By: Keffer of Eastland H.B. No. 3324
A BILL TO BE ENTITLED
AN ACT
relating to the issuance of financial obligations for the
unemployment compensation fund and revenue to support such
obligations.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. The subchapter title and Section 203.102 of the
Texas Labor Code are amended to read as follows:
Subchapter C. Advances from Federal Trust Fund and an
Obligation Assessment.
Sec. 203.102. The Obligation Trust Fund
(a) The obligation trust fund is a dedicated trust fund
outside the state treasury but in the custody of the Comptroller.
(b) The Commission and the Governor may use the money in the
obligation trust fund without legislative appropriation to:
(1) to pay bond obligations and bond administrative
expenses; and
(2) to pay principle and interest incurred on advances
from the federal trust fund.
SECTION 2. Repeal Section 203.103 of the Texas Labor Code.
Section 203.104 of the Texas Labor Code is amended to read as
follows:
Sec. 203.104. Limitation to Transfers
No amounts attributable to the portion of the unemployment
obligation assessment authorized by Subsection 203.105(a)(2) shall
be transferred to the compensation fund unless all bond
obligations, including bond administrative expenses, have been
fully paid and satisfied. When such obligations have been fully
satisfied, the commission shall transfer the balance in the
obligation trust fund to the compensation fund.
SECTION 3. Section 203.105 of the Texas Labor Code is
amended to read as follows:
Section 203.105 Unemployment Obligation Assessment
(a) In each calendar year when any condition set out in
clauses (1) and (2), is met, an unemployment obligation assessment
shall be collected from each employer entitled to an experience
rating. The unemployment obligation assessment rate shall consist
of the total of the rates set under each clause.
(1) If an interest payment on an advance from the
federal trust fund will be due after January 1 of a year, and the
estimated amount necessary to make the interest payment is not
available in the obligation trust fund, or otherwise available, the
commission shall set an unemployment obligation assessment rate
sufficient to ensure timely payment of interest, not exceeding
two-tenths of one percent.
(2) If after January 1 of a year bond obligations are
due and the amount of funds necessary to pay in full these
obligations, together with the bond administrative expenses, is not
available in the obligation trust fund, or otherwise available, the
commission shall set an unemployment obligation assessment rate
sufficient to ensure timely payment of the bond obligations,
together with the bond administrative expenses, and to provide the
amounts necessary in the judgment of the Commission to enhance
investor acceptance of the bonds. This rate shall be based on a
formula prescribed by Commission rule, utilizing the employers
experience rating from the prior year.
(b) The unemployment obligation assessment rate applies to
the same wage base to which the employer's unemployment tax applies
for the year.
(c) This unemployment obligation assessment is due at the
same time, collected in the same manner, and subject to the same
penalties and interest as other contributions assessed under this
subtitle.
(d) The commission shall deposit the revenues collected
under this section to the credit of the obligation trust fund
created under Texas Labor Code Sec.203.102.
SECTION 4. Title 4, Subtitle A, Chapter 203 of the Texas
Labor Code is amended by adding Subchapter F, to read as follows:
Subchapter F. Issuance of Financial Obligations for the,
Unemployment Compensation Fund.
Sec. 203.301. Findings and Purpose
The legislature funds that:
(1) it is an essential governmental function to
maintain funds in an amount sufficient to pay unemployment benefits
when due;
(2) currently, borrowing from the federal government
is the only option available to obtain sufficient funds to pay
benefits when the balance in the compensation fund is depleted;
(3) alternative methods of financing replenishment of
the unemployment compensation fund may reduce the costs of
providing unemployment benefits and employers' cost of doing
business in the state; and
(4) funds representing revenues received from the
unemployment obligation assessment authorized under this
subchapter and any income from the investment of those funds do not
constitute state property.
The purpose of this subchapter is to provide an appropriate
range of methods through which the state may continue its
unemployment compensation program at the least possible cost to the
state and its employers.
Sec. 203.302. Definitions
In this subchapter:
(1) "Authority" means the Texas Public Finance
Authority.
