By: Branch, Frullo, Coleman, Button, Bonnen,	H.B. No. 1000
	et al.

	A BILL TO BE ENTITLED
	AN ACT
	relating to the distribution of money appropriated from the
	national research university fund and to one or more audits of
	certain general academic teaching institutions in connection with
	that distribution; making an appropriation.
	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
	SECTION 1.  Section 62.145(a), Education Code, is amended to
	read as follows:
	(a)  A general academic teaching institution becomes [is]
	eligible to receive an initial [a] distribution of money
	appropriated under this subchapter for a state fiscal [each] year
	[of a state fiscal biennium] if:
	(1)  the institution is designated as an emerging
	research university under the coordinating board's accountability
	system;
	(2)  in each of the two state fiscal years preceding the
	state fiscal year for which the appropriation is made [biennium],
	the institution expended at least $45 million in restricted
	research funds; and
	(3)  the institution satisfies at least four of the
	following criteria:
	(A)  the value of the institution's endowment
	funds is at least $400 million;
	(B)  the institution awarded at least 200 doctor
	of philosophy degrees during each of the two academic years
	preceding the state fiscal year for which the appropriation is made
	[biennium];
	(C)  the entering freshman class of the
	institution for each of those two academic years demonstrated high
	academic achievement, as determined according to standards
	prescribed by the coordinating board by rule, giving consideration
	to the future educational needs of the state as articulated in the
	coordinating board's "Closing the Gaps" report;
	(D)  the institution is designated as a member of
	the Association of Research Libraries or has a Phi Beta Kappa
	chapter or has received an equivalent recognition of research
	capabilities and scholarly attainment as determined according to
	standards prescribed by the coordinating board by rule;
	(E)  the faculty of the institution for each of
	those two academic years was of high quality, as determined
	according to coordinating board standards based on the professional
	achievement and recognition of the institution's faculty,
	including the election of faculty members to national academies;
	and
	(F)  the institution has demonstrated a
	commitment to high-quality graduate education, as determined
	according to standards prescribed by the coordinating board by
	rule, including the number of graduate-level programs at the
	institution, the institution's admission standards for graduate
	programs, and the level of institutional support for graduate
	students.
	SECTION 2.  Section 62.146, Education Code, is amended to
	read as follows:
	Sec. 62.146.  ACCOUNTING STANDARDS; VERIFICATION OF
	INFORMATION. (a) The coordinating board by rule shall prescribe
	standard methods of accounting and standard methods of reporting
	information for the purpose of determining:
	(1)  the eligibility of institutions under Section
	62.145; and
	(2)  the amount of restricted research funds expended
	by an eligible institution in a state fiscal year.
	(b)  As soon as practicable in each state fiscal
	[even-numbered] year, based on information submitted by the
	institutions to the coordinating board as required by the
	coordinating board, the coordinating board shall certify to the
	comptroller and the legislature verified information relating to
	the criteria established by Section 62.145 to be used to determine
	which institutions are [initially] eligible for distributions of
	money from the fund.
	(c)  Information submitted to the coordinating board by
	institutions for purposes of establishing eligibility under this
	subchapter and the coordinating board's certification or
	verification of that information under this section [subsection]
	are subject to a mandatory audit by the state auditor in accordance
	with Chapter 321, Government Code. The coordinating board may also
	request one or more audits by the state auditor as necessary or
	appropriate at any time after an eligible institution begins
	receiving distributions under this subchapter. Each audit must be
	based on an examination of all or a representative sample of the
	restricted research funds awarded to the institution and the
	institution's expenditures of those funds, and must include, among
	other elements:
	(1)  verification of the amount of restricted research
	funds expended by the institution in the appropriate state fiscal
	year or years; and
	(2)  verification of compliance by the institution and
	the coordinating board with the standard methods of accounting and
	standard methods of reporting prescribed by the coordinating board
	under Subsection (a), including verification of:
	(A)  the institution's compliance with the
	coordinating board's standards and accounting methods for
	reporting expenditures of restricted research funds; and
	(B)  whether the institution's expenditures meet
	the coordinating board's definition of restricted research
	expenditures.
