House Appropriations: S/C on Articles VI, VII, VIII – February 23, 2023

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The House Appropriations Subcommittee on Articles VI, VII, VIII met on February 23. This report focuses on LBB and agency presentations for the following:

Public Utility Commission of Texas
Office of Public Utility Counsel
State Office of Administrative Hearings
Board of Professional Geoscientists
Texas Department of Insurance
Office of Public Insurance Counsel
Texas Department of Licensing and Regulation
Board of Plumbing Examiners
Texas Racing Commission
Special Provisions Relating to All Regulatory Agencies

This report is intended to give you an overview and highlight the various topics taken up. It is not a verbatim transcript of the discussions but is based upon what was audible or understandable to the observer and the desire to get details out as quickly as possible with few errors or omissions.

Public Utility Commission of Texas

Jeb Bell, LBB Staff

LBB presentation here
Total funding $45.1m and maintaining FTEs
$2.6m for salary increases
Removal of one-time funding for additional commissioner offices
Agency requested self-funded self-leveling designation, would require a statutory change
Highlights Sunset recommendations:
- Continue for 6 years, committees should consider funding a data analytics team, and increase appropriations to ensure eater/wastewater are funded appropriately
- GAA performance metric update
- Agency should develop a reliability standard by May 1, 2023
Full amount of water utility; increasing GRD fund to $5m per fiscal year
Recommend funding to implement SB 2154 $1.6m in GR and 6 FTEs
Deletion of riders related to reports that have been issued
Exceptional items total $19m with 33 FTEs
Exceptional item 7 for a data analytics team $1.91m

Emily Johnson, Sunset Staff

Commission has two funding recommendations for PUC
Sunset recommends continuing for 6 years to review changes being made now
PUC lacks resources to independently analyze data; recommend funding PUC EIs 4 and 7 totaling $2m per year
Recommends additional resource to regulate water/wastewater utilities efficiently
C. Bell – Should be a rider that requires reporting to allow legislature to monitor specific items?
- Legislature could do that; Sunset did not make that specific recommendations
- Are performance metrics tied to EI requests
C. Bell – Could leave water/wastewater in the grey for 6 years
Chair Walle – Anything the agency did well?
- Generally do not write reports on what agencies do well; agency is working hard

Peter Lake, Chair PUC

Agency is substantially under resourced while responsibility grows
Are losing good employees at a staggering rate
Dramatically improved communication and outreach

Thomas Gleeson, Executive Director PUC

8 exceptional items
Exceptional item 1 $4.5m per year for 23 FTEs
Exceptional item 2 funding for a 5% or 10% salary increase; staff leaving due to heavy workload
Exceptional item 3 five planned IT replacement and modernization projects
Exceptional item 4 GR and GRD to digitize files and review certain plans
Exceptional item 5 for travel, training, and equipment
Exceptional item 6 for 3 FTEs for a new Office of Public Participation
Exceptional item 7 $1.91m for a new Data Analysis Team
Exceptional item 8 GR funding for an Energy Efficiency Plan and outreach team
Self-funded and self-leveling request would be a way to reduce taxes paid by utility customers
Would need a statutory change to set assessment to bring in only enough revenue as needed
Did away with stand-alone enforcement division and tied it to legal division; beneficial to not take those types of cuts
After the Winter Storm, members asked if our request for more FTEs was enough; do not come to you with these requests lightly
Chair Walle – Were those FTEs filled?
- Yes; includes additional communications FTEs
Chair Walle – Exceptional item total is $19m, this includes FTEs?
- No
C. Bell – Are there people out there to fill FTE positions?
- Yes; notes average tenure for positions like attorneys have decreased
- Involved in a billion-dollar rate case, had three lead attorneys because they have left
C. Bell – Request is enough to retain?
- Believe so
C. Bell – Small entities have struggled with water/wastewater rate cases; should there be a matrix in place to see progress on this?
- Are required to provide status updates, but don’t see an issue adding a reporting rider
Martinez Fischer – We do something wrong in the baseline to miss out on $19m of good ideas?
- No; part of the issue is the PUC’s historic failure to report what we needed
Martinez Fischer – Think we are devoting enough resources to get the talent we need?
- Will get us on the right track; are losing on work-life balance and wages
Martinez Fischer – Should have post-employment guidelines like legislative members?
- Already have pretty strict guidelines; also lose to other state agencies
Martinez Fischer – Work Public Engagement Office has done?
- Have been working with Thompson and Alvarado’s district on a water utility issues
- Will work with rural communities on how to interact with us
Martinez Fischer – Anticipate having a program that can reach all populations? Notes TDHCA has their communications in multiple languages
- Put all communications in English and Spanish; looking to expand further
Martinez Fischer – How do you communicate if people do not have power?
- Aim to send information prior to crisis; trying to communicate in all modes
Chair Walle – Is $19m enough?
- Is appropriate for the next two years
Chair Walle and Gleeson discusses how staff work on every issue at the commission and recruitment/retention issues; EI 2 raises salaries

