SRC-ARR C.S.H.B. 1161 76(R)BILL ANALYSIS


Senate Research CenterC.S.H.B. 1161
76R14187 DLF-FBy: Junell (Ratliff)
Finance
5/5/1999
Committee Report (Substituted)


DIGEST 

On March 28, 1996, the attorney general filed suit against the tobacco
industry on behalf of the State of Texas, which resulted in a settlement
agreement in which the tobacco industry agreed to pay the state $15 billion
over the next 25 years. Subsequent to the settlement, several legal
challenges were filed to ensure the deposit of the settlement proceeds into
the state treasury, to preserve the authority of the legislature to
appropriate the funds, and to ensure the allocation of some of the proceeds
into counties and hospital districts with indigent care responsibilities.
C.S.H.B. 1161 would implement the county and hospital district tobacco
settlement. It establishes the permanent fund, mechanisms for managing the
assets of the fund, and mechanisms for distributing tobacco proceeds to
political subdivisions. The mechanisms established in the bill have been
developed by the counties and hospital districts.  

PURPOSE

As proposed, C.S.H.B. 1161 establishes the tobacco settlement permanent
trust account. 

RULEMAKING AUTHORITY

Rulemaking authority is granted to the comptroller of public accounts in
SECTION 1.01 (Section 403.1041, Government Code) and the Texas Board of
Health in SECTION 2.01 (Section 12.133(b) and 12.134(a), Health and Safety
Code) of this bill. 

SECTION BY SECTION ANALYSIS

SECTION 1.01. Amends Chapter 403G, Government Code, by adding Sections
403.1041, 403.1042, 403.1043, and 403.1044, as follows: 

Sec. 403.1041. TOBACCO SETTLEMENT PERMANENT TRUST ACCOUNT. Defines
"account," "advisory committee," "agreement," "department," and "political
subdivision." Requires the comptroller to administer the tobacco settlement
permanent trust account (account) and to manage the assets of the account,
with the advice of and in consultation with the tobacco settlement
permanent trust account investment advisory committee (advisory committee).
Sets forth requirements for managing the assets of the account. Provides
that the account is a trust account with the comptroller and is composed of
certain money paid to the account. Requires the corpus of the account to
remain in the account and may not be distributed for any purpose. Provides
that the money and other assets in the account are not part of the general
fund of the state. Authorizes the comptroller to appoint one or more
financial institutions to serve as a custodian of the account's assets.
Provides that Section 404.071 does not apply to the account. Authorizes the
comptroller, with the advice of and in consultation with the advisory
committee, to use the earnings of the account for any investment expenses,
including to obtain the advice of appropriate investment consultation for
managing the assets in the account. Requires the comptroller to make an
annual distribution of the net earnings from the account to each eligible
political subdivision as provided in the agreement regarding disposition of
settlement proceeds, subject to Section 403.1044. Sets forth requirements
for a report regarding the account. Requires the comptroller to adopt
certain rules.  

Sec. 403.1042. TOBACCO SETTLEMENT PERMANENT TRUST ACCOUNT  INVESTMENT
ADVISORY COMMITTEE. Sets forth requirements for the advisory committee.
Sets forth the members of the advisory committee. Requires a commissioners
court that sets the tax rate for a hospital district to approve any person
nominated by the hospital district to serve on the advisory committee.
Requires the advisory committee to elect the officers of the advisory
committee from among the members of the advisory committee. Provides that
members of the advisory committee serve staggered six-year terms expiring
on August 31 of each odd-numbered year. Sets forth requirements regarding
appointment to the committee. Prohibits members of the advisory committee
from being compensated and reimbursed for travel by the trust fund or the
state. Requires the comptroller to provide administrative support and
resources to the advisory committee as necessary to perform its duties.
Provides that Chapter 2110 does not apply to the advisory committee. 

Sec. 403.1043. RESTRICTIONS ON LOBBYING EXPENDITURES. Prohibits a political
subdivision receiving a distribution under Section 403.1041(f) from using
the distribution to pay for certain lobbying expenses. Provides that the
persons or entities described by Subsection (a) are not eligible to receive
the money or participate either directly or indirectly in the distribution
made under Section 403.1041(f). 

Sec. 403.1044. USE OF CERTAIN FUNDS. Defines "state hospital or clinic."
Requires a political subdivision that has received a distribution under
Section 403.1041 to use the distribution as necessary to reimburse a state
hospital or clinic for any certified unreimbursed health care expenditures
under certain conditions. Sets forth requirements for a state hospital or
clinic that has made unreimbursed health care expenditures described in
Subsection (b). Prohibits the comptroller from making a subsequent annual
distribution to a political subdivision until the state hospital or clinic
notifies the comptroller that the amount certified under this section has
been paid or that the debt has been settled and all claims against the
political subdivision for the debt have been released, after receiving a
certification of money owed under this section. Provides that a political
subdivision is not required to pay the unreimbursed health care
expenditures to the South Texas Hospital to the extent that those
expenditures relate to the care and treatment of patients with
tuberculosis.  

SECTION 1.02. Provides that the initial tobacco settlement permanent trust
account investment advisory committee (initial advisory committee) is
composed of certain members. Sets forth the terms of the  initial advisory
committee members.  

SECTION 1.03. Provides that not later than the 30th day after the effective
date of this Act each appointing authority and the comptroller shall take
certain actions. 

