HF 2568 (LSB 6150HH (2) 91)

HOUSE FILE 2568

BY  THOMSON

A BILL FOR

An Act establishing a temporary independent fiscal restructuring authority to provide oversight of institutions of higher education governed by the state board of regents, providing penalties, and making appropriations.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

    Section 1.  LEGISLATIVE FINDINGS AND INTENT.  The general assembly finds and declares all of the following:
   1.  Public purpose and long-term state interest.  The institutions governed by the state board of regents exist to advance the long-term educational, economic, cultural, and civic vitality of the people of Iowa, including the preparation of Iowa’s future leaders across every profession, industry, and community. The fiscal stability, operational integrity, and faithful alignment of those institutions with their founding purposes is therefore a matter of vital statewide concern and a proper subject of legislative action under the police power of this state. The general assembly has both the constitutional authority and the solemn duty to ensure that public resources entrusted to these institutions are deployed efficiently, transparently, and in furtherance of the purposes for which the people of Iowa created them.
   2.  Regents as creatures of statute —— no tolerance for insubordination.  The state board of regents is a creature of statute, established by legislative enactment and exercising only such authority as has been delegated to it by the general assembly. The board is subordinate to statutes duly enacted, and must implement legislative mandates fully, faithfully, and promptly. Any willful refusal, delay, obstruction, circumvention, or noncompliance with statutory directives, whether by the board itself or by university administrators, employees, or agents, constitutes ultra vires conduct incompatible with the delegated status of the board’s enterprise and will not be tolerated by the general assembly. Recent events have demonstrated that elements within the regents institutions have engaged in deliberate efforts to evade or undermine legislative mandates, including documented instances in which university personnel have openly discussed strategies to circumvent duly enacted laws while maintaining superficial compliance. Such conduct betrays the public trust and necessitates enhanced legislative oversight mechanisms.
   3.  Tuition and revenue growth outpacing inflation.  Tuition, mandatory fees, and related charges at regents institutions have increased at rates substantially exceeding general inflation over extended periods, imposing mounting and often crushing burdens on Iowa families and taxpayers. The cost of attendance at Iowa’s public universities has increased by more than two hundred percent over the past two decades, far outstripping the growth in median family income and the general consumer price index. Where in 1981 state appropriations accounted for seventy-seven percent of the universities’ general education budgets and tuition accounted for twenty-one percent, those proportions have effectively reversed. Today, tuition accounts for approximately sixty-four percent of general education funding while state appropriations account for approximately thirty-one percent. This structural inversion signals cost drivers that have not been sufficiently constrained by ordinary budget processes and demonstrates the failure of the current governance framework to protect Iowa families from relentless cost escalation.
   4.  Federal credit expansion has weakened market discipline.  The general assembly finds that the widespread availability of federal student loans and related financing mechanisms has substantially weakened ordinary consumer price discipline in higher education, contributing to tuition and cost escalation and reducing institutional incentives to constrain cost growth. This dynamic is especially acute where the borrowers are young adults and first-time financial actors who often lack the mature price sensitivity that normally constrains consumer markets. The availability of easily accessible credit has insulated regents institutions from the market discipline that would ordinarily punish inefficiency, bloat, and mission drift. Research from the federal reserve bank of Richmond and the federal reserve bank of New York confirms the relationship between expanded federal student aid and rising tuition. This validates what has become known as the Bennett hypothesis, which states that federal financial aid policies, while well-intentioned, have enabled institutions to raise tuition with confidence that loan subsidies would absorb the increases. The general assembly concludes that absent external discipline imposed by legislative action, regents institutions have insufficient internal incentive to constrain costs.
   5.  Absence of true audit discipline and intrusive performance scrutiny.  Regents institutions have not been compelled to submit, on a routine and system-wide basis, to the type of intrusive, independent, performance-oriented, forensic audit discipline commonly imposed in private-sector restructuring or receivership contexts. While compliance and financial audits have been conducted, these have proven insufficient to identify structural inefficiencies, administrative bloat, or misalignment with legislative intent. Internal audit functions have experienced chronic workforce challenges, with audit plans regularly falling short of completion due to staffing vacancies and resource constraints. Recent audit findings have revealed unacceptable weaknesses in operational controls, including weaknesses at units that had been the subject of prior investigations and should have implemented comprehensive reforms. The general assembly finds that the existing audit framework lacks the forensic intensity and independence necessary to impose genuine fiscal discipline on institutions that control billions of dollars of public resources.
   6.  Cost growth contrary to legislative intent —— human burden.  The general assembly finds that major cost increases in tuition, fees, and institution-provided services have proceeded in ways fundamentally inconsistent with legislative intent in creating and funding regents institutions, which is to provide accessible, high-value public education for Iowans at a reasonable cost. The financial burden imposed on Iowa families has become unreasonable and, in effect, inhumane. Students report needing to work multiple jobs to afford attendance. Graduate students describe tuition increases as dollars diverted from rent, utilities, child care, and basic necessities. The general assembly created these institutions to serve Iowans, not to extract from them ever-increasing resources while delivering services of uncertain value. The disconnect between institutional cost growth and the financial capacity of ordinary Iowa families represents a betrayal of the foundational compact between the people and their public universities.
   7.  Programmatic drift from measurable Iowa benefit.  The general assembly finds that, over time, substantial portions of instruction, research, and administrative activity at regents institutions have drifted away from measurable benefit to Iowa’s public interests, workforce needs, civic health, and economic priorities. Programs have proliferated without rigorous assessment of their contribution to the state’s needs. Administrative positions have multiplied while faculty numbers have declined relative to enrollment. Academic offerings have expanded into areas of questionable relevance to Iowa’s economy and workforce requirements. The general assembly concludes that comprehensive rejustification of all expenditures is necessary to restore alignment with the public purpose for which these institutions were created and for which they continue to receive public appropriations.
   8.  Fiscal opacity encourages institutional monoculture and diminishes excellence.  The general assembly finds that prolonged insulation from rigorous fiscal scrutiny can contribute to institutional monoculture, reduced intellectual competitiveness, and diminished robustness and value. A durable and excellent public university system requires diversity of thought, viewpoint pluralism, and competitive excellence rather than unchallenged uniformity enforced through administrative orthodoxy. The general assembly is concerned that fiscal opacity and lack of accountability have enabled ideological conformity to take root in ways that undermine the intellectual vitality, competitive position, and long-term institutional health of Iowa’s universities. Fiscal discipline is a legitimate and necessary tool to restore institutional health, encourage intellectual diversity, and ensure that Iowa’s universities remain competitive with peer institutions rather than declining into comfortable mediocrity.
