CAPITOL UPDATE

Dear Friends:

For those of you just tuning in, this is Capitol Update, with your legislator, Senator John Carona. We take you to the midpoint of the 78th legislative session, where the new Republican leadership is busy galvanizing support for its fiscally conservative agenda. The 78th Legislature faces many unique challenges this year including: the change in leadership, a budget chasm and faltering economy, the Columbia space shuttle tragedy, and increased homeland security concerns since the outbreak of war. And, the Legislature must confront the herculean tasks of overhauling an out-of-date school finance system and reversing skyrocketing homeowners and medical malpractice insurance premiums.

On Friday, March 14 the window of opportunity for filing non-local and non-emergency bills and joint resolutions officially closed. Back at the Capitol, legislators and their staff are engrossed in discussions about pending legislation. With so little time left for hearings, bill authors and sponsors are scrambling to line up witnesses and shore up support in both houses for their legislative proposals. It is already evident that budget pressures have staunched the flow of bills this session and may restrict the number passed to those that show immediate results, have no fiscal impact, or require simple changes to the law.

STATE BUDGET

The revenue shortfall has dominated the 2003 session as legislators work to write a balanced budget for the next biennium. State Comptroller Strayhorn's revenue estimates keep plunging, prompting Texas leaders to reconsider all state programs. Obviously, the first and highest priority is to reduce spending, thus living within our means. Governor Perry, Lieutenant Governor Dewhurst, and House Speaker Craddick led this effort by requesting that state agencies submit plans for reducing their current budgets, while still being careful to reassess the core mission of the agency and paring down to provide essential services. Both chambers have been engaged in a series of finance meetings outlining budget cut proposals for individual agencies, but further analysis and testimony have proved none of these cuts will be painless. The Governor is adamant that legislators avoid 'quick fix' solutions such as using the rainy day fund or selling off part of the state's tobacco settlement to balance the budget. He favors instead drawing from the rainy day fund to establish a more hospitable climate for economic development in Texas. The challenge is thus to make appropriate reductions that are considered good public policy both now and in the future. Since session is halfway underway, the participants must work diligently with each other and the public on writing the next budget. It might be the one great feat of the Legislature during regular session, or it might play out late into the summer in a special session.

EDUCATION

• Both chambers are charged with and committed to overhauling the public school finance system, and thus far have proposed 136 different solutions. Some of the major proposals call for the sunsetting of the current system or "Robin Hood" by 2005 and would replace the property tax revenue that would otherwise be generated with an allocation of $300 additional state dollars per student taken from savings in other state education programs. Most of the other public school finance bills deal with specific components of the system such as: facilities funding, teacher salaries, the equalized wealth level, the mid-sized district adjustment, and the Permanent School Fund. Many of these proposals mirror those outlined in the section on improving educational efficiency by State Comptroller Carole Keeton Strayhorn in her "Limited Government, Unlimited Opportunity" report released in January. All state government leaders have sworn to protect the Permanent School Fund from cuts, but the Texas Education Agency may have to cut its budget by as much as $70 million.
• In spite of Robin Hood's general unpopularity, there regrettably is resistance by some to dismantling it without a blueprint for its replacement. A new system would likely uphold the gains made in equity since the last Edgewood court case, and may be drawn based on the results of an adequacy study. The goal is to put a plan in action for school finance reform this session so that the courts will not design the new system. Complicating matters are pending court cases concerning the constitutionality of the current school finance system, such as those involving Chapter 41 property wealthy districts. On March 27, the Texas Supreme Court heard oral arguments in the West Orange-Cove CISD v. Nelson case, which was originally brought before the district court in Travis County in 1991, charging that the defendants (former TEA Commissioner Nelson, Comptroller Strayhorn, TEA, and the SBOE) had imposed an implicit statewide ad valorem tax by setting the property tax rate cap at $1.50. The case was dismissed before it even went to trial because the district court found that there weren't sufficient districts at the constitutional cap to constitute a statewide property tax, and it has been on appeal ever since. The Supreme Court will determine in the next few months whether the 400 some districts out of the 1,046 that have reached the maximum property tax rate would qualify, which would thereby overturn the district court's ruling. The test will be whether the Supreme Court decides that these districts are forced to pay this rate to meet the new state education standards or are using the revenue for supplemental programs or facilities such as expensive stadiums.

