The Senate Committee on Finance met on April 12 to take up a number of bills and vote on pending business. In order, this report covers discussions on SB 153 (Perry), SB 678 (Alvarado), SB 706 (Lucio), SB 1029 (Huffman), SB 1105 (Hughes), SB 1245 (Perry), SB 1438 (Bettencourt), HB 1445 (Oliverson), SB 1827 (Huffman), and SB 1794 (West). All bills covered aside from SB 1827 and SB 1794 were voted out at the end of the hearing.
This report is intended to give you an overview and highlight of the discussions on 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.
Pending Business Vote Outs
- CSSB 63 (Nelson) to Local 11-0
- New CS, addresses Sen. Bettencourt’s concern, provides more time for appraisal review board to schedule protest hearings
- CSSB 609 (Alvarado) 10-1
- SB 372 substituted with HB 1195, HB 1195 (Geren) to Local 11-0
- West – We’ve already had the hearing on the HB?
- Hancock – Laid out the SB, but heard testimony on the HB, moved all testimony from HB to SB, now subbing HB for SB
- Nelson – Made sure when we took testimony that witnesses understood they were speaking on both
- West – We’ve already had the hearing on the HB?
Vote Outs for Bills on Agenda
The following bills were voted out towards the end of the hearing after public testimony was taken
- CSSB 153 (Perry) 11-0
- SB 313 (Huffman) to Local 11-0
- CSSB 678 (Alvarado) 10-1
- SB 706 (Lucio) 11-0
- SB 1029 (Huffman) 11-0
- CSSB 1245 (Perry) to Local 12-0
- SB 1438 (Bettencourt) 11-0, 1 PNV
- CSSB 1524 (Hughes) 11-1
- HB 1445 (Oliverson) to Local 12-0
Bills on Agenda
SB 153 (Perry) Relating to the exclusion of certain payment processing services from the definition of “data processing service” for purposes of sales and use taxes.
- Amends Tax Code to codify Comptroller’s current practice of excluding payments made by card from the definition
- CS makes clear that merchants are not providing taxable data processing services
- Does not alter taxability, creates exclusion for persons solely making financial transactions
Terry Barton, Comptroller’s Office – Resource
- Perry – Has been a year since issue first came up, is SB 153 pretty much agreed upon by industry?
- Yes, have worked with financial transaction folks
- Perry – True this does not create new taxability or remove taxability?
- Correct, we view this as a clean up of credit card transactions
- Perry – Appreciates efforts, complicated technology necessitates this
- West – It’s a practice that the Comptroller doesn’t tax this service and now you’re asking for codification of a practice done by Comptroller’s without statutory authority?
- Not sure I’d characterize it that way; an old hearing without much detail stated credit card processing is taxable data processing, has popped up in audits, refund requests, etc.
- Realized this hasn’t been how it’s applied, credit cards are viewed as financial transactions and not taxable data processing
- West – Appears as though Comptroller is saying that transactions are no longer taxable, has been confusion in audits, this clears it up?
- This clears it up?
- West – So hearing application has been inconsistent?
- Correct
- West – So if this bill passes it will cost state budget about $19 million in 22-23
- This was the original filing, CS does not get into processing of other payments
- West – How is it handled in other states?
- Not normally taxed, many states don’t tax data processing at all
- West – What is the impact with the CS?
- No fiscal impact to the state as CS is limited to credit card transaction
John Christian, Ryan – For
- Clarifies scope related to financial transactions, statute for data processing has not changed much and is limited to word processing, data storage and manipulation, etc.
- Scope never intended to include financial transactions, history of Comptroller action supports this; bill eliminates ambiguity about previous hearing
- Clarifies that payee does not owe sales tax on fees that merchants charge
Mandy Tomlin, United Family – For
- Provides overview of United supermarkets and card processing fees
- Interchange fees has not been taxed in Texas, no other states collect tax on these fees
CS adopted, SB 153 left pending, public testimony to be taken later
SB 678 (Alvarado) Relating to the creation of the small business disaster recovery loan program.