(2) "Bond" means any type of revenue obligation,
including a bond, note, certificate, or other instrument, payable
from and secured by a pledge of revenues received from the
unemployment obligation assessment and amounts on deposit in the
obligation trust fund to the extent provided in the proceedings
authorizing such obligation.
(3) "Bond administrative expenses" means expenses
incurred to administer bonds issued under this subchapter,
including fees for paying agent, trustee, legal, and other
professional services necessary to ensure compliance with
applicable state or federal law.
(4) "Bond obligations" means principal, premium if
any, and interest on bonds issued under this subchapter, together
with amounts owed under related credit agreements.
(5) "Credit agreement" means a loan agreement,
revolving credit agreement, agreement establishing a line of
credit, letter of credit, interest rate swap agreement, interest
rate lock agreement, currency swap agreement, forward payment
conversion agreement, an agreement to provide payments based on
levels of or changes in interest rates or currency exchange rates,
an agreement to exchange cash flows or a series of payments, an
option, put, or call to hedge payment, currency, interest rate or
other exposure, or other agreement that enhances the marketability,
security, or creditworthiness of a bond issued under this
subchapter. Amounts owed by the Authority or the Commission under
any credit agreement shall be payable from and secured by a pledge
of revenues received from the unemployment assessment obligation
and amounts on deposit in the obligation trust fund to the extent
provided in the proceedings authorizing such credit agreement.
(6) "Obligation trust fund" means the trust fund
established in Section 203.102.
(7) "Unemployment obligation assessment" means the
assessment authorized in Section 203.105 (a)(2).
Sec. 203.303. Request for Bond Issuance
(a) If the Commission determines that the issuance of bonds
is necessary to reduce or avoid the need to borrow or obtain a
federal advance under Section 1201, Social Security Act, or any
similar federal legislation, or to refinance any such previous
borrowing or federal advance received by the Commission, and that
bond financing is the most cost effective method of funding the
payment of benefits, it may either request the Authority to issue
such bonds on its behalf, or may issue its own bonds. Before making
such a request or issuing its own bonds, the Commission shall by
resolution find that the issuance of bonds for the purposes
established in this Section results in a savings to the state and
its employers when compared to the cost of borrowing or obtaining a
federal advance under Section 1201, Social Security Act, or any
similar legislation.
(b) The Commission shall either:
(1) specify in its request to the Authority the
maximum principal amount of the bonds, not to exceed $2 billion for
any separate bond issue, and the maximum term of the bonds, not to
exceed 10 years. The principal amount determined by the Commission
may be increased to include an amount sufficient to pay the
Authority's costs of issuance, provide a bond reserve fund and
capitalize interest for the period determined necessary by the
Commission, not to exceed two years; or
(2) shall specify in its authorizing resolution the
maximum principal amount of the bonds, not to exceed $2 billion for
any separate bond issue, and the maximum term of the bonds, not to
exceed 10 years. The principal amount determined by the Commission
may be increased to include an amount sufficient to pay the costs of
issuance, provide a bond reserve fund and capitalize interest for
the period determined necessary by the Commission, not to exceed
two years.
Sec. 203.304. Issuance of Bonds by the Authority
(a) The Authority shall issue bonds pursuant to the request
of the Commission, in accordance with the requirements of its
enabling act, Texas Government Code, Chapter 1232, and other
provisions of Title 9 of the Texas Government Code applicable to
bond issuance by a state agency, including specifically Chapters
1201 through 1207, 1231 and 1371.
(b) The Authority shall determine a method of sale, type of
bond, bond form, maximum interest rates, and other terms of the
bonds in its judgment to best achieve the economic goals of the
Commission and effect the borrowing at the lowest practicable cost.
(c) The Authority may enter into a credit agreement in
connection with the bonds.
Sec. 203.305. Issuance of Bonds by the Commission
(a) The Commission is authorized to issue, sell, and deliver
bonds in the name of the Commission in an amount determined by the
Commission.
