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Home , Briscoe Cain, Cesar Blanco, Claudia Ordaz Perez, Cody Vasut, Dade Phelan, Dan Flynn (politician)

87th LEGISLATIVE SESSION AND COVID RESTRICTIONS

On January 12, 2021, lawmakers from across the state will convene the 87th Legislative Session, meeting for the Regular Session over the following 140 days through May 31. This will be the first time that all 181 legislators will come together since the beginning of the Covid-19 pandemic, and the virus is top-of-mind for everyone involved.

While the Governor recently announced the re-opening of the Capitol building on January 4, we have minimal knowledge of the health and safety protocols the members, staff and Capitol visitors will have to follow when they enter the building next week. It will surely be a much different environment than previous sessions. We know the following requirements will be in place as of today, per a memo released by the State Preservation Board last week: • The Capitol building will only be open from 9 a.m. to 6 p.m., Monday through Friday; it will be closed Saturday and Sunday for cleaning. • The public may only enter through the North Capitol entrance. • Covid testing will be encouraged and provided on the North Plaza at no expense. • A mask will be required to be worn inside the building at all times. • All deliveries to the Capitol, including food and beverage, must be left at the loading dock; no delivery personnel will be allowed beyond the loading dock or through the public entrance. • No public tours or groups or sponsored event space will be available. • The House and Senate will manage public access to their offices once convened and rules are adopted, and the public will need to check with the offices directly for specific guidelines. • We do know that offices have been encouraged to: o Conduct temperature checks for staff and guests o Conduct rapid Covid testing (15 min. response) for staff and guests inside the office; testing will also be provided to the public by the National Guard on the North Plaza before entering the Capitol building o Wear masks while in the office o Maintain at least 6 feet of distance between the Member, staff, and guests o Stagger staff schedules and work remotely when able to do so o Ensure that food delivered to the office is individually packaged o Discourage outside deliveries and request electronic copies of handouts and advocacy materials; establish a contactless delivery process, if needed o Conduct virtual meetings or schedule meetings outside of the Capitol, and limit meetings to 10 or less when in person; discourage drop-ins at the office

Both the and House of Representatives have set up working groups to provide suggestions and guidelines identifying best practices for how the broader session will operate. Legislators will vote on these recommendations and other rule changes when session convenes next week.

In the meantime, we have learned a little bit about how the session may commence and run through the first 60 days until vaccines are more widely distributed.

At a recent meeting of the Senate Republican Caucus, Lieutenant Governor laid out his cautious approach to running the body. The House will have to adopt rules governing Covid restrictions but House Administration recently released a similar Opening Day plan. Some of those details are as follows: • Members will only be allowed one person on the floor and one in the gallery on Opening Day, both of which will be tested for Covid. • The Senate will most likely plan to take off the next week of January 18. • Senate Finance will begin meetings the week of January 25. • For the remainder of January and then February, the Senate will gather late on Tuesdays and meet on the floor on Wednesdays. • Beginning the third week of February, other Senate committees (announced the Friday after rules are adopted) will start to meet on Tuesdays and Wednesdays. • No one will be allowed on the floor for resolutions throughout the first couple months in either body. • Those who testify in-person in committee hearings will have to sign up online well in advance.

A big question that remains: Will members be allowed to vote remotely or be required to do so on the floor of each body? State Representative recently requested the Attorney General’s opinion on whether members may vote on legislation from a location other than their respective chambers, and we are awaiting the AG’s response.

Patrick has advised the Senate to brace for a drastically pared down session with far fewer pieces of legislation making their way through the process, and the same is expected in the House.

TIPRO will keep you updated on these processes as we learn more in the coming weeks.

COMPOSITION OF THE LEGISLATURE

The political makeup of the is almost completely unchanged from the prior legislative session with Republicans still controlling both the Senate (18-13) and the House (83- 67).

