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The Senate Committee on Finance met on March 8th to take up SB 30.

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.

 

SB 30 (Huffman)– Supplemental bill

  • Supplemental bill for budget of 22-23 biennium & also makes one time investments
  • $2.3 billion to continue the Legislature’s commitment in expanding inpatient mental health care capacity;
  • $600 million to provide additional assistance grants to school districts for safety and security upgrades;
  • $1 billion to provide supplemental benefit enhancements to retired educators;
  • $296 million to support Department of Criminal Justice operations including additional
  • resources to support staffing, operational needs, and enhanced security through a new
  • correctional officer training facility, transport surveillance systems, security maintenance
  • projects and improved fencing;
  • $1 billion toward the Employees Retirement System unfunded liability, reducing future
  • interest payments and length of amortization for outstanding pension obligations;
  • $3.86 billion to pay aggregate customer rate relief charges associated with Winter Storm Uri,
  • contingent on passage of legislation;

 

LBB Staff

  • Walks through prepared handout information
  • Perry – wants to know makeup of companies who are in $3.86 billion in customer rate relief
  • Huffman – there are bonds being issued today
  • Perry – there are some who adjusted internally on customer payments, a lot of companies fixed this and some didn’t, given bonds are being issued today, can they be paid off quickly
    • Huffman – these are callable bonds, agrees thinks they can be paid off quickly
    • Huffman – $3.8 billion goes to bill that passed out of Senate that dealt with gas security, the Railroad Commission determines who received what
    • Huffman – there were other entities that incurred costs but they were not part of this bill
    • Huffman – this is to issue bonds, call bonds and pay off bonds
    • Perry – it gets complicated since consumers are already paying it back
    • Huffman – these amounts are not supposed to be the ones already being paid
  • Schwertner – just for gas utility securitization portion, there is still a remaining issue for what to do with co-ops and ERCOT
    • Huffman confirms previous bonds were not callable
    • Huffman – tried to claw back prices but it didn’t work, this is $3.8 billion that benefits consumers directly so they don’t have to pay
    • Huffman – if there is legislation members want to file on previous bonds, they can do it – its right at $11 billion
    • Huffman – have room in supplemental to address this $3.8 billion
  • Hancock – securitization was opt in, some used fund balance, etc
  • Hancock – 8 participated in state securitization, notes probably smaller rural gas distribution facilities picked up there own
  • Schwertner – regarding portion not in this bill, electric securitization total cost was $4.2 billion for co-op electric portion of Uri, etc
  • Nichols – understand rational not perfect, but huge amount of people on co-op totally ignored is hard to think about
    • Huffman – ask if he wants to author legislation to address, but have limits on funding
    • Nichols – take proportional amounts for gas, co-ops, etc across the state, this makes it more fair
    • Nichols – will file legislation before Friday, won’t be a legislative council draft
  • Nichols – this section is only for gas customers, not at all for electric customers
  • Nichols – more people across the state of Texas if they modify the portion contingent upon legislation, not asking for more funding necessarily
  • Nichols – wants to modify amount in supplemental so it is proportional and written for gas and electricity
    • Huffman – not sure what can be done, bonds being issued today
  • Huffman and Nichols continue to discuss language of supplemental and if co-ops could be included if different legislation passed
  • Schwertner – issue of equity and callable and non-callable
  • Kolkhorst – wants to echo Nichols concerns, maybe pro-rate these amounts and disperse in a fair and equitable way across the system
    • Huffman – legislation would have to be filed
  • Nichols – thinks there is a way to do this, willing to work on it, will have something filed but not planning on asking for more money
  • Nichols – concerned bill language only allows for gas, wants to amend the supplemental bill

 

Lee Deviney, Texas Public Finance Authority and staff

  • Perry – you are issuing bonds today on contingent legislation
    • Authorized from previous legislation
  • Perry – is $3.8 billion security or back stop for bonds being issued today or have been issued
    • HB 1520 authorized issuance, went through process with Railroad Commission
    • 8 utilities chose to securitize through this process and bonds being sold today and tomorrow
  • Perry – bonds will be issued with or without bond
    • Yes
  • Perry – what is callable and noncallable feature
    • Optional call up to 3 year after day of issuance, taxable bonds
    • Tied to treasury notes rates
  • Perry – doesn’t want string attached of $3.8 billion to bonds being issued today
  • Schwertner – the callable feature, how much are we paying for that
    • Formula determines call feature
    • If treasury rates were not to move, $325 million
  • Schwertner – non callable bonds means you pay entire interest
    • In bond market, when you include call feature there is a cost but hard to prove
  • Schwertner – who is charged with securitization of co-ops
    • No idea
  • Nichols – asks room if anyone knows about bonds for co-ops, bonds have already been sold and non-callable, continues to talk through some of the options he sees
  • Perry – some co-ops had short term finance, some bonded, etc but in theory should pro-rate the general welfare and help everyone
  • Huffman – reiterate bonds issued, companies participated will get money so its who covers the debt
  • Huffman – if paid off debt on gas can you call some of bonds and leave others?
    • Bonds they are issuing today, possible to call a portion
    • Defeasance could be possible
  • Bettencourt- callable feature in bond today, what time frame
    • From day of issuance to 3years
    • Expands on how they could call a portion of the bonds
  • Huffman – how does a portion impact the fees in October?
    • You would pay a portion
  • Hancock – follows up on Nichols question if language needs to be changed in supplemental if members wanted to do proportion
    • LBB staff says language would need to be amended
    • Huffman – this is the beginning of discussion, sure both chambers can work together to see what solutions they can come up with
    • Huffman – can’t slow down process, House is waiting for this
    • Huffman – they want to take up supplemental with House budget bill in same time frame
    • Huffman – this needs to be off senate floor by next Wednesday so it can get to the House the following week
  • Nichols – if this goes as is to the floor, could it be amended on Senate floor
    • LBB staff says correct
    • Huffman – notes House could make changes as well