INSURANCE REFORM

• Insurance reform for individual homeowners and automobile owners has been given legislative priority this session, as skyrocketing rates and accusations of discriminatory practices used by the industry such as credit scoring demand immediate action.
• Currently, the commissioner of insurance establishes benchmark rates for automobile and residential property insurance; however, most homeowners and many automobile owners are insured by companies not subject to benchmark rate regulation.
• Senate: Two key insurance reform bills were recently passed out of the Texas Senate. One of the bills, relating to the regulation of residential property and automobile insurance, is the omnibus insurance bill that addresses rate standards, public disclosure requirements, credit scoring, rights of the insured and the public insurance counsel, required quarterly legislative reports, rate hearings and appeals. Another bill includes provisions for the handling, settling, and use of certain claims in the insurance business and deals with licensing of public adjusters, claims handling procedures, and prior water damage claims.
• House: Exorbitant medical liability insurance premiums and a plethora of related lawsuits in Texas also continue to threaten the profession, state healthcare, and the economy, and as such, legislative proposals addressing this concern have also been put on the fast-track. One proposal would amend the limits on liability in medical malpractice cases both in general and in specific instances. The legislation would include punitive damages in the general, $500,000 indexed (for inflation) cap and would replace the alternative indexed limitation of $150,000 with a non-indexed cap on non-economic damages (i.e. pain and suffering) of $250,000 per claimant, regardless of the number of defendants. The bill would also create an alternative limit that would be effective if the previously described cap were invalidated. The alternative cap would apply to all damages, other than economic damages, and also would be set at $250,000. This provision would only apply to physicians and hospitals that carry certain levels of liability coverage, levels that would increase in three tiers over time.

TORT REFORM

Tort and insurance reform, while intuitively connected, are proving to be politically divisive. The major house bill that is just now making its way over to the Senate, is a comprehensive civil justice reform bill intended to address and correct problems that currently impair the fairness and efficiency of our court system. Its aim is to clear the dockets of non-meritous lawsuits, halt the increase in jury awards including those for non-economic damages, and address the unreasonable pressure to settle defensible claims. This litigious climate comes at too high a cost for medical providers and others in the private sector, in addition to consumers. Key components of the reform bill include: a cap on non-economic damages for medical liability claims, provisions for payment of future damages as accrued, limitations on plaintiff attorney contingency fee contracts, some cost-shifting of litigation costs, and class action reforms.

CRIMINAL JUSTICE

• Capital Punishment Legislators must decide this session how to retrofit state law to comply with the U.S. Supreme Court's ruling last year that the execution of mentally retarded convicted killers is unconstitutional. Similar attempts were made last session, but the bills passed were vetoed by Governor Perry. Most of the relevant bills this session have been filed in the Senate, including a couple which are currently being considered for hearing. Some of the proposals favor having the jury determine whether the defendant is mentally retarded before he or she goes to trial, to save the state the cost of an expensive capital murder trial if the accused is exempted from that sentence due to his or her condition. Others call for the assessment by the trial jury that the defendant should be spared from execution to be made after the defendant is found guilty.
• DWI: Sobriety Checkpoints Two similar bills that would authorize certain Texas law enforcement agencies to set up and operate sobriety checkpoints on highways or streets are currently being reviewed in the House and the Senate. Although upheld by the U.S. Supreme Court, the checkpoints have not been deemed constitutional by Texas courts since no guidelines for their operation currently exist in Texas law. Under the bills, law enforcement agencies must produce written guidelines for their operation, including rules regarding their location and criteria for stopping certain operators of motor vehicles. If passed, the bills would help Texas qualify for an additional $2.3 million in federal traffic safety funds such as the Alcohol-Impaired Driving Prevention Incentive Grants (Section 410 grants).
• Determination of Incompetency of the Defendant: The 77th Legislature created a task force to study the issue of competency in criminal proceedings. The current state law regarding criminal competency is complex, confusing, and difficult to use; leading to possibly contradictory interpretations of the same section by judges presiding over almost identical cases. The task force rewrote the statute to streamline the law, make it easy to understand and implement, and ensure consistency throughout the state. Those recommendations have been made into a Senate bill, which is currently being considered. Under the bill, any party or the court may raise the issue of competency. If there is evidence of incompetence, the court must order a competency evaluation. Once the evaluation is complete, a hearing is held to determine whether the defendant is competent to stand trial. Either party may request a jury, but a jury is not mandatory. Upon a finding of incompetence, the defendant may be committed for up to 120 days (with a possible 60-day extension) for treatment. The bill also outlines the qualifications for experts who examine a defendant and sets out what factors they must consider in their reports.