(b) The Commission shall issue bonds, in accordance with the
requirements of Title 9 of the Texas Government Code applicable to
bond issuance by a state agency, including specifically Chapters
1201 through 1207, 1231 and 1371.
(c) The Commission shall determine a method of sale, type of
bond, bond form, maximum interest rates, and other terms of the
bonds in its judgment to best achieve the economic goals of the
Commission and effect the borrowing at the lowest practicable cost.
(d) The Commission may enter into a credit agreement in
connection with the bonds.
Sec. 203.306. Bond proceeds
(a) Proceeds of bonds issued by the Authority under this
subchapter may be deposited with a trustee selected by the
Authority and the Commission or held by the Comptroller in a
dedicated trust fund outside the state treasury but in the custody
of the Comptroller.
(b) Proceeds of bonds issued by the Commission under this
subchapter may be deposited with a trustee selected by the
Commission or held by the Comptroller in a dedicated trust fund
outside the state treasury but in the custody of the Comptroller.
(c) Bond proceeds, including investment income, shall be
held in trust for the exclusive use and benefit of the Commission.
The Commission may use the proceeds for the following purposes:
(1) to repay the principal and interest of previous
advances from the federal trust fund;
(2) to be deposited in the unemployment compensation
trust fund as defined in Subchapter B of this chapter to pay
unemployment benefits;
(3) to pay costs of issuing the bonds;
(4) to provide a bond reserve; and
(5) to pay capitalized interest on the bonds for the
period determined necessary by the Commission, not to exceed two
years.
(d) Any excess or residue remaining, after the purposes for
which the bonds were issued is satisfied, may be used to purchase or
redeem outstanding bonds.
(e) At any time that no bonds or bond interest remains
outstanding, the remaining proceeds will be transferred to the
state's unemployment compensation trust fund.
Sec. 203.307. Repayment of the Commission's Financial
Obligations
(a) The Commission shall assess an unemployment obligation
assessment, annually on each employer entitled to an experience
rating under chapter 204, as long as any bonds issued under this
subchapter are outstanding.
(b) When the Authority has issued bonds on behalf of the
Commission, then the Authority must notify the Commission of the
amount of the bond obligations and the estimated amount of bond
administrative expenses each year in sufficient time, as determined
by the Commission, to permit the Commission to fix the annual rate
of the unemployment obligation assessment, subject to verification
by a financial advisor to the Commission or as otherwise specified
in the proceedings authorizing the bonds.
(c) When the Commission has issued bonds then it must
determine the amount of the bond obligations and the estimated
amount of bond administrative expenses each year in sufficient
time, to permit it to fix the annual rate of the unemployment
obligation assessment, subject to verification by a financial
advisor to the Commission or as otherwise specified in the
proceedings authorizing the bonds.
(d) The Commission shall deposit all revenue it collects
from the unemployment obligation assessment into the obligation
trust fund. Money deposited to the fund may be invested as
permitted by general law.
(e) Money in the obligation trust fund required to pay bond
obligations and bond administrative expenses shall be transferred
to the Authority or utilized by the Commission in the manner and at
the time specified in the resolution adopted in connection with the
bond issue to ensure timely payment of such obligations and
expenses, or as otherwise provided by the bond documents.
(f) Whether the bonds are issued by the Commission or by the
Authority on behalf of the Commission, the Commission shall provide
for the payment of the bond obligations and the bond administrative
expenses by irrevocably pledging revenues received from the
unemployment obligation assessment and amounts on deposit in the
obligation trust fund, together with any bond reserve fund, all to
the extent provided in the proceeding authorizing the bonds and
related credit agreements.
Sec. 203.308. Bond Payments
(a) Revenues received from the unemployment obligation
assessment may only be applied as provided in this subchapter.
(b) The Commission may pay bond obligations with other
legally available funds.
(c) Bond obligations are payable only from sources provided
for payment in this subchapter.
Sec. 203.309. Excess Revenue Collections and Investment
Earnings.
