84R22491 CLG-D

By: Button, Johnson H.B. No. 27

Substitute the following for H.B. No. 27:

By: Johnson C.S.H.B. No. 27

A BILL TO BE ENTITLED

AN ACT

relating to state economic development measures, including administration of the Texas Enterprise Fund, the abolishment of the Texas emerging technology fund, and the disposition of balances from the Texas emerging technology fund.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Section 481.078, Government Code, is amended by amending Subsections (c), (d-1), (e), (e-1), (f), and (k) and adding Subsections (e-2) and (m) to read as follows:

(c) Except as provided by Subsections (d) and (d-1), the fund may be used only for:

(1) economic development, infrastructure development, community development, job training programs, and business incentives; and

(2) projects for commercialization of property derived from research developed at or through public or private institutions of higher education as provided by Section 481.081.

(d-1) The fund may be used for the Texas homeless housing and services program administered by the Texas Department of Housing and Community Affairs under Section 2306.2585. The governor may transfer appropriations from the fund to the Texas Department of Housing and Community Affairs to fund the Texas homeless housing and services program. Subsections (e-2) [(e-1)], (f), (f-1), (f-2), (g), (h), (h-1), (i), and (j) and Section 481.080 do not apply to a grant awarded for a purpose specified by this subsection.

(e) The administration of the fund is considered to be a trusteed program within the office of the governor. The governor may negotiate on behalf of the state regarding awarding, by grant, money appropriated from the fund.

(e-1) The governor may award money appropriated from the fund only with the prior approval of the lieutenant governor and speaker of the house of representatives. For purposes of this subsection, an award of money appropriated from the fund is considered disapproved by the lieutenant governor or speaker of the house of representatives if that officer does not approve the proposal to award the grant before the 31st [91st] day after the date of receipt of the proposal from the governor. The lieutenant governor or the speaker of the house of representatives may extend the review deadline applicable to that officer for an additional 14 days by submitting a written notice to that effect to the governor before the expiration of the initial review period.

(e-2) [(e-1)] To be eligible to receive a grant under this section, the entity must:

(1) be in good standing under the laws of the state in which the entity was formed or organized, as evidenced by a certificate issued by the secretary of state or the state official having custody of the records pertaining to entities or other organizations formed under the laws of that state; and

(2) owe no delinquent taxes to a taxing unit of this state.

(f) Before awarding a grant from the fund [under this section], the governor shall enter into a written agreement with the entity to be awarded the grant money. If the entity is awarded a grant for a purpose described by Subsection (c)(1), the agreement must specify [specifying] that:

(1) if the governor finds that the grant recipient has not met each of the performance targets specified in the agreement as of a date certain provided in the agreement:

(A) the recipient shall repay the grant and any related interest to the state at the agreed rate and on the agreed terms;

(B) the governor will not distribute to the recipient any grant money that remains to be awarded under the agreement; and

(C) the governor may assess specified penalties for noncompliance against the recipient;

(2) if all or any portion of the amount of the grant is used to build a capital improvement, the state may:

(A) retain a lien or other interest in the capital improvement in proportion to the percentage of the grant amount used to pay for the capital improvement; and

(B) require the recipient of the grant, if the capital improvement is sold, to:

(i) repay to the state the grant money used to pay for the capital improvement, with interest at the rate and according to the other terms provided by the agreement; and

(ii) share with the state a proportionate amount of any profit realized from the sale; and

(3) if, as of a date certain provided in the agreement, the grant recipient has not used grant money awarded under this section for the purposes for which the grant was intended, the recipient shall repay that amount and any related interest to the state at the agreed rate and on the agreed terms.

(k) To encourage the development and location of small businesses in this state, the governor shall make [consider making] grants from the fund:

(1) to recipients that are small businesses in this state that commit to using the grants to create additional jobs;

(2) to recipients that are small businesses from outside the state that commit to relocate to this state; or

(3) for individual projects that create 100 or fewer additional jobs.

