HBA-MPM, NLM H.B. 1676 76(R)BILL ANALYSIS Office of House Bill AnalysisH.B. 1676 By: Junell Appropriations 9/16/1999 Enrolled BACKGROUND AND PURPOSE 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 industry agreed to pay the state $15 billion over the next 25 years. Subsequent to the settlement, several legal challenges were filed, including one to ensure the deposit of the settlement proceeds into the state treasury and to preserve the authority of the legislature to appropriate the funds, and one to ensure the allocation of some of the proceeds into counties and hospital districts with indigent care responsibilities. On February 3, 1998, an agreement was reached between the attorney general and Representative Robert Junell, chairman of the House Appropriations Committee, and Senator Bill Ratliff, chairman of the of the Senate Finance Committee, to deposit the proceeds into the treasury for appropriation by the legislature. On July 24, 1998, an agreement was reached between the attorney general and certain counties and hospital districts to preserve the entire amount of the original $15 billion for the benefit of the State of Texas. Under this agreement, the parties also agreed that the additional payments of $2.275 billion received under the "Most Favored Nation" provision of the settlement agreement would be used for the benefit of counties and hospital districts. The purpose of H.B. 1676 is to provide for the implementation of these two agreements. H.B. 1676 creates a permanent fund for tobacco education and enforcement and a permanent fund for children and public health. This bill appropriates the interest received from investment of these funds to the Texas Department of Health (TDH) for programs to reduce the use of cigarettes and tobacco products in this state, and also for children's health care and to address the public health priorities of local communities, respectively. This bill also establishes a permanent fund for emergency medical services and trauma and a permanent fund for rural health facility capital improvements. The interest from investment of these funds is appropriated to TDH and the Center for Rural Health Initiatives (center) for programs to provide emergency medical services and trauma care in this state, and for the purpose and functions of the center, respectively. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that rulemaking authority is expressly delegated to the Texas Board of Health in SECTION 1 (Sections 403.105, 403.1055, 403.106, and 403.1066, Government Code); and to the Center for Rural Health Initiatives in SECTION 2 (Sections 106.202 and 106.204, Health and Safety Code) of this bill. SECTION BY SECTION ANALYSIS SECTION 1. Amends Subchapter G, Chapter 403, Government Code, by adding Sections 403.105, 403.1055, 403.106, 403.1065, 403.1066, 403.1067, 403.1068, and 403.1069, as follows: Sec. 403.105. PERMANENT FUND FOR TOBACCO EDUCATION AND ENFORCEMENT. (a) Establishes that the permanent fund for tobacco education and enforcement is a dedicated account in the general revenue fund. Provides that the fund is composed of money transferred to the fund at the direction of the legislature, gifts and grants contributed to the fund, and the fund's available earnings determined according to Section 403.1068, Government Code. (b) Prohibits the appropriation of money in the fund except for the purposes provided by this section. (c) Authorizes the available earnings of the fund to be appropriated to the Texas Department of Health (TDH) for certain programs designed to reduce cigarette or tobacco product use in this state. (d) Authorizes TDH to contract with another entity to perform all or a part of the functions described in this section regarding programs to reduce cigarette and tobacco product use or to award grants to community organizations, public institutions of higher education, or political subdivisions to perform all or part of those functions. Requires the Texas Board of Health (board) to give high priority and preference to existing programs that do not otherwise receive money from specified endowment programs. Authorizes the board to adopt rules governing any grant program established under this section. (e) Authorizes the comptroller to solicit and accept gifts and grants to the fund. Authorizes the appropriation of a gift or grant in the same manner as the available earnings of the fund, subject to any limitation or requirement placed on the gift or grant by the donor or granting entity. (f) Authorizes appropriation of money in the fund to pay any amount of money that the federal government determines that the state should repay or that the federal government should recoup from the state in the event of national legislation regarding the case styled The State of Texas v. The American Tobacco Co., et al., No. 5-96CV-91, in the United States District Court, Eastern District of Texas. (g) Provides