Texas Legislature Monthly Report December 2018

STATEWIDE: GENERAL ELECTION RESULTS: STATEWIDE - Republicans again won all statewide offices on the ballot. Democrats have not won a statewide office in since 1994. This is a non- Presidential election year but most of the statewide offices were on the ballot including races for: U.S. Senate (Ted Cruz), Governor (), Lt. Governor (), Attorney General (), Comptroller (Glenn Hegar), Agriculture Commissioner (Sid Miller), Land Commissioner (George P. Bush), Railroad Commissioner (Christi Craddick), three Texas Supreme Court Justices (Jimmy Blacklock, John Devine, and Jeff Brown), and two Court of Criminal Appeals Justices (Sharon Keller and Barbara Parker Hervey). Voter Turnout - 52.72% of registered voters (8,326,216 voters) cast ballots. That compares to 59.16% (8,934,718 voters) in 2016; and 33% (4,708,556 voters) in 2014. This year’s turnout is in the range of typical turnout for presidential elections and is the highest non-presidential turnout this decade by over 10 points. - The Texas Senate has 31 members. Since Senate members serve staggered four-year terms, only 15 of the 31 Senate members were up for re-election in 2018. Partisan Makeup: The Texas Senate currently has 21 Republicans and 10 Democrats. The Democrats picked up two seats (Senate Districts 10 and 16) in the General Election. In 2019, the partisan makeup of the Texas Senate will be 19 Republicans and 12 Democrats. One Incumbent Senate Member Did Not Seek Re-election: • (R-Plano) in Senate District 8 One incumbent Senate Member Was Defeated in the Primary Election: • Senator Craig Estes (R-Wichita Falls) in Senate District 30 2 incumbent Senate Members were Defeated in the General Election: • (R-Colleyville) in Senate District 10 • (R-) in Senate District 16 New Members of the Texas Senate in 2019: • Senate District 6: Winner of the December 11th Special Election • Senate District 8: (R-McKinney) • Senate District 10: (D-Burleson) • Senate District 16: Nathan Johnson (D-Dallas) • Senate District 19: Peter P. Flores (R-Pleasanton) - he was sworn into the Senate on October 12, 2018 • Senate District 30: (R-Prosper) 1

Note: Democrat Sylvia Garcia of Houston won Congressional District 29. She resigned from the Texas Senate necessitating a special election in Senate District 6. TEXAS HOUSE OF REPRESENTATIVES - There are 150 House members. All 150 members of the House were up for re-election in 2018. Partisan Makeup: The Texas House currently has 95 Republicans and 55 Democrats. The Democrats picked up 12 seats in the General Election. In 2019, the House will have 83 Republicans and 67 Democrats. 13 Incumbent House Members Did Not Seek Re-election: • Cindy Burkett (R-Sunnyvale) in House District 113 • Byron Cook (R-Corsicana) in House District 8 • Pat Fallon (R-Frisco) in House District 106 • Helen Giddings (D-Dallas) in House District 109 • Larry Gonzales (R-Round Rock) in House District 52 • Lance Gooden (R-Terrell) in House District 4 • Jason Isaac (R-Dripping Springs) in House District 45 • Mark Keough (R-The Woodlands) in House District 15 • Jodie Laubenberg (R-Wylie) in House District 89 • Larry Phillips (R-Sherman) in House District 62 • Kevin Roberts (R-Houston) in House District 126 • Leighton Schubert (R-Caldwell) in House District 13 • Joe Straus (R-San Antonio) in House District 121 6 Incumbent House Members Were Defeated in the Primary Elections: • Wayne Faircloth (R-Dickinson) in House District 23 • Dawnna Dukes (D-Austin) in House District 46 • Roberto Alonzo (D-Dallas) in House District 104 • Jason Villalba (R-Dallas) in House District 114 • Diana Arevalo (D-San Antonio) in House District 116 • Tomas Uresti (D-San Antonio) in House District 118 2 Incumbent House Members Were Defeated in the Run-off Elections: • Rene Oliveira (D-Brownsville) in House District 37 • Scott Cosper (R-Killeen) in House District 54 8 Incumbent House Members Were Defeated in the General Election: • Paul Workman (R-Austin) in House District 47 • Ron Simmons (R-Carrollton) in House District 65 • Linda Koop (R-Dallas) in House District 102 • Rodney Anderson (R-Grand Prairie) in House District 105 • Matt Rinaldi (R-Irving) in House District 115 • Mike Schofield (R-Katy) in House District 132 • Gary Elkins (R-Houston) in House District 135 • Tony Dale (R-Cedar Park) in House District 136 27 New Members of the Texas House in 2019: • House District 4 – Keith Bell (R-Forney) • House District 8 – Cody Harris (R-Palestine)