Office of Public Utility Counsel

Jeb Bell, LBB Staff

LBB presentation here
Total funding $5.2m and maintaining FTEs
Statewide salary increases included
Agency has trouble with recruitment/retention; especially attorneys
Sunset Commission recommendations: continuing for 6 years, formulize certain contracting procedures for expert witnesses
$81k per FY to implement provisions for HB 3853 which requires agency to participate in providing broadband on behalf of the state’s residential and small commercial consumer
Agency has had issues filling this role
Agency has two exceptional items totaling $1.65m

Emily Johnson, Sunset Staff

Need to formulize certain contracting procedures for expert witnesses; requesting a formal analysis on if keeping them on staff would be more economic

Courtney Hjaltman, Chief Executive and Public Counsel OPUC

In FY 2022 provided $239m in savings for residential and small commercial users
Have a 43% increase in cases alone
Exceptional item 1 GR and GRD funds for 6 FTEs
Exceptional item 2 for $600k for expert witnesses

State Office of Administrative Hearings

Jeb Bell, LBB Staff

LBB presentation here
Funding totaling $24.3m; 7% increase; maintaining FTEs
$1.4m increase for employee salaries
Recommendations do not include request to increase hourly billing rate
Recommendations add Behavioral Health Executive Council authorized to use GR appropriated to SOAH to conducting administrative hearings
Three exceptional items totaling $1.3m and one rider change

Christopher Manza, Chief Administrative Law Judge SOA

Exceptional item 1 targeted 5% salary increase for field-office judges and IT staff
Are working on hiring those outside of Austin to not have to attract people to Austin
Exceptional item 2 to support new hybrid-appearance model
Asking for a rider change in billable rate change from $150 to $165
Chair Walle – Average field worker salary?
- $86k and try to get those with at least 8-10 years of litigation experience
Chair Walle – How address those with issues with interconnectivity connections?
- Adding hybrid as an additional option
Chair Walle – Timeframe of cases?
- Have some statutory deadlines; depends on the case
- Are about 85% billing rate and using time more efficiently
Chair Walle – What percentage of time for what cases?
- Most time are the rate saving cases like those in PUC; discusses other cases
Chair Walle – Turnover rate 17%?
- Yes, is quite high

Board of Professional Geoscientists

Blake Fall, LBB

LBB presentation here
$1.2m GR, 7.5 FTEs, increase of $16.2k GR
Funding changes including $38k decrease due to removal of one-time funding and increase for employee salaries
2 exceptional items totaling $186.1k

René Truan, TBPG

Provides overview of TBPG; important to reach next wave of geoscientists & engage with universities to better serve licensees
Switch exams to computer-based model, expanded locations from 1 to 40 and removes major barrier to licensing exams & lead to increase of licensees; related to an exceptional item request
Exceptional items incl. $6k for HPC FTE to manage regulatory database and $45k/year, $180k total to post for 2 FTEs to meet increase in licensing workload
C Bell – Confident that $45k/year will hire the people you’re trying to hire?
- Moving target, previously posted at $50k and didn’t get applicants
- Trying to retain current employees, if we need to replace then $45k-$50k is the sweet spot
C Bell – Seems like a challenge holding people once they’re hired given pay structure; appreciate your perspective

