BILL ANALYSIS H.B. 1320 By: Romo 03-03-95 Committee Report (Unamended) BACKGROUND There are two authorized but unissued bond issues that could be removed from the state's bond authorization. First, the National Research Laboratory Commission has authorized but not issued debt for the Superconducting Super Collider: $250 million of General Obligation bonds and $250 million of revenue bonds. There is no need for this debt, given the decision by Congress to end the project's federal funding. General revenue bonds can be revoked by the Texas legislature while General Obligation bonds must be revoked by the voters of Texas. Rating agencies periodically evaluate the state's debt structure to determine municipal bond ratings, which affect the state's interest rate of bonds. Debt factors include the type of security pledged to debt repayment, debt burden, debt history and trend. Texas currently has a "Aa" bond rating from Moody's, a "AA" rating from Standard and Poor's and a "AA+" rating from Fitch Investors Service. The difference between the interest rate on a "AA"-rated bond and a "AAA" bond is a rating of 20 basis points which could, in fact, save the State of Texas as much as $15 million in debt service payments. Revoking the authorization of the unissued bonds would affect the state's debt structure by lowering the potential debt. By lowering the debt, the state could eventually have its General Obligation bond rating raised. The authorized-but unissued-debt is considered in the overall debt analysis, and reducing this amount would represent effective debt management and accounting. PURPOSE As proposed, HB 1320 authorizes the legislature to reduce the amount of general revenue bonds issued for the Superconducting Super Collider from $500 million to $250 million. RULEMAKING AUTHORITY It is the committee's opinion that this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency or institution. SECTION BY SECTION ANALYSIS Section 1. Repeals Chapter 626, Acts of the 70th Legislature, Regular Session, 1987 (Article 601d-2, Vernon's Texas Civil Statutes). Section 2. Amends Section 465.022, Government Code, (a) Provides for a reduction in the amount of general revenue bonds that the commission is authorized to issue, sell, and deliver or cause any financing corporation to issue, sell, and deliver from $500 million to $250 million. Section 3. Amends Section 465.022, Government Code, (a) Provides for a reduction in the amount of general obligation bonds that the commission is authorized to issue, sell, and deliver or cause any financing corporation to issue, sell, and deliver from $500 million to $250 million. (b) Provides that Section 3 takes effect on the date which the constitutional amendment proposed by the 74th Legislature, Regular Session, 1995; reducing the amount of authorized general obligation bonds for the superconducting super collider research facility, takes effect. Provides that if the amendment is not approved by the voters, this section has no effect. Section 4. Amends Chapter 1078 Acts of the 70th Legislature, Regular Session, 1987 (Article 717k-7, Vernon's Texas Civil Statutes) by adding Section 7c. Sec. 7c. REVIEW OF UNISSUED STATE BONDS; REPORT. (a) Provides that the board shall review authorized but unissued state general obligation and revenue bonds. (b) Requires that the board submit to the legislature a report no later than October 31 of each even-numbered year whether any general obligation or revenue authorization should be revoked. Section 5. Provides that this except for Section 3(b) this Act takes effect on September 1, 1995. Section 6. Emergency Clause. SUMMARY OF COMMITTEE ACTION The committee convened in a public hearing on March 6, 1995 to consider HB 1320. The following people testified in neutrally of the bill: Edward C. Binglar and Robert P. Carpenter. HB 1320 was left pending. The committee convened in a public hearing on March 13, 1995 to consider HB 1320. The motion to report HB 1320 without amendments, with the recommendation that it do pass and be printed, prevailed by the following record vote: 9 Ayes, 0 Nays, 0 PNV, 0 Absent.