- CS laid out, adds Nelson amendments
- Establishes small business recovery loan program, provides short-term low-interest emergency bridge loans to affected small business, run through Comptroller, Comptroller develops eligibility and application
- Establishes revolving fund, allows portion of fund to maintain purchasing power
- Trying to set this up for future disasters
- Kolkhorst – Love the concept, but can’t figure out mechanism to get money in there
- Setting up the framework for the program, allows Comptroller to establish program
Janice Jucker, Three Brothers Bakery – For
- Provides history of the bakery, cashflow is needed to support businesses through disasters, most businesses do not have the cashflow to keep paying payroll
- Not all disasters are federally declared so disaster loans are not always available
CS adopted, CSSB 678 left pending, public testimony to be taken later
SB 706 (Lucio) Relating to the continuation and functions of the Teacher Retirement System of Texas.
- Incorporates several major Sunset provisions that will improve system interactions
- Creates ombudsman for members, fixes employment after retirement law (replaces month annuity with dollar-for-dollar reduction), directs TRS to develop member outreach plan
- Lucio intends to lay out committee amendments and then pull them down
- CA 1 Lucio – Deals with employment after retirement provisions, replaces with text of Sen. Seliger’s SB 288*, makes conforming changes to transition language
- Nelson – Was this discussed in Sunset? Cognizant of things being voted on that weren’t discussed during Sunset
- Lucio – Absolutely, understand we cannot present things to the Finance committee without original language being presented
- Buckingham – Topic was discussed, wording is slightly different
- Nelson – Was this discussed in Sunset? Cognizant of things being voted on that weren’t discussed during Sunset
- CA 2 Lucio – Grandfathers in retirees who retire before Jan. 1 2021 into return to work requirements to allow them to return without forfeiting annuity
- Nelson – Was this discussed in Sunset?
- Lucio – I believe it was
- Nelson – Was this discussed in Sunset?
- CA 3 Lucio – Ombudsman reports directly to TRS board, clarifies scope of ombudsman, statements made to ombudsman not subject to subpoena, incl. outreach guidelines like financial literacy, technical corrections
- Nelson – Was this discussed in Sunset?
- Lucio – Yes
- Nelson – Was this discussed in Sunset?
- Kolkhorst – On the 3 committee amendments, we will vote on them on the Senate floor?
- Nelson – Allows them to be voted on in the Senate floor
- Kolkhorst – Was the rehire provisions in amendment 2 discussed in Senate?
- Buckingham – Discussed these topics, solutions recommended by Sunset were slightly different
SB 706 left pending, public testimony to be taken later
SB 1029 (Huffman) Relating to the exemption from ad valorem taxation for certain solar or wind-powered energy devices.
- All residential solar devices qualify for tax exemption regardless of how system is financed; covers rented systems
- All should have access to credits, not just those with upfront funds
SB 1029 left pending, public testimony to be taken later
SB 1105 (Hughes) Relating to the resumption of employment by certain retirees within the Texas Municipal Retirement System.
- Schwertner lays out bill
- Those re-employed within 8 years have payments suspended, this is much longer than the other state retirement systems; can discourage TMRS
- Allows for TMRS to be re-employed after 1 year without break in payments, benefits based on when they retire, so not double-dipping
- CS laid out, fixes a few components that were left out in drafting process (CS later withdrawn, Schwertner notes the CS passed out was not for this bill)
David Wescoe, TMRS – Resource
- Kolkhorst – So when retiree comes back into the system, they do not pay in?
- Correct, once they retire payments into the system cease and they receive benefits
- Kolkhorst – Saw issues before and worked on this in 2005 for TRS as those rehired do not pay back into it; concerned that people may pull benefit, then use this to not pay into the system
- Excellent, looked at these when drafting, actuary certified this will not break retirement patterns, 1 year is a long time for someone to wait
- Don’t necessarily go back to same position and won’t go back immediately
- Requiring forfeit of benefit if returning to work within 8 years is a significant penalty
- Kolkhorst – There is a match from local government?