   9.  Recent capital projects demonstrate scrutiny failures.  The general assembly finds that recent major proposals affecting regents-related facilities and long-term financial obligations have been advanced without adequate, independently validated justification. Proposals involving expenditures exceeding two billion dollars were at risk of proceeding without sufficient scrutiny until individual board members raised objections questioning the adequacy of the underlying analysis and the reliability of key assumptions. That such objections had to come from a single board member, rather than emerging naturally from robust institutional processes, reveals the failure of existing oversight mechanisms. Prior major construction projects have experienced significant cost overruns, design disputes, and budget escalations that might have been avoided with more rigorous initial scrutiny. The general assembly concludes that current capital planning and approval processes provide insufficient protection for the state’s fiscal interests.
   10.  Regents budget process lacks adequate transparency and detail.  The general assembly finds that the budget formation and approval process employed by the state board of regents has proven inadequate to ensure meaningful oversight by board members themselves, let alone by the general assembly or the public. Members of the board have expressed concern that they receive proposed budgets with insufficient time for review, without access to actual expenditure data from prior years, without adequate information about contingency planning, and without opportunity for substantive committee discussion before approval votes. When board members charged with fiduciary responsibility for billions of dollars of public resources vote against budget approval as a protest against the inadequacy of the process itself, the general assembly concludes that the process has fundamentally failed and requires legislative intervention to establish minimum standards for transparency, detail, and deliberation.
   11.  Need for extraordinary oversight tools.  The general assembly finds that ordinary oversight methods have proven inadequate to impose timely, system-wide fiscal discipline on regents institutions. Incremental reforms, voluntary compliance initiatives, and traditional appropriations processes have failed to arrest cost growth, restore alignment with legislative intent, or ensure accountability. Extraordinary temporary restructuring authority is therefore necessary to restore lawful, transparent, accountable, and efficient operations and to protect legislative appropriations and the interests of Iowa taxpayers. The general assembly intends by this Act to establish mechanisms capable of compelling the systemic reform that normal processes have failed to achieve.
   12.  Zero-based budgeting is independently beneficial regardless of disputed facts.  The general assembly finds that even if any specific contested factual premise regarding particular programs, costs, or administrative decisions were later disputed or shown to be incomplete, periodic system-wide, zero-based budgeting and external restructuring review are independently beneficial governance tools for large institutions that have not previously been subjected to such intrusive scrutiny. Zero-based budgeting requires each expenditure to be justified anew rather than carried forward automatically, thereby forcing institutions to articulate the continuing necessity and value of each program and function. Such processes have proven valuable in both public and private sector contexts, enabling organizations to identify inefficiencies, eliminate redundancies, and reallocate resources to higher-value functions. The general assembly concludes that zero-based budgeting is a sound governance practice that should be applied to regents institutions regardless of any particular factual controversies, and that such application is reasonably expected to reveal substantial savings and efficiency opportunities.
   13.  Anticipated savings magnitude and reinvestment potential.  The general assembly finds, based on restructuring experience in other large organizations and budget-reset methodologies, that substantial savings, potentially in the range of fifteen percent or more of current expenditures, are often identified when zero-based budgeting and intrusive restructuring tools are imposed on systems previously insulated from such scrutiny. In 2003, the state of Texas faced a projected ten billion dollar budget shortfall. By requiring state agencies to justify every expenditure from a zero base, the legislature identified opportunities to consolidate agencies and reduce costs, achieving approximately one billion dollars in annual savings without tax increases. Private sector applications of zero-based budgeting have identified comparable efficiencies. The general assembly concludes that achieving such efficiencies within the regents system will enable these institutions to redirect substantial resources toward their highest-value educational and research functions, which are the truly excellent programs and faculty that likely have been suffering from inadequate funding due to bloat, administrative overhead, and mission drift in other areas of the enterprise.
   14.  Federal funds preservation —— no immunity from state oversight.  The general assembly finds that preservation of federal funds and compliance with mandatory federal grant conditions are important public interests that this Act is designed to protect. However, receipt of federal funds does not immunize regents institutions from state fiscal oversight, audit, and restructuring. The state of Iowa retains full authority to condition, structure, and oversee institutional fiscal operations while directing compliance with mandatory federal requirements. Nothing in this Act shall be construed to require any action that would violate binding federal law or result in forfeiture of federal funds to which regents institutions would otherwise be entitled. However, neither shall federal funding relationships serve as a shield against legitimate state oversight or as an excuse for failing to implement lawful state directives in areas where federal requirements do not apply.
   15.  Construction of Act.  This Act shall be construed broadly to effectuate its purposes, including the restoration of fiscal integrity, transparency, accountability, and alignment with the public purpose of regents institutions. Any ambiguity in the provisions of this Act shall be resolved in favor of the authority granted herein to obtain data, impose restructuring requirements, mandate zero-based budgeting, and protect state fiscal stability. The general assembly declares that the findings set forth in this section reflect its considered legislative judgment based on extensive review of institutional operations, public testimony, media reports, academic research, and the experience of other jurisdictions, and that these findings shall inform the interpretation and application of all provisions of this Act.
    Sec. 2.  NEW SECTION.  262C.1  Short title.
   This chapter shall be known and may be cited as the “Independent Fiscal Restructuring Authority Act”.
    Sec. 3.  NEW SECTION.  262C.2  Purpose, findings, and declarations.
   1.  Public purpose, police power, and constitutional authority.  The general assembly finds and declares all of the following:
   a.  Regents institutions exist to educate Iowa’s future leaders and sustain state economic and civic health.
   b.  Fiscal integrity, affordability, and durability of these institutions are matters of compelling statewide concern.
   c.  This chapter constitutes a valid exercise of the state’s police power to preserve fiscal stability, protect taxpayers, and ensure efficient operation of public institutions.
   d.  The fiscal condition of regents institutions requires extraordinary legislative intervention.
   e.  This chapter exercises the general assembly’s appropriations power under Article III, section 24, of the Constitution of the State of Iowa.
   f.  Contract modifications authorized herein are necessary and reasonable means to serve a significant public purpose, representing the least impairing means available to achieve fiscal stability while respecting contract rights to the maximum extent feasible.
   2.  Ministerial execution framework.  The general assembly finds and declares all of the following:
   a.  This chapter establishes fixed statutory policy regarding fiscal objectives, performance metrics, metric weights, reduction targets, and procedural requirements.
   b.  The independent fiscal restructuring authority exercises ministerial authority to apply criteria and execute policies established by statute.
   c.  The independent fiscal restructuring authority does not formulate new fiscal, academic, or institutional policy; the authority implements policy choices made by the general assembly.
   d.  The metrics, weights, targets, timelines, and procedures in this chapter constitute an intelligible principle sufficient to guide action by the independent fiscal restructuring authority and permit judicial review.
   e.  Powers exercised by the independent fiscal restructuring authority are bounded by statutory criteria and subject to legislative override, ensuring accountability to the legislative branch.