2 • House District 13 – Ben Leman (R-Brenham) – he is already a member of the Texas House filling the unexpired term of Representative Leighton Schubert • House District 23 – Mayes Middleton (R-Wallisville) • House District 37 – Alex Dominguez (D-Brownsville) • House District 45 – Erin Zwiener (D-Driftwood) • House District 46 – Sheryl Cole (D-Austin) • House District 47 – Vikki Goodwin (D-Austin) • House District 52 – James Talarico (D-Round Rock) • House District 54 – Brad Buckley (R-Killeen) • House District 62 – Reggie Smith (R-Sherman) • House District 65 – Michelle Beckley (D-Carrollton) • House District 89 – Candy Noble (R-Allen) • House District 102 – Ana-Maria Ramos (D-Richardson) • House District 104 – Jessica Gonzalez (D-Dallas) • House District 105 – Terry Meza (D-Irving) • House District 106 – Jared Patterson (R-Frisco) • House District 109 – Carl Sherman, Sr. (D-Dallas) • House District 113 – Rhetta Andrews Bowers (D-Rowlett) • House District 114 – John Turner (D-Dallas) • House District 115 – Julie Johnson (D-Carrollton) • House District 118 – Leo Pacheco (D-San Antonio) • House District 121 – Stephen Allison (R-San Antonio) • House District 126 – Sam Harless (R-Spring) • House District 132 – Gina Calanni (D-Katy) • House District 135 – Jon Rosenthal (D-Houston) • House District 136 – John Bucy (D-Austin) 2 Former House Members Will Be Returning to the Texas House in 2019: • House District 15 – Steve Toth (R-The Woodlands) • House District 116 – Trey Martinez Fischer (D-San Antonio)

Bill Filing – Legislators began pre-filing bills for the 2019 legislative session on November 12th. As of December 1st: • House Bills – 424 have been filed with HB’s 1-20 reserved for Speaker priority bills; • House Joint Resolutions - 22 have been filed with HJR’s 1-10 reserved for Speaker priority Constitutional Amendments; • Senate Bills - 182 have been filed with SB’s 1-30 reserved for Lt. Governor priority bills; and • Senate Joint Resolutions - 10 have been filed.

SENATE: Special Election in Senate District 6 – Governor Abbott ordered an emergency special election to be held in Texas Senate District 6 on Tuesday, December 11,

3 2018, to elect a state senator to serve out the unexpired term of Senator Sylvia R. Garcia, who is going to Congress in District 29 replacing long-time Congressman Gene Green (D-Houston), who did not seek re-election. The filing deadline was Friday, November 16, 2018. Early voting started on Monday, November 26, 2018. Candidates include 3 Democrats and 1 Republican: • State Representative (D-Houston) • State Representative Ana Hernandez (D-Houston) • Mia Mundy (D-Houston) • Martha Elena Fierro (R-Houston)