(m) The office of the governor shall adopt rules for the operation of the trusteed program established under this section. The rules must include:

(1) forms and procedures for applications for and the award of grants;

(2) procedures for evaluating grant applications;

(3) provisions governing the grant agreement process;

(4) methods and procedures for monitoring grant recipients and projects or activities for which a grant is awarded from the fund to determine whether and to what extent the grant recipients comply with job creation performance targets, capital investment commitments, or other specified performance targets in the grant agreement, including requirements that grant recipients provide to the office periodic compliance updates;

(5) document retention requirements for grant recipients that are consistent with applicable state law; and

(6) conflict of interest provisions to ensure that persons involved in the operation of the program, including persons involved in evaluating applications for or awarding grants from the fund or in monitoring grant recipients or determining compliance with the terms of grant agreements, do not have a substantial interest in any grant recipient or grant awarded from the fund.

SECTION 2. Section 481.079(a-1), Government Code, is amended to read as follows:

(a-1) For grants awarded for a purpose specified by Section 481.078(d-1) or 481.081, the report must include only the amount and purpose of each grant.

SECTION 3. Subchapter E, Chapter 481, Government Code, is amended by adding Section 481.081 to read as follows:

Sec. 481.081. TEXAS ENTERPRISE FUND: GRANT FOR UNIVERSITY RESEARCH DEVELOPMENT WITH PRIVATE SPONSORSHIP. (a) In this section:

(1) "Fund" means the Texas Enterprise Fund under Section 481.078.

(2) "Public or private institution of higher education" means an institution of higher education or a private or independent institution of higher education as those terms are defined by Section 61.003, Education Code.

(b) The governor shall provide grants to public or private institutions of higher education from the fund to supplement other funding for projects involving the commercialization of intellectual property or other property derived from research developed at or through a public or private institution of higher education. To be eligible for a grant under this section, a project must be supported by funding provided by one or more private entities participating in the project, in addition to any funding provided by the public or private institution of higher education.

(c) The amount of a grant awarded under this section may not exceed 50 percent of the total amount of investment in the project provided by the applicable public or private institution of higher education and the participating private entity or entities.

SECTION 4. Subchapter G, Chapter 404, Government Code, is amended by adding Section 404.1031 to read as follows:

Sec. 404.1031. MANAGEMENT OF INVESTMENT PORTFOLIO FROM FORMER TEXAS EMERGING TECHNOLOGY FUND. (a) In this section, "state's emerging technology investment portfolio" means:

(1) the equity positions in the form of stock or other security the governor took, on behalf of the state, in companies that received awards under the former Texas emerging technology fund; and

(2) any other investments made by the governor, on behalf of the state, in connection with an award made under the former Texas emerging technology fund.

(b) The trust company shall manage the state's emerging technology investment portfolio in a manner that a prudent investor would employ exercising reasonable care, skill, and caution, taking into consideration the investment of all assets of the portfolio. The trust company may recover its reasonable and necessary costs incurred in the management of the portfolio from the earnings on the investments in the portfolio.

(c) Any proceeds or other earnings from the sale of stock or other investments in the state's emerging technology investment portfolio, less the amount permitted to be retained for payment of its costs for managing the portfolio as provided by Subsection (b), shall be remitted by the trust company to the comptroller for deposit in the general revenue fund.

SECTION 5. Effective September 1, 2016, Subchapter G, Chapter 404, Government Code, is amended by adding Section 404.1032 to read as follows:

Sec. 404.1032. VALUATION OF INVESTMENTS FROM FORMER FUND; ANNUAL REPORT. (a) To the maximum extent practicable, the trust company annually shall perform a valuation of the equity positions the governor took, on behalf of the state, in companies that received awards under the former Texas emerging technology fund and of other investments made by the governor, on behalf of the state, in connection with an award under that fund. The valuation must be based on a methodology that is consistent with generally accepted accounting principles.

(b) Not later than January 31 of each year, the trust company shall submit to the lieutenant governor, the speaker of the house of representatives, and the standing committee of each house of the legislature with primary jurisdiction over economic development matters and post on the trust company's Internet website a report of any valuation performed under this section during the preceding state fiscal year.