HOMELAND SECURITY

After September 11, 2001, Governor Rick Perry appointed a Texas Task Force on Homeland Security comprised of several appointees who advised him on such matters as: emergency preparedness and response, facilitating coordination among agencies, and other related matters. The task force was able to identify issues to be addressed by state and local agencies, but did not explain how those efforts would be coordinated or how the information gathered by the agencies and governmental entities would be reported. Current proposals in the Senate and the House seek to provide a more centralized communication and coordination effort out of the Governor's office and call for the development of a statewide homeland security strategy that would complement the federal homeland security strategy and would be funded in part by federal grants. Both major bills would establish more permanent advisory councils and committees made up of representatives from various state and local agencies, and in some cases, non-governmental entities, that would coordinate and document all homeland security efforts in the state. While the House and Senate bills are very similar in structure and in intent, the Senate version precludes reports submitted to the Critical Infrastructure Protection Council, a council established by the bill, from public disclosure due to the highly sensitive nature of their content.

Other homeland security measures being reviewed address concerns about school safety, pecuniary losses for terroristic threats, Internet security, protection of natural resources from eco- or biological terrorism, and safety along the state's border and at its ports. The Governor's Office also revealed that it is developing a Texas homeland security website and has made its new Texas school safety handbook available to schools.

TRANSPORTATION

This session we have the opportunity to approve legislative policy that would improve our transportation networks, relieve congestion, and enhance passenger safety around the state by funding the Texas Mobility Fund and the Trans Texas Corridor.

• Texas Mobility Fund Currently, Texas can only fund 36 percent of its needed transportation projects using constitutionally designated sources such as money collected from vehicle registration fees and three-fourths of motor fuels taxes. In November 2002, Texas voters approved passage of a constitutional amendment authorizing the Texas Mobility Fund (TMF) which was originally created in 2001. The TMF allows state dollars to be used by the Texas Transportation Commission for bonding on state highway projects. One proposal in the Senate would authorize the Legislature to appropriate $100 million of general revenue a year, in addition to the amounts already required to be credited to the TMF account under the Constitution, to get these projects started.
• Trans Texas Corridor There are two similar bills on file in the Texas Legislature that would establish in statute the mammoth system of multimodal facilities or Trans Texas Corridor (TTC) originally proposed by Governor Perry. The bills would broaden the authorities and abilities of the Texas Department of Transportation (TxDOT) to finance and construct the TTC, but make no immediate appropriation. It is estimated that the TTC will take 50 to 75 years to build and could cost more than $145 billion over that period of time. The TTC is likely to be funded and constructed in installments for four priority segments, including: the proposed segments of I-35, I-37 and I-69 from Denison to the Rio Grande Valley; I-69 from Texarkana to Houston to Laredo; I-45 from Dallas-Fort Worth to Houston; and I-10 from El Paso to Orange.

HOME EQUITY LENDING

Home equity legislation filed this session is designed to provide comprehensive consumer protection for homeowners seeking more flexible payment options for their homes. The proposals on the table address one or more of the following: lines of credit, interpretative authority, cure provisions, and reverse mortgages.