	(d)  From money appropriated from the fund, the comptroller
	shall reimburse the state auditor for the expenses of any audits
	conducted under Subsection (c).
	SECTION 3.  Section 62.148, Education Code, is amended to
	read as follows:
	Sec. 62.148.  DISTRIBUTION [ALLOCATION] OF APPROPRIATED
	FUNDS TO ELIGIBLE INSTITUTIONS. (a)  In each state fiscal year,
	the comptroller shall distribute to eligible institutions in
	accordance with this section an [the total] amount appropriated
	from the fund for that fiscal year.
	(b)  The total amount appropriated from the fund for any
	state fiscal year may not exceed an amount equal to 4.5 percent of
	the average net market value of the investment assets of the fund
	for the 20 consecutive state fiscal quarters ending with the last
	quarter of the preceding state fiscal year, as determined by the
	comptroller.
	(b-1)  For purposes of Subsection (b), for a state fiscal
	quarter that includes any period before the fund was established on
	January 1, 2010, a reference to the average net market value of the
	investment assets of the fund includes the average net market value
	of the investment assets of the former higher education fund for the
	applicable state fiscal quarter.  This subsection expires January
	1, 2016.
	(c)  In each state fiscal year, each eligible institution is
	entitled to an equal share of the total amount to be distributed
	from the fund in that year. Subject to Subsection (e), the total
	amount to be distributed from the fund to those eligible
	institutions in that year is a portion of the total amount
	appropriated from the fund for that year determined as follows:
	(1)  one-half of the total amount appropriated if only
	one institution has established eligibility;
	(2)  two-thirds of the total amount appropriated if two
	institutions have established eligibility;
	(3)  three-fourths of the total amount appropriated if
	three institutions have established eligibility;
	(4)  four-fifths of the total amount appropriated if
	four institutions have established eligibility;
	(5)  five-sixths of the total amount appropriated if
	five institutions have established eligibility; and
	(6)  six-sevenths of the total amount appropriated if
	six institutions have established eligibility.
	(d)  The comptroller shall retain within the fund any portion
	of an appropriated amount that remains after all distributions are
	made for a state fiscal year under this section. The appropriation
	of that retained amount lapses at the end of that state fiscal year.
	(e)  If the number of institutions that are eligible for
	distributions in a state fiscal year is more than six, each eligible
	institution is entitled to an equal share of the total amount
	appropriated from the fund for that fiscal year.
	(f)  For purposes of this section, the total amount
	appropriated from the fund for a state fiscal year does not include
	any portion of the amount appropriated that is used to reimburse the
	costs of an audit conducted under Section 62.146(c) [The amount
	shall be allocated to the eligible institutions based on an
	equitable formula adopted by the legislature to carry out the
	purposes of the fund as established by Section 20, Article VII,
	Texas Constitution.     In adopting the allocation formula, the
	legislature may consider the recommendations of the coordinating
	board, including recommendations on the appropriate elements and
	relative weights of elements of the formula].
	SECTION 4.  For each fiscal year of the state fiscal biennium
	ending August 31, 2013, the maximum amount permitted by Section 20,
	Article VII, Texas Constitution, and by Section 62.148(b),
	Education Code, as added by this Act, is appropriated to the
	comptroller from the national research university fund for
	distribution to eligible institutions in accordance with and for
	the purposes described by Subchapter G, Chapter 62, Education Code.
	SECTION 5.  This Act takes effect immediately if it receives
	a vote of two-thirds of all the members elected to each house, as
	provided by Section 39, Article III, Texas Constitution.  If this
	Act does not receive the vote necessary for immediate effect, this
	Act takes effect September 1, 2011.