Senate Republicans lost a seat and Democrats gained one with the loss of Pete Flores (R- Pleasanton) to challenger Roland Gutierrez, a former House member from . There were a few other new Senate members elected in November, including: • (D-El Paso) replaced retiring Jose Rodriguez • (D-Austin) replaced following his retirement earlier this year • Newly-elected (R-Muenster) replaced Congressman-Elect after he was chosen by voters to represent Texas Congressional District 4 in November.

The House remained unchanged with the loss of one Republican seat, Sarah Davis (R-) to Democratic challenger , and the pick-up of Republican Mike Schofield who won his old seat back from Democrat Gina Calanni (D-Katy).

The House also gained the following new members in open seats, all of which were maintained by the party who held them during the 2019 Legislative Session: • (D-San Antonio) replaced Roland Gutierrez • Jeff Cason (R-Bedford) replaced • David Cook (R-Mansfield) replaced Bill Zedler • (D-) replaced Lorraine Birabil who won a special election in November 2019 to fill the seat when it was vacated by Eric Johnson when he became Mayor of Dallas • (R-Midlothian) replaced John Wray • (R-Houston) replaced • (R-Sugar Land) replaced Rick Miller • , Jr. (D-Eagle Pass) replaced Poncho Nevarez • (D-El Paso) replaced Cesar Blanco • Glenn Rogers (R-Graford) replaced Mike Lang • Penny Shaw (D-Houston) replaced Jessica Farrar • (R-Royse City) replaced • (R-Stephenville) replaced J.D. Sheffield • (R-Angleton) replaced

A special election for HD 68, previously held by Drew Springer has been set by Governor for Saturday, January 23, 2021. Early voting will begin on Monday, January 11. Thus far, Cooke County Judge Jason Brinkley (R) and David Spiller (R), Jacksboro ISD Trustee, have announced their intentions to run for the seat that is very much considered a safe Republican district. The deadline for candidates to file is 5 p.m. today.

For photos and more information on each new member, you can visit the Senate member website here and the House member website here.

LEGISLATIVE AGENDAS Lieutenant Governor Patrick has shared his legislative priorities for the Senate, which include: • Passing a conservative, balanced budget; • New redistricting maps as required by the Constitution; • Election reforms; • Limited liability protections for business as it relates to Covid; and • Support for law enforcement.

Patrick has planned for a couple changes that will play to his advantage when it comes to votes.

In an unexpected move, he replaced Chuy Hinojosa (D-McAllen) who has served as the Vice Chair of Senate Finance for more than a decade with Eddie Lucio, II (D-Brownsville), a more conservative Democrat who often votes with Republicans in support of Lieutenant Governor’s agenda.

Patrick also announced that he intends to ask the Senate to change the number of votes required to bring a bill to the floor from 19 votes to 18. The loss of Republican Pete Flores and reduction of the number of Senate Republicans to 18 means that without the rule change, there would be more procedural options available to Democrats to prevent a bill from making it to the Senate floor. This will be the second time Patrick has asked for such a vote during his tenure as Lieutenant Governor, giving his agenda and that of other Republican Senate members an advantage. The first was in 2015 when he lowered the requirement to 19 to allow the chamber’s 20 Republicans to control the flow of legislation and pass a bill without Democratic support. For 70 years prior the Texas Senate had a “two-thirds rule” requiring 21 of the 31 senators to vote to bring a bill to the floor.

On the House side, the legislative tempo and agenda, committee makeup and chairmanship designations are expected to see a major shake-up, to be determined by the next speaker. Presumptive Speaker-Elect (R-Beaumont) will almost certainly replace outgoing Speaker Dennis Bonnen. Having secured the support of more than a super majority of the House, Phelan has already set up a transition team and named his executive and policy staff to ensure a smooth and easy transition of power.

While Phelan’s legislative agenda has yet to be laid out, it has been announced that his team will be led by capitol veteran Julia Rathgeber who will serve as his Chief of Staff. Rathgeber was a former Deputy Chief of Staff to Governor Greg Abbott and Lieutenant Governor . She was appointed Texas Commissioner of Insurance by Governor from 2013-2015. Most recently, Rathgeber served as the President and CEO of the Association of Electric Companies of Texas.