ARTICLE 2. DUTIES OF THE TEXAS DEPARTMENT OF HEALTH

SECTION 2.01. Amends Chapter 12, Health and Safety Code, by adding
Subchapter J, as follows: 

SUBCHAPTER J. TOBACCO SETTLEMENT PROCEEDS

Sec. 12.131. DEFINITIONS. Defines "account," "advisory committee,"
"agreement," and "political subdivisions." 

Sec. 12.132. CERTIFICATION TO COMPTROLLER. Requires the Department of
Health (department) to collect information relating to the unreimbursed
health care expenditures of each political subdivision and certify to the
comptroller the percentage of each annual distribution to be paid from the
account to each political subdivision. 

Sec. 12.133. COLLECTION OF INFORMATION. Requires each political subdivision
to submit to the department certain information. Requires the Texas Board
of Health (board) to adopt certain rules governing the collection of
information under Subsection (a), subject to the approval of the advisory
committee. 

Sec. 12.134. DISPUTES RELATING TO INFORMATION COLLECTED. Requires the board
to adopt rules under which a political subdivision or agency of this state
may dispute  information submitted by a political subdivision under Section
12.133, subject to the approval of the advisory committee. Authorizes the
rules to provide for certain actions. Prohibits the monetary penalty under
Subsection (b)(4) from exceeding 10 percent of the amount of the
overstatement of unreimbursed health costs. Provides that a dispute under
this section is a contested case for purposes of Chapter 2001, Government
Code. 

Sec. 12.135. EFFECT OF DISPUTE. Provides that a dispute filed under
department rules adopted under Section 12.134 does not affect the
percentage of the annual distribution of the earnings from the account to
be paid to the political subdivision for the year for which the information
that is the subject of the dispute was submitted. 

Sec. 12.136. ADJUSTMENT FOLLOWING AUDIT. Requires the department to take
certain action if the board finds that a political subdivision has
overstated unreimbursed health care expenditures.  

Sec. 12.137. TOBACCO SETTLEMENT PERMANENT TRUST ACCOUNT ADMINISTRATION
ADVISORY COMMITTEE. Requires the tobacco settlement permanent trust account
administration advisory committee (administration committee) to advise the
board on the implementation of the department's duties under this
subchapter. Sets forth the members of the advisory committee. Requires a
commissioners court that sets the tax rate for a hospital district to
approve any person nominated by the hospital district to serve on the
administrative committee. Requires the administrative committee to elect
the officers of the advisory committee from among the members of the
administrative committee. Authorizes members to the administrative
committee to act only on the affirmative votes of eight members of the
committee. Provides that members of the administrative committee serve
staggered six-year terms expiring on August 31 of each oddnumbered year.
Requires the appointment to the advisory committee to be made without
regard to the race, color, disability, sex, religion, age, or national
origin of the appointees. Prohibits members of the advisory committee from
receiving compensation from the trust fund or the state agency on the
advisory committee and reimbursement for travel expenses. Requires the
department to provide administrative support and resources to the advisory
committee as necessary for the advisory committee to perform the advisory
committee's duties under this subchapter. Provides that Chapter 2110,
Government Code, does not apply to the advisory committee. 

Sec. 12.138. APPROVAL OF RULES. Requires certain rules adopted by the board
to be submitted to the advisory committee and may not become effective
before the rule is approved by the advisory committee. Requires the
advisory committee to provide the board the specific reasons that the rule
was disapproved, if the advisory committee disapproves a proposed rule.  

 Sec. 12.139. ANNUAL REVIEW. Sets forth requirements for an annual review.

SECTION 2.02. Provides that the initial tobacco settlement permanent trust
account administrative advisory committee is composed of certain members.
Sets forth the terms of the  initial administrative advisory committee
members.  

SECTION 2.03. Provides that not later than the 30th day after the effective
date of this Act each appointing authority and the commissioner of public
health shall take certain actions. 

SECTION 2.04. Defines "account," "agreement," and "lump sum trust account."
Authorizes the Texas Department of Health to take certain action with
respect to the pro rata lump sum distribution to be made in 2000 and 2001
under Paragraph 5.B of the agreement. Provides that Chapter 12J, Health and
Safety Code, as added by the Act, applies to the information to be
collected under this section in the same manner that it applies to
information collected with respect to distributions to be made from the
account. Requires the applicable percentage of the total distribution to be
made to a political subdivision in the subsequent year to be reduced as
appropriate, to the extent that, in accordance with Section 12.136, Health
and Safety Code, as added by this Act, the Texas Board of Health finds an
overstatement of unreimbursed health care expenditures in the information
collected  under this section for the pro rata lump sum distribution or if
a monetary penalty is applied under Section 12.134, Health and Safety Code.
Provides that this section expires December 31, 2002. 

ARTICLE 3. EMERGENCY

SECTION 3.01. Emergency clause.
     Effective date: upon passage.

SUMMARY OF COMMITTEE CHANGES

SECTION 1.01.

Amends Section 403.1041, Government Code, to require the comptroller to
make an annual distribution of the net earnings from the account to each
eligible political subdivision as provided in the agreement regarding
disposition of settlement proceeds, subject to Section 403.1044. Adds new
Section 403.1044, Government Code, regarding the use of certain funds.  

Deletes proposed SECTION 1.02, amending Chapter 403G, Government Code, and
redisignates existing SECTIONS.  

SECTION 2.04. 

 Amends SECTION 2.04 to make conforming changes.