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Below is the HillCo client report from the October 6 House Appropriations Subcommittee on Articles VI, VII & VIII hearing.
 
The committee heard testimony related to the Speaker's Strategic Fiscal Review Charge for the following agencies and programs:

  • Public Utility Commission
  • Texas Emissions Reduction Plan at the Texas Commission on Environmental Quality
  • Texas Department of Transportation

 
 
Ursula Parks, Legislative Budget Board (LBB)

  • Performing a strategic budget review to assess the budgetary issues within agency programs
  • A systemic collection of analysis will be beneficial and provide LBB and the legislature with helpful information that isn’t always available otherwise
  • Agencies were asked to submit ideas for funding alternatives such as how global funding would work, outsourcing, how the agency would be affected by funding reductions, etc.
  • The evaluation will allow for a different kind of examination of both large and small programs
  • Also trying to determine to what degree a program relates to an agency’s mission
  • Rep. Bryan Hughes asked about the statutory and constitutional authority being looked at within the agencies
    • For many programs the statutory authority is already known; will be looking at what is in statute and the constitution regarding a program; sometimes it will be very clear and the statute lines out what the program does, sometimes it may be more broad and sometimes it may be ambiguous or have a conflict with other statute; in some places statute may need to be caught up
  • Chairman Drew Darby asked about the timing; would like to be able to start formulating solutions and ideas before bill filing
    • Timing is different for each agency; some have already submitted their initial surveys; some will take longer because of more complicated programs

 
Brian Lloyd, Public Utility Commission (PUC)

  • PUC regulates electricity, telecommunications and water rates
  • The telecommunications industry is mostly deregulated at this point except for rural areas where there is not much choice of provider
  • In the electricity market, PUC regulates wholesale and retail aspects of the industry
  • Water regulation is mostly traditional regulation
  • The most important program within PUC is electric market oversight including authority over access to the grid and system reliability
  • Discussed regional committees that oversee electricity grids; Texas is a member of the groups that oversee the grids that Texas is a part of
  • Hughes asked about Texas having a more active role in the Southwest Power Pool
    • Even if the utilities never go to competition, Texas needs to be involved because there are issues that affect Texas either way;  regions have been delayed for competition because they do not have the wholesale market capabilities to go to competition
  • On the retail side, PUC licenses market participants, ensuring customers have access and pricing issues
  • Working with TCEQ right now concerning the proposed EPA Clean Power Plan and greenhouse gas rules which significantly affect power markets
  • PUC also has appellate authority of municipal utilities
  • Have had authority over water for about a month now; only have the economic regulation piece, not the water quality piece
  • Rep. Cecil Bell asked what the agency is doing for the water rate process
    • The program came over with the same process that has been in place at TCEQ; the four biggest utilities will have a new process and the smaller utilities will have a process for rate increases that will work better with less capital where rates can grow with CPI; medium sized utilities will largely work under the same process; rules should be coming out next year
  • The Universal Service Fund comes from a fee on telecom bills; supports high cost rural service among other things
  • System Benefit Fund provides subsidies for low-income families on their electricity bill
  • Other smaller programs serve smaller populations such as elderly and disabled populations
  • PUC is about 25% smaller than the agency was in 2003; mostly has happened through efficiencies and increased use of technology
  • Darby asked what is anticipated to be remaining in the SBF account after 2014
    • Projecting $197 million left in fund at the end of the first year of the next biennium; there are options to help use the rest of that fund
    • Suggesting to move the money back into GR
    • Could add another year to the program, remove the cap on the discount or increase the number of months that can be subsidized to deplete that account
      • Any of these options would require a statutory change
  • The agency is mostly funded by a 1/6 of 1% fee on utility bills that brings about $54 million into GR each year; PUC only needs $14 million to function  so that fee could be cut significantly saving taxpayers $40 million annually
  • Water authority is funded mostly through fees on water bills
  • Darby asked if PUC is meeting the needs of the industries that are regulated
    • Because Texas is growing and renewable energy is growing there are needs for transmission to integrate that energy; there is a lot of investment going into environmental controls so there may be an opportunity to look at some streamlining mechanisms in that area; have been doing a lot to try to streamline rate cases at PUC because they can be expensive
  • Darby asked about using the rainy day fund to provide securitization for bonds that are sold to rebuild infrastructure after storms
    • Securitizations are expensive to do so they tend to need very high dollar amount bonds to justify them
  • Bell asked what the committee can do to help PUC deal with EPA regulations that are upcoming
    • Making sure the attorney general’s office has enough money to help TCEQ and PUC in legal dealings with EPA is the biggest thing