SECTION 6. The heading to Chapter 490, Government Code, is amended to read as follows:

CHAPTER 490. PROVISIONS RELATING TO FORMER TEXAS [FUNDING FOR]

EMERGING TECHNOLOGY FUND

SECTION 7. Sections 490.001(2) and (4), Government Code, are amended to read as follows:

(2) "Fund" means the former Texas emerging technology fund.

(4) "Award" means:

(A) for purposes of former Subchapter D, an investment in the form of equity or a convertible note;

(B) for purposes of former Subchapter E, an investment in the form of a debt instrument;

(C) for purposes of former Subchapter F, a grant; or

(D) other forms of contribution or investment as recommended by the former Texas Emerging Technology Advisory Committee [committee] and approved by the governor, lieutenant governor, and speaker of the house of representatives before amendment of this chapter by the 84th Legislature, Regular Session, 2015.

SECTION 8. The heading to Section 490.005, Government Code, is amended to read as follows:

Sec. 490.005. REPORT ON AWARDS FROM FORMER FUND [ANNUAL REPORT].

SECTION 9. Section 490.005, Government Code, is amended by amending Subsections (a) and (b) and adding Subsection (d) to read as follows:

(a) Not later than January 31, 2016 [of each year], the governor shall submit to the lieutenant governor, the speaker of the house of representatives, and the standing committee of each house of the legislature with primary jurisdiction over economic development matters and post on the office of the governor's Internet website a report that includes for each preceding state fiscal year the following information regarding awards made under the fund [during each preceding state fiscal year]:

(1) the total number and amount of awards made;

(2) the number and amount of awards made under former Subchapters D, E, and F;

(3) the aggregate total of private sector investment, federal government funding, and contributions from other sources obtained in connection with awards made under each of the subchapters listed in Subdivision (2);

(4) the name of each award recipient and the amount of the award made to the recipient; and

(5) a brief description of the equity position that the governor, on behalf of the state, has taken [may take] in companies that received [receiving] awards and the names of the companies in which the state has taken an equity position.

(b) The [annual] report must also contain:

(1) the total number of jobs actually created by each project that received an award from the fund [receiving funding under this chapter];

(2) an analysis of the number of jobs actually created by each project that received an award from the fund [receiving funding under this chapter]; and

(3) a brief description regarding:

(A) the methodology used to determine the information provided under Subdivisions (1) and (2), which may be developed in consultation with the comptroller's office;

(B) the intended outcomes of projects funded under former Subchapter D [during each preceding state fiscal year]; and

(C) the actual outcomes of all projects funded under former Subchapter D [during each preceding state fiscal year], including any financial impact on the state resulting from a liquidity event involving a company whose project was funded under that subchapter.

(d) This section expires September 1, 2017.

SECTION 10. Effective September 1, 2016, Subchapter A, Chapter 490, Government Code, is amended by adding Section 490.0051 to read as follows:

Sec. 490.0051. ANNUAL REPORT ON PROJECTS FUNDED; JOB CREATION AND OUTCOMES. (a) Not later than January 31 of each year, the governor shall submit to the lieutenant governor, the speaker of the house of representatives, and the standing committee of each house of the legislature with primary jurisdiction over economic development matters and post on the office of the governor's Internet website a report that contains for each preceding state fiscal year the following information regarding awards made under the fund:

(1) the total number of jobs actually created by each project that received an award from the fund;

(2) an analysis of the number of jobs actually created by each project that received an award from the fund; and

(3) a brief description regarding:

(A) the methodology used to determine the information provided under Subdivisions (1) and (2), which may be developed in consultation with the comptroller's office;

(B) the intended outcomes of all projects funded under former Subchapter D; and

(C) the actual outcomes of all projects funded under former Subchapter D, including any financial impact on the state resulting from a liquidity event involving a company whose project was funded under that subchapter.

(b) The governor shall exclude from the report information that is made confidential by law.

(c) This section expires September 1, 2030.

