HBA-ALS H.B. 1161 76(R) BILL ANALYSIS
Office of House Bill AnalysisH.B. 1161
By: Junell
Appropriations
3/10/1999
Introduced
BACKGROUND AND PURPOSE
On March 28, 1996, the attorney general filed suit against the tobacco
industry on behalf of the State of Texas, which resulted in a 1998
settlement agreement in which the tobacco industry agreed to pay the state
$15 billion over the next 25 years. Subsequent to the settlement, several
legal challenges were filed to ensure the deposit of the settlement
proceeds into the state treasury, to preserve the authority of the
legislature to appropriate the funds, and to ensure the allocation of some
of the proceeds into counties and hospital districts with indigent care
responsibilities.
On February 3, 1998, an agreement was reached between the attorney general
and Representative Robert Junell and Senator Bill Ratliff to deposit the
proceeds into the treasury for appropriation by the legislature. On July
24, 1998, an agreement was reached between the attorney general and certain
counties and hospital districts to preserve the entire amount of the
original $15 billion for the benefit of the State of Texas. Under this
agreement, the parties agreed that future payments pursuant to the "Most
Favored Nation" provision of the settlement agreement, totaling $2.275
billion, would be used for the benefit of counties and hospital districts.
The purpose of H.B.1161, H.B. 1676, and H.B. 1945 is to provide for the
implementation of these two agreements.
H.B. 1161 provides for the implementation of the "Agreement Regarding
Disposition of Settlement Proceeds" between the attorney general and
certain counties and hospital districts. This bill establishes the tobacco
settlement permanent trust account (account) with the comptroller, who is
required to administer and manage the assets of the account under the
advice of and in consultation with the appointed tobacco settlement
permanent trust account investment advisory committee (investment
committee). This bill establishes the comptroller's powers and fiduciary
duties regarding the management and investment of the account. Under this
bill, the comptroller is required to make annual distributions to each
eligible political subdivision; is required to prepare and distribute
annual reports regarding the account assets and investments; and is granted
rulemaking authority to implement those duties. H.B. 1161 specifies the
manner in which the members of the investment committee are to be
appointed, and provides for the appointment of an initial tobacco
settlement permanent trust account investment advisory committee.
H.B. 1161 requires the Texas Department of Health (department) to collect
information regarding the amount of each political subdivision's
unreimbursed health care expenditures, and to certify to the comptroller
the percentage payable from the account to each political subdivision.
This bill grants the department authority to adopt rules governing the
collection of such information and rules providing for regular audits of
political subdivision. This bill grants the Texas Board of Health (board)
authority to adopt rules under which a political subdivision or agency of
the state may dispute collected information and rules which provide for
monetary penalties against political subdivisions that overstate
expenditures.
H.B. 1161 creates a tobacco settlement permanent trust account
administration advisory committee (administration committee) to advise the
board on the implementation of the department's duties, and provides for
the appointment the administration committee's members. This bill requires
the administration committee to annually review specified audit results and
rules adopted by the board. In addition, this bill creates the initial
administration committee and provides for the appointment of its members.
RULEMAKING AUTHORITY
It is the opinion of the Office of House Bill Analysis that rulemaking
authority is expressly delegated to the comptroller of public accounts in
SECTION 1.01 (Section 403.105, Government Code) and to the Texas Board of
Health in SECTION 2.01 (Sections 12.133(b) and 12.134, Health and Safety
Code) of this bill.
SECTION BY SECTION ANALYSIS
ARTICLE 1. DUTIES OF THE COMPTROLLER
SECTION 1. Amends Subchapter G, Chapter 403, Government Code, by adding
Sections 403.105 and 403.106, as follows:
Sec. 403.105. TOBACCO SETTLEMENT PERMANENT TRUST ACCOUNT. (a) Defines
"account," "advisory committee," "agreement," "department," and "political
subdivision."
(b) Requires the comptroller to administer and manage the assets of the
tobacco settlement permanent trust account (account) with the advice of and
in consultation with the tobacco settlement permanent trust account
investment advisory committee (investment committee).
(c) Authorizes the comptroller, in managing the assets of the account, to
acquire, exchange, sell, supervise, manage, or retain any investment using
the specified fiduciary standard of care. Provides that investment and
management decisions concerning individual investments must be evaluated in
the context of the whole investment portfolio and as part of an overall
investment strategy consistent with the investment objectives of the
account.
(d) Provides that the account is a trust account with the comptroller and
is composed of money paid into the account pursuant to the agreement,
assets purchased with that money, earnings of the account, and
contributions made to the account. Requires that the corpus of the account
remain in the account and prohibits its distribution for any purpose.
Provides that the money and assets contained in the account are not part of
the state's general funds. Authorizes the comptroller to appoint specified
entities as a custodian of the account's assets. Provides that Section
404.071, Government Code (Disposition of Interest on Investments) does not
apply to the account.
(e) Authorizes the comptroller with the advice and consultation of the
investment committee, to use the account's earnings for any investment
expense.