Revenue collected from the unemployment obligation
assessment as provided for in Section 203.105(a)(2) in any year in
excess of the bond obligations and bond administrative expenses
payable in that year and interest earned on the obligation trust
fund may, in the discretion of the Commission be applied:
(1) to pay bond obligations payable in the subsequent
year, offsetting the amount of the assessment that would otherwise
have to be levied for the year under this subchapter;
(2) to redeem or purchase outstanding bonds,
(3) to deposit in the unemployment trust fund, or
(4) to pay principle and interest on advances from the
federal trust fund.
Sec. 203.310 Bonds and credit agreements not obligations of
the state
(a) Bonds issued under this subchapter and related credit
agreements do not constitute debt of the state or its agencies or
political subdivisions and are not secured by a pledge of the full
faith and credit or taxing power of this state.
(b) The bonds and related credit agreements may be repaid
only from the sources provided for their payment under this
subchapter and in the proceedings authorizing the bonds and the
credit agreements.
(c) The provisions of this section and section 203.308 must
be set forth in the bonds and the credit agreements.
Sec. 203.311 State Not to Impair Bond Obligations
As long as bonds are outstanding, the state will take no action to
limit or restrict the rights of the Commission to fulfill its
responsibility to pay bond obligations or in any way impair the
rights and remedies of the bond owners until the bonds are fully
discharged.
Sec. 203.312 Bond Tax Exempt
The bonds issued under this subchapter, and earnings and profits
thereon, are free from taxation by this state, a political
subdivision, or other taxing jurisdiction in the state.
Sec. 203.313 No personal liability
Neither the individual members of the Commission and its
employees nor the Board of Directors and employees of the Authority
shall have any personal liability as a result of exercising the
rights and responsibilities granted to them in this subchapter.
SECTION 5. Section 204.061 of the Texas Labor Code is
amended to read as follows:
Sec. 204.061. Ceiling and Floor of Compensation Fund
In computing the tax rates under this subchapter:
(1) the ceiling of the compensation fund is two
percent of the total taxable wages for the four calendar quarters
ending the preceding June 30; and
(2) the floor of the compensation fund is equal to the
greater of
(A) $400 million; or
(B) one percent of the total taxable wages for
the four calendar quarters ending the preceding June 30.
SECTION 6. Section 204.063 of the Texas Labor Code is
amended to read as follows:
Sec. 204.063. Deficit Assessment [Tax]
a) If the amount of money in the compensation fund on a tax
rate computation date is less than the floor of the compensation
fund, a deficit assessment rate is added for the next calendar year
to the general tax rate for each employer entitled to an experience
rate for that year.
(b) The deficit assessment rate for a calendar year is the
lesser of:
(1) the rate computed by multiplying the deficit
ratio, as computed under Section 204.064, by the sum of the
employer's general tax rate, the replenishment tax rate, and the
deficit assessment rate for the previous calendar year; or
(2) two percent.
SECTION 7. Section 204.064 of the Texas Labor Code is
amended to read as follows:
Sec. 204.064. Deficit Ratio
(a) The deficit ratio is computed by:
(1) dividing the numerator computed under Subsection
(b) by the denominator described by Subsection (c); and
(2) rounding that result to the nearest hundredth.
(b) The numerator is computed by subtracting the balance of
the compensation fund, considering any federal advance [or other
liability of the fund,] from the floor of the compensation fund.
(c) The denominator is the amount of contributions due under
the general tax rate and the replenishment rate for the four
calendar quarters ending the preceding September 30 from employers
entitled to an experience rate on the tax rate computation date.
SECTION 8. The advance interest trust fund created by
Section 203.102 of this Subtitle is abolished as of the effective
date of this act, and any balance remaining in such fund is
transferred to the obligation trust created by this act.
SECTION 9. This Act takes effect immediately if it receives
a vote of two-thirds of all the members elected to each house, as
provided by Section 39, Article III, Texas Constitution. If this
Act does not receive the vote necessary for immediate effect, this
Act takes effect September 1, 2003.