WORKERS' COMPENSATION

• Voluntary Health Network Last session, the 77th Legislature overhauled the workers' compensation insurance system in response to mounting evidence and concern that the state had among the highest workers' compensation medical costs in the nation due to over-utilization of treatment. The high expenditure on treatment was not resulting in either greater job satisfaction or a quick return to work. The omnibus bill passed by the previous Legislature was designed to correct this problem by authorizing the creation of a voluntary health network pilot program that would allow employers to use the services of physicians and medical professionals on the Texas Workers' Compensation Commission (TWCC) approved doctor list in the network, and would exclude those professionals that over-prescribed for additional financial gain. However, the TWCC has taken two years to implement this legislation, and as such, the cost-saving potential of the voluntary network cannot reasonably be determined at this point.
• Mandated Health Network New legislation proposed this session would allow carriers and employers, rather than state government, to create a mandated managed care delivery network aligned with the best elements of other health-care delivery systems, that would ensure higher-quality medical care at a lower cost. Employers would contract with a network of providers, including doctors, chiropractors, and others; which would in turn negotiate with the insurance carriers.

JUDICIAL REFORM

The concept of an appointment/retention election system for judges and justices has surfaced again this session. The proposal in question would require the governor, with the consent of the Senate, to fill judicial vacancies as they arise, and then force the appointees to face a nonpartisan retention election during the general election in which voters could decide whether to retain the judges. The intent, according to the bill's author, is to make statewide courts more diverse, ensure through a screening process that judges in office are better qualified, and improve the public perception of the judicial system. If passed by the Legislature, and approved by voters, Texas would join the majority of states having an appointed/retention system.

REDISTRICTING

One Texas state senator has taken the initiative to file a redistricting bill that would establish a nine-member independent, bipartisan citizen redistricting commission to draw district lines for congressional districts, state senate districts, and state representative districts. Traditionally, the Legislature apportions Texas into senate and representative districts at the legislature's first regular session after the publication of the United States decennial census. This proposal was created in response to the 1991 Supreme Court ruling that Texas was guilty of gerrymandering. The independent Texas Redistricting Commission, comprised by gubernatorial appointees approved by the state senate, is designed to ensure that political boundaries be redrawn to make sure that each Texan is more accurately represented. Although several other states have created similar commissions, statewide support for this body is mixed, due to concerns that new lines drawn to reflect the growing population would create artificial barriers between communities with many commonalties.

CAMPAIGN FINANCE REFORM

• In past years, there has been controversy surrounding the impact of political contributions made after the conclusion of the regular session to state elected officials on the number of bills vetoed or signed by the Governor. One bill making its way through the Senate would prohibit statewide officeholders, legislators, and committees working with or against these officials from accepting contributions from the period 30 days prior to a regular session through the veto period.
• Another bill, the sunset bill for the Texas Ethics Commission, which oversees campaign finance issues, would require the agency to adopt rules specifying those who are exempt from and those who are subject to electronic filing of campaign finance reports. To increase transparency, the new bill would also require district judges and multi-county district attorneys to file electronically and would create an electronic filing system for lobbyists as well. To strengthen the agency, the bill would also grant the Ethics Commission subpoena power for documents and other materials.
• A third proposal would serve as enabling legislation that would limit the time period during which judicial candidates may accept political contributions and would increase the terms of office for judges and justices.

NATURAL RESOURCES/ENVIRONMENT

• Paying for air quality measures The Legislature must fund the Texas Emissions Reduction Plan (TERP) established by the 77th Legislature this session and get EPA approval of the State Implementation Plans (SIPs) or risk losing millions of dollars in federal highway funding. A couple of key bills filed this session in the Senate and the House lay the groundwork for the TERP, but the authors are currently in the throes of working out the funding mechanism for the program. In addition to the deadline pressure imposed by the federal government, the Legislature is also under fire from broad-based environmental coalitions such as Alliance for A Clean Texas, Blue Skies Alliance, and Downwinders at Risk, to pass and implement solutions for the state's air quality problems.
• E-waste The Legislature is considering a slew of new solid waste reduction proposals, including a few that would create a mechanism for disposing of electronic waste such as outdated or malfunctioning computers, video equipment, telecommunications equipment (cellular phones, facsimile machines, and wireline phones), audio equipment, toys and games, and major household appliances.
• Water Recognizing that water is a finite and precious resource, many legislators are pushing for bills to become law that would increase water conservation, enhance and protect water quality, and would establish rules regarding water rights. One omnibus bill in the Senate would consolidate three financial assistance programs related to agricultural water conservation into one program and establish a linked-deposit program for agricultural and non-point source pollution programs. Consolidation is meant to contribute to more efficient and flexible program management and enable more local governments to participate in Texas Water Development Board assistance programs. While the majority of the proposals center around financing and coordinating conservation programs and drought contingency plans, a few focus on energy and water saving performance standards and efficiencies for products such as toilets and commercial washing machines. In addition, there is strong support for bills that would enhance legal and environmental protection of riverbeds on public land from recreational vehicles.

