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The House Committee on Business and Industry met on February 12, 2019, for an organizational hearing. The Committee heard invited testimony from the Texas Department of Banking, Workers’ Compensation Division of the Texas Department of Insurance, Consumer Protection Division of the Office of the Attorney General, Office of Risk Management, Texas Mutual Insurance Company, Office of the Comptroller, Legislative Budget Board, and the Texas Workforce Commission.

This report is intended to give you an overview and highlight of the discussions on the various topics the committee took up. It is not a verbatim transcript of the hearing 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.

 

Texas Dept. of Banking

Charles Cooper, Commissioner of the Texas Dept. of Banking

  • Discussed agency response to Equifax breach
    • Have instituted new cybersecurity programs
    • Banks are advancing appropriately, but some remain at the minimum level.
    • DoB has 11 dedicated IT security examiners
    • All 110 financial examiners will receive cybersecurity training.
    • DoB was authorized to examine 3rd party service providers. Statute changed by the 85th
    • Examination of Equifax resulted in a “consent order”.
  • Parker – Thanked Cooper for his job in handling the Equifax situation.
  • Darby – In the consent order, what mechanism do you use to make sure items in the order are be adhered to properly and in a timely manner?
    • Cooper – We require detailed progress reports. These reports can result in follow-up examinations where we can determine if what they say is what they are actually doing.
    • Darby – Do you have enough tools to ensure they maintain the expectations outlined in the order?
    • Cooper – Equifax hired a group of lawyers to “fight” us when we were coming in. As of today, we are getting what we need. If they decided they did not want to do what we are asking them to do, we would need more resources.
    • Darby – It seems that based on their fee structures they are incentivized to have these freezes, have you looked into that issue?
    • Cooper – Yes we have looked into that. In California and NY my counterparts have specific authority over that. In TX we had to use common sense and persuasion to get them to realize the incentives created by their fees. But we do not have specific authority to change that.
  • Martinez-Fischer – In consent order it says you will pursue all legal remedies allowed by law. Can you let us know what your legislative priorities would be so you can have full authority to investigate the credit agencies?
    • Cooper – Yes.
    • Cooper – NY charged $700k and CA charged $400k for their work, but they had the ability to do that. The result of our examination is not public, but it theoretically could have been made public.

 

Office of the Attorney General, Consumer Protection Division

Chris Kennedy, Deputy Chief, Consumer Protection Division, Office of the Attorney General

  • Primary enforcement statute the Deceptive Trade Practices Act (DTPA)
    • Under DTPA can recover $20,000 per violation
    • Several tie-in statutes, including Texas Debt Collection Act, and Texas Identity Theft and Enforcement Act
  • Investigations remain confidential until they are made public in order to avoid damage to business where no evidence of wrongdoing is found
  • AG has been aggressive in prosecuting sale of synthetic cannabinoids
  • Authority to enforce 15 different laws concerning identity theft
  • Data breaches at Neiman-Marcus, Target, and Uber, have been investigated by Consumer Protection Division. In each case money was returned to consumers and certain security procedures implemented.
  • Martinez-Fischer –working groups and data security
    • Martinez-Fischer – Is DoB a part of those confidential conversations?
    • Kennedy – Not that I am aware of
    • Martinez-Fischer – Is the agency looking in any capacity at any working group?
    • Kennedy – We do not release that information.
    • Martinez-Fischer – Many of us believe in voluntary compliance but there are situations where we could incent people to comply sooner rather than later.
  • Patterson – When talking about returning money to Uber drivers, what is the process?
    • Kennedy – It depends, I believe we had an admin who would be returning the money. The problem is that Uber delayed in the disclosure of that breach for quite some time. There is an ongoing process of notifying those drivers. There is often a restitution fund, but people may not know that it exists, or they can access those funds.
  • Martinez-Fischer – I would want to know as it related to looking at agencies, is there a best practice in order for them to do their work to ensure the consumers are representing. I would like to have conversations about how to equip these agencies with the tools they need.

 

Texas Department of Insurance, Division of Workers’ Compensation

Cassie Brown, Commissioner of Workers’ Compensation

  • DWC provides injured employees with benefits, protect employers from lawsuits in many cases.
  • Only state where participation is voluntary for private employers, 82% of private sector employees covered by workers’ comp, 72% of employers participate.
  • Workers’ Comp is under TDI but operates mostly independently.
  • Since adoption of HB 7 in 2005, Texas has seen significant system improvements
  • Recommend new rules concerning balance payments for patients at military treatment facilities
  • Cancer presumption for firefighters and EMTs, a firefighter or EMT is presumed to have developed the cancer due to their job given certain assumptions (not smoking, etc.).

 

Jessica Barta, Public Counsel at Office of Injured Employee Council

  • Created under HB 7 in 2005.
  • 8% of claims to DWC go through dispute resolution, these are all handled by OIEC.
  • Recommend an increase in filing deadline for district court from 45 days to 60 days.
  • Martinez-Fischer – With regard to Spanish speaking population, are you providing website access or forms in Spanish?
    • Barta – All of our website and one-pagers are in Spanish. We try to match up Spanish speaking ombudsmen with Spanish speaking claimants.
    • Martinez-Fischer – Is there a smarter way to do it?
    • Barta – In a mediation we sometimes have a family member or friend who may be able to help. When we rolled out our matching program for Spanish speaking ombudsmen with Spanish speaking claimants translation costs have decreased by half.