- Yes, our investment team manages money put in
- Kolkhorst – Is there any value in making cities pay both sides to ensure system remains solvent?
- Often don’t go back to the same position, often work in different cities who have difficulty attracting personnel
- Kolkhorst – So if they retire from city A and want to go to work for city X, they don’t pay into city X?
- They do, they pay into that system as a new job for a new retiree
- Schwertner – Why was there an 8 year gap?
- Until 10 years ago TMRS always forfeited, passed an 8 year window and now seeking to take this down to 1 year
SB 1245 (Perry) Relating to the farm and ranch survey conducted by the comptroller for purposes of estimating the productivity value of qualified open-space land as part of the study of school district taxable values.
- Hancock lays out bill
- Ensures landowners have tools needed to fill out farm and ranch survey; other aspects play into property value, but this is an important part of the calculation, not always completed or included
- Bill ensures there is proper training and info resources to get best data possible
- CS laid out, moves language from Tax Code to Gov Code, alters wording and clarifies definitions apply only to instructional guide under bill
CS adopted, SB 1245 left pending, public testimony to be taken later
SB 1438 (Bettencourt) Relating to the effect of a disaster on the calculation of certain tax rates and the procedure for adoption of a tax rate by a taxing unit.
- Clean up from SB 2, requires declared disaster to have caused physical damages, excludes epidemics and pandemics as qualified disasters
- Last fall there were 3 dozen taxing units contemplating using this to raise rate, most decided not
- Codifies when disaster exemption would apply and how long, limits how long taxing units can use higher rate
SB 1428 left pending, public testimony to be taken later
HB 1445 (Oliverson) Relating to the applicability of the sales and use tax to medical or dental billing services.
- Nichols – Without this bill, insurance service tax on medical insurance will be reinstated; would prevent new health care tax from coming into effect
HB 1445 left pending, public testimony to be taken later
SB 1827 & SB 1794 laid out together
SB 1827 (Huffman) Relating to the creation of the opioid abatement account.
- Huffman – Provides overview of opioid settlement, SB 1827 creates abatement fund that would receive settlement funds due to the state
- Sets out generally how money received can be spent, incl. prevention, purchasing antagonists, etc.
- AG established opioid council in 2020, 15% to state, 15% to state, 70% to health care regional allocations; list of cities included in settlement agreement
- Some provisions are noncontroversial, more controversial part of the CS will be whether or not to include provisions prohibiting additional claims after settlement
- AG is saying hat if this is not included it cuts state amount from $1.6 billion to $300 million, but will cut off outstanding claims made that aren’t part of the settlement, Parkland would be cut off; not offering CS on this currently to allow for discussions
- Want to make sure state portion is protected
SB 1794 (West) Relating to a statewide opioid settlement agreement.
- West – Create Abatement Fund Council to manage distribution of funds
- Crux of the matter is whether or not the settlement and term sheet includes hospitals like Parkland; my understanding is it did not and their claims would be cut off
- Need clarity on this and what would be best for the taxpayer, question remains on whether some of these companies would be forced into bankruptcy ahead of claims
Paul Singer, AG’s Office – Resource
- Huffman – The Opioid Council was established in May 2020 by the AG’s Office, how did you determine how money should be allocated
- Agreement between AG and lead attorneys in Texas multi-district suit, tool for Texas to handle future settlements
- Were under pressure from judges that dollars would go to future opioid abatement & need to have structure in place to maximize dollars
- Huffman – Who determined percentages?
- Agreement between AG and attorneys, matches what national default is in some settlements
- Huffman – National standard is state only gets 15%?
- Correct, majority goes into an abatement pot
- Huffman – SB 1794 seeks to set up Council in statute, would that apply to future lawsuits?
