institutions of higher education; and provide for the disposition or transfer of assets and property of the commission.
Although this bill would reduce the general appropriation budgets by $4.4 million, the compounding effect of the legislation would have a substantial negative financial impact on the State, institutions and students served by public higher education. The bill does not address Commission debt nor does it provide for administration of shared services that cannot be managed individually by the institutions. It is estimated that the minimum initial costs incurred net of the $4.4 million in General Fund appropriations savings would be about $400.9 million and the net additional annual costs thereafter would be about $13.9 million.
Fiscal Note Detail
| Effect of Proposal |
Fiscal Year |
2016
Increase/Decrease
(use"-") |
2017
Increase/Decrease
(use"-") |
Fiscal Year
(Upon Full
Implementation) |
| 1. Estmated Total Cost |
0 |
400,900,000 |
13,900,000 |
| Personal Services |
0 |
900,000 |
900,000 |
| Current Expenses |
0 |
10,100,000 |
10,100,000 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
0 |
0 |
0 |
| Other |
0 |
389,900,000 |
2,900,000 |
| 2. Estimated Total Revenues |
0 |
0 |
0 |
Explanation of above estimates (including long-range effect):
Commission Debt
As of July 15, 2015, the Commission owed $349.9 million in bonds payable; $36.0 million in future interest payable; and $1.1 million in leases payable. The proposed legislation or debt agreements do not discuss the disposition of this debt. In the absence of any legislative or bond agreement direction, payments would not be made on the bonds. If debt payments were not made, bond trustees would consider the debt to be in default. It is likely that a default would damage State and institutional bond ratings.
Even if the disposition of the Commission’s debt was addressed by the proposed legislation, it is not clear that bondholders would accept the refinancing and assignment of the debt to the institutions. Most of the institutions’ debt ratings are below the Commission’s rating.
Shared Services
The Commission performs services benefiting all institutions that could not be administered by individual institutions. For some shared services additional costs would be incurred if they were managed by the institutions.
The Commission annually expends over $90.4 million for financial aid. The West Virginia Code requires these funds to be centrally disbursed. The legislation does not discuss their expenditures; consequently, the payments could not be made to public and private institutions for the existing financial aid programs. If no alternative mechanism was developed to meet their needs, many students would not receive enough financial aid and enrollments would decline precipitously. The dramatic decline in enrollment would cause a corresponding decline in tuition and fees. A decline of this magnitude would likely force some institutions into bankruptcy. If the $90.4 million currently budgeted for system financial aid programs was appropriated directly to the institutions, they could possibly create the alternative mechanisms to ensure the maintenance of enrollments and tuition and fee revenues to remain financially solvent.
Federal revenues totaling about $10 million would be lost. The Commission receives federal revenues for several programs including Gear Up. The value of these programs is based upon their operation at the system level. The Gear Up program has demonstrated its success in increasing low-income students attending colleges and universities. The Commission also receives federal revenues to coordinate services to veterans.
The Commission coordinates the completion of annual financial audits for all institutions and the Higher Education Fund. It is estimated that the cost to hire a contractor to perform this service would be approximately $100,000.
The Commission administers the workers compensation contract for most of the institutions. It is estimated that these costs would increase at least $200,000 if each institution had its own contract.
The West Virginia Network (WVNET) provides shared information technology services to institutions. It is estimated that hosted institutions would incur about $8 million in additional costs to replace the services provided by WVNET.
These are estimates of the most readily apparent costs. Additional unforeseen costs may result from such a dramatic change.
Memorandum
Person submitting Fiscal Note: Ed Magee
Email Address: edward.magee@wvhepc.edu