 

Public Testimony

Ray Hymel, Texas Public Employees

  • Thanks them for accelerate salary increase for state employees
  • 27% loss of buying power since Sep 2014
  • Maybe look at people at lower end of the scale

 

Brandon Young, Heart of Texas Co-Op

  • To ask for fair treatment, want same opportunity as natural gas

 

Christy Rome, Texas School Coalition

  • $8.2 million reduction to foundation school program, over $2 billion is from higher than estimated recapture that was paid
  • Appreciates $600 million for school safety, but thinks more can be done – not more money but less reduction
  • Formula transition grant is needed this current school year

 

Luther Elmore, AFSCME State of Texas Retirees

  • Would like to see support in supplemental
  • Could provide a COLA and 13th check in supplemental

 

Eddie Parades, Nursing Home Provider and Texas Coalition of Nursing Homes

  • Thanks them for nursing home rate adjustment
  • Need funds for next 4 months, requires an additional $40 million state share as bridge to budget
  • Absent bridge rural nursing homes face risk of closure

 

Mark Stubbs, Farmers Electric Cooperatives

  • Request electric cooperatives receive rate payer relief
  • Can’t pay off non-callable bonds, but can set up way to bond defeasance with earmark debit
  • Bettencourt – asked more about ear mark debit
    • Preferred debt to defease the bonds
  • Perry and Stubbs discuss more on complications to address
  • Schwertner – did each entity do this, seeing 13 entities financed, only talking about securitized ones, what would you do about the ones that privately financed
    • There was not one universal entity
    • Schwertner and Stubbs continue to discuss
  • Nichols – encourages witness to work together to come up with a plan and language and share it with members of the committee
  • Hancock – whether you securitize or finance in another way, books will be able to show evidence right
    • Yes
    • This was a securitization bond and not typical
  • Perry – there is securitization, finance and people that paid it out of their checkbook
  • Perry – need to know loss, need full picture of everyone’s loss so it can be shared across the board
  • Perry – need to know total loss and quickly
  • Bettencourt – this is the real problem, already have analysis and determination that you do not have because they don’t even know the amount
  • Nichols – asking for a plan, points out gas doesn’t cover everyone either
  • Nichols – trying to treat everyone as equally and fairly as we can

 

Donnie Clary, CoServe Gas 

  • Did not participate in securitization
  • Opted out of securitization because could charge customers less, give them lowest possible cost

 

Larry Hill, Founder of TMP

  • Most used provider of IDD
  • Current hourly model rate is $8.11 an hour but new rate increase effective, which they do support, staff can now make $21 an hour
  • They cannot retain staff, they need rate relief
  • Hearing group homes closing, loss of access to services
  • Need a minimum of $15 an hour for support staff and increase in operational costs

 

Tim Lee, Texas Retired Teachers Association

  • Know ongoing work for some kind of benefit enhancement and appreciate ongoing work right now

 

Kevin Warren, Texas Health Care Association

  • Requesting $40 million in GR for rate increase
  • End of emergency means loss of temporary rate increase
  • Fully funded rate would be $273 per day, currently would only fund about 70%

 

Ashley Leenerts, Texas Right to Life

  • Request funding for alternative to abortion program
  • 43% increase in demand for services

 

Carla James, Retired State Employees Association

  • Same as teachers in that they are public servants
  • Inflation is eating away at paychecks

 

Rodney Rueter, Lutheran Sunset Ministries

  • Thanks them for the Medicaid rate, additional funding is crucial
  • Daily cost of care has increased as well as need to increase staff salary

 

Steven Hotze, Houston Texas

  • Encourage to adopt a rider amendment to protect children from transgender medical industry

 

Chase Kronzer, American Flood Coalition

  • $400 million for flood mitigation project is just a stop gar measure

 

Cyrus Reed, Sierra Chapter

  • Fund parks and wildlife for park acquisition
  • It makes sense to buy off debt and gas customers relief from high prices but also for electric

 

Sandra Batton, PACSTX

  • Timing is awful, lots of resignation 14 group home or more have closed or will closed
  • Would hope you could increase the funds

 

Tracy Shannon, Mass Resistance

  • Concerned with gender affirming care
  • These procedures are characterized as child abuse by Gov and Lt. Gov.

 

Committee took a break to wait for quorum

 

Huffman laid out committee amendment 1

  • Removes section 209 and adds broadly worded amendment that would provide for customer rate relief of $3.86 Billion
  • Amendment 1 is adopted

 

Huffman made a motion for amendment to be included and Committee Substitute be adopted

 

CSSB 30 voted out (15-0)