Senate Finance met on March 13 to consider: SB 61 (Zaffirini), SB 266 (Springer), SB 341 (Springer), SB 506 (Perry), SB 675 (Springer), SB 729 (Huffman), SB 740 (Huffman), SJR 24 (Springer). An archive of this hearing can be found here.
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.
Vote Outs
SB 740 (Huffman) (13-0)
CSSB 61 (Zaffirini) (10-0)
SB 729 (Huffman) (10-0)
SB 740 (Huffman) Relating to an election to approve a reduction or reallocation of funding or resources for certain county prosecutors’ offices.
- Chair Huffman – Harris County $5m in cuts to DA’s offices; adds prosecutors to SB 23 87(R)
- Decreasing prosecutors’ funding
- West – Harris County issue, why are applying it to all counties?
- Is for counties over 1m; want to make sure it is never done
- Is a statewide fight; need to ensure we protect and respect prosecutors
- West – Will be supportive, but this is a Harris County fight
- Hall – Don’t counties in smaller counties deserve the same protections?
- Being pragmatic; a lot of times when you add the whole state to a bill would be pushback from those who would explain their budgets are very small
- Hall – Would not prevent us from expanding this; had some examples from
- If you have any counties in mind to add let me know
Kim Ogg, District Attorney Harris County District Attorney’s Office – For
- Total case log 132k felony and misdemeanor cases and 98k are active
- Strategic accounting by the Harris County Commissioner’s Court has been used to not sufficiently fund our offices; effectively defunds our office
- Prosecutors are law enforcement; all 87 law enforcement agencies file cases with our office
- Entire criminal justice system can be defunded when depriving our office of funds; need protection from this
- Whitmire and Ogg discuss the backlog of cases in Harris County
- Whitmire – Would actually need additional resources to address this backlog?
- Correct
- Flores – How comparable to Dallas and Bexar County in terms of backlog?
- Courts were stalled due to Harvey compounded by Covid-19; are the lowest staffed DA’s office in top 20 urban areas in the nation
Vivian King, Harris County District Attorney’s Office
- FY 21 our budget was $99m and by the end of the year $5m was taken away from our office
- Now have 87 unfunded positions
- Kolkhorst – FY change by the Commissioner’s Court from October to September? Support bill
- Correct, changed to September 1, 2023; the math works out that we started off with $8m too little
- Hancock – Would consider adding a provision that states if you are going to trick the books have a certain amount of time to correct the issue
- Chair Huffman – If anyone has ideas about this, please bring them to me
- Kolkhorst – Informed electorate is necessary; concerned about the amount of time the budget has been moved around
Russel Shaffer, Tarrant County Commissioner Court
- TCCC is committed to funding the Tarrant County’s DA office
- Request changing “budget to “operating budget”
- Recommend excluding special purpose funds
- Recommend requiring the governor/comptroller to promulgate rules regarding their processes if a complaint is filed
- Include lang in HB 1900 from last session allowing a county to seek pre-approval from the gov’s office if are emergency/other items come up
Closing Comments
- West – Supportive of the bill, want to give other large cities time to come talk about it
- Chair Huffman – Bill has been out there for several weeks, is not new
- West – Request if Dallas has any thoughts on this to come to me
SB 740 voted out to the Senate (13-0)
SB 266 (Springer) Relating to a prohibition on the enactment of a law imposing an occupation tax on certain entities that enter into transactions conveying securities or imposing a tax on certain securities transactions.
SJR 24 (Springer) Proposing a constitutional amendment prohibiting the enactment of a law imposing an occupation tax on certain entities that enter into transactions conveying securities or imposing a tax on certain securities transactions.
- Springer – Prohibits legislature from enacting new taxes on transfer of securities or processing of financial transactions
- Exempts any activities subject to current taxes such as sales tax on data processing services
- Was passed unanimously last session but ran out of time
- Hinojosa – Supportive, but why do we need to put this in the constitution?
