Require Peer Review of Special Item Funding for Higher Education

Funding for special items at public institutions for higher education should undergo peer review to evaluate its continued appropriateness.

During the 1992-93 biennium, Texas provided $227.3 million in so-called special items at public institutions of higher education; requests for the 1994-95 biennium total $840.2 million. This increase of $612.9 million is nearly three times the current level of funding. The 1994-95 appropriation req uests include $345.3 million for special items funded during the current biennium (a 56 percent increase over current funding levels) plus $494.9 million in funding for new special items (twice the level of funding for all special items in the current bien nium). It should be noted the 1994-95 appropriation requests do not include the System Support category since this item is requested by the University Systems rather than individual general academic institutions.

Special items represent about 7.2 percent of the total General Revenue Fund 1992-93 biennium appropriations to the 35 general academic teaching institutions and 3.3 percent of the funding for health-related institutions. 1 Although they represent a small percentage of total higher education funding, special items are a controversial expenditure due to an inequitable distribution of funds and their potential to become long-term commitments.

Special items are appropriated by the Legislature to provide program support for operations not covered by formula, such as scholarship programs, research, construction projects and public service. 2 For the most part, they are included as separate items in the General Appropriations Act. Table 1 summarizes nine categories of special items for the 1992-93 biennium.

Table 1 - Categories of Special Items in Higher Education Appropriations

1992-93 Biennium Percent of
Special Item Special Item
Category Appropriations Appropriations

Tuition Revenue Bonds, Leases and
Facility Maintenance $ 37,535,229 16.5%
Continuing Education, Extension and
Public Service 14,423,848 6.3
Economic Development 7,068,968 3.1
Formula Supplements and Program
Start-ups 56,023,523 24.6
Museums 7,151,752 3.2
Research Institutes, Centers and Projects 76,216,602 33.5
Scholarships, Internships and Recruitment
of Minority Students, Faculty and Staff 10,564,955 4.7
Special, Honors and Remedial Education 8,870,156 3.9
System Support 9,489,894 4.2

Total, All Categories $227,344,927 100.00%

Totals may not add due to rounding.

Some special items are extremely old several museum items date back to the early 1930s. Others are new. The 72nd Legislature created 58 new special items in 1991. Not all were intended to be permanent, but history suggests that once begun, it is difficult to discontinue funding. Anomalies can be found in each of the nine categories. Four institutions are still receiving formula supplements and program start-up funds for programs that began in the late 1960s or 1970s. One institution h as been receiving funds for enhancement of two programs since 1986, even though it also has been getting funds to keep its accreditation for these programs since 1984.

Special items should undergo a peer review process by the Texas Higher Education Coordinating Board (THECB) after the item has received funding for four years (or two biennia).

THECB should determine program success and assess whether the item could be incorporated into a formula, distinguished as a line item, discontinued or reduced. The Coordinating Board s recommendations for each special item should be made available to the Legislative Budget Board and the Governor s office before the next legislative session in a manner that allows consideration in the appropriations process.

The adoption of this recommendation could eventually result in savings of General Revenue Fund appropriations. With the implementation of an efficient peer review process, a larger portion of higher education institutions appropriations would be allocated based on formula, reduced or eliminated, yielding a more equitable distribution of funds.

Fiscal Impact
This recommendation is revenue neutral, although it is anticipated that the peer review process would eventually yield savings through reduced or eliminated special items.

1 State of Texas, General Appropriations Act, Seventy-second Legislature, First Called Session (Austin, Texas, 1991), Article III.
2 Texas Higher Education Coordinating Board, Division of Research, Planning, and Finance, Special Item Funding in Texas Institutions of Higher Education: Fiscal Years 1992 and 1993 (Austin, Texas, August 1992), p. 1.