SECTION 11. Section 490.006, Government Code, is amended to read as follows:

Sec. 490.006. VALUATION OF INVESTMENTS; [INCLUSION IN] ANNUAL REPORT. (a) To the maximum extent practicable, the office of the governor shall annually perform a valuation of the equity positions taken by the governor, on behalf of the state, in companies that received [receiving] awards under the fund and of other investments made by the governor, on behalf of the state, in connection with an award under the fund. The valuation must[:

[(1)] be based on a methodology that:

(1) [(A)] may be developed in consultation with the comptroller's office; and

(2) [(B)] is consistent with generally accepted accounting principles[; and

[(2) be included with the annual report required under Section 490.005].

(b) Except as provided by Subsection (c), not later than January 31, 2016, the governor shall submit to the lieutenant governor, the speaker of the house of representatives, and the standing committee of each house of the legislature with primary jurisdiction over economic development matters and post on the office of the governor's Internet website a report of any valuation performed under this section during the preceding state fiscal year.

(c) A valuation performed for the state fiscal year ending August 31, 2015, must be included with the report required under Section 490.005.

(d) This section expires September 1, 2016.

SECTION 12. The heading to Subchapter B, Chapter 490, Government Code, is amended to read as follows:

SUBCHAPTER B. MISCELLANEOUS PROVISIONS [TEXAS EMERGING TECHNOLOGY

ADVISORY COMMITTEE]

SECTION 13. Section 490.057, Government Code, is amended to read as follows:

Sec. 490.057. CONFIDENTIALITY. (a) Except as provided by Subsection (b), information collected by the governor's office, the former Texas Emerging Technology Advisory Committee [committee], or the committee's advisory panels concerning the identity, background, finance, marketing plans, trade secrets, or other commercially or academically sensitive information of an individual or entity that was [being] considered for or [, receiving, or having] received an award from the fund is confidential unless the individual or entity consents to disclosure of the information.

(b) The following information collected by the governor's office, the former Texas Emerging Technology Advisory Committee [committee], or the committee's advisory panels under this chapter is public information and may be disclosed under Chapter 552:

(1) the name and address of an individual or entity that [receiving or having] received an award from the fund;

(2) the amount of funding received by an award recipient;

(3) a brief description of the project [that is] funded under this chapter;

(4) if applicable, a brief description of the equity position that the governor, on behalf of the state, has taken in an entity that [has] received an award from the fund; and

(5) any other information designated by the committee with the consent of:

(A) the individual or entity that [receiving or having] received an award from the fund[, as applicable];

(B) the governor;

(C) the lieutenant governor; and

(D) the speaker of the house of representatives.

SECTION 14. Section 50D.013(a), Agriculture Code, is amended to read as follows:

(a) The policy council shall:

(1) provide a vision for unifying this state's agricultural, energy, and research strengths in a successful launch of a cellulosic biofuel and bioenergy industry;

(2) foster development of cellulosic-based and bio-based fuels and build on the former Texas emerging technology fund's investments in leading-edge energy research and efforts to commercialize the production of bioenergy;

(3) pursue the creation of a next-generation biofuels energy research program at a university in this state;

(4) work to procure federal and other funding to aid this state in becoming a bioenergy leader;

(5) study the feasibility and economic development effect of a blending requirement for biodiesel or cellulosic fuels;

(6) pursue the development and use of thermochemical process technologies to produce alternative chemical feedstocks;

(7) study the feasibility and economic development of the requirements for pipeline-quality, renewable natural gas; and

(8) perform other advisory duties as requested by the commissioner regarding the responsible development of bioenergy resources in this state.

SECTION 15. Section 203.021(e), Labor Code, is amended to read as follows:

(e) Money in the compensation fund may not be transferred to the[:

[(1)] Texas Enterprise Fund created under Section 481.078, Government Code[; or

[(2) Texas emerging technology fund established under Section 490.101, Government Code].

SECTION 16. The following laws are repealed:

(1) Sections 490.001(1), (3), and (5), Government Code;

(2) Sections 490.002 and 490.003, Government Code;

(3) Sections 490.051, 490.052, 490.0521, 490.053, 490.054, 490.055, and 490.056, Government Code; and

(4) Subchapters C, D, E, F, and G, Chapter 490, Government Code.