Texas Department of Insurance

Lyle Blanco, LBB Staff

LBB presentation here
Total funding $260.6m; increase of FTEs and decrease of funding from 22-23
Includes $14.2m for statewide salary increases
Recommendations include continuation of the state regulatory response rider
Remove funding associated with the Temporary Risk Pool
Minor changes to the budget structure
LAR carried forward $16.2m from GRD Fund 36 and reallocated $12m towards salaries and IT modernization
One exceptional item and two rider requests total $450k

Cassie Brown, Commissioner of Insurance TDI

TDI’s operating account is self-leveling
Exceptional item request $450k to replace vehicles in fleet
E. Thompson – Are a pretty big donor agency?
- Amy Maddox, TDI – Yes $74m go to other agencies and have fees that go into GR
E. Thompson – Property maintenance tax is the bulk of those funds?
- Maddox – Yes
E. Thompson – Applaud the department on their work and efforts
- Turning applications around within one day; took legislature’s feedback to heart
Martinez Fischer – Asks about implementation of legislation
- Texas IDR system aims to protect from surprise medical bills
- Received 3k requests for arbitration; saved $1.3b in medical suits
Martinez Fischer – Rate filings within the last year?
- Texas is a file-and-use state but TDI determines if they are adequate; have ability to question an already filed suit; saved $16m last year based on this
Martinez Fischer – Would be interested in seeing data on rate increases; would like to work with the department on this
- Have seen severity increases on property and casualty; includes costs to repair self-driving vehicles plus inflation
Martinez Fischer and Brown discuss TDI outreach after recent emergency weather events
Martinez Fischer you and other agencies could be leaders in expanding the languages communications are sent out in
Ed Thompson – Had IT issues; no requests for that this time? Need to continue to work on that
- Not this round, currently have funds from HB 2 and other sources
- Are currently in process of replacing legacy system
Ed Thompson – Texas Mutual is largest concerning workers compensation
- Jeff Nelson – Yes; makes up 43%

Jeff Nelson, Workers Compensation Division TDI

Have two rider requests that would not cost any funds
Request deletion of rider 14 that specifies funding amounts dedicated for the purpose of workers’ compensation fraud prosecution in cooperation with Travis County DA’s Office
Walle – Reduction rate in workers comp policies? Filed a bill related to worker’s comp
- Is a lot of competition for those policies
Walle – How does Texas Captive work?
- Brown – Have 70 captives that are licensed in Texas; are treated like other insurers
- Insurance companies transfer risks to captive and
Walle – Have the personnel to address that niche?
- Brown – Yes

Office of Public Insurance Counsel

Lyle Blanco, LBB Staff

LBB presentation here
Total finding $2.1m and maintaining FTEs
$121k for salary increases

David Bolduc, Public Insurance Counsel

Had one legislative recommendation this year; to preserve the right for appraisal for vehicles/homes
Overviews exceptional items totaling $1.2m and 6 FTEs
Martinez Fischer – Seems like you have assumed a lot of responsibility and we have not given you resources to address that; need to look at this
- Believe you are right
Martinez Fischer – Appraisal process?
- Because of inflation has made it appraisals difficult for vehicles/homes
- A number of insurers who are proposing getting rid of these appraisals; legislature previously mandated these appraisals for TWIA
Martinez Fischer – Are there conversations about this with TDI? Is pretty serious
- Are wrestling with it as there are causation issues
Ed Thompson – Insurance has become more complex; don’t know how, but need to address; concerned we have taken out some of the teeth to regulate insurance companies
Ed Thompson – How TDI, OPIC and legislature moves forward on this?
- Transparency matters
Ed Thompson – Are not talking about over-regulation, but what can we do?
- Promising is amending form filing requirements for more transparency
- Exclusions for business use
That’s where transparency an
Martinez Fischer – Need to have discussions on consistency in policy; insurance forms change all the time; not sure if 10 FTEs to address all of this will cut it; need this to be fairly regulated
- We try and is why we have EI requests; will be in touch