   3.  Legislative supremacy.  The general assembly finds and declares all of the following:
   a.  The state board of regents is a statutory body with no inherent constitutional authority.
   b.  All the board’s authority is delegated by the general assembly and subject to legislative revision or revocation.
   c.  Conduct inconsistent with legislative directives constitutes ultra vires action.
   4.  State subsidy neutrality.  The general assembly finds and declares all of the following:
   a.  The state does not penalize receipt of federal funds.
   b.  The state declines to provide duplicative state subsidies for administrative functions that are shielded from state oversight by federal requirements.
   c.  Regents institutions remain free to accept federal funds on federal terms. The state may adjust only its own independent financial contributions.
   d.  Such action by the state represents a neutral exercise of appropriation authority, not retaliation or coercion.
   5.  Meaningful judicial review.  The general assembly finds and declares all of the following:
   a.  The procedural provisions of this chapter regulate the process of judicial review to ensure efficiency, finality, and protection of state fiscal interests.
   b.  Such provisions preserve meaningful access to courts consistent with due process.
   c.  Nothing in this chapter eliminates judicial review. This chapter channels and expedites such review.
   d.  Bond and standing requirements serve legitimate state interests and are proportionally calibrated in this chapter.
   6.  Additional findings.  The detailed findings regarding absence of fiscal discipline, tuition growth, federal loan market distortion, institutional drift, capital planning deficiencies, internal audit capacity, and zero-based budgeting benefits set forth in section 1 of this Act are incorporated by reference.
   7.  Construction.  This chapter shall be construed broadly to effectuate its purposes. Ambiguity shall be resolved in favor of the functions of the independent fiscal restructuring authority provided in this chapter consistent with constitutional limitations.
    Sec. 4.  NEW SECTION.  262.3  Definitions.
   As used in this chapter, unless the context otherwise requires:
   1.  “Authority” means the independent fiscal restructuring authority.
   2.  “Board” means the state board of regents.
   3.  “Contract” does not include a collective bargaining agreement entered into pursuant to chapter 20.
   4.  “Department” means the department of management.
   5.  “Institution” means an institution specified in section 262.7, subsections 1 through 3.
   6.  “Major directive” means a directive of the authority that requires the board, an institution, or an individual not employed by the authority to carry out or not carry out an action.
    Sec. 5.  NEW SECTION.  262C.4  Independent fiscal restructuring authority —— functions and limitations —— reports.
   1.  The independent fiscal restructuring authority is created as a temporary instrumentality of the general assembly exercising ministerial authority to apply statutory criteria to the board and institutions.
   2.  The authority shall commence operations on July 1, 2027, and shall cease operations on July 1, 2032. The authority is dissolved on the date it ceases operations and shall exercise no further authority unless otherwise provided by law.
   3.  A directive of the authority, issued as provided in this chapter, is controlling, notwithstanding any provision of law, including but not limited to chapter 17A, 21, 22, 70A, or 262, or of a board or institution policy, or of a contract entered into by the board or an institution to the contrary.
   4.  The board shall serve as the implementing body for directives of the authority. The board shall not countermand, delay, or interfere with the implementation or enforcement of such directives.
   5.  The authority shall submit quarterly reports on its activities to the general assembly.
   6.  The general assembly, by joint resolution subject to approval by the governor, may override any directive of the authority by a vote of at least two-thirds of the members of both chambers of the general assembly.
   7.  Each major directive of the authority shall expressly state all of the following in writing, and a major directive that fails to state all of the following is voidable upon a timely challenge in district court:
   a.  The specific statutory objective being served, which shall be one or more of affordability, fiscal integrity, workforce alignment, operational efficiency, or taxpayer protection.
   b.  The exact metric or metrics from section 262C.7 that triggered the action, including weights applied and final score.
   c.  The specific statutory authority under which the authority acts.
    Sec. 6.  NEW SECTION.  262C.5  Composition.
   1.  The authority shall consist of the following three members:
   a.  One member be appointed by the speaker of the house of representatives.
   b.  One member appointed by the majority leader of the senate.
   c.  One member jointly selected by the other two members, who shall serve as chairperson. If the other two members cannot agree on the selection of the third member within thirty days of the later of their appointments, the speaker of the house of representatives and the majority leader of the senate shall jointly select the third member.
   2.  A member shall have demonstrated experience in one or more of public finance, higher education administration, organizational restructuring, public sector management, or law. A member need not be a member of the general assembly.
   3.  A member shall not have been employed by an institution or the board within the five years preceding appointment or have a spouse, parent, or child currently employed by an institution or the board.
   4.  The members specified in subsection 1, paragraphs “a” and “b”, serve at the pleasure of the appointing authority. The chairperson may be removed by agreement of the speaker of the house and the majority leader of the senate or by agreement of the other two members with the concurrence of either the speaker of the house or the majority leader of the senate.
   5.  A vacancy of the members specified in subsection 1, paragraphs “a” and “b”, shall be filled in the same manner as the original appointment. A vacancy of the member specified in subsection 1, paragraph “c”, shall be filled by agreement of the remaining two members, or if they cannot agree within fifteen days, by agreement of the speaker of the house and the majority leader of the senate.
   6.  Two members constitute a quorum. Action by the authority requires the affirmative vote of at least two members.
   7.  Members shall be compensated at a salary determined by the legislative council to be commensurate with the expertise and acumen required for the position, taking into account the compensation of comparable positions in state government and the private sector. Members shall be reimbursed for actual and necessary expenses incurred in the performance of their duties.
   8.  Members and staff of the authority are not state employees for purposes of chapter 8A, subchapter IV, or public employees for purposes of chapter 20, but are considered public officers for purposes of chapter 68B.
   9.  The authority may employ staff, retain consultants, and contract for services necessary to carry out its duties. Staff of the authority serve at the pleasure of the authority.
    Sec. 7.  NEW SECTION.  262C.6  Zero-based budgeting.
   For the fiscal year beginning July 1, 2027, and the four subsequent fiscal years, an institution shall establish its budget from a zero baseline annually. The institution shall not presume in favor of continuation of any program, position, or expenditure. The requirement applies to all expenditures regardless of funding source, including general fund appropriations, tuition, federal funds, gifts, and auxiliary enterprises.
    Sec. 8.  NEW SECTION.  262C.7  Reduction of positions —— limitation on reclassification.
   1.  Each institution shall achieve a fifteen percent reduction in administrative full-time equivalent positions, relative to the number of such positions on July 1, 2027, no later than January 1, 2029. Each institution shall achieve a twenty-five percent reduction in managerial and executive full-time equivalent positions, relative to the number of such positions on July 1, 2027, no later than July 1, 2030.