that Sections 403.095 (Use of Dedicated Revenue) and 404.071(Disposition of Interest on Investments), Government Code, do not apply to the fund. Sec. 403.1055. PERMANENT FUND FOR CHILDREN AND PUBLIC HEALTH. (a) Establishes that the permanent fund for children and public health is a dedicated account in the general revenue fund. Provides that the fund is composed of money transferred to the fund at the direction of the legislature, gifts and grants contributed to the fund, and the available earnings of the fund determined according to Section 403.1068, Government Code. (b) Prohibits the appropriation of money in the fund except for the purposes provided by this section. (c) Authorizes the available earnings of the fund to be appropriated to TDH for the purpose of developing and demonstrating cost-effective prevention and intervention strategies to improve health outcomes and for grants to the local communities to address specific public health priorities, and for providing grants to local communities for essential public health services as defined in the Health and Safety Code. (d) Authorizes the board to adopt rules governing any grant program established under this section. (e) Authorizes the comptroller to solicit and accept gifts and grants to the fund. Authorizes the appropriation of a gift or grant in the same manner as the available earnings of the fund, subject to certain limitations or requirements. (f) Authorizes appropriation of money in the fund to pay any amount of money that the federal government determines that the state should repay or that the federal government should recoup from the state in the event of national legislation regarding the case styled The State of Texas v. The American Tobacco Co., et al., No. 5-96CV-91, in the United States District Court, Eastern District of Texas. (g) Provides that Sections 403.095 and 404.071, Government Code, do not apply to the fund. Sec. 403.106. PERMANENT FUND FOR EMERGENCY MEDICAL SERVICES AND TRAUMA CARE. (a) Establishes that the permanent fund for emergency medical services and trauma care is a dedicated account in the general revenue fund. Provides that the fund is composed of money transferred to the fund at the direction of the legislature, gifts and grants contributed to the fund, and the available earnings of the fund determined according to Section 403.1068, Government Code. (b) Prohibits the appropriation of money in the fund except for the purposes provided by this section. (c) Authorizes the appropriation of the available earnings of the fund to TDH for programs to provide emergency medical services and trauma care in this state. (d) Authorizes TDH to establish programs to provide emergency medical services and trauma care in this state, to contract with another entity to establish those programs, or to award grants to political subdivisions to establish or support those programs. Authorizes TDH to consolidate any grant program established under this section with other grant programs relating to the provision of emergency medical services and trauma care. Authorizes the board to adopt rules governing any grant program established under this section. (e) Authorizes the comptroller to solicit and accept gifts and grants to the fund. Authorizes the appropriation of a gift or grant in the same manner as the available earnings of the fund, subject to certain limitations or requirements. (f) Authorizes appropriation of money in the fund to pay any amount of money that the federal government determines that the state should repay or that the federal government should recoup from the state in the event of national legislation regarding the case styled The State of Texas v. The American Tobacco Co., et al., No. 5-96CV-91, in the United States District Court, Eastern District of Texas. (g) Provides that Sections 403.095 and 404.071, Government Code, do not apply to the fund. Sec. 403.1065. PERMANENT FUND FOR RURAL HEALTH FACILITY CAPITAL IMPROVEMENT. (a) Establishes that the permanent fund for rural health facility capital improvement is a dedicated account in the general revenue fund. Provides that the fund is composed of money transferred to the fund at the direction of the legislature, payments of interest and principal on loans made under Subchapter G, Chapter 106 (Center for Rural Health Initiatives), Health and Safety Code, and fees collected under that subchapter, gifts and grants contributed to the fund, and the available earnings of the fund determined according to Section 403.1068, Government Code. (b) Prohibits the appropriation of money in the fund except for the purposes provided by this section. (c) Authorizes the appropriation of the available earnings of the fund to the Center for Rural Health Initiatives (center) for the purposes of Subchapter G, Chapter 106, Health and Safety Code. (d) Authorizes the comptroller to solicit and accept gifts and grants