C.S.H.B. 3324 78(R) BILL ANALYSIS C.S.H.B. 3324 By: Keffer, Jim Economic Development Committee Report (Substituted) BACKGROUND AND PURPOSE Due to the downturn in the economy, the Unemployment Compensation Insurance Trust Fund is currently at a negative balance and must borrow from the Federal Government. The state borrows from the Federal government at 6.08%, a cost absorbed by the employers of Texas. CSHB 3324 would allow the state to pursue the most cost effective method of funding the unemployment insurance fund. RULEMAKING AUTHORITY It is the committee's opinion that rulemaking authority is expressly granted to the Texas Workforce Commission in SECTION 4 (Section 203.105, Labor Code) of this bill. ANALYSIS CSHB 3324 amends the Labor Code to create an Obligation Trust Fund. The fund may be used to pay bond obligations and pay principle and interest on advances from the federal trust fund. CSHB 3324 requires an unemployment obligation to be collected from each employer with an experience rating if the amount in the fund is not enough to pay the interest payment to the federal trust fund, or bond obligations are due and the fund cannot cover these obligations. CSHB 3324 authorizes TWC, or the Texas Public Finance Authority to issue bonds to reduce or avoid the need to borrow from the federal government, provided that is the most cost effective method of funding the payment of benefits. CSHB 3324 authorizes the use of bond proceeds to: repay principal and interest of previous advances from the federal trust fund, to pay unemployment benefits, provide a bond reserve, pay capitolized interest on bonds, or purchase or redeem outstanding bonds. CSHB 3324 requires TWC to assess an unemployment obligation assessment on all experience rated employers, as long as bonds issued under this chapter are outstanding. Revenue collected from this assessment shall be deposited in the obligation trust fund. CSHB 3324 authorizes the TWC to use excess revenue collected from the unemployment obligation assessment to pay bond obligations, redeem or purchase outstanding bonds, deposit in the unemployment trust fund, or pay interest and principle on advances from the federal trust fund. CSHB 3324 provides that bonds issued under this chapter are not debts of the state, and may be repaid only as provided in this chapter and prohibits the state from limiting TWC from repaying the bonds. CSHB 3324 provides that earnings from bonds issued under this chapter are exempt from taxes by the state or any other taxing jurisdiction within the state. EFFECTIVE DATE Upon passage, or, if the Act does not receive the necessary vote, the Act takes effect September 1, 2003. COMPARISON OF ORIGINAL TO SUBSTITUTE The substitute is written in Legislative Council style and format.