   2.  Following achievement of reductions required by subsection 1, any increase in the number of such positions in an academic year shall be capped annually at the lesser of the annual increase in the consumer price index announced by the federal bureau of labor statistics in the previous academic year or enrollment growth in the previous academic year. This subsection applies for five years after the authority ceases operations.
   3.  An institution shall not reclassify a position as administrative, managerial, or executive, or remove such a classification, without prior written approval from the authority. This subsection applies until the authority ceases operations.
   4.  For purposes of this section, each position at an institution shall be classified according to the integrated postsecondary education data system human resources survey functional categories. Administrative positions are those classified under institutional support and the nondirect portions of academic support and student services. The baseline shall be the institution’s most recent integrated postsecondary education data system submission prior to July 1, 2027.
   5.  Attempts to evade the requirements of this section through reclassification of a position constitutes obstruction under section 262C.15.
    Sec. 9.  NEW SECTION.  262C.8  Evaluation of academic programs —— metrics and weights.
   1.  The authority shall evaluate each academic program by audit at each institution with a score using the following metrics and weights:
   a.  Economic and workforce metrics, constituting a minimum of fifty percent of the total score, including the following:
   (1)  Iowa workforce placement rate, calculated as the percentage of graduates employed in Iowa within two years of graduation, with a weight of twenty percent.
   (2)  Workforce alignment score, calculated by correlation with the list of high-wage and high-demand jobs and corresponding academic majors created pursuant to section 84A.1B, subsection 5, with a weight of fifteen percent.
   (3)  Cost per degree, calculated as the total program cost divided by the number of degrees conferred, compared to similar programs at peer institutions, with a weight of fifteen percent.
   b.  Academic performance metrics, constituting twenty-five to thirty-five percent of the total score, including the following:
   (1)  Graduation and completion rate, calculated as a comparison to institutional and national benchmarks, with a weight of fifteen percent.
   (2)  Enrollment trends, calculated based on the trajectory of enrollment over the previous five years, or the period of existence of the program if less than five years, with a weight of ten to twenty percent as determined by the authority.
   c.  External validation metrics, constituting fifteen to twenty-five percent of the total score, including the following:
   (1)  External funding ratio, calculated by the net dollar amount of grants, contracts, and gifts per program dollar, with a weight of ten to fifteen percent as determined by the authority.
   (2)  Accreditation status, determined based on whether accreditation is required for professional licensure, accreditation is voluntary, or accreditation is not involved, with a weight of five percent to ten percent as determined by the authority.
   2.  The general assembly declares that Iowa taxpayers fund higher education primarily for workforce development and economic benefit to the state. The fifty percent weight of metrics provided in subsection 1, paragraph “a”, reflects this policy determination.
   3.  The authority shall publish its scoring methodology on the general assembly’s internet site within sixty days of commencing operations, including specification of exact weights within ranges established in subsection 2. Using the scoring methodology, the authority shall assign each academic program a composite score from zero to one hundred.
   4.  Standards for scoring of academic programs shall be as follows:
   a.  Programs scoring below fifty shall be presumptively subject to elimination.
   b.  Programs scoring from fifty to sixty-five shall be subject to restructuring review.
   c.  Programs scoring above sixty-five shall be presumptively retained absent extraordinary circumstances.
    Sec. 10.  NEW SECTION.  262C.9  Standards for audit of academic programs.
   1.  The authority shall not audit individual academic programs in isolation. The authority shall conduct audits by academic college or equivalent administrative unit. The authority shall audit all programs within a college or unit simultaneously before issuing any elimination orders for that college or unit. The authority shall not issue elimination orders for any academic program until the complete audit of the corresponding college or unit is complete and the authority has documented a comparative analysis of all academic programs in the college or unit, to ensure elimination orders result from comparative analysis across peer programs within each college or unit.
   2.  A decision by the authority to eliminate, reduce, or restructure an academic program that scores below fifty in the scoring methodology is presumptively based on legitimate fiscal and educational grounds. This presumption may be rebutted only by clear and convincing evidence that the score was pretextual and that the actual motivation was based on the viewpoint or ideological content of the program. Any statistical disparity in outcomes across academic disciplines shall not rebut the presumption absent direct evidence of discriminatory intent. A challenging party shall have the burden of proving pretextual scoring. If the authority complies with the requirements of section 262C.8 and subsection 1 of this section, a decision by the authority shall be presumed to have been made in good faith.
   3.  a.  The authority shall publish quarterly summaries on the general assembly’s internet site showing the distribution of program elimination, reduction, and restructuring across the following categories:
   (1)  Science, technology, engineering, and mathematics.
   (2)  Humanities and social sciences.
   (3)  Professional programs including business, law, and education.
   (4)  Health sciences.
   (5)  Arts and communications.
   b.  A summary shall include the number of programs reviewed; the number eliminated, reduced, or restructured; and the aggregate savings by category. If the authority materially deviates from the requirements of section 262C.8 or subsection 1 of this section in any respect, the authority shall include justification of the deviation in the summary.
   4.  The authority shall apply only the metrics and weights provided in section 262C.8 when conducting audits of academic programs. The authority shall not consider the ideological or political content of a program.
   5.  All audit materials of the authority, including but not limited to scoring materials for each academic program, are public records under chapter 22.
    Sec. 11.  NEW SECTION.  262C.10  Programs and positions —— authority orders and procedures.
   1.  After providing notice and an opportunity to respond pursuant to subsection 2, the authority may order an institution to do any of the following:
   a.  Eliminate, consolidate, or restructure an academic program.
   b.  Eliminate a specific employment position or a specified number of positions.
   c.  Merge administrative functions.
   d.  Establish or modify an operational standard.
   e.  Establish or modify a procurement standard, including but not limited to consolidating purchasing across institutions or, where efficiency requires, waiving competitive bidding requirements.
   2.  Before issuing an order pursuant to subsection 1, the authority must provide written notice to the affected institution any affected individual specifying the proposed order, the information required by section 262C.4, subsection 7, and the deadline for response. An affected institution or individual shall have thirty days to respond.
   3.  a.  Before ordering the elimination, consolidation, or restructuring of any academic program, the authority shall certify in writing that compliance with the order does not result in any of the following outcomes:
   (1)  Breach any interstate compact to which Iowa is a party, including the midwest higher education compact.
   (2)  Violate the terms of any multi-state research consortium agreement.
   (3)  Trigger liability under any multi-jurisdictional contract or memorandum of understanding.
   b.  If compliance with the order would result in any of the outcomes provided in paragraph “a”, the authority shall obtain release from the relevant obligation, negotiate an amendment thereto, or defer elimination until the obligation expires. This paragraph shall not be construed to prohibit compliance with the other, but rather to require that the relevant obligation be appropriately managed before compliance occurs.
   4.  If compliance with an order under this section would jeopardize receipt of federal funds, the authority shall pursue equivalent savings from sources not impacted by the federal requirement or direct an offset pursuant to section 262C.14.
