The House Pensions, Investments & Financial Services Committee met to take up the following bills: HB 440 (Murphy), HB 477 (Murphy), and HB 596 (Hernandez).
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.
HB 440 (Murphy) –Relating to general obligation bonds issued by political subdivisions.
- Bill is about reform for bond issuance
- Informing voters by posting sample ballots on websites, stops practice of rolling polling, and requires term of bond is tied to useful life of the project
- Requires unspent bond proceeds to be used for specific purpose authorized or to retire debt or any other authorized use in subsequent election but have been working on language that would allow for posted public hearing for board to vote on use of unspent proceeds
- This language would be a committee substitute and they are working on that language
- Hawkins – asked if shorter term for shorter life would result in larger payments
- Not a wide spread problem but it is there
Brian Woods, Northside ISD
- Wants to note he has been working with the bill author and wants to make comments on the substitute
- Woods was told he could not talk about sub at this point since it was not laid out yet
- Bonds can be for projects multiple years in the future, because of the challenges of estimating the cost there may be times when cost savings is realized
- Notes in his case they begin bond planning 18 months before going to the voters, describes this bond process and noted costs for notices and elections
- Many time when bond savings do occur, projects done with the savings are chosen from items next up to be bonded
- Requested language in substitute that allows for a public meeting and notice on spending of savings from bond and board could also address at the time putting savings towards retirement of debt or toward new projects
- Would recommend committee consider bond savings on items needed after a natural disaster or student safety
- Flynn – do you really want to put the cost of advertising into the bond, what about rubber bands, paperclips. We have fast growth districts and we have one that was about $4billion in debt due to CAB and taxpayer had no idea. Concerned the items the witness listed makes it sound like district is acting like a bank.
- Flynn – would think bond is for specific purpose not for school board to act as a bank and have a slush fund
- Public needs to know what is being purchased with bond funds, CS being discussed is how the public would be informed, what the process would look like is savings were generated
- Flynn – guess I don’t agree with you
- Lambert – heard comment on waiting or delaying you may see an increase in expenses, but in his experience he saw a savings
- In current environment, important to look at entire yield curve and agrees with point its important to look at environment
- Gutierrez – may agree with Chair Flynn; asked if he heard correctly that a whole school was built on savings, he thinks the public should have known that
- Wood – did go through process to vet how savings will be used and recommendation was made to the board and board voted on it
- Gutierrez – there needs to be some transparency to public itself not just something drawn up in committee, transparency at the voting process
- Flynn – It really is misleading with money left over not asking the public to vote on it
- That school would have been voted on regardless
- Flynn – know of one situation where a bond was for a football stadium but they needed additional money for it and public did not know, don’t think they want school board to be acting as a bank and it concerns me greatly
- All agree that transparency in use of funds is important but how we go about getting that transparency
- In his mind, in Flynn’s example, local voters voted for the trustees and so the public will have recourse
- Flynn – different when you ask the public for money for a specific purpose and then use it for a different purpose.
- I am not aware of any bond savings program where the project was not completed, not talking about substitution but savings generated
- Flynn – Then those savings should go to reduction of debt?
- That should be one option the board should consider
- Flynn – because committee a future board, in case of CAB committing board out 40 years
- Hawkins – Northside is largest and shown as stellar example of what growth should be about. I don’t see it as a banking situation I see it as being prudent with those dollars. I think this bill moves in the right direction and will give school districts local control.
- Hawkins – as a subject expert will support based on witness guidance
- Capriglione – I think the average voter wants as much info as possible on what they are voting on, where the money will go, etc. I see this bill as us wanting to give more help to school districts across the state and to have more transparency while doing that.
- Capriglione – see this bill as part of a package, in addition to new dollars in the finance bill want additional transparency, will look at this as part of package that will be delivered for school and taxpayers
- Gutierrez r – You said earlier that “the additional school would have been built anyway”?
- Woods – If we went out in a later issue then the school would have been built
- Gutierrez – You are conflating two different things, you didn’t know at the time that there would be an additional school. The voters could have said no to a later issue.
- Woods – That would have been possible but unusual.