 

Office of Risk Management

Stephen Vollbrecht, Executive Director State Risk Manager for Texas

  • Office administratively attached to Office of the AG.
  • Reduce and control risk in cost-efficient and effective manner.
  • Funded through contracts, changes to budget do not affect GR.
  • Administer workers’ comp program for state employees.
    • Injured employees are entitled to all healthcare costs reasonably related to the injury
  • Risk transfer program
  • Help advise customers on insurance programs, board of directors must provide approval before a state agency purchases insurance
  • Design continuity of operations plans
  • Martinez-Fischer – What is the collaboration you have with other agencies when performing risk analysis?
    • Vollbrecht – We have 2 different types of formal consultations. We perform a minimum of 248 on-site consultations per year. We do 29 more in-depth every year. We are not investigative or enforcement, we only provide advice
    • Martinez-Fischer – How do you work with subject matter experts from different agencies?
    • Vollbrecht – We set up advisory councils to work with subject matter experts in different agencies.
    • Martinez-Fischer – Are you ever involved in conversations where you see project timelines or budgets expanding
    • Vollbrecht – We consult on insurance matters and whether the contracts are sufficient to protect against excess liabilities.
    • Martinez-Fischer – I am wondering where you fit in on the project and contract side of things
    • Vollbrecht – If we are asked to consult we respond
    • Martinez-Fischer – You do not have the authority to invite yourself?
    • Vollbrecht – That is correct

 

Texas Mutual Insurance Company

Jo Betsy Norton, Texas Mutual Insurance Company

  • Texas Mutual the state’s largest workers’ comp insurer with 43% of market
  • Texas Mutual serves as insurer of last resort
  • Does not operate with any state funds or state employees.
  • State has no liability if the company becomes insolvent.
  • Governor appoints 5 out of 9 board members.
  • Has paid out 20 years of consecutive dividends.
  • Motor vehicle accidents the leading cause of workplace fatalities
  • Have instituted 4 grant programs to improve health and safety of workers
  • Martinez-Fischer – What is the ratio of policy commitments between people who
    • Norton – Only about 140 are in the program as the insurer of last resort. Most of these are very high-risk industries, for example firefighters or underwater welders. Some professional sports teams are also coming to us.
    • Martinez-Fischer – What would happen if the company failed?
    • Norton – The same thing that would happen to any other insurer, insolvency, receivership, etc. We make sure we have plenty of reserves and surplus so we can remain financially solvent.
    • Martinez-Fischer – Does anyone monitor evaluating insurers to see if there are any industry trends of not covering certain industries knowing they will end up with you?
    • Norton – We have been finding that we have competitors in certain niche markets, or oil and gas for example.

 

Office of the Comptroller

Tom Currah, Chief Revenue Estimator

  • $119.12b for general purpose spending
  • Sales tax collections grew by 10% in fiscal 2018, those have slowed. Expect growth closer to historic rates in the next year.
  • Interest rates, oil prices, and trade policy can have large impacts on Texas as an export-heavy state.
  • Projecting $103.7b in GRR collections, $18b in non-GRR collections.
  • $266b in all funds including federal funds.
  • Every estimate has a certain amount of uncertainty.
    • More uncertainty surrounding this estimate than previous estimates due to uncertainty about global economic situations.
  • Estimate will be updated as needed.

 

Legislative Budget Board

Sarah Keyton, Asst. Dir. LBB

  • HB 1 GR includes $115b.
  • Article II – Health and Human Services, increase by $2b in all funds
  • Article III – Education, increases by $10b in all funds
  • HB 1 funds projected caseload growth in Medicaid and maintains Medicaid cost, projecting a more favorable FMAP.
  • HB 1 includes $231m in ESF to maintain benefits for TRS, which is higher than constitutional requirements.
  • Martinez-Fischer – A couple big ticket items in Senate for public ed and property tax, is there any guidance or comment to allay my concerns about moving or debating on big pieces of legislation? Is this unusual or has it happened before?
    • Currah – We have put a fiscal note on SB 2, any note is officially LBB, but some are sent to Comptroller. All we could do for that note was making certain assumptions about what might happen if the 2.5% was instituted. We could not do an estimate of how it would affect State Foundation School Funding because of the way the bill was crafted.
    • Martinez-Fischer – For me as a lawmaker I know people will take note if they have to pay for anything, is there any conversation taking place within LBB or Comptroller for how we are going to alert members? How will the Senate be in a position to decide?
    • Currah – Cannot speak for the Senate
    • Keyton – IN our fiscal notes we are sometimes not able to put a table saying, “this is the cost”, but we try to provide as much context as possible

 

Texas Workforce Commission

Ed Serna, Interim Exec. Dir. Texas Workforce Commission

  • Annual budget $1.8b, 85% of which is funded by federal money.
  • Administer unemployment insurance system
    • 518,000 claims in FY 2018
  • Requested approval to use federal funds to update systems built in 80s and 90s
  • Employer’s tax rate rises or falls based on successful claims filed against the employer
    • These taxes put into unemployment insurance (UI) trust fund.
    • UI trust balance currently about $2.1b.
  • Civil rights division exists to prevent employment and housing discrimination.
  • Martinez-Fischer – Is there anything outside of your legislative request we on the Committee could help you with?
    • Serna – We would like to work with the Committee as the opportunity presents itself.
    • Martinez-Fischer – We as a legislature have done more things to bring more people into your jurisdiction, I am interested in how we can help you carry out your mission.