March 9, 2003
March 14th, 60th Day of the 78th Legislative Session, last day to file bills and joint resolutions not declared an emergency.
See separate email for detailed report about your bills.
The Real Work Begins

The end of the first 60 days of the legislative session, which occurs on Friday, marks two important milestones: the end of the bill filing period and the beginning of active consideration of legislation. And true to form, the Legislature is beginning to move forward on several important issues.

One emergency measure that has garnered little attention but is critical to the future economic development of the state is financing the Texas Emissions Reduction Plan (TERP). Last session the Legislature enacted S.B. 5, which established a grant program for converting high emission diesel engines to cleaner technologies. This program is central to achieving compliance with federal clean air standards and maintaining highway funding for the state. Unfortunately, a state district judge struck down the funding mechanism for the plan (a significantly higher registration fee for new residents bringing vehicles into the state), jeopardizing Texas’ ability to comply with the Clean Air Act.

H.B. 1365 is this session’s attempt to restore program funding and bring TERP fully online. The bill seeks to raise about $150 million by imposing a series of fees and surcharges, including: an increase in the tax imposed on motor vehicles brought into the state by new Texas residents; a charge on the storage, use, or consumption of new or used equipment; a TERP fee of $6 per year on tractors, farm equipment, mobile machinery, and off-road construction equipment with at least a 50 horsepower engine; a $6 per year fee on all motor vehicles; and a $12 per year fee on motorboats. The latter three fees expire on August 31, 2008. H.B. 1365 was heard in committee last week.

A second emergency measure—medical liability reform—has cleared the House Civil Practices Committee and is headed for floor debate, probably the week of March 17. H.B. 4, the civil justice reform act, encompasses both the medical liability reforms originally contained in H.B. 3 and the general reforms, such as offer of settlement, joint and several liability, products liability, and class actions, that made up the original H.B. 4. While there has been much made in the media of combining the two bills, most people forget that the initial comprehensive tort reform act of 1987 contained both general reforms and subject-specific reforms, such as medical and governmental liability. In fact, it makes little sense to run the bills separately, since each subject fundamentally affects the other. Moreover, from a strategic point of view, a combined bill limits the number of votes on the issue and minimizes the opportunity for trading between multiple bills, an important consideration especially in the Senate, where 21 votes will be hard to come by.

In a related development, legislation was filed last week that would force medical liability insurers to roll back the rates physicians and hospitals pay for malpractice insurance. While physicians are clamoring for liability reforms, they are also unhappy that their insurers have yet to promise any short-term relief if the reforms are indeed enacted. Responding to their complaints, the chair of the House Insurance Committee filed the rollback legislation, apparently catching the insurers off their guard. If such legislation clears committee, as is expected, it will be impossible to block on the House floor, presenting an interesting challenge for the coalition of physicians, hospitals, and insurers that are promoting H.B. 4’s reform package.

The third emergency issue is insurance reform. It, too, is teed up, this time on the Senate side. Last week Lieutenant Governor Dewhurst held a press conference in which he and several senators announced the outline of a compromise plan that had strong majority support in the Senate. The plan includes a prior approval system for all insurance rates, subject to strict time limitations on the commissioner of insurance’s ability to reject rate filings. Under the plan, even companies currently exempt from rate regulation would be subjected to rate regulation. However, the new system would allow insurers to file and use their own forms, thus removing one of the major causes of the so-called mold crisis: the extremely broad water damage coverage mandated by the Texas promulgated homeowner’s policy form. Another element of the plan is the restricted use of credit scoring for rating and underwriting purposes. Finally, the plan will be accompanied by some kind of mandatory rate rollback, probably for insurers with the most market share. The rollback could be in the 15% to 20% range, although consumer interests would like to see more.

On Thursday the House Local Government Ways and Means Committee will turn its attention to some of the most controversial legislation filed this session: various constitutional amendments and enabling legislation that lower the cap on residential homestead values. Sparked politically by the Harris County Tax Assessor-Collector, these proposals would essentially shift substantial taxable value from more valuable homes to other taxpayers, including large and small businesses, lower-value homes, and farm and ranch property. The so-called “split roll” effect of these bills would be to raise effective tax rates on other property, while lowering those rates on a narrow base of residential homeowners. Busloads of irate Harris County homeowners are likely to converge on the Capitol to press their case for the lower cap, while business groups are bracing to fight the proposals to the last ditch. There may be no more critical general business issue this session.

Three relatively low profile but important business bills will likewise be heard in the House Business and Industry Committee on Tuesday. One of these bills, H.B. 1156, is an enormous codification bill that streamlines and modernizes Texas’ business organizations law. Another, H.B. 1165, makes much-needed amendments to the Texas Business Corporation Act. The third bill, H.B. 1394, updates Article 1 of the Uniform Commercial Code. While these bills are not expected to draw significant opposition, the Business Organizations Code has run aground in prior sessions over liability issues. With the new make-up of the House, that stumbling block should be removed and the bill finally allowed to proceed.

On the health and human services side, where cost containment is the watchword, numerous bills were filed last week to bring expenditures on prescription drugs under control. The leading candidate for ultimate passage is legislation that establishes a preferred drug list under the state’s Vendor Drug Program, which provides billions of dollars of medication for the state’s Medicaid recipients. Under the legislation, H.B. 1804, the state would negotiate with drug manufacturers for so-called “supplemental rebates”—essentially a state tax in addition to the 20% to 30% price break the state already gets on prescription drugs through the Medicaid program. Manufacturers that agree to pay rebates would have the inside track for their products to be placed on the preferred drug list, meaning that physicians could prescribe those products without going through a bureaucratic approval process for non-preferred drugs. Such a program could net the state hundreds of millions of dollars in “savings” derived from additional revenues from supplemental rebates. However, the costs of establishing a preferred drug list, accompanied with the prior authorization system needed to enforce it, could eat up a substantial amount of those revenues.