LEGISLATIVE BUDGET BOARD

Austin, Texas

FISCAL NOTE, 88TH LEGISLATIVE REGULAR SESSION

April 27, 2023

TO:	Honorable Brian Birdwell, Chair, Senate Committee on Natural Resources & Economic Development
FROM:	Jerry McGinty, Director, Legislative Budget Board
IN RE:	SB2530 by Hughes (relating to contracts with and investments in companies that boycott certain energy companies.), Committee Report 1st House, Substituted

The fiscal implications of the bill cannot be determined due to the uncertainty concerning fiduciary exceptions and the unknown difference in returns between affected investments and those that would replace them.

The bill would amend Chapter 809, Government Code, relating to the prohibition of investment in financial companies that boycott certain energy companies. The bill would modify the definition of "financial company" to include a mutual fund or exchange traded fund, including a money market mutual fund or a government mutual fund.

The bill would add reporting requirements regarding contracts with financial companies to be included in the annual report required by each state governmental entity that details divesture of securities and would add the Comptroller as an entity with which to submit the report.

The bill would add Subchapter D, prohibiting state governmental entities from entering into a contract for goods or services worth $100,000 or more, with a company of at least ten employees, unless the contract contains verification that the company does not boycott energy companies, or is not a listed financial company or an affiliate of a listed financial company. However, this would not apply if the state governmental entity determines that these requirements are inconsistent with the entity's constitutional or statutory duties related to issuance, incurrence, or management of debt obligations, or the deposit, custody, management, borrowing, or investment of funds. 

The Employee Retirement System (ERS) anticipates that any costs associated with the bill could be absorbed using existing resources. According to the Teacher Retirement System (TRS) and the Permanent School Fund Corporation (PSF Corp.), the difference in returns between affected investments and those that would replace them cannot be estimated, and thus, the fiscal impact to the state cannot be determined. 

Local Government Impact

According to the Texas County and District Retirement System (TCDRS) and the Texas Municipal Retirement System (TMRS), the bill could potentially have a negative impact on investment returns. However, there are fiduciary exceptions if an entity determines that the requirements of the bill are inconsistent with constitutional or statutory duties related to the management and investment of funds. Due to these factors, fiscal implications to local units of government cannot be determined.

Source Agencies:

302 Office of the Attorney General, 304 Comptroller of Public Accounts, 323 Teacher Retirement System, 326 Texas Emergency Services Retirement System, 327 Employees Retirement System, 706 Texas Permanent School Fund Corporation

LBB Staff:

JMc, MOc, LCO, CSmi, NV, CMA