to the fund. Authorizes the appropriation of a gift or grant in the same manner as the available earnings of the fund, subject to certain limitations or requirements. (e) Authorizes appropriation of money in the fund to pay any amount of money that the federal government determines that the state should repay or that the federal government should recoup from the state in the event of national legislation regarding the case styled The State of Texas v. The American Tobacco Co., et al., No. 5-96CV-91, in the United States District Court, Eastern District of Texas. (f) Provides that Sections 403.095 and 404.071, Government Code, do not apply to the fund. Sec. 403.1066. COMMUNITY HOSPITAL CAPITAL IMPROVEMENT FUND. (a) Establishes the community hospital capital improvement fund as a dedicated account in the general revenue fund. Provides that this fund is composed of money transferred to the fund at the legislature's direction; payments of interest and principal on loans and fees collected under this section; gifts and grants contributed to the fund; and the available earnings of the fund determined according to Section 403.1068, Government Code. (b) Prohibits the money in the fund from being appropriated from any purpose except those set forth in Subsections (c), (d), and (e). (c) Authorizes the available earnings of the fund to be appropriated to TDH to provide grants, loans, or loan guarantees to public or nonprofit community hospitals with 125 beds or fewer in an urban area of the state. (d) Authorizes the comptroller to solicit and accept gifts and grants to the fund. Authorizes a gift or grant to be appropriated the same way as available earnings of the fund, subject to certain limitations or requirements. (e) Authorizes appropriation of money in the fund to pay any amount of money that the federal government determines that the state should repay or that the federal government should recoup from the state in the event of national legislation regarding the case styled The State of Texas v. The American Tobacco Co., et al., No. 5-96CV-91, in the United States District Court, Eastern District of Texas. (f) Authorizes the board to adopt rules governing any grant, loan, or loan guarantee program established under this section. (g) Makes a hospital eligible to receive a grant, loan, or loan guarantee under Subchapter G, Chapter 106, Health and Safety Code, ineligible to receive a grant, loan, or loan guarantee under this section. (h) Provides that Sections 403.095 and 404.071, Government Code, do not apply to the fund. Sec. 403.1067. RESTRICTIONS ON LOBBYING EXPENDITURES. (a) Prohibits any entity receiving funds or grants from the permanent funds in Section 403.105, 403.1055, 403.106, 403.1065, or 403.1066 from using the funds or grants to pay the following: lobbying expenses; a person or entity required to register with the Texas Ethics Commission under Chapter 305 (Registration of Lobbyists), Government Code; any person, entity, or related entity of a person described by Chapter 305, or a person or entity hired to represent associations or other entities to affect the outcome of legislation, agency rules, ordinances, or other government policies. (b) Makes persons or entities described by Subsection (a) ineligible to receive money or directly or indirectly participate in the contracts, funds, or grants awarded in Section 403.105, 403.1055, 403.106, 403.1065, or 403.1066. (c) Prohibits grants or awards made under Section 403.105, 403.1055, 403.106, 403.1065, or 403.1066 from being conditioned on the enactment of legislation, agency rules, or local ordinances. Sec. 403.1068. MANAGEMENT OF CERTAIN FUNDS. (a) Makes this section applicable only to the management of the permanent funds established under Sections 403.105, 403.1055, 403.106, 403.1065, and 403.1066. (b) Requires the comptroller of public accounts (comptroller) to manage the permanent fund's assets and in doing so, is authorized to acquire, exchange, sell, supervise, manage, or retain, through procedures and subject to restrictions the comptroller considers appropriate, any kind of investment that prudent investors, exercising reasonable care, skill, and caution, would acquire or retain in light of the purposes, terms, distribution requirements, and other circumstances of the fund then prevailing, taking into consideration the investment of all fund assets, rather than a single investment. (c) Provides that the available earnings of each permanent fund consist of distributions made to the fund from the total return on all investment assets of the fund, including net income attributable to the surface of land held by the fund. (d) Requires the amount of any distribution to each fund under Subsection (c) to be determined by the comptroller in a manner intended to provide a stable and predictable stream of annual distributions and to maintain over time the purchasing power of fund