OFFICE OF FISCAL ANALYSIS

Legislative Office Building, Room 5200

Hartford, CT 06106 (860) 240-0200

http://www.cga.ct.gov/ofa

sSB-870

AN ACT IMPLEMENTING THE RECOMMENDATIONS OF THE BOARD OF REGENTS FOR HIGHER EDUCATION.

AMENDMENT

LCO No.: 7678

File Copy No.: 371

Senate Calendar No.: 198


OFA Fiscal Note

State Impact:

Agency Affected

Fund-Effect

FY 18 $

FY 19 $

Higher Ed., Off.

GF - Potential Cost

See Below

See Below

UConn; Board of Regents for Higher Education; UConn Health Ctr.

Various - Potential Revenue Gain

See Below

See Below

Note: GF=General Fund; Various=Various

Municipal Impact: None

The amendment strikes the underlying bill and its associated fiscal impact, replacing it with the fiscal impact described below. Sections 1 through 6 of the amendment are the same as the underlying bill, and therefore the associated fiscal impact of a potential cost is the same. Section 7 and the associated fiscal impact of potential revenue gain are new. Sections 8 and 9, also new, result in no fiscal impact as they contain technical and conforming changes.

Sections 1 through 6 of the amendment result in a potential cost to the Office of Higher Education (OHE) as a number of duties are transferred to it, from the Board of Regents (BOR). The cost to OHE is potential, as the BOR is not currently performing the functions, and if OHE continues not to execute the functions, there will be no additional cost. However, if OHE chooses to implement the functions, they would require additional resources and staff to do so. The level of resources would be dependent on the scope of the programs and corresponding funding levels.

The only duty mentioned in the amendment that has been carried out is the annual development of a Naugatuck Valley center plan. The amendment maintains the obligation and the role of the Connecticut State Colleges and Universities, but eliminates the plan's reporting requirement.

Section 7 of the amendment results in a potential revenue gain for the higher education constituent units, by allowing the state portion of certain endowed chair funds to be invested by the respective constituent unit foundation, at the foundation's request.

The amendment results in a potential revenue gain because the interest from endowed chair funds has tended to be higher at the constituent unit foundations, compared to the current investment requirement for the state portion of these funds. The interest (not the principal) from endowed chair funds can be used by the universities, as revenue, to pay endowed chair expenses.

Currently, the state portion of certain endowed chair funds is required to be invested in the state's Short Term Investment Fund (STIF) by the Office of the State Treasurer, while the non-state (i.e., university or business) matching portion is invested by the respective constituent unit foundation. The STIF invested funds have yielded annual interest between 0.13% and 4.78%, averaging 1.2%, since FY 07. Since FY 10, the interest yield has been less than 1%. In contrast, for example, the UConn and UConn Health Center non-state matching portions invested with the UConn Foundation have yielded annual interest between -19.9% and 15.9%, averaging 3.9%. To the extent that foundation interest yields continue to exceed STIF yields, the constituent units will receive more interest – and therefore, more revenue available – than in the amendment's absence.

The amendment may result in a cost to the affected constituent unit foundations, which will be required to make up for any loss in principal funds in a fiscal year. Since FY 17, the non-state portion of UConn's endowed chair funds has had annual losses three times. The median loss (-5.6%) totaled $235,010 across the funds.

If all constituent unit foundations choose to transfer the entirety of their state matching endowed chair funds from STIF, STIF performance will be unaffected. The state matching funds total $5.6 million, which is estimated to be less than 1% of STIF assets.

The preceding Fiscal Impact statement is prepared for the benefit of the members of the General Assembly, solely for the purposes of information, summarization and explanation and does not represent the intent of the General Assembly or either chamber thereof for any purpose. In general, fiscal impacts are based upon a variety of informational sources, including the analyst's professional knowledge. Whenever applicable, agency data is consulted as part of the analysis, however final products do not necessarily reflect an assessment from any specific department.