    Sec. 12.  NEW SECTION.  262C.11  Contracts —— authority orders and procedures.
   1.  a.  The general assembly finds and declares the following:
   (1)  A significant public problem exists regarding the contracting practices of the board and institutions that requires a legislative response.
   (2)  Modification, suspension, or termination of such contracts is necessary to address this problem.
   (3)  Such actions are reasonable and appropriate due to inclusion of mandatory compensation.
   (4)  This chapter represents the least impairing means to achieve fiscal stability.
   (5)  The state may exercise its police power to protect the public fisc.
   b.  With respect to tenure, the general assembly further finds and declares the following:
   (1)  Tenure constitutes contractual protection against termination without cause but does not guarantee the continued existence of any position or program.
   (2)  Bona fide program discontinuation based on fiscal or educational grounds is a permissible basis for elimination of a position.
   (3)  This chapter codifies principles recognized in guidelines of the American association of university professors and judicial precedent regarding financial exigency and program discontinuation.
   2.  The authority may order the modification, suspension, or termination of any contract entered into by the board or an institution where necessary to achieve the statutory objectives of this chapter.
   3.  Before ordering the modification, suspension, or termination of a contract, the authority shall do all of the following:
   a.  Issue a notice of intent specifying the contract at issue, the proposed modification, suspension, or termination, the fiscal savings required, and the information required by section 262C.4, subsection 7.
   b.  Provide a counterparty fifteen calendar days to propose an alternative means of achieving equivalent fiscal savings.
   c.  Respond in writing within ten days to any counterparty proposal by accepting, rejecting with specific reasons, or offering a counterproposal.
   d.  Document the complete negotiation exchange in the authority’s administrative record.
   4.  The authority may proceed to the order only after the fifteen-day period expires without a counterparty proposal or good-faith negotiation fails to produce an acceptable alternative. Subsection 3, paragraphs “b”, “c”, and “d”, do not apply if a counterparty cannot be located after reasonable effort, delay would cause imminent harm to students or patients, or the counterparty has materially breached the contract.
    Sec. 13.  NEW SECTION.  262C.12  Contracts —— compensation.
   1.  Upon issuing an order pursuant to section 262C.11, the authority shall authorize reasonable compensation for counterparties whose contracts are modified, suspended, or terminated. Compensation shall be mandatory.
   2.  Standards for compensation shall be as follows:
   a.  For service contracts, compensation shall be the documented costs incurred plus a reasonable margin, or the remaining contract value, whichever is less.
   b.  (1)  For employment contracts, compensation shall be a maximum of six months’ salary.
   (2)  If the employment contract covers a tenured position, compensation shall also include a good-faith effort to reassign the employee for twelve months.
   c.  For construction contracts, compensation shall be the documented costs plus demobilization expenses.
   3.  Compensation authorized under this section constitutes a vested statutory entitlement. The state’s obligation to pay is not discretionary and constitutes a binding obligation. A claim for compensation may be brought in district court.
   4.  If payment of compensation authorized by this section is delayed beyond ninety days from issuance of an order pursuant to section 262C.11, interest shall accrue at the prime rate plus two percent per year. Interest shall accrue without the need for a separate claim.
   5.  A counterparty must file a claim for compensation no later than ninety days from issuance of an order pursuant to section 262C.11. The authority shall issue a written decision on a claim no later than sixty days after it is filed.
   6.  A counterparty may seek judicial review of the authority’s decision in Polk county district court. A petition must be filed within thirty days. The standard of review shall be whether the authority’s decision was arbitrary and capricious. The court may award additional compensation but may not enjoin contract modification, suspension, or termination.
    Sec. 14.  NEW SECTION.  262C.13  Withholding of appropriations and tuition —— moneys.
   1.  Each fiscal quarter beginning on or after July 1, 2027, until the quarter in which the authority ceases operations, the department shall withhold twenty percent of the moneys appropriated to an institution from the general fund of the state that would otherwise be released to the institution in that quarter.
   2.  a.  A tuition withholding fund is established in the state treasury under the control of the department for each institution.
   b.  Each fiscal quarter beginning on or after July 1, 2027, until the quarter in which the authority ceases operations, an institution shall remit twenty percent of tuition moneys received each fiscal quarter to the department for deposit in its tuition withholding fund.
   3.  The department shall release moneys withheld pursuant to subsection 1 or deposited pursuant to subsection 2 for a fiscal quarter upon receiving written certification from the authority that the institution has done of all of the following during the quarter:
   a.  Complied with all authority directives.
   b.  Made adequate progress toward reduction of positions required by section 262C.7.
   c.  Provided complete and accurate documentation required pursuant to this chapter.
   4.  a.  An institution may petition for early release of moneys based on hardship.
   b.  Only the following shall be considered grounds for hardship. Impairment of any other function does not constitute hardship.
   (1)  Documented inability to meet payroll for direct instructional faculty within thirty days.
   (2)  Documented inability to maintain essential patient care functions at a health system facility within thirty days.
   (3)  Documented inability to perform federally mandated safety functions within thirty days.
   5.  A petition for hardship shall include all relevant certified financial statements, a ninety-day cash flow projection, a list of all nonessential expenditures that have been suspended, and a certification that all discretionary spending has been suspended.
    Sec. 15.  NEW SECTION.  262C.14  Oversight of federal funds.
   1.  The authority shall not order any action that would constitute a mandatory violation of binding requirements of federal law. However, federal pass-through moneys, indirect cost recovery, and quasi-endowment moneys derived from federal sources shall be subject to oversight by the authority the maximum extent permitted by federal law.
   2.  a.  If an institution claims that federal grant conditions prohibit oversight by the authority of specific moneys or programs, the institution shall provide the authority with a written determination of federal agency supporting the claim.
   b.  If the authority determines the claim is valid in a fiscal year, the authority shall direct the department to offset moneys appropriated to the institution from the general fund of the state for the fiscal year that would otherwise be released by an amount equal to the amount of moneys the institution has received or will receive in the fiscal year from the federal grant. The institution shall cooperate fully with the authority and department in the determination of the amount of moneys to be offset. The department shall terminate the offset for a fiscal year, and release any moneys offset in the fiscal year, if the institution facilitates oversight by the authority of the moneys or programs subject to the claim to the satisfaction of the authority and the authority so certifies in writing to the department.
   c.  If the authority determines the claim is invalid, the moneys or programs subject to the claim shall be subject to oversight by the authority as provided in this chapter.
   3.  Before directing an offset pursuant to subsection 2, paragraph “b”, the authority shall certify all of the following in writing to the department:
   a.  The offset is the least restrictive means to achieve fiscal equivalence.
   b.  The offset does not impair federally required program outputs.
   c.  Alternative approaches were considered and found insufficient.