- Would apply to future opioid settlement that is global in nature
- Mackenzie settlement was state only and subdivision claims remain
- Huffman – Can the current settlement proceed without putting the Council in statute and tying future legislatures?
- Possibly, would require cities and counties to adopt term sheet
- Huffman – So still ongoing?
- Yes, all settlements are in the works, very close to major settlement with 3 big opioid distributers and J&J
- Huffman – Why is the release claims language critical to ensure the most money flows down?
- J&J wanted global release in order to put this much money into settlement
- Structure that has been agreed to is that the more global piece you can deliver then the more your portion of the money you would receive
- Texas’ share is $1.5 billion, in order to front load this and maximize we need a legislative bar, would automatically qualify Texas for full $1.5 billion
- Without a complete bar we would qualify for a good portion, but leaving door open for future litigation it has potential to drastically reduce amounts we would receive
- Future litigation could have impact of freezing payments to state while settlement is pending
- West – SB 1794 was drafted in conjunction with AG’s Office, Texas Opioid Council is one method of distribution of funds; are there other alternatives?
- Without the Council, the default contemplated is similar with 70% going to administrator to hold funds for abatement purposes
- Would need single state point of contact to allocate money for abatement purposes
- West – So administrator would need to be appointed by someone at the state level
- West – As it relates to hospital districts, these are not specifically included in the term sheet
- Not specific parties and not on list for direct allocations
- But hospital districts and others would have 70% available for approved abatements
- West – Council would receive hospital districts for grants essentially
- Correct
- Have had ongoing conversations with hospital districts
- Nelson – Asks West, in Feb when AG’s Office brought this up, all of us were concerned, you asked if AG had entered into any similar agreements with Gov. and AG appointees; this bill appears to codify the Council, do you still have these same concerns?
- West – Have not been addressed yet, need to make certain the legislature has significant input into the process
- Nelson – Want to make sure the legislature has a voice in the process
- Nelson – You do have a CS right?
- Not sending it up now
- Nelson – Asks AG’s Office, how are the term sheet terms constitutional? Creates quasi-independent governmental entity with funds outside the treasury, exempt from key provisions of code incl. appropriations, contracting & oversight, etc.; how is this not a run around the legislature?
- Singer – My understanding is this is similar to tobacco funds
- Goal of providing abatement and allocating this way are hand-in-hand with the laws these actions were brought under
- Nelson – How will legislature know how much in settlement funds are distributed to any given entity?
- Anticipating a series of different reports as money flows to states
- Nelson – What will this look like? Legislature appropriated the tobacco settlement money
- Council will develop this, will work with you on what reporting you’d like to see
- Nelson – We appropriate hundreds of millions of dollars, have state and federal money coming in, legislature needs to be the ones making appropriation decisions
- Nelson – At some point I would like to know how the CS would address local govs directing money to hospital districts
- West – CS proposal carved hospital districts out because they weren’t a part of the term sheet
- Nelson – We’re going to do this right
HB 1827 & HB 1794 left pending, public testimony to be taken later
Public Testimony
George Keleman, Texas Retailers Association – On SB 153
- Given CS and testimony from this morning we’re closer to being for the bill, on the right path
- Issue could negatively impact thousands of retailers if left unattended, credit card processing is not taxed across most of the US
- Concerns surround marketplace language, in total favor of credit card processing language; have seen a lot of progress on marketplace language
Lisa Ross, Self – For SB 313
- Lost son to gun violence, created mentor program to make sure guns are stored safely
Gyl Switzer, Texas Gun Sense – For SB 313
- Focused on gun safety, supporting removing sales tax on gun safety equipment; firearms sales have increased significantly over the course of last year
Carla James, RSEA – For SB 620
- Bill addresses need to get retirees on the board of trustees for ERS, rare that those on the board have firsthand experience
Martin Gutierrez, San Antonio Hispanic Chamber of Commerce – For SB 678
- Top priority of Chamber is economic relief for small businesses, creating loan program is crucial for keeping small business running through disasters
Tim Lee, Texas Retired Teachers Association – For SB 706
- Bill addresses some Association issues; ombudsman reporting to TRS board of trustees is very important; amendments cover other items like return to work
Stephen Roth, Parkland – On SB 1794
- Expected a CS, but there is not so testifying on the bill
- Parkland has been on frontlines of the opioid epidemic and it is extraordinarily expensive; Parkland and ultimately taxpayers foot the bill
- Claims of Parkland and other hospital districts remain pending, but hospital districts are not parties to the term sheet, were not negotiated with, and not part of settlement distribution schedules
- Concerned claims will be wiped out
- In conversations with AG’s Office to work hospital districts into reimbursement structure
- Huffman – Why weren’t hospital districts invited to participate?