(f) Requires the comptroller upon certification by the department under
Subchapter J, Chapter 12, Health and Safety Code (Tobacco Settlement
Proceeds), to make an annual distribution of the net earnings from the
account to each eligible political subdivision according to the Agreement
Regarding Disposition of Settlement Proceeds filed on July 24, 1998, in the
United States District Court, Eastern District of Texas, in the case styled
The State of Texas v. The American Tobacco Co., et al., No. 5-96CV-91
(agreement) regarding settlement proceeds.
(g) Requires the comptroller to prepare by December 1 of each year, a
written report regarding the account during the fiscal year ending on the
preceding August 31; to distribute the report to the investment committee,
the governor, the lieutenant governor, the state auditor, the attorney
general and the Legislative Budget Board no later than January 1 of each
year; to furnish a copy of the report to any member of the legislature or
other interested person upon request. Provides that the report must contain
specified information.
(h) Requires the comptroller to adopt rules to implement the comptroller's
duties under this section, including rules distinguishing the net earnings
of the account that may be distributed pursuant to specified subsections.
Provides that an adopted rule of the comptroller must be submitted to the
investment by the committee and approved by the investment committee before
it can become effective. Requires the investment committee to provide the
comptroller the specific reasons for its disapproval of a proposed rule.
Sec. 403.106. TOBACCO SETTLEMENT PERMANENT TRUST ACCOUNT INVESTMENT
ADVISORY COMMITTEE. (a) Requires the investment committee to advise the
comptroller regarding the management of the assets of the account.
Requires the committee to provide the comptroller specified guidance
relating investment philosophy in managing the assets and the maximization
of corpus growth and earnings. Provides that the committee serves in an
advisory capacity only and is not a fiduciary concerning the account,
except as provided by Section 403.105(h).
(b) Provides that the investment committee is composed of 11 members and
specifies the manner in which the committee appoints those members.
(c) Provides that a commissioners court that sets the tax rate for a
hospital district must approve a person who is nominated by the hospital
district to serve on the investment committee.
(d) Requires the investment committee to elect committee officers from the
committee members.
(e) Provides that investment committee members serve staggered six-year
terms expiring on August 31 of each odd-numbered year.
(f) Requires that investment committee appointments to be made without
regard to race, color, disability, sex, religion, age, or national origin.
(g) Provides that investment committee members serve without compensation
from the trust fund or the state and prohibits reimbursement for travel
expense incurred while conducting committee business.
(h) Requires the comptroller to provide the committee the administrative
support and resources that are needed to perform the committee's duties
under Section 403.105.
(i) Provides that Chapter 2110, Government Code (State Agency Advisory
Committees), does not apply to the committee.
SECTION 1.02. (a) Provides that the initial investment committee is
composed of 11 members and specifies the manner in which those members are
appointed, notwithstanding Section 403.106(b).
(b)-(i) Requires the investment committee to appoint successor members of
the committee on the expiration of the terms of the members appointed under
Subsection (a) of this section in accordance with Section 403.106(b),
Government Code, as added by this Act.
SECTION 1.03. Requires each appointing authority to make the appointment to
the tobacco settlement permanent committee under Section 1.02(a) of this
Act and requires the comptroller to notify the appointees of the time and
place of the first committee meeting, no later than the 30th day after this
Act's effective date.
ARTICLE 2. DUTIES OF THE TEXAS DEPARTMENT OF HEALTH
SECTION 2.01. Amends Chapter 12, Health and Safety Code, by adding
Subchapter J, as follows:
SUBCHAPTER J. TOBACCO SETTLEMENT PROCEEDS
Sec. 12.131. DEFINITIONS. Defines "account," "advisory committee,"
"agreement," and "political subdivision."
Sec. 12.132. CERTIFICATION TO COMPTROLLER. Requires the Texas Department
of Health (department) to collect information relating to the unreimbursed
health care expenditures of each political subdivision and to certify to
the comptroller the percentage of each annual distribution to be paid from
the account to each political subdivision based on that information and by
using the formula in Paragraph 5.B. of the agreement.
Sec. 12.133. COLLECTION OF INFORMATION. (a) Requires each political
subdivision to submit to the department information relating to the
unreimbursed expenditures and information that is required by the
department to make the certification under Section 12.132, in the manner
and time required by the department.
(b) Requires the Texas Board of Health (board) to adopt rules governing the
collection of information under Subsection (a), subject to the approval of
the administration committee. Authorizes the rules to provide for regular
audits of the randomly selected political subdivisions and to govern the
manner in which a political subdivision and auditor is chosen.
Sec. 12.134. DISPUTES RELATING TO INFORMATION COLLECTED. (a) Requires the
board to adopt rules under which a political subdivision or state agency
dispute submitted information under Section 12.133, subject to the
administration committee's approval.
(b) Authorizes the rules to provide for an audit of the political
subdivision that submitted disputed information; the payment of the cost of
the audit by the party who does not prevail in the dispute; a filing
deadline for a dispute for a particular year; and a reasonable monetary
penalty to be applied to a subsequent annual distribution made to a
political subdivision that is found to have overstated unreimbursed health
care expenditures under Section 12.133.