Phelan’s executive staff will also include: • Mark Bell, Deputy Chief of Staff • Kelly Mitchell, Executive Director of Speaker Operations • Jay Dyer, Director of Policy • Andrew Blifford, Director of Budget • Enrique Marquez, Director of Communications • Sydney Watts, Director of Administration • Margo Cardwell, General Counsel • Zach Johnson, Special Advisor and Chief Director of District Operations

Policy staff are as follows: • Andrea Chavez, Policy Advisor for Transportation, Local Government, County Affairs, and Urban Affairs • Kory Curtis, Policy Advisor for Energy Resources, Environmental Regulation, International Relations & Economic Development, and Licensing & Administrative Procedures

• Molly Czepiel, Policy Advisor for Human Services and Public Health • Ross Giesinger, Policy Advisor for State Affairs and Elections • Danny Mittnacht, Policy Advisor for Insurance, Pensions, Investments & Financial Services, and Business & Industry • Marissa Patton, Policy Advisor for Natural Resources, Agriculture & Livestock, Land & Resource Management, and Culture, Recreation & Tourism • Shakira Pumphrey, Policy Advisor for Criminal Jurisprudence, Corrections, Juvenile Justice & Family Issues, Homeland Security & Public Safety, and Defense & Veterans’ Affairs • Jimmy Skipton, Policy Advisor for Ways & Means • Daniel Warner, Policy Advisor for Higher Education and Public Education

It has also been confirmed that the House Parliamentarians under Dennis Bonnen, Sharon Carter and Hugh Brady, will remain under Phelan.

FISCAL OUTLOOK The 2019-2020 biennium budget written during the last legislative session left a $2.9 billion surplus to address supplemental needs and was built on the projection that the state would bring in $121.5 billion in revenue over the biennium. Due to the Covid-19 pandemic, the state is on track to collect nearly $13 billion less than projected, turning a nearly $3 billion surplus into a $4.6 billion deficit, per Comptroller Hegar’s July 2020 revision to the Certification Revenue Estimate (CRE).

At the most recent budget presentation by the Comptroller to the Legislative Budget Board on November 30, 2020, he reported that all revenue streams continue to be down since he issued the revised CRE in July. Sales Tax collections have provided some relief to state revenue collections; however, they remain down about 4.8% compared to the second half of last year. Other revenue streams, including alcohol, hotel, and oil and gas severance taxes, look to be down more than 40% compared to the same period.

The Comptroller stopped short of providing an updated estimate for this year’s ending balance or the 2022-2023 biennium estimate, indicating he is still working on the Biennial Revenue Estimate (BRE) to be released on January 11, 2021. Though, he did note that the July CRE projected shortfall of $4.6B in general revenue (GR) related funds has improved and reminded the LBB that it did not include any potential GR savings from leadership’s requested 5% spending cuts by all state agencies, any potential swaps in GR with the use of federal CARES dollars thus reducing state expenses for this fiscal year and the biennium, or expenditures that might need to be authorized in a supplemental appropriations bill. The Comptroller said he anticipates this year’s revenue loss is not as dire as feared this past summer, and the shortfall for the 2022-23 BRE is likely to be much more manageable than expected.

At the meeting, the LBB adopted a 7.06% rate of growth, perhaps the lowest ever adopted, which essentially sets a maximum constitutional spending limit for the 2022-23 biennium at about $105.7 billion in expenditures from non-dedicated revenue.

This compares with a 9.89% rate of growth and spending limit of $100.3 billion from the previous 2020-21 budget.

This biennium, the legislature will be faced with managing a large list of payables and a severe lack of revenue to satisfy the state’s critical needs, including Medicaid, public education and dollars for economic recovery. In order to cover the state’s current and future financial commitments, budget writers will have to utilize tools like deferring expenses, delaying payments and tapping into the state’s Rainy Day Fund. Because of this, interest groups are anticipating that typical budget requests will not be fulfilled in the upcoming session unless an exceptional case can be made for the funding.

We will learn more about the budget shortfall with the release of the Comptroller’s updated budget numbers provided to the legislature in his BRE next week.

