According to the Legislative Budget Board (LBB), HB 5294 would have no significant fiscal impact on the state. The analysis assumes that any potential costs associated with implementing the bill's provisions could be managed within the existing resources of affected state agencies and educational institutions. Consequently, the bill would not require additional state funding.

Regarding local government impact, the LBB also anticipates no significant fiscal implications for local entities. This assessment is based on input from major university systems in Texas, including the Texas A&M University System, the University of Texas System, the Texas State University System, Texas Tech University System, University of North Texas System, University of Houston System, and the Texas Higher Education Coordinating Board. These institutions indicated that they could implement the bill's requirements without incurring significant additional expenses.

In summary, HB 5294 is expected to be fiscally neutral, with existing resources deemed sufficient to cover any administrative adjustments or compliance measures needed by medical schools.

HB 5294 addresses medical school admissions, grading practices, academic standards, and employment decisions in Texas. The bill mandates that medical schools use a letter grading system (A to F) for core coursework, prohibits the use of pass/fail grading for required medical courses, and requires any proposed changes to academic or admission standards to be submitted to the Texas Legislature and the Texas Higher Education Coordinating Board. Additionally, the bill mandates that medical schools consider standardized test scores in admissions, while ensuring that these scores are not the sole criterion. A central provision of the bill prohibits medical schools from granting admissions or employment preferences based on race, sex, color, ethnicity, or national origin, effectively banning DEI (Diversity, Equity, and Inclusion) hiring practices.

The most important and necessary provision of HB 5294 is its prohibition on using race, sex, color, ethnicity, or national origin as factors in admissions and hiring decisions at medical schools. This aligns with efforts to curb DEI initiatives in state-funded institutions, ensuring that employment and admissions decisions are based solely on merit rather than demographic characteristics. This ban supports the principles of individual liberty and equal opportunity by guaranteeing that applicants are judged solely on their qualifications. Therefore, this provision should remain intact and unaltered.

The bill’s mandate requiring medical schools to use letter grades (A to F) for core coursework unnecessarily infringes on institutional autonomy and academic freedom. Medical schools are in the best position to determine the most effective methods of evaluating student performance, and some schools find that a pass/fail system better supports student well-being, collaboration, and mastery of material. Imposing a rigid grading structure undermines the free enterprise principle by dictating uniform practices rather than allowing schools the flexibility to innovate. An amendment should eliminate this grading mandate, allowing each institution to choose grading methods that best align with their educational philosophies.

Requiring medical schools to report any changes to academic or admissions standards to the Legislature and the Higher Education Coordinating Board introduces unnecessary bureaucracy. This provision limits schools’ ability to adapt to changing educational needs and creates administrative burdens without demonstrable benefits. Medical schools should be empowered to make academic decisions without excessive state oversight. An amendment should strike this requirement, preserving limited government and respecting the expertise of academic institutions.

The bill’s requirement that standardized test scores be considered in medical school admissions, while not the sole criterion, is an overreach that limits schools’ ability to adopt holistic or innovative admission practices. Medical schools should have the autonomy to weigh various aspects of a candidate’s qualifications, including interviews, recommendations, and non-academic achievements. Prescriptive regulations on admissions processes reduce flexibility and may hinder efforts to select candidates with the best potential for success in medical practice. An amendment should eliminate this mandate, allowing schools to develop their own comprehensive admission criteria.

While HB 5294 correctly addresses the need to eliminate DEI hiring practices, it oversteps by imposing rigid academic and admissions regulations that infringe on institutional autonomy. The central focus should be on preserving merit-based hiring and admissions while minimizing unnecessary state intervention in how medical schools grade and evaluate students. By amending the bill to remove grading and admissions regulations while maintaining the DEI hiring ban, lawmakers can better balance the principles of free enterprise, limited government, and individual responsibility.

Therefore, a Yes; Amend vote is recommended: preserve the DEI hiring ban, but remove the regulations on grading, admissions criteria, and state oversight of academic standards. Texas Policy Research recommends that lawmakers vote Yes; Amend on HB 5294.

• Individual Liberty: HB 5294 both supports and restricts individual liberty in different aspects. On one hand, the bill supports liberty by prohibiting medical schools from using race, sex, color, ethnicity, or national origin as factors in admissions and hiring. This promotes equality of opportunity by ensuring that decisions are based on merit rather than demographic characteristics. On the other hand, the bill restricts individual liberty by imposing rigid grading policies (requiring letter grades instead of pass/fail) and mandating how medical schools structure their admissions criteria. These regulations reduce the autonomy of educational institutions and the freedom of educators to determine the most effective teaching and evaluation methods.
• Personal Responsibility: The bill positively impacts personal responsibility by emphasizing merit-based practices in medical school admissions and hiring. By requiring letter grades, it holds students accountable for their performance rather than allowing the more ambiguous pass/fail evaluations. However, the mandated use of standardized test scores in admissions may inadvertently undermine the holistic assessment of personal achievements and character, potentially sidelining aspects of responsibility demonstrated outside of test performance. An amended version that maintains the ban on DEI hiring but removes prescriptive academic requirements would better align with fostering individual responsibility.
• Free Enterprise: HB 5294 negatively impacts the principle of free enterprise by imposing uniform standards on medical schools, which are public institutions but still operate within a competitive educational environment. The bill’s requirements on grading and admissions limit the ability of schools to innovate and develop unique academic models suited to their student populations. By standardizing how institutions assess performance and select students, the bill restricts the diversity of educational approaches, which is contrary to the free enterprise principle that encourages experimentation and adaptation. Maintaining only the DEI hiring ban while removing other prescriptive regulations would better preserve institutional flexibility and academic freedom.
• Private Property Rights: The bill does not directly affect private property rights, as it primarily addresses public medical schools rather than private institutions. However, to the extent that public medical schools operate as state-funded entities, the bill's regulations on grading and admissions practices could indirectly influence how these institutions manage their internal policies and resources. In this context, preserving institutional autonomy aligns more closely with respecting the operational freedom akin to private property rights.
• Limited Government: HB 5294 challenges the principle of limited government by extending state oversight into academic practices that traditionally fall under the jurisdiction of educational institutions. Requiring legislative reporting for changes in academic or admissions standards introduces bureaucratic control over internal decisions, increasing government influence in higher education. By dictating grading practices and how admissions are structured, the bill expands the government's role in regulating public educational institutions. While the DEI hiring ban aligns with a push to limit government involvement in promoting diversity initiatives, the bill's overall regulatory nature counters the principle of minimizing government interference.