84(R) - 2015
Relating to the payment of interest by state agencies.
A fiscal note dated April 14, 2015 anticipates not significant fiscal implication to the State or units of local government.
Under current law (Section 2251.026(j) of the Government Code), institutions of higher education are not required to pay interest on late payment to vendors if the amount of the interest accrued is less than or equal to $5.
House Bill 3601 would extend this provision to all state agencies.
Vote Recommendation Notes
Under Section 2251.026 of the Government Code, state agencies are liable for "any interest that accrues on an overdue payment [for goods and services] and shall pay the interest from funds appropriated or otherwise available to the agency at the same time the principal is paid." An exception exists though for interest accrued equal to or less than an amount of $5 and if the payment is made from the institutional funds of an institution of higher education.
The statement of purpose for the House Bill 3601 states that "while such a small payment would have little effect on vendors, the annual costs of the interest payments made by state agencies add up quickly."
The fiscal note indicates that "while the bill could reduce the amount agencies pay out in interest, the cost savings to the state are not anticipated to be significant."
A responsible, accountable, and limited government should pay its debt and any interest accrued on late payments to vendors for goods and services. This is not up to the state government to decide whether $5 would make a difference or not to vendors. On principle, and as part of a contract between a vendor and a private agency, if such interest is due, such interest should be paid. Additionally, if $5 does seem like a very small amount, ask yourself whether government would exempt a taxpayer's interest amount of $5 or less due on delinquent taxes. House Bill 3601 would go against our Liberty Principles of limited government and property rights. As a consequence, we oppose it.
As a measure of equity, and based on the same principles, the exception for institutions of higher education should be repealed.