BILL ANALYSIS
State Affairs Committee
05-01-95
Committee Report (Substituted)
BACKGROUND
The number of state-funded direct loans and loan guarantee program
has grown considerably over the past two years. The Legislative
Council recently studied the total number of agencies with loan
authority and the number of established loan programs. According to
the review, twenty-two state agencies manage over sixty direct loan
and loan-guarantee programs. These programs are designed to address
the needs of diverse constituencies through programs ranging from
the purchase of farm and ranch land and veteran's housing to
funding higher education.
PURPOSE
HB 2490 merges existing state loan and development programs into a
single entity called the Texas Development Bank.
RULEMAKING AUTHORITY
It is the committee's opinion that this bill grants rule making
authority to The Texas Development Bank board in Section 9 of this
bill.
SECTION BY SECTION ANALYSIS
SECTION 1. Defines "board" and "development bank."
SECTION 2. Creates the Texas Development Bank as an agency of the
state.
SECTION 3. Outlines the make-up of the Texas Development Bank
board. Provides a criteria for each position.
SECTION 4. States that the governor shall select a presiding
officer. States that the board shall meet, at minimum,
monthly.
SECTION 5. States that board members are not entitled to
compensation for their services but are entitled to
travel reimbursements.
SECTION 6. Applies open records and open meeting laws to the Texas
Development Bank board.
SECTION 7. The board may appoint advisory committees to assist it
in determining specific needs to be addressed by bank
administered programs. The advisory board members are
not entitled to compensation for their services but are
entitled to travel reimbursements.
SECTION 8. The Texas Development Bank shall have the exclusive
authority to act as the administrator of all state
lending programs. Each entity that transfers a program
to this bank shall execute a memorandum of understanding
governing the transfer.
SECTION 9. Authorizes the board to employ and delegate authority
to a Chief Executive Officer (CEO). The CEO may employ
necessary persons for the proper management of the bank.
SECTION 10. States that the board shall establish rules
outlining lending authority. The CEO shall
establish the loan authority of the bank employees
within board rules.
SECTION 11. Provides for regular cost-benefit analysis of
state-funded loan programs. The board shall report
findings every two years to the legislature.
SECTION 12. The auditor, in conjunction with the comptroller and
the Texas Department of
shall audit each agency and program transferred to the
bank to determine: the financial condition of the
transferred program; the statutory rules and federal
regulations that relate to the program; and the
administrative costs of the program to the agency from
which the program is transferred. The agency from which
the program is transferred shall pay the costs of the
audit. This audit must be completed before the program
is transferred to the bank.
SECTION 13. The bank may enter into participations to develop a
securitization program to sell
into secondary markets.
SECTION 14. The development bank shall be audited annually by
the state auditor or a private auditing firm.
SECTION 15. The bank may adopt a policy to market the programs
administered.
SECTION 16. The Department of Banking shall examine loans in
programs administered by the bank to determine
quality and value of the loans at least annually.
The Department shall recommend underwriting
standards.
SECTION 17. The bank and the Texas Public Finance Authority shall
execute a memorandum
of understanding relating to the bank retaining earnings
over the costs of bond retirement and the Public Finance
Authority.
SECTION 18. The bank may form a subsidiary.
SECTION 19. The board shall adopt a cash management policy to be
annually reviewed.
SECTION 20. Agencies transferred to the bank shall perform
technical services requested by the
bank. The bank may contract with other entities to
perform technical services.
SECTION 21. The bank may accept gifts and grants.
SECTION 22. The earnings from bank programs may be pooled and used
by other bank
programs.
SECTION 23. The bank shall implement a statewide needs
appraisal project to be conducted every two years.
The data shall be made available from programming
planning by the bank. The bank shall coordinate
its activities in relation to this project with the
appropriate public and private financial service
organizations.
SECTION 24. Lists programs transferred to the bank on or before
September 1, 1996.
SECTION 25. Lists programs transferred to the bank on or before
September 1, 1997.
SECTION 26. Lists programs transferred to the bank on or before
September 1, 1998.