HOUSE: House Speaker’s Race – On November 12th, State Representative Dennis Bonnen (R-Angleton) announced that he has 109 pledges to become the next Speaker of the Texas House. 78 of the 83 incoming Republicans pledged to Bonnen (5 Republicans were not on the “Pledge” list). 31 of the 67 incoming Democrats were on Bonnen’s “Pledge” list. 36 Democrats were not on the list, with 13 of those being incoming Freshman Democrats. Bonnen said, “Each one of my colleagues who has come forward to run for the Speakership has done so out of deep respect for their constituents, their state, and the legislative body that has afforded us this great honor in the first place. It is a privilege to work alongside so many dedicated House Members, and I am deeply humbled by those who have made the decision to support my candidacy. When the House stands together in unity, we can do great things. I look forward to bringing together my colleagues to continue the tradition of strong bipartisan leadership in the Texas House.” Speaker-Elect Bonnen’s announcements so far include: Transition Team Chair – Brian McCall – Dr. Brian McCall is Chancellor of Texas State University System. He will assist Representative Bonnen in recruiting senior staff, planning his swearing-in ceremony, and working with outgoing Speaker Joe Straus and his staff to facilitate a smooth transition. Bonnen said, "Chancellor McCall knows the Capitol and the people who make it work. More importantly, he has a reputation as both a legislator and a higher education leader for his fairness, decency and ability to bring people together. I look forward to working with Brian in the coming weeks to lay the foundation for a successful 86th Session." Chief-of-Staff – Gavin Massingill - Massingill, who has more than 20 years of legislative experience inside and outside the Capitol, will assume his new role on January 8, 2019, the first day of the 86th Regular Session. Representative Bonnen said, “Gavin brings a wealth of experience and a valued perspective to my office. In addition to his years of experience as a legislative staffer, Gavin has a deep passion for the institution of the House and the ability to work across party lines to achieve the best results for Texas.” Massingill, a governmental relations consultant, has more than a decade of experience in the where he served as chief of staff to two state representatives. He is an elected alderman on the Rollingwood City Council. He is a graduate of the University of Texas at Austin.

4 Policy Director and General Counsel – Gardner Pate – Pate is a private- practice attorney. Representative Bonnen said, “Gardner is one of the state’s leading experts on campaign finance and ethics and has more than a decade of experience providing legal counsel and policy advice to elected officials. He’ll be a huge asset to my office and the House.” Prior to starting his own law firm in early 2018, Pate was a partner in the Public Law Section at Locke Lord LLP. Pate’s legal practice focused on advising his clients, including Governor Greg Abbott, on Texas ethics laws. Pate is a graduate of the McCombs School of Business at The University Texas at Austin and earned a juris doctorate with honors from the UT Austin School of Law.

BUDGET: State Highway Fund/Economic Stabilization Fund Transfer - On November 29th, Comptroller Glenn Hegar announced that he has transferred $2.77 billion into the State Highway Fund (SHF) and the Economic Stabilization Fund (ESF- "Rainy Day Fund"). Each fund received more than $1.38 billion, or 50% of the total transfer.

Joint Economic Stabilization Fund Balance Committee – On November 30th, the Select Committee on the Joint Economic Stabilization Fund Balance met and unanimously agreed to set the minimum balance in the Rainy Day Fund at $7.5 billion, the same amount as last session. That will allow the comptroller to invest more money in high-yield investments. Phillip Ashley, associate deputy comptroller, told the committee that the Rainy Day Fund balance will be $11.8 billion next year, after deductions for projects approved by the legislature.

Senate Finance Committee - On November 30, the Senate Finance Committee issued its interim report. The committee’s charges, conclusions, and recommendations include:

Hurricane Harvey Impact - Monitor all funds currently being used to address Hurricane Harvey relief and recovery. Identify ways to maximize the use of federal funds and ensure the efficient use of state funds. Evaluate the long-term impact of Hurricane Harvey on the Texas economy and the gulf coast region. The committee concluded, “Hurricane Harvey will prove to be the most costly disaster ever to hit the Texas coast. While immediate direct costs to the state are estimated to be approximately $900 million, the total costs are undetermined and will be incurred over the years ahead. As the state continues to monitor future costs, state agencies must coordinate to mitigate state costs and ensure that available federal funds are maximized.”