(c) Prohibits the monetary penalty from exceeding 10 percent of the amount
of the overstatement of the unreimbursed health care costs.
(d) Provides that a dispute under this section is a contested case for
purposes of Chapter 2001, Government Code.
Sec. 12.135. EFFECT OF DISPUTE. Provides that a dispute that is filed under
the adopted department rules does not affect the percentage of the annual
distribution of the earnings from the account to be paid to the political
subdivision for the year for which the disputed information was submitted.
Sec. 12.136. ADJUSTMENT FOLLOWING AUDIT. Requires the department to
report a finding made after an audit that a political subdivision has
overstated unreimbursed health care expenditures for any year to the
comptroller and is required to reduce that political subdivision's
percentage of the subsequent annual distribution of the earnings from the
account accordingly.
(b) Requires the department to reduce the political subdivision's
percentage of the subsequent annual distribution of the earnings for the
account accordingly, if a monetary penalty is applied under Section 12.134.
(c) Requires the department to report the amount of a political
subdivision's assessed cost of an audit to the comptroller, and authorizes
the comptroller to withhold that amount from the political subdivision's
subsequent annual distribution. Authorizes the comptroller to use the
withheld amount to reimburse the general revenue fund for the cost of the
audit.
Sec.12.137. TOBACCO SETTLEMENT PERMANENT TRUST ACCOUNT ADMINISTRATION
ADVISORY COMMITTEE. (a) Requires the tobacco settlement permanent trust
account administration advisory committee (administration committee) to
advise the board on the implementation of the department's duties under
this subchapter.
(b) Provides that the administration committee is composed of 11 members
that are appointed by the administration committee and specifies the manner
in which the members are appointed.
(c) Provides that a commissioners court which sets the tax rate for a
hospital district must approve a person nominated by the hospital district
to serve on the administration committee.
(d) Requires the administration committee to elect the committee officers
from the committee members.
(e) Authorizes the administration committee to act only on the
affirmative votes of eight committee members.
(f) Provides that the administration committee members serve staggered
six-year terms which expire on August 31 of each odd-numbered year.
(g) Requires administration committee appointments to be made without
regard to race, color, disability, sex, religion, age, or national origin.
(h) Prohibits an administration committee member from receiving
compensation from the trust fund or the state for serving on the advisory
committee and from being reimbursed from the trust fund or the state for
travel expense incurred during administration committee business.
(i) Requires the department to provide administrative support and resources
to the administration committee needed to perform its duties under this
subchapter.
(j) Provides that Chapter 2110, Government Code, does not apply to the
administration committee.
Sec. 12.138. APPROVAL OF RULES. Provides that a rule that is to be
adopted by the board and which relates to certification of a percentage of
an annual distribution under Section 12.132 or collection of information
under Sections 12.132 through 12.134 must be submitted to the
administration committee, and is prohibited from becoming effective before
it is approved by the administration committee. Requires the
administration committee to provide specific reasons for its disapproval of
a proposed rule to the board.
Sec. 12.139. ANNUAL REVIEW. Requires the administration committee to
annually review the audit results conducted under this subchapter and the
results of any dispute filed under Section 12.134, and to review the rules
adopted by the board under this subchapter and to propose amendments to
those rules that the committee considers necessary.
SECTION 2.02. (a) Provides that the administration committee is composed
of 11 members and specifies the manner in which those members are chosen,
notwithstanding Section 12.137(b), Health and Safety Code, as added by this
Act.
(b)-(i) Requires the administration committee to appoint successor members
of the committee on the expiration of the terms of the members appointed
under Subsection (a) in accordance with Section 12.137(b), Health and
Safety Code, as added by this Act.
SECTION 2.03. Requires each appointing authority to make the appointment to
the administration committee under Section 2.02(a) of this Act and requires
the commissioner of public health to notify the appointees of the time and
place of the first administration committee meeting, no later than the 30th
day after this Act's effective date.
SECTION 2.04. (a) Defines "account," "agreement," and "lump sum trust
account."
(b) Authorizes the department to collect information under Section 12.133,
Health and Safety Code, as amended by this Act, and to make the
certification under Section 12.132, Health and Safety Code, as amended by
this Act, with respect to the pro rata lump sum distributions to be made in
2000 and 2001, pursuant to Paragraph 5.B. of the agreement.
(c) Provides that Subchapter J, Chapter 12, Health and Safety Code, as
added by this Act, applies to the information collected under this section
in the same manner that it applies to information collected with respect to
distributions to be made from the account.
(d) Requires the subsequent year's applicable percentage of the total
distribution to a political subdivision to be appropriately reduced to the
extent that the board finds an overstatement of unreimbursed health care
expenditures in accordance with Section 12.136, Health and Safety Code, as
added by this Act.
(e) Provides that this section expires on December 31, 2002.
ARTICLE 3. EMERGENCY
SECTION 3.01. Emergency clause.
Effective date: upon passage.