SECTION 27. Lists programs transferred to the bank on or before
September 1, 1999.
SECTION 28. Amends Section 9B(a), Texas Public Finance
Authority Act, to make a codifying change.
SECTION 29. By January 1, 1997, the auditor, in conjunction
with the comptroller and Texas Department of
Banking, shall audit each state agency loan and
guarantee program. Sets criteria for the audit.
The affected agency shall pay the costs of this
audit.
SECTION 30. By January 1, 1997, the auditor, in conjunction
with the comptroller and Texas Department of
Banking, shall audit each state agency loan and
guarantee program. Sets criteria for the audit.
The affected agency shall pay the costs of this
audit. This section only applies to certain
programs. Lists programs affected.
SECTION 31. Effective date: January 1, 1996, except as provided
by Section 32.
SECTION 32. Sections 1-28, and 30 take affect only if HJR 98 is
approved. Section 29 takes effect only if HJR 98
is not approved by the voters.
SECTION 33. Emergency clause.
COMPARISON OF ORIGINAL TO SUBSTITUTE
The substitute makes several substantial changes to the original
legislation. Both bills call for the merger of state loan programs
from various agencies into one new agency -- The Texas Development
Bank. The original bill had a nine-member board. The substitute
increases the board to eleven, with the addition of the Chairman of
the Texas Water Development Board and the Commissioner of Higher
Education.
The substitute also provides for the board to appoint advisory
committees to assist in determining specific needs carried out by
the bank. The substitute provides for an audit of financial
condition of each program to be transferred to the bank and to
review federal and statutory rules relevant to the programs. The
bank is authorized to institute a marketing program and to be
audited annually in the substitute.
Additional substantial changes made by the substitute are valuing
loan portfolios by the Department of Banking and executing a
memorandum of understanding between the Texas Public Finance
Authority and for the bank to use retained earnings of the programs
above those necessary for bond retirement.
The substitute provides that the bank board is to institute a cash
management policy, to enter into technical services with agencies
or private firms, and may form subsidiaries. The substitute allows
the bank to pool retained earnings and to accept gifts and grants.
The major substantial changes of the substitute to the original is
the inclusion of programs to be transferred and staggered dates of
inclusion into the bank from September 1, 1996 through September 1,
1999.
The substitute provides for an audit of agency loan programs, paid
by the agencies, and performed by the State Auditor in conjunction
with the Comptroller of Public Accounts, and the State Department
of Banking. These audits take place even if a program, for some
reason, does not come into the bank or if the accompanying HJR does
not meet voter approval.
The substitute amends Section 9B(a), Texas Public Finance Authority
Act (Article 601d, Vernon's Texas Civil Statutes) to provide for
the Texas Public Finance Authority to be the bond issuer for
programs transferred to the bank.
Finally, the substitute changes the effective date to January 1,
1996.
SUMMARY OF COMMITTEE ACTION
Pursuant to public notice posted on March 22, 1995, HB 2490 was
considered by the Committee on State Affairs in a public hearing on
March 27, 1995. The Chair laid out HB 2490 and recognized Rep.
Patterson to explain the bill. The following persons testified
neutrally on the bill: Land Commissioner Garry Mauro representing
himself; Keith Jones representing himself; Anne L. Schwartz
representing herself; and Kenneth Ashworth representing the Higher
Education Coordinating Board. The following persons testified for
the bill: Kelly Rodgers representing the Texas Bankers Association;
Caren Neeley representing the Independent Bankers Association of
Texas; and David Pinkus representing Small Business United of
Texas. The Chair recognized Rep. Patterson to close. The Chair
sent HB 2490 to a subcommittee consisting of the following members:
Rep. Black, Chair; Rep. S. Turner, Rep. B. Hunter. After being
recalled from subcommittee, HB 2490 was considered by the committee
in a public hearing on April 11, 1995. The Chair laid out HB 2490.
The committee considered a complete committee substitute for the
bill. The substitute was adopted without objection. The bill was
reported favorably as substituted with the recommendation that it
do pass and be printed, by a record vote of 12 ayes, 1 nay, 0 pnv,
and 2 absent.