Economic Stabilization Fund - “Examine options to increase investment earnings of the Economic Stabilization Fund (ESF) in a manner that minimizes overall risk to the fund balance. Investment options should ensure the liquidity of a sufficient portion of the balance so that the legislature has the resources

5 necessary to address the needs of the state, including natural disasters. Evaluate how the Economic Stabilization Fund constitutional limit is calculated; consider alternative methods to calculate the limit, and alternative uses for funds above the limit. Examine options and make recommendations for strengthening restriction on appropriations established in Article VIII Section 22 of the state constitution, including related procedures defined in statute. Consider options for ensuring available revenues above spending limit are reserved for tax relief. The committee concluded, “The state needs to maintain a healthy balance in the ESF for emergencies. The state also needs to maximize returns on its investment of reserve funds while maintaining a level of liquidity in case of an immediate need to access the funds.” They recommended: 1. Allow a greater portion of the ESF to be invested in high-yield strategies while maintaining enough liquidity in case of emergency or natural disaster. 2. Seek out alternate methodologies to establish the sufficient balance. 3. Reconsider the manner by which the ESF cap will be determined, potentially by exempting federal funds as part of the calculation.

Trauma Funding - Review revenue sources currently funding the state's trauma system and the impact of declining revenues and balances in General Revenue- Dedicated accounts. Evaluate the impact of statutory changes affecting trauma system funding, including efforts to eliminate the Driver Responsibility Program (DRP). Examine ways to ensure sustainability of the trauma system in Texas. The committee concluded, “A coordinated and adequately funded trauma system is essential to providing effective response and treatment for Texans experiencing trauma. Funding challenges in recent years have put dedicated funding for the state's trauma system at risk. Due to real concerns about the effectiveness of the DRP and red light cameras, the Legislature should consider changes to these programs. However, as part of the discussion, the Legislature must carefully consider the negative fiscal impact to the trauma system.”

Property Tax on Business Personal Property - Evaluate the property tax as it applies to business personal property and the current $500 exemption. Quantify the economic effect of taxing business personal property and determine whether the tax places Texas at a competitive disadvantage relative to other states. Evaluate the burden on taxpayers and local governments of administering the property tax on business personal property and determine whether the current $500 exemption should be increased. The committee concluded, “The Legislature must continually review the state's tax structure to protect our competitive advantage when it comes to the recruitment and retention of Texas businesses. The business personal property tax presents a burden on several classes of industry in Texas and should be reviewed in the next legislative session. There are many options available to address these challenges, including exempting inventory, raising the exemption above $500, or doing away with the business personal property tax entirely. As with any tax reform, the Legislature must weigh the potential benefits of tax relief against the impact on state

6 revenue. Eliminating the business personal property tax entirely would have a roughly $6 billion negative fiscal impact. Exempting inventory entirely would have a negative fiscal impact of $1-$1.5 billion. Increasing the $500 exemption would be scalable.” They recommended: 1. Consider changing the current $500 exemption by adjusting it upward to keep up with inflation. 2. Continue studying options for reducing the business personal property tax burden on Texas businesses.

HIGHER EDUCATION: House Higher Education Committee – The House Higher Education Committee has released its interim committee report. Interim charges and recommendations include:

Dual Credit - Examine the rapid growth of dual credit course offerings across the state and evaluate whether dual credit is effectively reducing time-to-degree and improving affordability for students and the state. Evaluate institutions’ policies and processes for ensuring rigor and quality, and the adequacy of student advising regarding the potential applicability of dual credit courses to future academic program requirements. Review the current state funding methodology and costs of, and the share of state funding attributable to, dual credit programs. The committee recommended: 1. The Texas legislature should seek to support policy solutions that could encourage the growth of high quality, proven college readiness support programs. Providing advisors and a support framework that could help prepare dual-credit students for college and beyond is vital to improve attainment, graduation rates and workforce quality. This could come in several forms, from advice about financial aid and the holistic college experience to help completing concrete degree plans. 2. The committee should continue to explore the rigor of dual-credit programs, with a regular review into the content and outcome of these programs. Following on from the American Institutes for Research’s study the committee would welcome more evidence in particular from faculty about the consistency of dual credit programs. By maintaining high standards Texas can continue to produce excellent graduates, ready to enter a high-skill workforce.

PUBLIC EDUCATION: Senate Education Committee – On November 27th, the Senate Education Committee took up its interim study charges on: Mandate Relief and Innovation - Study cost-drivers, unnecessary mandates, reduction/elimination of inefficiencies, focus on policies or opportunities targeted to improving student outcomes, and better utilization of taxpayer resources.

