84(R) - 2015
House Economic & Small Business Development
House Economic & Small Business Development
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.
A fiscal note dated April 21, 2015 anticipates a two-year net impact to General Revenue Related Funds for CSHB 27 of $0 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.
House Bill 27 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 27 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 27 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, 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 27 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.
Note: This bill proposes many similar reforms to HB 26.
Vote Recommendation Notes
According to House Bill 27's statement of intent, studies and audits have shown that there might be opportunity to improve the state's economic development programs, and that they should focus more on small businesses.
House Bill 27 would have merit if it abolished the Texas Emerging Technology Fund. Unfortunately, as written, it would only tweak the Texas Enterprise Fund, even adding new grants to those the fund can already award.
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 the fact that House Bill 27 would abolish the Texas Emerging Technology Fund, it is clearly not heading in the right direction, that is getting rid of economic development incentive programs. As a consequence, we will remain neutral on House Bill 27.