AGENCIES UP FOR SUNSET REVIEW

During every biennial legislative session, 20-30 state agencies come up for reassessment by a commission of 10 legislators and public members appointed by the Lieutenant Governor and Speaker of the House who determine whether the functions of the agencies in question are still needed in the state. The process includes many opportunities for public participation and debate on substantive issues. Among the 24 agencies slated for review this year are the Texas Aerospace Commission, Texas Department of Economic Development, Texas Ethics Commission, Texas Higher Education Coordinating Board, the Texas Lottery Commission, and the Texas Workforce Commission. This session, leaders will be scrutinizing agencies more than ever in an effort to reduce fraud, waste, and inefficiency and generate savings for the state. State Comptroller Strayhorn recommended abolishing the Texas Department of Economic Development, deemed ineffective by both the Texas State Auditor's Office and the Sunset Advisory Commission, and transferring its economic development and tourism functions to the Governor's Office and the Texas Department of Transportation respectively.

IDENTITY THEFT

In response to recent cyber security threats in the UT System and in the nation, several legislators have proposed bills that would protect citizens and consumers from identity theft. Some of these bills would restrict the use of Social Security numbers on state records, including identification cards, and as personal identifiers in all institutions of higher education of the state. Other bills include measures to prevent further incidence of this growing problem in Texas and the nation, by omitting at least four digits of the credit cardholder's account number on printed receipts. Additional bills filed would help law enforcement combat identity theft and assist victims recovering from this theft, by establishing guidelines for the criminal investigation and reporting and by providing criminal penalties for the offense. Victims would also be able to place a freeze on their credit reports while the alleged crime is being investigated, to prevent further financial loss and damage to their credit history. Using electronic devices, such as scanners or re-encoders to obtain personal identification information from the magnetic strips of credit cards without the cardholder's consent, could also be a punishable offense.

PROMPT PAY

Issues related to the prompt payment of physicians' claims by insurers have confronted lawmakers since 1997. The 77th Legislature enacted legislation to further revise prompt-payment requirements and establish requirements for submission of a clean claim, but the bill was subsequently vetoed. Texas physicians contend that insurers are slow to pay or refuse to pay for services rendered to insured patients; insurers contend that providers do not provide complete and accurate billing information. Despite passage of state law in 1999 that was intended to accelerate payments to providers and rules clarifying the definition of a clean claim adopted by the Texas Department of Insurance in 2000, physicians still claim that insurers have been able to avoid prompt payment of claims. The Senate Special Interim Committee on Prompt Payment of Health Care Providers was established to evaluate current state law and agency rules, and to recommend ways to improve the process of paying health insurance claims. Resulting from that interim committee is a new Senate bill that provides for the regulation and prompt payment of health care providers under certain health benefit plans and establishes penalties for violations of statutory provisions.

CONCLUSION

At this stage, it is difficult to make predictions about where these proposals will go, how they will be funded, and what shape the budget will take by the end of session. As must be evident from this newsletter, it is tricky to condense and trace these legislative histories-in-the-making, but hopefully together we can see the forest for the trees.

Many of my colleagues agree that this appears to be the most difficult session in many years. In spite of our best efforts to get all major legislation squared away by June, the unique challenges we face may yet mean a special session or two. Therefore I ask, help us make the right choices by staying abreast of the issues and keeping us informed about your positions. Remember, I am always just a ring, click, or beep away. I can be reached at 800-662-0334 and news updates on my legislative projects can be found on my website at:

www.senate.state.tx.us/75r/Senate/members/dist16/dist16.htm

For more information, please avail yourself of the following resources:

Sincerely,

John Carona

The above analysis is intended to be neutral, as required under rules of the Texas Senate.