84(R) - 2015
Senate Natural Resources & Economic Development
Senate Natural Resources & Economic Development
Economic & Small Business Development
Science and Technology
The caption was updated with the House committee substitute to: Relating to the abolishment of the Texas emerging technology fund.
First chamber caption:
Relating to the creation of the governor's university research initiative and to the abolishment of the Texas emerging technology fund.
A fiscal note dated April 20, 2015 anticipates no fiscal impact to General Revenue Related Funds for SB632, Committee Report 1st House, Substituted through the biennium ending August 31, 2017.
It adds that the bill would make no appropriation but could provide the legal basis for an appropriation of funds to implement the provisions of the bill.
Additionally, The amount of royalties and revenues realized in association with grant awards that would be returned to the fund is unknown, so it is assumed the grants would end when the initial funding balance is expended,estimated to occur in 2019. Since the bill requires a match of funds from the institution applying for a grant, it's assumed $4 million each fiscal year for the three grants awarded by the Governor's Office would come from matching Institutional Funds.
While the bill directs the Texas Treasury Safekeeping Trust Company to wind down the Emerging Technology Fund, the Office of the Governor indicates the fiscal impact cannot be determined at this time. The sale proceeds and other earnings from investments in the state's portfolio, and the required portfolio management fees are unidentified due to the unpredictability of the stock market and the unknown liquidity status of the investments.
A House committee substitute was introduced since we first reported on this bill.
CSSB 632 would phase out the Texas Emerging Technology Fund which would continue solely for the purposes of winding up the contracts governing awards from that fund and the state ’s portfolio of equity positions and other investments in connection with awards from that fund.
CSSB 632 would amend Chapter 490 of the Government Code to wind up contracts and the state's investment portfolio in connection with awards from the Texas Emerging Technology Fund.
The Texas Treasury Safekeeping Trust Company would manage and wind up the state's emerging technology investment portfolio. The proceeds could be used for the management of the portfolio, and any in excess would be deposited to the credit of general revenue.
Any unencumbered balance of the Texas emerging technology fund would have to be appropriated only to one or more of the following: the Texas Research Incentive Program (TRIP), the Texas research university fund, the Texas Enterprise Fund, and the comptroller for the purposes of managing the state’s portfolio of equity positions and other investments in connection with awards from the Texas emerging technology fund.
First chamber analysis:
Senate Bill 632 would repeal Chapter 490 of the Government Code and hence abolish the Texas emerging technology fund. It would also create the Governor's University Research Initiative to replace it. The initiative would be administered by the Texas Economic Development and Tourism Office within the office of the governor that would be able to adopt the necessary rules to its administration.
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 this state ’s national and global economic competitiveness.
Royalties, revenues, and other financial benefits provided for by a contract under the former Texas Emerging Technology Fund (TETF) should continue to be distributed according to the terms of the contract. Roylaties, revenues, and other financial benefits accruing to the State under such a contract would be credited to the governor's university research initiative.
Money awarded by the TETF that remains encumbered by a contract executed before September 1, 2015 but has not been distributed before that date would have to be distributed from the initiative fund. If the money has been fully distributed the entity that was granted the money should file a final report detailing the purpose for which the money was spent and for which any remaining money would be spent.
The Texas Treasury Safekeeping Trust Company would manage equity positions taken by the governor on behalf of the state in companies receiving awards under the TETF before September 1, 2015 and investments made by the governor on behalf of the state in connection with such awards.Starting September 1, 2015, the Texas Treasury Safekeeping Trust Company would have to wind up these equity positions and investments when it is most advantageous to the state. Revenues from the sale of these investments would have to go to the initiative fund.
Some information collected in relation with the TETF, such as trade secrets, for example, would remain confidential, with some information would be made public such as the name and the address of the recipient of an award, the amount of an award and its purpose.
The Governor would have to provide, at the beginning of each regular legislative session, a report to the lieutenant governor, the speaker of the house, and standing committees dealing with economic development and higher education, and post it on the office of the governor's website detailing general and detailed information on grants, and any resulting contribution to the state's economic competitiveness.
On the date Senate Bill 632 would take effect, the Comptroller would have to transfer 50% of any unencumbered balance from the fund to the credit of the Texas Enterprise Fund, and 50% to the Governor's University Initiative Fund.
Vote Recommendation Notes
Although the House committee substitute to Senate Bill 632 would not create the Governor's University Research Initiative as SB 632 initially did to replace the Texas Emerging Technology Fund, another house bill has a similar purpose and any unencumbered balance from the abolished fund, instead of being given back to taxpayers in the form of tax cuts, would be deposited to the benefit of other funds or programs. As a consequence, we remain neutral on this bill.
The second chamber sponsor is Representative Angie Chen Button.
First chamber recommendation:
Senate Bill 632 would start by abolishing the Texas Emerging Technology Fund (TETF) whose mission was to make Texas "the best place in the nation to pursue the next great idea" by awarding grants for the research, development and commercialization of emerging technologies. The TETF was an economic development initiative. The role of a limited government does not include picking winners and losers in any economic area. As a consequence, we support the abolition of this fund.
Senate Bill 632 would create the Governor's University Research Initiative fund to replace the TETF. The goal of this initiative would be to support and increase the state of Texas' economic competitiveness by helping institutions of higher education recruit distinguished researchers such as Nobel laureates. This is another economic development program.
The best economic development incentive is a limited government that does not over-regulate or over-tax businesses and individuals. In such an environment, the best judge of which individual or what business or initiative can bring the best competitive advantage to a state is the market itself, not government.
Because Senate Bill 632 would not require new appropriations of money, but would receive 50% of the unencumbered balance of the former Texas Emerging Technology Fund, we will remain neutral on this bill.