    Sec. 16.  NEW SECTION.  262C.15  Obstruction —— penalties.
   1.  An institution employee or official found to have obstructed any function of the authority shall be subject to state employment disqualification scaled to the severity of misconduct as follows, and such disqualification extends to all positions funded by state appropriations, including institutions, community colleges, state agencies, and contractors deriving more than twenty-five percent of their revenue from sources funded by state appropriations:
   a.  Negligent noncompliance, which is defined as failure to exercise reasonable care, a one-year disqualification.
   b.  Knowing obstruction, which is defined as intentional delay, interference, or evasion, a three-year disqualification.
   c.  For intentional falsification, or destruction, including false certification, fraud, or record destruction, a five-year disqualification.
   2.  Before imposing an employment disqualification, the authority shall do all of the following:
   a.  Provide written notice to the employee or official specifying the alleged conduct, the severity classification, and the applicable disqualification period.
   b.  Allow the employee or official at least fourteen days to respond.
   c.  (1)  Provide a thirty-day cure period during which the individual may remedy the deficiency, provide evidence of compliance, or demonstrate the conduct was not as alleged. The authority shall issue a final written determination only after the cure period expires or is waived in writing.
   (2)  If the alleged conduct is fraud, intentional destruction of records, or ongoing harm requiring immediate action, no cure period is required. The authority may issue a final written determination in a time period determined by the authority and shall schedule a hearing at which the employee or official may be heard within fourteen days of imposition of disqualification.
   d.  Good-faith disputes regarding interpretation or compliance shall not constitute obstruction.
    Sec. 17.  NEW SECTION.  262C.16  Annual certification of compliance —— penalty.
   1.  The president and chief financial officer of each institution shall certify annually under oath that the institution is in compliance with all directives of the authority and that all information provided to the authority in the previous year is accurate, truthful, and complete.
   2.  If the authority determines a president or chief financial officer made a false certification under this section, the authority may prohibit any increase in the individual’s salary, impose forfeiture of any performance bonus, or refer the individual for discipline under chapter 70A or to the attorney general for investigation. The authority shall give due consideration to the severity of the falsehood and impose a proportional penalty.
   3.  Good-faith reliance on information provided by subordinates combined with reasonable diligence, and prompt correction upon discovery of any error, constitutes a defense under this section.
    Sec. 18.  NEW SECTION.  262C.17  Whistleblower protection.
   1.  For purposes of this section, “employee” means an employee of an institution, of a contractor with the institution, or of an entity affiliated with the institution.
   2.  An employee who reports conduct to the authority reasonably believed to constitute obstruction, evasion, or noncompliance with this chapter shall not be subject to retaliation. Retaliation against such an employee constitutes obstruction under section 262C.15.
   3.  The authority shall establish a confidential means for employees to report to the authority under subsection 1. The identity of an employee who makes a confidential report shall remain confidential unless the authority determines that due process requires disclosure.
   4.  An employee whose report leads to identification of savings exceeding one hundred thousand dollars may be eligible for a recognition payment not to exceed five percent of savings achieved in the first year of implementation, but not more than fifty thousand dollars, as determined by the authority.
    Sec. 19.  NEW SECTION.  262C.18  Subpoena power and information access —— penalty.
   1.  The authority may subpoena documents, data, and testimony as it determines necessary to carry out its functions. A document shall not be withheld based on proprietary interest, as a trade secret, or based on a nondisclosure agreement. Proprietary information shall be protected through confidentiality protocols established by the authority rather than denial of access.
   2.  The following university-affiliated entities are subject to access of information and subpoena by the authority:
   a.  Any tax-exempt organization under section 501(c)(3) of the Internal Revenue Code using the name, branding, or trademarks of an institution.
   b.  Any entity employing personnel whose compensation is funded in whole or in part by state appropriations.
   c.  Any entity managing, holding, or administering assets related to state-funded facilities, programs, or operations.
   d.  Any entity receiving pass-through funding from an institution.
   e.  Any institution foundation, research park, alumni association, athletics fundraising entity, and faculty practice plan.
   3.  A response to a subpoena of the authority shall include a sworn certification of the search methodology employed. The authority may subpoena the chief information officer or records officer of the subject of a subpoena for testimony regarding the search methodology.
   4.  A subpoenaed document shall be produced within sixty days unless the authority grants a written extension. If the subject of the subpoena does not produce the document within the deadline, such action creates a presumption of noncompliance.
   5.  Any claim of privilege shall be accompanied by a privilege log submitted simultaneously with the first production to the authority. Failure to provide a timely privilege log constitutes waiver of privilege.
   6.  Knowing and willful provision of materially false information to the authority, or knowing and willful destruction of records responsive to an authority subpoena, constitutes an aggravated misdemeanor. The authority shall refer the matter to the attorney general for investigation.
    Sec. 20.  NEW SECTION.  262C.19  Litigation management.
   1.  Standing to challenge action of the authority shall be limited to persons with direct, personal, and particularized harm. Generalized grievances do not confer standing. Institutions have standing only for direct institutional interests.
   2.  Polk county district court shall be the primary venue for challenges to action of the authority. Alternative venue is available for parties with no connection to Polk county as determined by the district court.
   3.  Dispositive motions shall be decided by the court within thirty days. Trial shall occur within one hundred twenty days of filing of the answer.
   4.  Granting of preliminary relief shall require clear and convincing evidence of likelihood of success on the merits, irreparable harm, and a balance of equities favoring the movant. The public interest is presumptively served by implementation of the duties of the authority provided in this chapter.
   5.  a.  For an as-applied challenge to a specific action of the authority, the court shall set a bond to equal the greater of twenty-five thousand dollars or one percent of the annual savings projected from the challenged action, not to exceed five hundred thousand dollars. The court shall determine projected savings based on the authority’s administrative record.
   b.  For a facial constitutional challenge to the validity of this Act or a portion thereof, the court may in its discretion reduce or waive the bond requirement provided in paragraph “a”.
   6.  Authority members and staff shall have qualified official immunity for actions within the scope of their authority under section 669.14A. Sovereign immunity is preserved except as expressly waived for compensation claims under section 262C.12.
    Sec. 21.  NEW SECTION.  262C.20  Reinstatement of academic programs.
   1.  An academic program eliminated by the authority shall not be reinstated for whichever period is shorter absent express legislative authorization by statute:
   a.  Five years from the date of elimination.
   b.  Two years from the date the authority ceases operations.
   2.  a.  An academic program eliminated by the authority shall be associated by the board with its code in the federal classification of instructional programs at the time of elimination.
   b.  A proposed new academic program with the same six-digit classification of instructional programs code as an eliminated program is conclusively substantially similar to the eliminated program and shall be subject to subsection 1.
   c.  (1)  A proposed new academic program with the same four-digit classification of instructional programs code prefix as an eliminated program is presumptively substantially similar to the eliminated program. Eliminated academic programs proposed under different names, proposed to be implemented by a different part of the institution, or proposed with reorganized structure or content presumptively substantially similar to the eliminated program regardless of the classification of instructional programs code.