 
Liz Day, Texas Commission on Environmental Quality

  • TCEQ works to protect public health and natural resources consistent with sustainable economic development
  • TERP is a voluntary program to provide incentives to replace older vehicles with newer equipment; the focus is to reduce the emissions of nitrogen oxides from vehicles and engines

 
David Brimer, Air Quality Division, TCEQ

  • The vast majority of Texas does meet air quality standards
  • If the EPA continues to reduce the ozone standards more Texas communities will be at risk of being in non-attainment
  • Ozone levels are exacerbated by mobile emissions from automobiles so the best way to increase air quality is to reduce emissions from automobiles and mobile sources
  • Darby asked for a breakdown of FTEs in each program, the breakdown of applications made versus grants made and the effectiveness of the programs
    • Can provide that
  • Darby asked about the tower 55 program
    • Tower 55 was a rail intersection in the Fort Worth area where there were congestion issues; they asked for a small amount of emissions reduction grants to relocate the interchange; the funding did not go through because the project was not cost competitive and it would have been a lengthy project
  • Darby asked about other TERP issues
    • There was a bill last session that would have allowed TERP funding to go to congestion mitigation; would have not gone to increased capacity but better flow of traffic
  • Darby asked about emissions activities in the oil and gas industry
    • Looking at those activities and ensuring the agency knows their impact on air quality; haven’t seen a significant increase in emitted nitrogen oxides
  • Bell asked about simplifying the application for TERP grants to increase participation

 
James Bass, Texas Department of Transportation

  • Primary focus of TxDOT is highways; maintain over 195,000 lane miles across the state
  • Inspect over 53,000 bridges in the state
  • Operate flight services for the state
  • Serve as the non-federal sponsor for the gulf coast waterways
  • Population, number of vehicles on the road and vehicle miles traveled are all increasing; at the same time inflation in the construction industry is increasing at a very high rate; causing a problem with purchasing power and ability to grow and maintain infrastructure
  • Rep. Sergio Martinez asked about unexpended funds within TxDOT
    • There are expected to be some funds from contract payments that are often unexpended due to cost coming in below estimate; they are put toward other projects and shifted between fiscal years
  • Martinez asked about changes to the UTP
    • The Texas Transportation Commission is in a process of updating the plan on a quarterly basis
  • Martinez noted his concerns about funds turning into discretionary funds because certain projects finish with lower cost than what was expected
    • John Barton with TxDOT noted most of the time bids are within 2-3% of the actual cost; when funding planned for a project is left over it usually goes to another similar project in the same fiscal year; some projects also come in above estimates so funds can be used to satisfy those underestimates
  • Martinez asked about what is being done for roads in South Texas
    • Have been looking at FTEs and determining if they are allocated efficiently; have given a district in South Texas an additional 16 FTEs to work on maintenance; also expanded their contracting abilities to get maintenance projects done
  • Rep. Trent Ashby asked about federal reimbursements, is the number increasing or decreasing
    • There is a great deal of uncertainty surrounding federal funding; they have continued funding until May of 2015 but there is no guarantee that level of funding will continue past that date; taking a conservative approach and only planning for funding at a reduced level
  • Darby asked about sequencing of the federal obligation reimbursement
    • Once funds have been obligated, it is assumed the federal government will be good for the money; with the changes in the reimbursement for future years, TxDOT will have to adjust plans accordingly; can sustain existing projects with short term borrowing for about 6 months if federal reimbursement is not continued
  • Darby asked about pass through funding
    • There haven’t been any pass through projects funded in the last several years
  • Ashby asked about information centers; are people still using them with the advent of the internet
    • Not aware of any plans to build more; there are currently 12  which saw 2.1 million visitors last year
  • Bell asked about the challenges of the pass through funding program, was it a good program
    • It had benefits, one of the challenges was that once a project began the state highway fund was committed over the next 10-20 years to provide funding for the project; it was hard to determine what other needs could be met if more and more future year money was being committed to pass through agreements