James Quintero, Texas Public Policy Foundation – Support
- Around $12,500 is owed for every person in Texas. A sizable amount of that is reliant on property taxes.
- Data clearly signal there is an overconsumption of public debt.
- This bill will fix some of those issues.
Trey Lary, Allen Bonne and Humphreys – Support
- Debt is necessary for long-term capital assets.
- Bill is about what is transparent to voters.
Chairman Murphy closing remarks
- Make sure bond savings are spent on long-term kinds of needs.
- Will tweak the bill and bring a committee sub back in the near future.
HB 440 left pending.
HB 596 (Hernandez) – Relating to the composition of the board of trustees of the Employees Retirement System of Texas.
- Bill would allow 1 of 3 board members to be either active of retirees.
- Will allow ERS boards to better represent the electorate as retirees vote at ta higher rate in these elections than other voters.
Leroy Haverloh, self – Support
- Retirees have experience of having a pension and not a salary.
- ERS system helped pay for medical care when wife struggled with cancer.
Luther Elmore, AFSCME Texas Retirees – Support
- Pensions makes the difference between dignified retirement and one in poverty.
- AFSCME members think it is important to have a seat at the table in ERS decisions.
- Perspectives of retirees and active employees are both important.
- Bill does not add a board seat, nor does it reserve a board seat for a retiree. Simply allows a retiree to run.
- Murphy – Comments about not reserving a seat are well received, could retirees run for every seat and take it over?
- Elmore – No, the rules would prohibit more than one retiree from serving.
- Murphy – Good, it is important to make that clear.
Bill Hamilton, Retired State Employees Association of Texas – Support
- RSEA has 3 basic priorities
- Get pension fund to actuarial soundness.
- Make sure insurance benefits are not diminished.
- Get retiree on the ERS board.
- There is rarely a retiree at the table, speaking as someone on a fixed income of $1,700/month.
- 300,000 eligible voters in ERS elections, around 25% of those are retirees. In those elections retirees generally account of 60% of the total vote.
- Support the testimony for Luther Elmore.
Hernandez closing remarks
- Hawkins – People who are opposed believe it is a conflict of interest or a self-serving situation?
- Hernandez – I have heard that argument, but it could be applied equally to the active members.
- Hawkins – And this is just one, how many are on the board?
- Hernandez – There are 6, 3 elected and 3 appointed. This would allow just one of the elected seats to be held by a retiree.
HB 596 left pending.
HB 477 (Murphy) – Relating to the notice required before the issuance of certain debt obligations by political subdivisions.
- Want to ensure elections are uniform and transparent.
- Ballot for the election must have general description of how funds will be used and taxes to pay the debt. Ballot must include annual maximum tax increase on a $100,000 home.
- A political subdivision with more than 250 people will have to create a voter information document describing existing debt and any other relevant information.
- Disclosures for certificates of obligation, ensure voters are informed before they vote.
- Stephenson – Explain COs
- Murphy – With this bill there would be a public meeting and they would be disclosed before the vote.
- Stephenson – It has surprised me that often voters do not know they have them.
- Murphy – We are not trying to preclude the use of them, just let the voters know what is occurring.
James Quintero, Texas Public Policy Foundation – Support
- Voters are not adequately informed on many ballot measures.
- Some voters do not realize that there is a connection between voting yes on some propositions and increases in taxes.
Tally Wildman, self – Against
- As proposed the bill undermines bond borrowing capacity to build schools and public parks.
- Most voters do not know what a bond is.
- General public does not understand challenges of school finance system and does not necessarily care. Public only wants to make sure children are safe and well educated.
- Capriglione – That is the worst testimony I have ever heard someone present. You said that most voters do not know what a bond is. Do you really think that people know what debt is and they don’t know what a bond is?
- Wildman – There is a difference between bond and debt.
- Capriglione – You said the general public does not understand the challenges of school finance and that they don’t want to know more, do you really believe that?
- Wildman – I attended hundreds of meetings and not a single constituent showed up.
- Capriglione – Not a lot of people have the opportunity to go to those meetings. What exactly on this bill do you have a problem with people knowing?