7 Texas Association of School Administrators and Texas Association of School Boards representative Ellen Williams presented a report on school district mandates that are cost drivers in public education. TASB/TASA prepared the report to assist school leaders in identifying the most significant unfunded or underfunded mandates and in calculating the cost of implementing those mandates in their districts. It summarizes each mandate, lists the cost factors associated with the mandate and provides the statutory citation for the mandate. Almost all mandates increase the workload of existing employees; some require hiring of additional employees; and many require purchasing supplies, equipment, technology or programs.

The mandates are in 8 categories and include multiple cost drivers under each:

• Instructional Programs • Assessment and Accountability • Human Resources and Employee Relations • Safe Schools • Special Education • Governance and General Administration • Reporting Requirements • Public Notices • Parental/Student Notifications

TAX: Tax Exemptions and Tax Incidence Report – On November 26th, Comptroller Glenn Hegar released the Tax Exemptions and Tax Incidence report, as required by state law. The report estimates the value of each exemption, exclusion, discount, deduction, special accounting method, credit, refund and special appraisal available to payers of Texas’ sales, franchise, motor vehicle sales, oil production and gasoline taxes, as well as property taxes levied by school districts. For fiscal 2019, aggregate exemptions for these revenue sources will total an estimated $59.8 billion. Of this amount, exemptions related to the state taxes included in the report will account for $45.6 billion; school property tax exemptions will account for the remaining $14.2 billion. Nearly $16 billion of the estimated fiscal 2019 amount represents sales tax exemptions for items taxable under other law, including insurance premiums, motor vehicle sales and motor fuels. Exemptions from the sales tax on those items are estimated to be worth $7.2 billion, $4.4 billion and $3 billion respectively. Other exemptions from the sales tax include $9 billion in raw materials used in manufacturing, $3.2 billion in food for home consumption and $1 billion worth of over-the-counter drugs and prescription medicines and devices.

Senate Select Committee on Property Tax Reform – On November 28th, the Senate Select Committee on Property Tax Reform met at Lone Star College Montgomery in Conroe to take up three of its interim charges.

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Rollback Rate Calculation – The charge is to “evaluate the effective tax rate and rollback tax rate calculations and identify modifications that would yield a rollback process that is meaningful for local governments and for citizens. Evaluate whether the current rollback election trigger serves modern objectives.” Senator Bettencourt provided background on the history of rollbacks. He said, “the rollback rate was originally set at 5% in 1979 and the inflation rate at the time was over 10%. The Legislature modified it to 8% 1981 to reflect this high inflation rate and it has remained unchanged ever since, despite today’s climate of low interest rates.” Debbie Cartwright of Texas Taxpayers and Research Association discussed Truth-in-Taxation statutes and inflation and rollback provisions. She also pointed out that since 1994, median family income is up 86%, while the property taxes on a median-valued home are up 135%. She concluded: • The rollback rate of 8% is excessive, especially considering the new value added to the appraisal roll from the preceding year by annexation or additional improvements; • The petition process is ineffective due to the number of signatures required within the limited time period; • The ratification election process for schools is successful; and • Increased voter participation in tax rate setting is needed. She offered suggestions related to tax notices: • Delivery of annual notices to all property owners in August, instead of estimates of taxes in April with notices of appraised value; • Maintenance of a county-wide tax rate information website by each appraisal district, or if no access to a computer, contact information for an assessor to provide paper copies of tax information; and • Real-time tax information based on the certified value for each owner’s property for that year, no-new-revenue and proposed tax rates, amount of taxes to be imposed, and date, time, and location of public meetings to set tax rates for all taxing units.

Appraisal Review Boards - Evaluate the operations of appraisal review boards (ARBs), specifically the training and expertise of members concerning appraisal standards and law, ethics, and meeting procedures. Determine whether ARB operations are sufficiently independent of central appraisal districts and taxing units and whether ARBs and/or chief appraisers should be elected.