investments and annual distributions to the fund. Prohibits the comptroller from increasing annual distributions to the available earnings of the fund until the purchasing power of the fund investments is restored in the event the purchasing power of fund investments for any 10-year period is not preserved. (e) Prohibits an annual distribution made by the comptroller to the available earnings of a fund during any fiscal year from exceeding an amount equal to seven percent of the average net fair market value of the investment assets of each fund as the comptroller determines. (f) Requires the expenses of managing land and investments of each fund to be paid from each fund. (g) Requires the comptroller to fully disclose all details concerning the investments of each fund on request. Sec. 403.1069. REPORTING REQUIREMENT. Requires TDH to provide a report on the permanent funds established under this subchapter to the Legislative Budget Board no later than November 1 of each year. Requires the report to include specific information with respect to how the money in the fund is distributed, for what purpose, and other information requested by the Legislative Budget Board. SECTION 2. Amends Chapter 106, Health and Safety Code, by adding Subchapter G, as follows: SUBCHAPTER G. RURAL HEALTH FACILITY CAPITAL IMPROVEMENT Sec. 106.201. DEFINITIONS. Defines "public hospital" and "rural county." Sec. 106.202. POWERS OF CENTER. Authorizes the center in administering this subchapter to: (1) enter into and enforce contracts and execute and deliver conveyances and other instruments necessary to make and administer grants, loans, and loan guarantees under this subchapter; (2) employ personnel and counsel necessary to implement this subchapter and pay them from money in the fund appropriated for that purpose; (3) impose and collect reasonable fees and charges in connection with grants, loans and loan guarantees made under this subchapter and provide reasonable penalties for delinquent payment of fees, charges, or loan repayments; (4) take and enforce a mortgage or appropriate security interest in real or personal property that a loan recipient acquires with the proceeds of a loan made under this subchapter; and (5) adopt rules necessary to implement the grant, loan, and loan guarantee program. Sec. 106.203. GRANT, LOAN, AND LOAN GUARANTEE PROGRAM. Authorizes the center to use money appropriated under Section 403.1065, Government Code, to make a grant or low interest loan to, or guarantee a loan for, a public or nonprofit hospital located in a rural county. Authorizes a grant, loan, or loan guarantee recipient to use the money only to make capital improvements, to construct new health facilities, or to purchase capital equipment as described by this subsection for a health facility located in a rural county. Sec. 106.204. ELIGIBILITY FOR GRANT, LOAN, OR LOAN GUARANTEE; INTEREST RATE. Requires the center to adopt rules that establish eligibility criteria for receiving a grant, loan, or loan guarantee under this subchapter. Specifies the content of the rules by which the center will determine whether an applicant should receive a grant, loan, or loan guarantee. Provides that the rules must allow the center to give preference to public hospitals and to consider at least the financial need of the applicant, the health care needs of the rural area served by the applicant, and the probability that the applicant will effectively and efficiently use the money obtained through the grant, loan, or loan guarantee to meet the health care needs of the rural area served by the applicant. Provides that the rules must state generally the factors the center will consider in determining the extent to which the interest rate on a loan should be below market rates. SECTION 3. Requires the comptroller on the effective date of this Act to transfer: _$200 million from tobacco proceeds in the general revenue fund to the permanent fund for tobacco education and enforcement established by Section 403.105, Government Code, as added by this Act; _$100 million from tobacco proceeds in the general revenue fund to the permanent fund for children and public health established by Section 403.1055, Government Code, as added by this Act; _$100 million from tobacco proceeds in the general revenue fund to the permanent fund for emergency medical services and trauma care established by Section 403.106, Government Code, as added by this Act; and _$50 million from tobacco proceeds in the general revenue fund to the permanent fund for rural health facility capital improvement established by Section 403.1065, Government Code, as added by this Act. _$25 million from tobacco proceeds in the general revenue fund to the community hospital capital improvement fund established by Section 403.1066, Government Code, as added by this Act. SECTION 4. Effective date: August 31, 1999. SECTION 5. Emergency clause.