By:  Fraser                                                       S.B. No. 1230


A BILL TO BE ENTITLED

AN ACT

relating to the authority of the state to fund the operations of the 
unemployment compensation system.
	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:                        
	SECTION 1.  (a)  The legislature finds that:                                   
		(1)  in 2002, Texas received only 37 percent of the 
federal unemployment tax dollars that employers remitted to the 
federal government to administer this state's unemployment 
compensation system and at the time of the enactment of this Act the 
state continues to receive only a fraction of the money paid by 
employers;
		(2)  the remainder of the federal unemployment tax 
dollars is redistributed by the United States Department of Labor 
to other states to subsidize the unemployment compensation 
operations of those states or is retained by the federal 
government;
		(3)  the factors and methods used by the United States 
Department of Labor to determine the amount of federal unemployment 
taxes to be returned to a state reward overspending and 
inefficiency and penalize states such as Texas that have 
streamlined and automated their unemployment compensation 
operations;
		(4)  the current inequitable allocation to the states 
hinders the ability of this state to continue to improve services 
and shortchanges Texas employers whose taxes finance the system;
		(5)  reform by the United States Congress of the 
Federal Unemployment Tax Act that would permit Texas to assume 
responsibility for funding the operations of the unemployment 
compensation system in accordance with the provisions of this Act 
and using the federal wage base has the potential to decrease the 
administrative tax on Texas employers by 50 percent resulting in a 
reduction in taxes of $280 million in 2005; and
		(6)  the legislature should support the enactment of 
federal law that would allow this state to assume responsibility 
for funding the operations of the state's unemployment compensation 
system.
	(b)  The purpose of this Act is to provide an appropriate 
method by which the state may fund an efficient unemployment 
compensation system that maintains superior customer service at a 
lower cost to Texas employers.
	SECTION 2.  Chapter 203, Labor Code, is amended by adding 
Subchapter G to read as follows:

SUBCHAPTER G.  UNEMPLOYMENT INSURANCE OPERATIONS
	Sec. 203.301.  UNEMPLOYMENT INSURANCE OPERATIONS FUND.  
(a)  The unemployment insurance operations fund is a dedicated 
trust fund in the state treasury in the custody of the comptroller.
	(b)  The operations fund consists of money deposited in the 
fund as follows:
		(1)  the unemployment insurance operations assessment 
under Section 203.302;
		(2)  money appropriated to the fund by the state; and                  
		(3)  money derived from sources described by Section 
203.151(b).     
	Sec. 203.302.  OPERATIONS ASSESSMENT.  (a)  An employer 
liable for paying contributions under this subtitle shall pay a 
separate and additional operations assessment on wages.  The rate 
of the assessment shall be 0.2 percent of wages paid by the employer 
during a calendar year or the portion of the calendar year in which 
the employer is subject to this subtitle.
	(b)  The operations assessment shall be deposited in the 
unemployment insurance operations fund under Section 203.301 and 
may not be deposited in the administration fund under Section 
203.151.
	(c)  The limitation on wages provided by Section 3306(b)(1) 
of the Federal Unemployment Tax Act (26 U.S.C. Section 3306(b)(1)) 
applies to the assessment under this section.
	Sec. 203.303.  RULES.  The commission shall adopt rules 
necessary to implement and enforce this subchapter.
	SECTION 3.  If the Texas Workforce Commission determines 
before implementing any provision of this Act that a waiver or 
authorization from a federal agency is needed to implement that 
provision, the commission shall request the waiver or authorization 
and may delay the implementation of that provision until the waiver 
or authorization is granted.
	SECTION 4.  (a)  This Act takes effect only if:                                
		(1)  the United States Congress or the United States 
Department of Labor transfers authority to this state to fund the 
operational portion of this state's unemployment compensation 
system; and
		(2)  the Texas Workforce Commission determines that the 
transition of that authority to this state is the most 
cost-effective and beneficial approach for this state.
	(b)  If the Texas Workforce Commission makes the 
determination required by Subsection (a) of this section, the 
commission shall provide notice of that determination to the 
secretary of state for publication in the Texas Register.
	SECTION 5.  This Act takes effect on the date the notice of 
the Texas Workforce Commission's determination under Section 4 of 
this Act is published in the Texas Register.  If, however, the 
notice of that determination is published before September 1, 2005, 
this Act takes effect September 1, 2005.