According to the Legislative Budget Board (LBB), SB 1835 would have no significant fiscal impact on the State of Texas. The changes proposed—allowing certain public higher education institutions to increase the cap on nonresident scholarship students eligible to pay resident tuition—are not expected to create material additional costs. Any administrative expenses incurred by the Texas Higher Education Coordinating Board (THECB) in developing and enforcing the eligibility rules are anticipated to be absorbed within existing agency resources.

Similarly, the LBB reports no significant fiscal impact on local governments. While institutions might experience a shift in tuition revenue due to offering in-state rates to a larger group of nonresidents, any reduction in per-student tuition revenue may be offset by increased enrollment and associated funding from other revenue streams or economies of scale. Additionally, because the bill applies only to institutions that have excess capacity and are located in regions with below-average population growth, the financial impact is likely to be limited to those campuses already seeking to optimize underutilized resources.

Institutions that qualify under the proposed rules may experience long-term financial benefits by attracting more nonresident students who meet academic scholarship criteria, thereby enhancing institutional prestige, retention, and auxiliary revenues (e.g., housing, dining). However, these benefits are indirect and were not quantified in the LBB analysis. Overall, the legislation is structured to be fiscally neutral at the state level while potentially offering strategic advantages to specific higher education institutions.

SB 1835 proposes a targeted revision to Section 54.213 of the Texas Education Code by raising the cap on the number of nonresident students who may qualify for resident tuition rates through competitive scholarships. Currently capped at 5% of the total student population, this limit would be increased to 20% for institutions located in workforce development areas with below-average population growth and demonstrated physical capacity, as determined by the Texas Higher Education Coordinating Board (THECB).

The bill represents a sound policy approach to supporting regional institutions that are disadvantaged by stagnant or declining local demographics. These universities often face steep competition from both in-state urban campuses and out-of-state institutions. By modestly expanding access to tuition waivers for nonresident students who earn competitive scholarships, the bill enables underutilized institutions to stabilize or grow enrollment and enhance their financial viability without requiring additional state appropriations. This aligns with the liberty principles of free enterprise and personal responsibility, rewarding academic achievement, and encouraging market-driven competition among higher education providers.

The bill also adheres to the principle of limited government by relying on THECB to determine eligibility through rulemaking rather than expanding state bureaucracy or applying arbitrary formulas. It is notable that the fiscal note confirms there is no significant cost to the state or local governments, and that implementation can occur within existing resources.

However, there are reasonable concerns regarding the long-term implications of expanding in-state tuition eligibility to nonresident students. Without careful guardrails, such policies could gradually erode the preference traditionally given to Texas residents for publicly subsidized tuition. While this bill mitigates that risk by limiting eligibility to institutions with excess capacity and slow-growth regions, the legislation would benefit from strengthening amendments, such as a sunset provision, a periodic review mechanism, or required reporting on the program’s impact on both institutional finances and resident student access.

For these reasons, Texas Policy Research recommends that lawmakers vote YES on SB 1835 but also consider amendments as described above. The bill advances core liberty-aligned goals by increasing institutional flexibility, promoting academic merit, and responding to local economic conditions. However, targeted amendments would improve transparency and ensure that the program remains balanced and aligned with the public interest over time.

• Individual Liberty: The bill expands access to Texas institutions of higher education for nonresident students who earn competitive scholarships, granting them the financial benefit of resident tuition rates. This facilitates greater educational choice and mobility for high-achieving students across state lines, enhancing individual liberty in terms of access to opportunity and freedom of movement. However, some tension arises if expanding in-state tuition to nonresidents comes at the perceived or actual expense of Texas resident students. If institutional priorities shift toward recruiting more nonresident scholarship recipients, this could diminish access for Texans, thus indirectly infringing on the individual liberty of those who fund and rely on the state system.
• Personal Responsibility: The bill maintains a merit-based standard: nonresident students must earn competitive scholarships of at least $1,000 to qualify for resident tuition. This structure rewards individual achievement and academic excellence, aligning with the principle that individuals should bear the consequences—and reap the rewards—of their efforts. Furthermore, regional institutions are encouraged to proactively address enrollment and financial challenges through strategic, self-initiated recruitment, rather than relying on state bailouts or blanket subsidies.
• Free Enterprise: The bill fosters institutional autonomy and market competition within the public education sector. By raising the waiver cap for qualifying institutions, the bill allows under-enrolled universities in slow-growth areas to compete more effectively for out-of-state talent. This approach enhances revenue generation and operational sustainability through a market-based mechanism, rather than through regulatory mandates or appropriations. Moreover, this flexibility helps Texas institutions remain competitive against out-of-state universities aggressively recruiting Texas students, mitigating outbound enrollment, and retaining economic and intellectual capital.
• Private Property Rights: The bill has no direct impact on private property rights. However, in a broader interpretive sense, one could argue that extending in-state tuition subsidies to nonresidents, who do not pay property taxes that help support public institutions, raises questions about how public resources are allocated. While this doesn’t constitute a violation of property rights per se, it does merit careful scrutiny to ensure that resident taxpayers’ contributions continue to primarily benefit Texas residents.
• Limited Government: The bill adheres to the principle of limited government in key ways. It does not create new agencies, programs, or funding mechanisms. Instead, it grants authority to the Texas Higher Education Coordinating Board (THECB) to define eligibility through rules based on existing population and space-use metrics. This delegation of rulemaking, while adding administrative interpretation, avoids statutory micromanagement and maintains institutional flexibility. However, the absence of built-in reporting requirements or sunset provisions may reduce transparency and legislative oversight over time. Strengthening the bill with accountability mechanisms would bolster its alignment with the limited government principle by ensuring that the policy remains targeted and efficient.

• HB 3574 (Same As)