Texas Department of Licensing and Regulation

Blake Fall, LBB Staff

LBB presentation here
Total funding $94m and maintaining FTEs
Recommendations include the continuation of $2.6m in GR for the Financial Crimes Intelligence Center
$1.5 million in General Revenue for the operation/administration of the Anti-Trafficking Unit
10 exceptional items totaling $45.1m

Mike Arismendez, Executive Director TDLR

Since 2015 TDLR has seen 35% growth in licensing population
Exceptional item 1 $32.9m to acquire a new information
Exceptional item 2 $3.2 to offer competitive compensation for employee retention
Exceptional item 3 $5.01 to provide the Financial Crimes Intelligence Center with additional resources; Center has recovered or diverted $51m
Exceptional item 4 additional FTEs and resource for the Anti-Trafficking Unit
Walle – Was a card skimming bill and the appropriations have been fixed for this?
- Correct

Board of Plumbing Examiners

LBB Staff

Staff presentation

Lisa Hill, Executive Director & Frank Denton, Chair

Denton – gave examples of improvements made and the work they have done
Denton – met with TEA and developed a high school curriculum, students who take it will eligible to take exam and go straight to workforce
Denton – worked with Texas Workforce Commission to establish funding for this through JET program
Hill – reviews exceptional items
Bell – appreciative of work they have done noting this was a different conversation last session
Thompson – wanted more details on the JET program, said community colleges are important as well and wonders if they have had any conversations with them
- Denton – yes but points out community colleges are about preparatory work and higher education, says TSTC has done a phenomenal job of career ready focus
- Thompson – does want information about JET to get to community colleges
- Hill – mentioned work with Colin County and expect to hear from more, she will send letter to members
Walle – had question about testing
- TSTC picked up some of the cost, they still give the test and staff the testing center
Kenneth Biddle, CFO – reviewed cost, noted testing was exception item

Texas Racing Commission

LBB Staff

LBB presentation here

Amy Cook, Executive Director

Provided an overview of changes made in response to Sunset Advisory
Been in the position for 15 months

Special Provisions for All Regulatory Agencies

LBB Staff

LBB presentation here

Public Testimony

Brian Llyod, Oncor

Support for PUC requests
Fully regulated by PUC
$10 billion of capital investment being reviewed and bad rate decisions impact Texas economy, global investors pay attention what happens to the PUC

Cyrus Reed, Sierra Club

Support items 1 & 2 increase staff at PUC and funding for office of public engagement
Challenge to know how to comment at PUC, they need more people to help engage with the public
Energy efficiency program should be looked at, only have one staffer over the area; recommends an office and council to work with public
OPIC represents many people, they need additional funding for experts on rate cases

Emily Brizzolara-Dove, Texas 2036

Support of PUC exceptional items in relation to staffing

Kenneth Flippin, US Green Building Council

Agree with PUC staffing and funding, each exceptional item is really important
Also focused on item 6 & 8, would see big impacts with an energy efficiency council
Supports OPIC requests, attorneys need to be knowledgeable

Testifier

Registered for all the agencies so comments are broad strokes
There are some specialization positions carrying out critical tasks, given market conditions they need more pay and would like committee to pay attention to that issue
Thanks for staff raises
May want to look at method of finance for Racing Commission, benefits they pay for employees

Robert Howard, Brushy County Groundwater Conservation District

Advocate for a bit more funding for TDLR
Provided personal examples

Tim Morstad, AARP

Supports office of pubic engagement at PUC, they need more support

Hearing adjourned

Monday will be testimony on remaining budget items and agencies