LEGISLATION Due to Covid’s impact on the functioning of the legislature as well as the deficit it has created in the state budget and the resulting difficulty the legislature will face in covering all of the state’s expenses, there will be little capacity for addressing issues other than the budget or even hearing about them in committee meetings. These sentiments were voiced this fall by the Lieutenant Governor and they are expected to be echoed in the House debate coming up over this session’s rules.

As of the delivery of this report, 1275 bills have been filed in both the House and Senate, which is a pretty large number compared to this time ahead of sessions of the past. The majority of the bills are focused on public education needs, response to the pandemic, tax hikes, police reform, election reform, and restricting emergency powers of the governor. The events of the interim, particularly in 2020, have provided legislators with plenty of issues to attempt to address. However, very few of these bills will move past their referral to committees.

In addition to the budget, there are a few major issues that are expected to be tackled this session:

Redistricting: Typically, legislation to re-draw the state’s House, Senate and congressional district maps takes precedent over most other issues during a legislative session following a census year. In a normal redistricting session, the federal government delivers the census population data to the legislature no later than April 1. However, this year the federal government is anticipating a delay, and Texas may not receive the data until July 31, 2021. If the data is delayed to July, Texas will likely have to convene for a special session this summer or early fall. Despite the delay, redistricting committees will take public testimony during the Regular Session and conversations will be had behind the scenes about the potential maps.

Public Education: The conversation over online learning in our public schools was pushed to the forefront of discussion this past year. Weaknesses in Texas’ virtual education program were exposed and the need for additional technology funding for school districts became paramount. On that same note, the legislature anticipates initiatives to enhance and expand broadband access across the state, particularly in rural areas.

Liability Protections Related to COVID-19: In an effort to prevent frivolous law suits, the Lieutenant Governor has noted his interest in the passage of legislation to help shield businesses, health care providers, schools, non-profit organizations, and other entities from liability for personal injury claims allegedly caused by exposure to the novel coronavirus. While we have yet to see any related legislation filed, it is expected that a bill could be filed soon and provided a priority bill number in the Senate.

Tax Increases or Elimination of Tax Breaks: As lawmakers are focused on rebalancing the budget this session, they could be forced to cut spending and/or find new money to make up the difference, hence the large number of bills already filed to generate new taxes, increase current ones, and eliminate tax loopholes and incentives. History has proven that it is easier to raise taxes or create new ones rather than get rid of tax breaks and loopholes. In a recent report by Comptroller Hegar, Tax Exemptions & Tax Incidence, ordered by the Legislature, he estimates the value of each exemption, exclusion, discount, deduction, special accounting method, credit, refund, and special appraisal available to payers of Texas’ sales, motor vehicle sales, franchise and oil production taxes, as well as property taxes levied by Texas school districts. The estimates amount to $58.6 billion, most of which stays in the hands of taxpayers instead of in the state treasury. Sales taxes are the state’s biggest source of tax money, bringing in 59% of state taxes in fiscal 2020, which is where you will find the most exemptions, about $42 billion worth. There are easier ways to balance the budget rather than to patch holes in ways that are not popular with large numbers of voters, like proposals that provide the public with a choice about whether to pay a tax – the lottery, excise taxes, etc. Every tax break has a champion, and they will all get a good look this session.

Law Enforcement Reform: Following headlines highlighting accounts of police brutality last year, we have seen a number of bills filed to reform the criminal justice system, provide training for law enforcement, and eliminate certain tactics like the ‘George Floyd’ Bill to ban chokeholds. The Governor has also engaged on the issue, promising to ensure the passage of legislation that would place the Austin Police Department and any other police department whose funding is eliminated under the Department of Public Safety and the state’s control.

Election Reform: After the controversial 2020 election cycle and allegations of voter fraud, there have been a large number of election reform bills filed that may be considered this session. The legislation spans a variety of topics, like online voter registration, expansion of early voting by mail, extension of the deadline for returning a mail-in ballot, limiting certain persons from becoming poll watchers, creation of a database of non-citizens in Texas who are unable to vote, and the creation and increase of criminal penalties related to voter fraud convictions. Many of these concepts will never make it out of committee, but one or two could see a floor vote and potentially make it to the Governor’s desk.