- Sends a message to financial institutions and stock exchange that Texas will not take that step
- Hinojosa – Ties the hands of future legislators if there is a crisis
- Would do that; is one of the worst taxes you can put on people
- Hinojosa – Passed a constitutional amendment to prevent a state income tax which different than what you are doing here; have reservations about placing in constitution
- Hall – Not in favor of the government picking winners/losers or new taxes; why not say anything we are not taxing today can be taxed in the future?
- Would be something to consider in the future; want to focus on this area first
- Hall – Would hate to see us limit ourselves and create a problem for future legislators; tied our hands previously with real estate
- Nichols – Did this to real estate taxes previously that had large public support; is an excellent idea
- West – Currently tax any securities transactions?
- No; have never done this, but other states do have this on their books
- West – Cryptocurrency would be subject to this?
- Correct; is considered a securities transaction
SB 266 and SJR 24 left pending
SB 341 (Springer) Relating to the applicability of the mixed beverage gross receipts tax and the mixed beverage sales tax to items sold by certain nonprofit entity temporary event permittees
- Springer – Changes definition of a permitted in alcohol beverage code to allow nonprofits that sell only beer/wine to remit taxes for only beer/wine instead of remitting for mixed beverages
- Fixes consequences of TABC 2021 Sunset bill
- Provides an example of a charity that sold beer/wine that had to pay extra in taxes under the mixed beverage tax
SB 341 left pending
SB 675 (Springer | et al.) Relating to small business recovery funds and insurance tax credits for certain investments in those funds; imposing a monetary penalty; authorizing fees
- Springer – Do not have a formal CS yet, but have an informal version
- Rural business less than 1% private equity/venture capital investment; bill seeks to solve this problem
- Sets up a program implemented across 30 states that creates $300m public private investment program; successful examples in Ohio, Utah, Georgia, Pennsylvania, and Oklahoma
- 60% of investment must be put in service in two years and 100% of investment put in service in three years
- Leverages experienced federally-licensed fund managers, identifies those in need of growth investment, and provides financing at below-market rates and flexible terms
- Fund managers will raise 100% of the required capital from private sources; insurance companies through private tax credits; minimum of 10% from fund manager
- Return capital must be reinvested for at least 6 years in rural Texas
- Will be penalties for fund managers if fail to meet goals; issued tax credits can be remitted back to the state
- Water, Ag and Rural affairs studied this program over the interim; committee recommended the development of such a program
- Permissive structure and does not cut revenue; offers an average 2X return on state’s investment
- Fund managers will cover cost of administrating the program
- Committee will be able to monitor and make changes if needed
- CS makes technical changes and requires 100% investment in rural, adds participate fee language, allows RBICs and SBICs or Texas based offices with 3 years rural track records and $70m investments in rural Texas to participate
- Allows proportional recapture for reimbursements
- Adds more robust jobs penalties similar to one in Utah
- Nichols – Heard a bill like this previously; does a loan count as investment in this bill?
- Are loaning capital below market terms
- Nichols – Insurance companies are looking to invest their pool of resources; when you give tax credits to insurance companies do not have a level playing field
- Are incentivizing things that would not have qualified
- Nichols – Concerned giving deference to insurance companies; why not give banks tax credits?
- Oklahoma just passed a similar $100m program
- Creighton – Thanks for this bill; is important as rural Texas needs any help it can get with loans
- Creighton – In CS 65% incentives through insurance tax credits?
- Correct
- Hall – Agree with Nichols; how will we measure success of this program?
- Are job requirements in the bill; Governor’s Office of Eco Dev and Comptroller will have ability to monitor this
- Hall – Want specifics in the bill about a lookback
- Appreciate your comments; are five other states who have done this and will testify to how you can hold people accountable
- Hall – Some have not been successful in deploying similar programs?
- Have learned from others’ failures
- Whitmire – Trying to understand who would qualify for this
- Are small rural businesses
- Whitmire – Can’t these businesses get traditional financing?
- Will have witnesses speak about this
- Paxton – Concern about unintended consequences for rural banks? Have concerns about a level playing field
- No; $300m is not going to fund 1% of rural businesses that need this funding
- Springer and Perry discuss envision candidates go to banks first and then this fills the gaps
- Paxton – Program is bracketed to insurance companies not to other sources?
