Senator Robert "Bob" Deuell, M.D.
The Texas State Senate
District 2

For Immediate Release
January 31, 2003

***CAPITOL UPDATE***

Issues Facing the 78th Legislature

(Austin) - During the upcoming legislative session, my colleagues and I will face a number of challenging issues. Insurance reform, health and human services, transportation and highway infrastructure, and public school finance are just a few areas that will be addressed.

Recently, the Senate Research Center (SRC) issued a document highlighting some of theses issues. This article contains the SRC report on two of these issues, the state budget and insurance. Subsequent articles will focus on other issue areas that will be addressed by the legislature. If you would like to view the full document, you can read it on-line at www.senate.state.tx.us, or contact my office for a copy.

REVENUE/BUDGET OUTLOOK

The 77th Legislature appropriated $61.5 billion in general revenue funding for the FY 2002-2003 budget. This budgeted amount contains expenditures of $5.1 billion funded from "one-time" or non-recurring sources of revenue that will not be available for the FY 2004-2005 biennium. In order to maintain current services due to the natural growth of the economy combined with unexpected increased costs, the legislature, for the first time in more than a decade, will be faced with a revenue shortfall.

Various revenue alternatives to help alleviate the budget gap have been discussed, including increasing the state cigarette tax rate; addressing the Delaware Sub-Structure, a corporate structure used by companies in Texas to avoid paying the state franchise tax; tapping into the Rainy Day Fund; and securitizing of tobacco settlement proceeds.

Agency baseline budget requests total $8.1 billion above the FY 2002-2003 baseline budget, which includes $3.8 billion in additional general revenue funds. An additional $9 billion in exceptional items (all funds) has been requested, of which $5 billion is additional general revenue funds. Significant requests for additional baseline funding include: the Health and Human Services Commission (HHSC) has an increased baseline request of $1.292 billion, primarily due to increases in caseloads for Medicaid and the increased cost and utilization of prescriptions in the Medicaid program; the Teacher Retirement System (TRS) general revenue baseline increase is $1.82 billion, primarily due to payroll growth in retirement, a significant increase in the TRS-Care shortfall, and two years of funding in the TRS Active Care program; and the Texas Higher Education Coordinating Board has included a baseline increase of $179 million, due to anticipated growth in the Texas Grants program.

On January 13, 2003, the Comptroller of Public Accounts issued the Biennial Revenue Estimate (BRE). The BRE projections include $54.1 billion available in general revenue funds. This amount represents a $9.9 billion revenue shortfall scenario, including $1.8 billion for the FY 2003, which will end August 31, 2003.

HOMEOWNERS AND AUTOMOBILE INSURANCE

The business of insurance is one of the most prominent issues facing the 78th Legislature. Texas regulators and legislators this interim have been dealing with an insurance crisis that included rapidly rising rates and the threat of limited product availability, which largely resulted from the recent rise in the number and cost of mold-related homeowners claims. Ninety-five percent of the homeowners market in Texas is carried by companies that are free from rate regulation and are not required to report rate information to the Texas Department of Insurance (TDI).

Approximately one third of the automobile insurance market is carried by county mutual insurance companies, which are also free from rate regulation.

Some of the pertinent insurance issues facing the legislature include: the benchmark rating system; changes to foster affordable rates and ensure the availability of homeowner and automobile insurance products by maintaining a competitive and profitable environment for insurers; insurers' use of credit information in making insurance determinations such as risk classification, underwriting, and rating; licensure of public insurance adjusters; regulation of building practices related to mold in indoor environments; and regulation of professionals who provide mold remediation services.

Please contact my office to discuss this, or any other issue. To contact Sen. Deuell about the legislative process, contact the Capitol Office at (512) 463-0556 or mail to Sen. Bob Deuell, Texas Senate, P.O. Box 12068, Austin, TX 78711. The website for the Texas Senate is www.senate.state.tx.us. The e-mail address for Sen. Deuell is: bob.deuell@senate.state.tx.us.

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