Restricting the Governor’s Power: Lawmakers on both sides of the aisle are attempting to rein in the Governor’s use of executive power during a declared disaster either by restricting his powers or by including the legislature’s input in the state’s response. Legislation filed thus far includes a proposed “Emergency Powers Board”, a constitutional amendment that would trigger a special session if a disaster or emergency was declared and continues for more than 21 days, a legislative role in determining how federal response funding is spent, and the

elimination of the Governor’s power to restrict the sale, transportation, and use of firearms and ammunition, combustibles or alcohol.

Eminent Domain Reform: Eminent domain reform, an ongoing issue discussed consistently over the past three legislative sessions, remains a priority for leadership in both the House and the Senate. Attempts at passing a reform bill to provide landowners more protections when their land is acquired for public use have been disrupted for numerous reasons in the past; however, it is expected that an agreed-to proposal should have a good opportunity to pass this session due to issue fatigue among legislators. As he did last session, Representative Dwayne Burns has filed the leading eminent domain proposals - HB 901 (bill filed by Burns last session with landowner support) and HB 902 (industry agreed-to bill as written by the Coalition for Critical Infrastructure). There are no Senate companion bills that have been filed as of yet. While we do not know who will be the Chairman of Land and Resource Management (House committee the eminent domain legislation was sent to in 2019) or which committee the eminent domain bill will be referred to, we know that Burns, a close friend of the presumptive new speaker, will manage the language in the bills and guide the legislation through the process. Much is still unknown about this issue. We expect to learn more by the time House committees are announced likely sometime in February.

Ban on Taxpayer-Funded Lobbying: First filed last session, Representative has re-filed legislation to end taxpayer-funded lobbying or the ability of entities funded with tax dollars, like cities, counties, water districts, and many others, to hire contract lobbyists to advocate on their behalf. While some would disagree, the argument against the practice is fueled by the belief that those lobbyists often advocate against taxpayer interests. The legislation passed the Senate in 2019 but fell short in the House. With the election of Dade Phelan as the new House Speaker, a supporter of Middleton’s bill, as well as the vocal support of Governor Abbott and leadership in other states across the country, it is anticipated that some form of the bill could pass this year.

IMPORTANT DATES

January 11, 2021: Comptroller delivers the Biennial Revenue Estimate to the Governor and the 87th Legislature

January 12, 2021: 87th Legislature convenes at noon; election of the new Speaker of the Texas House of Representatives

January 19, 2021: Legislative Budget Board general appropriations bill delivered to the Governor and the 87th Legislature

March 12, 2021: 60-day bill filing deadline

May 15, 2021: Last day for House to consider supplemental calendar House Bills and Joint Resolutions on 3rd reading (pending final adoption of House rules).

May 22, 2021: Last day for House to consider local House Bills on 2nd and 3rd reading (pending final adoption of House rules).

May 27, 2021: Last day for House to consider local and consent Senate Bills on 2nd and 3rd reading and all supplemental Senate Bills and Joint Resolutions on 3rd reading (pending final adoption of House rules).

May 31, 2021: Adjournment of 87th Legislature, Sine Die

June 20, 2021: Post-session 20-day deadline for Governor to sign or veto legislation

REPORTS TIPRO looks forward representing TIPRO member’s interests and the oil and gas industry as we begin this legislative session.

As always members will be provided with weekly reviews of events and activities that transpire at and around the Texas Capitol, inclusive of bill tracking lists, weekly calendars and TIPRO’s actions. As the legislative session gets going and we learn more about regularly scheduled meetings, both at the legislature and with stakeholder groups, you will be made aware of those meetings.

We look forward to keeping you updated and working on your behalf preserve the ability of independent operators to explore for and produce oil and natural gas. Please do not hesitate to contact TIPRO’s Director of Government and Regulatory Affairs, Ryan Paylor, at [email protected] with any questions or comments.