- Do not know, have had discussions with counties and were told no
- Huffman – Was there any discussion on if county distribution would include hospital districts?
- Don’t think that is the case, saw testimony before the judge that hospital districts should be carved out
- Huffman – Should be public knowledge then; do other districts have similar concerns?
- Yes, others have filed and wanted to file but were blocked by AG from filing
- Huffman – Also considering release language in my bill
- West – You said other districts were concerned but were blocked?
- New law that required contingency fee arrangements to be approved by hospital bord and AG, JPS submitted contingency fee arrangement that was denied by AG
- Likely the reason many other districts have not filed
- West – Will follow up with AG’s Office if other districts had this happen
- Huffman – Asks for clarification
- There was a previous law on contingency fee arrangements requiring AG to be part of approval process, in case of JPS, they were denied the right to file suing contingency fee arrangement
- Prohibitively expensive to file on fee for service
- Huffman – So is it your contention that some were denied and some were not?
- No; Parkland filed before the legislation went into effect
- West – Asks for AG’s Office to come back up and respond
Paul Singer, AG’s Office – Resource
- Will need to get the denial letters, aware that there are certain applications made after the legislation was passed that were denied
- The law does provide that when claims would conflict with state priorities it is grounds for denial
- Nelson – Make sure you get it to the whole committee
Adam Haynes, Conference of Urban Counties – On SB 1438
- Discrepancy in how pandemic applies; would like to see that if even if there isn’t physical damage that certain expenditures would be covered
- Asking to make sure 1) bill doesn’t affect this year’s budgets and 2) to account for some of these costs being state costs, e.g. holding state prisoners
- When these types of costs were shifted to counties, asking that we get some relief
Sally Bakko, City of Galveston – On SB 1438
- Appreciates Sen. Bettencourt’s commitment to disaster exception, critical for Galveston following hurricanes
- Disaster exception allows Galveston to moderate property value recovery and avoid tax spikes
- Hoping at some point Senate will reconsider 5 year term
James Quintero, Texas Public Policy Foundation – For SB 1438
- Some local governments took advantage loophole to move beyond revenue cap
- Need to add clarity to tax code, dispel misinterpretations, and protect taxpayers
- Urges strengthening tax rate setting by specifying disaster must cause physical damage
Ed Heimlich, Informed Citizen – On SB 1105
- Nothing that prevents government from ignoring SB 1105 after passage
Ed Heimlich, Informed Citizen – On SB 313
- Good suggestion, but should be made law; sovereign status of the state allows them to appropriate property similar to the Soviet Union
Serina Rivela, Bexar County Hospital District – On SB 1794 & SB 1827
- Provides overview of Bexar County Hospital District operations, care for opioid-related conditions is significant
- Regarding SB 1794, Bexar County Hospital District has its own distinct opioid claim, bill would release claims & bind hospitals to term sheet only between state, cities, and counties
- Preferred option would be a carve-out, working with AG on option to place districts in privity for distribution of funds
- Regarding SB 1827, concerned that bill would stop ongoing claims