Texas Commission on Public School Finance’ Revenue Work Group - On November 30, the Revenue Workgroup presented their series of recommendations to the full Texas Commission on Public School Finance. Three proposals submitted to the full Commission by the Revenue Workgroup share a common theme of weaning the state off of recapture, or ‘Robin Hood,’ while providing property tax relief due to property tax rate compression. Current projections estimate that without property tax reform the state ‘share’ of

9 Maintenance and Operations funding for public education will fall to 32% by 2023. The commission received statistics showing that: • The Texas Legislature will have additional revenue in the upcoming 86th Legislative Session. • Sales tax collections grew by 10.5% from $28.7 billion to $31.9 billion from FY 2016-2017 to FY 2017-2018. • Through the first two months of the current fiscal year that growth rate remains intact. • Texas Comptroller Glenn Hegar (R-Texas) recently announced a transfer to the Economic Stabilization Fund, which takes the fund balance to over $12 billion and expects that it will rise to over $15 billion in the near future.

TECHNOLOGY: House Government Transparency and Operations Committee – The House Government Transparency and Operations Committee submitted its report containing interim charges and the committee’s recommendations.

Supreme Court Public Information Act Rulings - Evaluate whether, in light of recent Texas Supreme Court rulings, the provisions of the Public Information Act are adequate to support transparency and accountability in government, particularly as it relates to government contracting and procurement. The Committee recommends that the 86th Legislature explore the following amendments to the Public Information Act: • Government Code, Chapter 552 - Adopt the statutory definition of “trade secret” for use under the Public Information Act. Since Texas has now adopted the Uniform Trade Secrets Act [TUTSA], all commercial disputes involving "trade secrets" will be litigated using the procedures and definitions of that statute. As such, there will likely be no more case law in Texas regarding the common law definition of "trade secret" created by the courts and applied by the attorney general’s office in reviewing public information requests. • Provide more detailed criteria for applying existing exceptions – It would appear that most of the dissatisfaction with the application of the Boeing opinion is not with the fundamental question addressed by the case – whether or not the §552.104 exception may be raised by third parties. The debate lies more in what elements need to be established in order for the exception to apply and for information to be withheld. The Legislature could provide detailed criteria setting forth what facts a bidder or competitor needs to show in order to qualify for the exception. It could also specify types of information that could not be withheld under the exception, like the ultimate price to be paid under a final contract and the goods or services to be received. An amendment clarifying the balance between proprietary information and the public’s right to know would prevent some of the more egregious examples of letter rulings relying on

10 the Boeing opinion. Defining terms and/or providing elements to be proven by the “specific factual evidence” would remove a great deal of uncertainty and delay from the public information process. • Improve notice to third parties – Government Code §552.305(d) requires that a governmental body referring a PIA request to the Open Records Division must make a good faith attempt to notify any party whose information might be released, so that party may submit a briefing. An amendment could clarify that all those with an interest in the information need to be notified, and could specify whether the governmental body is responsible for notifying all parties, or whether the party that submitted the information to the governmental body should be responsible for notifying the additional parties. • Transparency in briefing -- Government Code §552.305(e) requires that any person submitting a briefing to the Open Records Division must send a copy to the requestor. There is no requirement that a brief submitted by the requestor or briefs submitted by other third parties should be copied to all persons submitting briefs. To avoid placing a burden on requestors or governmental entities, consider adding §552.305(f) to provide that an interested third party could request that the Open Records Division provide notice and a copy of any briefing filed. Clarify that governmental entities must respond to PIA requests for those private and/or non-profit entities with which they contract. In addition, there needs to be clarification that not only the funds, but the specifics of the contracts should also be made public along with the audits and work product the private entity is to fulfill. • Reduce unnecessary submissions to OAG – It would be beneficial to all involved in public information requests to reduce the workload of the Open Records Division. Suggestions for accomplishing this include: Specify that certain exceptions should be applied by the governmental body without referring them to the AG’s office; and presume a narrow interpretation of a request unless the requestor specifies otherwise.

State Websites - Additional information can be obtained via the Senate, House, and capitol websites: www.senate.state.tx.us www.house.state.tx.us www.capitol.state.tx.us

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