   (2)  The presumption of substantial similarity may be rebutted by clear and convincing evidence that the proposed new program serves fundamentally different educational objectives. If the presumption is not successfully rebutted, the new program shall be subject to subsection 1.
   3.  A proposed new program is also substantially similar to an eliminated program and subject to subsection 1 if any two of the following apply:
   a.  The two programs overlap more than fifty percent in course content, research focus, or programmatic activities.
   b.  More than fifty percent of personnel for the proposed new academic program are drawn from the eliminated program.
   c.  More than fifty percent of the budget for the proposed new academic program is derived from reallocated funds from the eliminated program.
   d.  The proposed new academic program primarily serves students who would have enrolled in the eliminated program.
   e.  The new program was proposed by personnel from the eliminated program, or personnel in the new program report to personnel from the eliminated program.
   4.  An institution may petition for a determination that a proposed new academic program is not substantially similar to an eliminated program. The determination shall be made in writing within sixty days. A petition shall be made to the authority unless it has ceased operations, in which case it shall be made to the auditor of state. Judicial review of the determination may be sought in district court.
   5.  Subsection 1 does not apply to academic programs required by federal law, required for accreditation necessary for federal financial aid eligibility, or required by court order. The institution shall document the applicable requirement as required by the authority, or by the auditor of state if the authority has ceased operations.
    Sec. 22.  NEW SECTION.  262C.21  Compliance audits.
   The auditor of state shall conduct annual compliance audits to determine if the board and institutions are in compliance with this chapter. An audit shall be conducted in each fiscal year the authority is in operation and the two fiscal years after it ceases operations. The auditor shall report the results of each audit to the general assembly.
    Sec. 23.  NEW SECTION.  262C.22  Certification of savings.
   1.  As part of the annual audit conducted pursuant to section 262C.21, the auditor of state shall certify the dollar amount of total savings across all institutions each fiscal year achieved as a result of implementation of this chapter. Savings shall be determined by comparison to spending in the fiscal year beginning July 1, 2026.
   2.  If the amount of savings certified in any fiscal year is less than fifteen percent, the auditor of state shall include this in the report required by section 262C.21. The board shall establish a remediation plan to increase the amount of savings for the next fiscal year to at least fifteen percent and submit the plan to the general assembly and the auditor.
    Sec. 24.  NEW SECTION.  262C.23  Use of savings —— appropriations.
   1.  Moneys saved by an institution as a result of implementation of this chapter, as certified pursuant to section 262C.22, subsection 1, in the fiscal year beginning July 1, 2027, and the four subsequent fiscal years, are appropriated to the authority to cover the costs associated with the implementation of this chapter.
   2.  Upon certification by the authority to the department each fiscal year, in a manner provided by the department, that no further funding is required by the authority for the fiscal year, the remainder of such moneys are appropriated to the respective institutions at which the savings accrued to be used for the purposes of tuition reduction, need-based financial aid, high-priority academic programs meeting demonstrated workforce needs, and deferred maintenance. In no case shall such moneys be used to restore an academic program or position eliminated by the authority.
   3.  If the moneys appropriated to the authority in subsection 1 are insufficient to fully cover the costs of the authority associated with the implementation of this chapter in a fiscal year, an amount of moneys appropriated to the institutions from the general fund of the state in the fiscal year is appropriated to the authority for that purpose in the fiscal year. The authority shall certify the amount of moneys needed for the fiscal year to the department in a manner provided by the department. The amount appropriated shall be divided evenly across the institutions.
    Sec. 25.  NEW SECTION.  262C.24  Limitation on auditor authority.
   The auditor of state shall have no authority under this chapter that is not expressly provided for in this chapter.
    Sec. 26.  NEW SECTION.  262C.25  Accreditation —— construction of chapter.
   1.  This chapter shall not be construed to require any action that would cause loss of regional or specialized accreditation required for federal financial aid eligibility.
   2.  The authority shall consult with relevant accrediting bodies before taking any action that may implicate accreditation standards.
   3.  If an accrediting body provides written notice that a proposed action by the authority would jeopardize accreditation, the authority shall modify the action to preserve accreditation or submit to the accrediting body a written explanation of why the action is necessary and certification that alternative means were unavailable.
    Sec. 27.  NEW SECTION.  262C.26  Severability.
   1.  Pursuant to section 4.12, if any provision of this chapter is held invalid, the invalidity shall not affect other provisions that can operate independently.
   2.  Severability extends to individual enforcement mechanisms provided in this chapter; to individual metrics; to individual reduction targets; to procedural mechanisms including notice periods, cure periods, and negotiation periods; and to individual definitions. A court shall sever provisions of this chapter at the most granular level consistent with the legislative intent expressed in this Act.
   3.  The general assembly declares that it would have enacted this Act and each provision thereof independently.
EXPLANATION
The inclusion of this explanation does not constitute agreement with
the explanation’s substance by the members of the general assembly.
   This bill establishes a temporary independent fiscal restructuring authority (authority) to provide oversight of institutions of higher education (institutions) governed by the state board of regents (board).
   The authority is created as a temporary instrumentality of the general assembly exercising ministerial authority to apply statutory criteria to the board and institutions. The authority shall commence operations on July 1, 2027, and shall cease operations on July 1, 2032.
   A directive of the authority, issued as provided in the bill, is controlling, notwithstanding any provision of law, or of a board or institution policy, or of a contract entered into by the board or an institution to the contrary. The bill provides that the board shall serve as the implementing body for directives of the authority and prohibits the board from countermanding, delaying, or interfering with the implementation or enforcement of such directives. The bill requires the authority to submit quarterly reports on its activities to the general assembly.
   The bill authorizes the general assembly, by joint resolution subject to approval by the governor, to override any directive of the authority by a vote of at least two-thirds of the members of both chambers of the general assembly. The bill specifies required content of major directives of the authority and provides that such directives are voidable upon a timely challenge in district court if the required content is not included. The bill provides for judicial review of board activities.
   The authority shall consist of a member appointed by the speaker of the house of representatives, a member appointed by the majority leader of the senate, and a member jointly selected by the other two members, who shall serve as chairperson. The bill provides additional requirements and procedures for the membership of the authority.
   The bill requires an institution, for the fiscal year beginning July 1, 2027, and the four subsequent fiscal years, to establish its budget from a zero baseline annually. The institution shall not presume in favor of continuation of any program, position, or expenditure. The requirement applies to all expenditures.