SECTION 17. (a) On September 1, 2015, the Texas emerging technology fund is abolished. Any unencumbered balance of the fund may be appropriated only to any of the following:

(1) the Texas Research Incentive Program (TRIP) under Subchapter F, Chapter 62, Education Code;

(2) the Texas research university fund, subject to Subsection (b) of this section; and

(3) the comptroller for the purposes of expenses incurred in managing the state's portfolio of equity positions and other investments in connection with awards from the former Texas emerging technology fund in accordance with Section 404.1031, Government Code, as added by this Act.

(b) The authority of the Texas research university fund to receive the appropriation described by Subsection (a) of this section is contingent on passage and enactment of H.B. 1000, or similar legislation relating to state support for general academic teaching institutions in this state by the 84th Legislature, Regular Session, 2015, that renames the existing Texas competitive knowledge fund and changes the purposes for which the fund can be used.

(c) The abolishment by this Act of the Texas emerging technology fund and the repeal of provisions of Chapter 490, Government Code, relating to that fund do not affect the validity of an agreement between the governor and an award recipient or a person to be awarded money that is entered into under Chapter 490 before September 1, 2015.

(d) Money that was deposited in the Texas emerging technology fund as a gift, grant, or donation under Chapter 490, Government Code, and that is encumbered by the specific terms of the gift, grant, or donation may be spent only in accordance with the terms of the gift, grant, or donation.

(e) Money from the Texas emerging technology fund that is encumbered because the money is awarded or otherwise obligated by agreement before September 1, 2015, but under the terms of the award or agreement will not be distributed until a later date shall be distributed in accordance with the terms of the award or agreement. If the governor determines that the money will not be distributed in accordance with the terms of the award or agreement, the governor shall certify that fact to the comptroller. On that certification, the comptroller shall make that money available in the general revenue fund to be used in accordance with legislative appropriation.

(f) On or after the effective date of this Act, subject to any amounts used to recover costs under Section 404.1031(b), Government Code, as added by this Act, the following payments or other amounts shall be sent to the comptroller for deposit to the general revenue fund to be used in accordance with legislative appropriation:

(1) any royalties, revenues, and other financial benefits realized from a project undertaken with money from the Texas emerging technology fund, as provided by a contract described by former Section 490.103, Government Code;

(2) any interest or proceeds received as a result of a transaction authorized by former Section 490.101(h), Government Code;

(3) any money returned or repaid to the state by an award recipient pursuant to an agreement entered into under former Section 490.101, Government Code;

(4) any money derived from an interest the state retained in a capital improvement pursuant to an agreement entered into under former Section 490.101, Government Code; and

(5) any fund money returned by an entity that fails to perform an action guaranteed by a contract entered into under former Section 490.154 or 490.203, Government Code.

SECTION 18. A regional center of innovation and commercialization established under Section 490.152, Government Code, is abolished on the effective date of this Act. Each center shall transfer to the office of the governor a copy of any meeting minutes required to be retained under Section 490.1521, Government Code, as that section existed immediately before that section's repeal by this Act, and the office shall retain the minutes for the period prescribed by that section.

SECTION 19. On September 1, 2015, the Texas Emerging Technology Advisory Committee established under Subchapter B, Chapter 490, Government Code, is abolished.

SECTION 20. Except as provided by this Act, on September 1, 2015, the following powers, duties, functions, and activities performed by the office of the governor immediately before that date are transferred to the Texas Treasury Safekeeping Trust Company:

(1) all powers, duties, functions, and activities related to equity positions in the form of stock or other security the governor has taken, on behalf of the state, in companies that received awards under the Texas emerging technology fund before September 1, 2015; and

(2) all powers, duties, functions, and activities related to other investments made by the governor, on behalf of the state, in connection with an award made under the Texas emerging technology fund before September 1, 2015.

SECTION 21. If a conflict exists between this Act and another Act of the 84th Legislature, Regular Session, 2015, that relates to the Texas emerging technology fund, this Act controls without regard to the relative dates of enactment.

SECTION 22. Except as otherwise provided by this Act, this Act takes effect September 1, 2015.