Garnet F. Coleman
J.M. Lozano
Sergio Munoz Jr.
J.D. Sheffield
Fiscal Notes
A fiscal note dated April 20, 2015 anticipates a positive two-year net impact to General Revenue Related Funds for CSHB26 of f $846,024 through the biennium ending August 31, 2017.
The bill would make no appropriation but could provide the legal basis for an appropriation of funds to implement the provisions of the bill.
Bill Analysis
House Bill 26 would amend Chapter 481 of the Government Code regarding the Texas Enterprise Fund (TEF).
It would allow for the TEF to award grants for university research development with private sponsorship. Eligible projects would have to involve the commercialization of intellectual property or other property derived from research, and be funded by one or more private entities, as well as a public or private institution of higher education. The grant could not exceed 50 percent of the total amount of investment provided by the public or private institution of higher education and the participating private entity or entities.
House Bill 26 would reduce the number of days (from 90 to 30) after which a proposal for an award of money from the TEF that has not been approved by the lieutenant governor or the speaker of the House of Representatives is considered disapproved. It would also require that the office of the governor adopt rules for the operation of the trusteed program, including forms and procedures regarding applications, evaluations of applications, monitoring grant recipients, document retention, and conflict of interest provisions.
House Bill 26 would abolish the Texas Emerging Technology Fund on September 1, 2015. Any unencumbered balance of the fund could be appropriated only to the Texas Research Incentive Program, the Texas research university fund, the governor's university research initiative fund, or to cover 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. The bill would require a final report on awards from the former fund which would include information from each of the preceding state fiscal year. It would also require an annual report, until 2030, on projects funded and jobs created as a result. The Texas Emerging Technology Advisory Committee would also be abolished on September 1, 2015.
House Bill 26 would transfer the management of the investment portfolio from the former Texas Emerging Technology Fund to the Texas Treasury Safekeeping Trust Company. The proceeds could be used for the management of the portfolio, and any in excess would be deposited to the credit of general revenue. The trust company would have to provide an annual report on the valuation of investments from the former fund.
House Bill 26 would create the Economic Incentive Oversight Board to review certain incentive programs and to develop a performance matrix. The board would periodically review each state incentive program or fund and make recommendations to the legislature on whether to continue the program or fund. They would also provide an annual report.
House Bill 26 would also require the creation of the electronic economic development incentives information and application system. It would require that a single Internet website centralize all information regarding state monetary and tax incentives for which a business entity considering moving to or establishing in Texas could apply to. If possible, a tool would have to be created for business entities to determine what incentives they might be eligible for, with a single online application to apply to different incentives at once.
House Bill 26 would amend the Education Code to create the Governor's University Research Initiative. The initiative would award matching grants to eligible institutions who would commit grants for the recruitment of certain distinguished researchers. The initiative would give priority to the recruitment of distinguished researchers in the fields of science, technology, engineering, and mathematics, and in these fields to proposals that demonstrate a reasonable likelihood of contributing substantially to Texas’ national and global economic competitiveness.
The Governor's University Research Initiative Fund would be a dedicated account in the general revenue fund, consisting of amounts appropriated, allocated, or transferred by law, and gifts, grants, and other donations.
House Bill 26 would also rename the Major Events Trust Fund to the Major Events Reimbursement Program.
Vote Recommendation Notes
According to its statement of intent, House Bill 26 aims at doing even more in terms of encouraging economic development than Texas already does. And House Bill 26 shows that Texas already does a lot, even though it mainly deals with major incentive programs.
House Bill 26 has the merit to abolish the Texas Emerging Technology Fund, and to require more oversight of incentive programs by creating the Economic Incentive Oversight Board.
The goal of this bill is not to conclude or even tame the era of government picking winners and losers though, but to expedite the process and make it easier for businesses to know when and if they are eligible for incentives, and to apply to as many of them for which they may be eligible. It would also require the newly created Economic Incentive Oversight Board to develop a performance matrix "that clearly establishes the economic performance indicators, measures, and metrics that will guide the board’s evaluations of those programs and funds."
There already exists such a performance matrix. It is called the free market.
Economic development incentive programs are supposed to encourage economic growth and the creation of jobs by awarding monetary and tax incentives (taxpayers' money) to businesses that consider moving to or expanding their activities in Texas, based on the fear-mongering claim that without these incentives, they might forget about Texas to move to a state that offers bigger incentives. This is simplistic thinking about the reasons why a business would be created in a certain location or why it might decide to move or expand.
There are many considerations a business takes into account before making such decisions -- not all of them government agencies can know or foresee. By using taxpayer money to foster economic development, what government is doing is really picking winners and losers, forgetting that not one single person has all the knowledge necessary to predict what will be tomorrow's successful tech company or why a particular business might be able to create more jobs than the next genius idea of a young local entrepreneur. What incentive program supporters see is potential economic development. The unseen, unintended consequence is ingenious brilliant business ideas never seeing the light of day because of a heavy tax burden on small business -- especially on younger entrepreneurs.
Despite our misgivings about state-level economic development funds, House Bill 26 would not create any major changes in economic development programs that would fundamentally impact our Liberty Principles. We will remain neutral.