   The bill requires each institution to achieve a 15 percent reduction in administrative full-time equivalent positions, relative to the number of such positions on July 1, 2027, no later than January 1, 2029. The bill requires each institution to achieve a 25 percent reduction in managerial and executive full-time equivalent positions, relative to the number of such positions on July 1, 2027, no later than July 1, 2030. The bill provides for capped increases in the number of such positions for a period thereafter. The bill prohibits changes in classification relating to such positions without prior written approval from the authority.
   The bill requires the authority to evaluate each academic program by audit at each institution with a score using metrics and weights specified in the bill and a scoring methodology specified and published by the board. The bill provides procedures and standards for the authority to audit academic programs based on the scoring methodology, with a higher scoring indicating a program shall be presumptively retained and a lower score indicating the program shall be presumptively subject to elimination.
   The bill provides procedures for the authority to order an institution to eliminate, consolidate, or restructure an academic program; eliminate a specific employment position or a specified number of positions; merge administrative functions; establish or modify an operational standard; and establish or modify a procurement standard. The bill provides for notice and an opportunity to respond and other procedures for such orders. The bill requires the authority to publish quarterly summaries showing the distribution of program elimination, reduction, and restructuring.
   The bill authorizes the authority to order the modification, suspension, or termination of any contract, other than a collective bargaining agreement, entered into by the board or an institution where necessary to achieve the statutory objectives of the bill. The bill provides procedures for such orders. The bill requires that counterparties be provided reasonable compensation when a contract is modified, suspended, or terminated. The bill provides standards and procedures for such compensation. The bill specifies that such compensation is not discretionary and constitutes a binding obligation. 
   The bill requires the department of management (department) to withhold 20 percent of the moneys appropriated to an institution from the general fund that would otherwise be released to the institution in that quarter, in each fiscal quarter beginning on or after July 1, 2027, until the quarter in which the authority ceases operations. In each fiscal quarter, an institution is required to remit 20 percent of tuition moneys received to the department. The bill provides for the release of general fund and tuition moneys when the authority certifies to the department that an institution has carried out specified actions to comply with the bill. An institution may petition for early release of moneys based on hardship as specified in the bill.
   The bill prohibits the authority from ordering any action that would constitute a mandatory violation of binding requirements of federal law. The bill provides that federal pass-through funds, indirect cost recovery, and quasi-endowment funds derived from federal sources shall be subject to oversight by the authority the maximum extent permitted by federal law. The bill establishes a process whereby an institution’s general fund appropriations are offset by the department in an amount equal to federal funds not subject to oversight by the authority.
   The bill provides that an institution employee or official found to have obstructed any function of the authority shall be subject to state employment disqualification. The period of disqualification increases based on the severity of the obstruction. Disqualification includes employment by institutions, community colleges, state agencies, and certain contractors. The bill provides for notice, an opportunity to respond, and other procedures for such disqualification. The bill specifies other activities that also constitute obstruction.
   The bill requires the president and chief financial officer of each institution to certify annually under oath that the institution is in compliance with all directives of the authority and that all information provided to the authority in the previous year is accurate, truthful, and complete. The bill provides penalties including prohibition of salary increases, forfeiture of performance bonuses, and referral for discipline under Code chapter 70A or to the attorney general for investigation.
   The bill prohibits retaliation against an employee who reports conduct to the authority reasonably believed to constitute obstruction, evasion, or noncompliance with the bill. The bill provides for confidential reporting to the authority. The bill provides for a recognition payment to such an employee whose report results in a specified amount of savings.
   The bill authorizes the authority to subpoena documents, data, and testimony as it determines necessary to carry out its functions. The bill provides procedures for subpoenas. University-affiliated entities subject to subpoena include any tax-exempt organization using the name, branding, or trademarks of an institution; any entity employing personnel whose compensation is funded in whole or in part by state appropriations; any entity managing, holding, or administering assets related to state-funded facilities, programs, or operations; any entity receiving pass-through funding from an institution; and any institution foundation, research park, alumni association, athletics fundraising entity, and faculty practice plan. Knowing and willful provision of materially false information to the authority, or knowing and willful destruction of records responsive to an authority subpoena, constitutes an aggravated misdemeanor. An aggravated misdemeanor is punishable by confinement for no more than two years and a fine of at least $855 but not more than $8,540.
   The bill provides procedures for judicial review of action by the authority, including standing, venue, timelines, the standard of review, bonding requirements, and qualified immunity for authority members and staff.
   The bill prohibits reinstatement of an academic program eliminated by the authority for five years from the date of elimination or two years from the date the authority ceases operations, whichever is shorter. The bill provides procedures and standards for an institution to petition for a determination that a proposed new academic program is not substantially similar to an eliminated program. A proposed new academic program found to be substantially similar to an eliminated program is subject to the prohibition on reinstatement. A petition shall be made to the authority unless it has ceased operations, in which case it shall be made to the auditor of state (auditor). The prohibition does not apply to academic programs required by federal law, required for accreditation necessary for federal financial aid eligibility, or required by court order.
   The bill requires the auditor to conduct annual compliance audits to determine if the board and institutions are in compliance with the bill. An audit shall be conducted in each fiscal year the authority is in operation and the two fiscal years after it ceases operations. The auditor shall report the results of each audit to the general assembly.
   As part of the annual audit, the auditor is also required to certify the dollar amount of total savings across all institutions each fiscal year achieved as a result of implementation of the bill. If the amount of savings certified in any fiscal year is less than 15 percent, the board shall establish a remediation plan to increase the amount of savings for the next fiscal year to at least 15 percent.
   The bill appropriates moneys saved by an institution as a result of implementation of the bill, in the fiscal year beginning July 1, 2027, and the four subsequent fiscal years, to the authority to cover the costs associated with the implementation of the bill.
   Upon certification by the authority to the department each fiscal year that no further funding is required by the authority for the fiscal year, the bill appropriates the remainder of such funds to the respective institutions at which the savings accrued to be used for the purposes of tuition reduction, need-based financial aid, high-priority academic programs meeting demonstrated workforce needs, and deferred maintenance.
   If the funds appropriated to the authority are insufficient to fully cover the costs of the authority in a fiscal year, the bill appropriates an amount of moneys appropriated to the institutions from the general fund in the fiscal year to the authority for that purpose. The amount appropriated shall be divided evenly across the institutions.
   The bill shall not be construed to require any action that would cause loss of regional or specialized accreditation required for federal financial aid eligibility. The bill requires the authority to consult with relevant accrediting bodies before taking any action that may implicate accreditation standards. If an accrediting body provides written notice that a proposed action by the authority would jeopardize accreditation, the authority is required to modify the action to preserve accreditation or submit to the accrediting body an explanation of why the action is necessary and certification that alternative means were unavailable.
   The bill includes legislative findings and rules of construction.
   The bill provides for severability.