- Perry – Says a lot about insurance companies that they have a portfolio to invest; insurance premium tax is just the avenue we are going, not married to it
- Paxton – Open to unbracketing it?
- Can have that conversation; is about keeping Texas premiums here for investment
- Hinojosa – Physical impact?
- With CS eliminates administrative cost; $48m a year cost to the state when credits begin to roll out
- Hinojosa – That $48m out of GR or Foundation School Fund?
- GR
- Whitmire – How did you come up with $300m figure?
- Want to see how successful this is, can increase if need be
Dick Lavine, Every Texan – Against
- Bill has come back year after year unchanged; have not seen CS, but still is first come first serve and opportunity to double count and double invest in the same place
- Bill is ultimately flawed
- Competitive biding among insurance companies the premium insurance credits Maryland
Ryan Dressler, Advantage Capital – For
- Policies like this have been evolving for years; program previous testifier discussed is from 1980s no clawbacks/restrictions/etc.
- Things have evolved since then
- Banks are very limited on what they can do; currently 14% of loans are under $1m
- Perry – Banks do not want to do small loans because it is administratively burdensome; what makes this plan different?
- Are now requirements for participation; commitment to raise 100% funds upfront
- Perry – Asks about reporting
- Would turn in every year to the Governor’s Office and Comptroller
Stormy Mishnick, Bridgeport Manufacturing Inc
- Are in Stephens County and Breckenridge; company was acquired and now have the capital to repand and continue building/keeping people employed
SB 675 left pending
CSSB 61 (Zaffirini) Relating to the methods by which the comptroller may provide notice of a hearing on the revocation or suspension, or of the revocation or suspension, of a permit or license
- Zaffirini – Is identical to bill passed by this committee by Buckingham from last session 13-0
- Modernizes comptrollers by requiring electronic notification procedures
- CS aligns e-notice with current mailing processes
CSSB 61 voted out to local and uncontested calendars (10-0)
SB 729 (Huffman) Relating to the cash balance benefit under the Employees Retirement System of Texas.
- Chair Huffman – Bill ensures SB 321 87(R) is implemented as indented; are just technical changes
- Includes the following changes:
- Allows for qualified ex-spouses to gain sharing interest on their share; corrects correctional officer cash balance benefit; restore for future retirees to select optional annuities
- Corrects mechanics of gain-share calculation 5-year average annual return
SB 729 voted out to local and uncontested calendars (10-0)
SB 506 (Perry | et al.) Relating to a limitation on the authority of state agencies to adopt rules that require persons to pay certain fees or taxes
- Perry – No new revenue bill; state agency may not adopt a rule fee/tax without legislative approval
- Hall – Have any retroactive effects on taxes that have been snuck in?
- No; is no fiscal note
Phillip Ashley, Comptroller’s Office
- Chair Huffman – How would this effect Comptroller’s everyday business? Is a big policy shift
- Appreciates the concern of Perry; welcome opportunity to improve
- Agency is already prohibited from doing rulemaking not supported by statute
- Do not think this would have a direct change on how we currently run things; could open state and agency up to additional litigation
- Chair Huffman – Trying to solve when auditors make a decision?
- Yes; auditing is expensive/frustrating to the taxpayer; last session prohibited the interpretation of a data processing component was sales tax valued at $1b
- Nichols – Department of Agriculture has recently determined they are supposed to regulate measurement EV charging stations and charge them a $2.5k license fee; notes Schwertner has a bill that moves this regulation to TDLR where they will charge $50-$60
- Nichols – Will this bill prevent something like what Agriculture has proposed? Concerns me
- Not sure of the specifics; believes this would be contemplated under this bill
- Perry – This is a simple bill; want to talk to members on how to breed a culture of transparency and train our tax people that they are resource first
- Perry – Cannot have unclear ideas of what the rules are; will hopefully get an amendment that will tighten up the language of the concerns you have spoken of
SB 506 left pending
Closing Comments
- Chair Huffman – Will stand in recess until our next meeting on Wednesday