- Wildman – The information being proposed is not concise.
- Capriglione – I think your real problem is that you don’t think people are as smart as you are and cannot understand the ballot. There is nothing wrong with giving people more information.
- Flynn – You got involved in this is because you did not have enough information, correct?
- Wildman – Yes.
- Flynn – All this bill is trying to do is give voters more information, which is what you want?
- Wildman – You cannot fit this language on a ballot.
- Flynn – It will be more concise.
- Wildman – You cannot justify a billion dollar bond election in a paragraph.
- Flynn – I guess I have more confidence in the writers than you. I find it strange that lack of information is what motivated you to get involved and now you are opposed to this bill.
- Wildman – Taxation is extremely technical. The community wants to know specifics to their facilities and their kids, which would not be included in the ballot.
- Flynn – That information would be in public documents and not in the ballot. What would be wrong with allowing the voters a little more information.
- Hawkins – So you are not against information dissemination, you have a problem with the vehicle, you want to get the information out and give people time to read it?
- Wildman – Yes.
- Flynn – There will be info on the ballot, but there will be an additional informational sheet, are you opposed to that?
- Wildman – It depends on the vehicle.
- Flynn – You seem to want more information, but this is what the bill provides for and you are against it.
- Wildman – This bill provides information at the polls, I want information posted before the poll.
- Flynn – That is what the chairman is trying to accomplish here, to get the information to the people.
Trey Lary, Allen Boone Humphreys – Support
- Support getting more information to the voters in a way that will not frustrate the process of conducting elections.
- Stephenson – There was a recent bond election in my community in Wharton that passed for three new schools and a $10m football field. I was against this because it will eb difficult to pay for. This bill would have given voters the necessary information.
Joe Palmer, self – Support
- It is necessary to give the voters more information.
- We need fewer of these bonds to be passing and we need the ability to choose what we want.
- Stop making people pay for a $70m football stadium, we need to get the things our kids need.
- Rate of bond growth is out of control.
- Limited abilities to put things on ballot
- Murphy has proposed cleaner language for ballot
- Voter information document is provided to voters not on the ballot and jurisdiction gets to decide format and does not see this as a constraining but an enabling document
- Stephenson – just passed bond to build school and field but no details were provided in his area, he asked community how would they pay for it if they were not growing?
Joe Palmer, self from Tarrant county
- Person experience he has fought bond elections and had beaten one
- Contractors and developers come in a distribute to the PAC that pushes for the bond, but guess who gets the contract to build?
- This will not cost a lot of extra money
- Need less of bonds to be passing, need ability to choose what they want to pay for
- Don’t have enough money in PSF to protect from bonds, bonds passing is exceeding rate in PSF
14 people signed up to register position on bill but did not testify
Murphy, close
- Thinks testimony is wonderful information of what could be provided to the voters
- Originally, he wanted to put this information on the ballot, but his jurisdiction asked about putting it on the website instead, key is that they must let people know impact of bond issues
- Taxpayers pay the bond, not just the parents
- Hawkins – opposition hearing on bill?
- Not loading up the ballot, so they slimed down ballot language
- Not aware of any group against the bill
- Hawkins – schools are comfortable with it and no problem with it being on the ballot?
- His understanding is that they have worked with the districts so that the ballot is clean and moving information online
- Hawkins – will estimates be over 30 years or…
- Just initial debt load at current house value
- Because hearing bond will not raise taxes but it could be that old debt is rolling out and new debt coming in so its just a wash, but if new debt was not coming in then could reduce taxes
- Hawkins – wants to make sure there is a good balance, what happens if schools can’t pass needed bonds
- Voters pass bonds, its incumbent on those asking for the money to make a case for it
- Hawkins – lets say a school district has lost trust of citizens and they are saying no to everything, how would state deal with expansion need in that area
- Don’t think there will ever be a situation where citizens are so dismayed with school board that they will never pass a bond issue
- Most bond issues pass and that will continue to be the case
- Flynn – maybe districts are having a problem, maybe they need to change management and when they see what is being proposed maybe they need to change elected officials, this bill is an opportunity to have transparency
Committee adjourned