By Giddings                                     H.B. No. 3503

      75R8730 CLG-D                           

                                A BILL TO BE ENTITLED

 1-1                                   AN ACT

 1-2     relating to the guarantee of certain loans under the linked deposit

 1-3     program.

 1-4           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

 1-5           SECTION 1.  Section 481.196, Government Code, is amended to

 1-6     read as follows:

 1-7           Sec. 481.196.  State Liability Prohibited.  Except as

 1-8     provided by Section 481.198, the [The] state is not liable to an

 1-9     eligible lending institution for payment of the principal,

1-10     interest, or any late charges on a loan made to an eligible

1-11     borrower.  [Linked deposits are not an extension of the state's

1-12     credit within the meaning of any state constitutional prohibition.]

1-13           SECTION 2.  Subchapter N, Government Code, is amended by

1-14     adding Sections 481.198-481.202 to read as follows:

1-15           Sec. 481.198.  LOAN GUARANTEES.  (a)  Subject to the

1-16     availability of appropriations, the department may guarantee not

1-17     more than 50 percent of a loan made by an eligible lending

1-18     institution under this subchapter.  The percentage of a loan

1-19     guarantee made by the department is reduced annually by 10

1-20     percentage points  regardless of the term of the loan.  For each

1-21     guarantee the department shall determine:

1-22                 (1)  the amount of equity the eligible borrower must

1-23     pledge to construct or purchase the capital assets;

1-24                 (2)  the fees charged by the department, including

 2-1     guarantee fees, application fees, annual fees, and any other costs

 2-2     associated with the loan guarantee, as necessary to fund the

 2-3     administration of this section;

 2-4                 (3)  the maximum and minimum guarantee amounts; and

 2-5                 (4)  any other terms or conditions relating to a

 2-6     guarantee.

 2-7           (b)  The department may not make a loan guarantee, except on

 2-8     approval of a qualified application submitted by a borrower or

 2-9     eligible lending institution.

2-10           (c)  On approval of a qualified application, the department

2-11     may provide a loan guarantee of not more than 50 percent of the

2-12     cost of the capital assets the eligible borrower is to purchase or

2-13     construct with the proceeds of the loan to an eligible lending

2-14     institution, if the eligible borrower holds money or other property

2-15     in an amount or value equal to not less than 10 percent of the cost

2-16     of those capital assets and that money or property is then

2-17     available for and is pledged to be applied to the purchase or

2-18     construction of those capital assets.

2-19           (d)  Before making a loan guarantee, the department must have

2-20     determined that the eligible borrower has obtained from other

2-21     independent and responsible financial sources a firm commitment for

2-22     any other money in excess of the loan guaranteed by the department,

2-23     and that the sum of the money and the equity to be provided by the

2-24     eligible borrower is adequate for the purchase or construction of

2-25     the capital assets.

2-26           Sec. 481.199.  PAYMENTS NOT TO BE MADE TO DEFAULTING USERS.

2-27     (a)  The department shall report to the comptroller the name of any

 3-1     eligible borrower who is in default on a loan guaranteed under this

 3-2     subchapter and with respect to which the department has been

 3-3     required to honor a guarantee.  The comptroller may not issue a

 3-4     warrant or initiate an electronic funds transfer to the eligible

 3-5     borrower while the eligible borrower is in default.

 3-6           (b)  The comptroller may issue a warrant to the assignee of

 3-7     an eligible borrower who is in default only if the assignment

 3-8     became effective before the eligible borrower defaulted.

 3-9           (c)  This section does not prohibit the comptroller from

3-10     issuing a warrant or initiating an electronic funds transfer to pay

3-11     the compensation of a state officer or employee.

3-12           (d)  A state agency may not use funds inside or outside the

3-13     state treasury to pay an eligible borrower if the agency knows that

3-14     the eligible borrower is in default on a loan guaranteed under this

3-15     subchapter and with respect to which the department has been

3-16     required to honor a guarantee.  This subsection does not prohibit a

3-17     state agency from paying:

3-18                 (1)  the assignee of an eligible borrower who is in

3-19     default if the assignment became effective before the eligible

3-20     borrower defaulted; or

3-21                 (2)  the compensation of a state officer or employee.

3-22           (e)  The comptroller may not reimburse a state agency for a

3-23     payment that is made in violation of Subsection (d).

3-24           (f)  In this section:

3-25                 (1)  "Compensation" includes wages, salaries, longevity

3-26     pay, hazardous duty pay, and emoluments that are provided in lieu

3-27     of wages or salaries.  The term does not include expense

 4-1     reimbursements.

 4-2                 (2)  "State agency" means a board, commission, council,

 4-3     committee, department, office, agency, or other governmental entity

 4-4     in the executive, legislative, or judicial branch of state

 4-5     government.  The term includes an institution of higher education

 4-6     as defined by Section 61.003, Education Code.

 4-7                 (3)  "State officer or employee" means an officer or

 4-8     employee of a state agency.

 4-9           Sec. 481.200.  GUARANTEE-TO-RESERVE RATIO.  (a)  The

4-10     department may guarantee loans as provided by Section 481.198 in an

4-11     amount that exceeds the amount available in the program but does

4-12     not exceed the amount determined under the guarantee-to-reserve

4-13     ratio set by the policy board under this section.

4-14           (b)  The policy board by rule shall adopt a

4-15     guarantee-to-reserve ratio that determines the amount of loan

4-16     guarantees that may be made that exceed the amount available in the

4-17     program.  The ratio of guarantees to the amount of money available

4-18     may not exceed five to one.

4-19           (c)  The policy board shall review  the guarantee-to-reserve

4-20     ratio annually and adjust the ratio as appropriate.  In reviewing

4-21     the guarantee-to-reserve ratio, the policy board shall consider the

4-22     payment experience of the loans and any recommendations of the

4-23     state auditor as provided by Subsection (d).

4-24           (d)  The state auditor shall review the loan guarantee

4-25     program and payment activity.  Based on that review, the state

4-26     auditor shall make to the policy board not later than September 1

4-27     of each year recommendations about the program and the

 5-1     guarantee-to-reserve ratio.

 5-2           (e)  The department may not make a loan guarantee if the

 5-3     department has more than $1,000,000 in outstanding loan guarantees

 5-4     under this section.

 5-5           Sec. 481.201.  PENALTY FOR FALSE INFORMATION ON APPLICATION.

 5-6     An applicant who knowingly provides false information in an

 5-7     application under this subchapter:

 5-8                 (1)  may not submit another application under this

 5-9     subchapter at any time; and

5-10                 (2)  is liable to the state and any eligible lending

5-11     institution involved for any expense incurred by the state or

5-12     eligible lending institution, respectively, that would not have

5-13     been incurred if the applicant had not provided the false

5-14     information.

5-15           Sec. 481.202.  GIFTS AND GRANTS.  The department may accept

5-16     gifts, grants, and donations from any source for the purposes of

5-17     this subchapter.

5-18           SECTION 3.  This Act takes effect September 1, 1997.

5-19           SECTION 4.  The importance of this legislation and the

5-20     crowded condition of the calendars in both houses create an

5-21     emergency and an imperative public necessity that the

5-22     constitutional rule requiring bills to be read on three several

5-23     days in each house be suspended, and this rule is hereby suspended.