Legislative leaders are working to establish a permanent endowment — using funds from an unexpected source — to help alleviate some of the financial costs public universities incur educating veterans and their family members, who are exempted from tuition and most fees.

While there is broad support for the Hazlewood Act and the Hazlewood Legacy Act, the policies that establish these benefits, there is growing recognition in the Capitol that universities require some assistance as more individuals take advantage of them. In fiscal year 2009, institutions had to forgo $24 million in tuition and fees. By fiscal year 2011, the total had grown to $72 million, and it is still growing.

Multiple proposals on where to find money and how to cover some of the exemptions have been tossed around by lawmakers this session. The plan that appears to have the greatest chance of passing is still being developed by Gov. Rick Perry's office and others. It would put about $250 million into a fund for the purpose of providing some relief to universities.

"The governor is committed to working with lawmakers and stakeholders to create a permanent fund that helps mitigate the cost of the Hazlewood Exemption, allowing us to continue to support our veterans and their families as they pursue higher education in Texas," Perry spokeswoman Lucy Nashed said.

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To come up with the money, the governor's office struck a deal with TG, a nonprofit corporation — formerly known as the Texas Guaranteed Student Loan Corporation — established by the Legislature in 1979 to provide Texas students and families with information and services to help with the financing of higher education.

It also served as the guarantor for subsidized student loans originated under the Federal Family Education Loan Program, which was terminated in 2010. Perry has been trying to figure out what to do with TG since. In 2011, he vetoed enabling legislation for TG, noting that its future was uncertain as its loan portfolio declined.

This session, a major change was made in the substitute to Senate Bill 215, the Texas Higher Education Coordinating Board's sunset legislation, when it passed through the House Higher Education Committee. The bill became about much more than the coordinating board — it now includes a section that converts TG into a private nonprofit, though it remains "the designated guaranty agency for the State of Texas."

It's not in the bill, but as part of the arrangement, when TG becomes a private nonprofit, it will provide the state with a one-time payment out of its operating budget of about $250 million. The plan is to use that money to create a permanent endowment for the Hazlewood program.

A TG spokeswoman declined to comment on the plan.

The governor's staff is still determining which bill they can attach language to regarding payments from the fund.

Distributing only a small fraction of the fund to the state's many higher education institutions won't fully cover the cost, but it's a start. According to a Legislative Budget Board estimate, completely funding the exemptions over the next five fiscal years would require about $1 billion.

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