The 86th Texas Legislature convened on January 8 and adjourned for the last time on May 27. The intervening 140 days bore witness to an active and productive legislative session, with real progress made in addressing some of our state’s major challenges.
Two significant circumstances influenced the direction of the session from the beginning. The first was that this was a year of strong state revenues and increased flexibility in the budget-writing process. In the Biennial Revenue Estimate, the comptroller certified that Texas had significantly more revenue than anticipated, thanks in large part to a strong economy resulting in higher sales and severance tax receipts.
The second circumstance was a higher-than-usual level of bipartisan consensus on goals for the session, embodied by newly elected Speaker Dennis Bonnen’s continual emphasis on achieving school finance reform. In addition to tackling school funding, other widely shared priorities were property tax relief, school safety improvements, disaster response and recovery, and progress in mental health services. Leaders in both parties helped to drive members to remain focused on these challenges.
The Legislature succeeded in passing significant school finance reform in House Bill 3. This legislation directs substantial investments to our public education system, intended to better prepare young Texans for higher education and the workforce. It also compresses school district property tax rates across the state and reforms how money is allocated and spent in our public schools.
Notably, this investment in public schools and property tax compression – totaling over $11 billion above current-law levels for the coming biennium – was achieved without a tax increase. While a proposal was offered to increase the state sales tax by a penny and use the proceeds to further reduce property taxes, this idea did not ultimately advance in either the House or the Senate. Some additional revenue will be provided as a result of House Bill 1525, which requires online marketplaces to collect and remit Texas sales taxes on out-of-state sellers. Another significant bill on the taxation front was Senate Bill 2, which mandates that city and county governments must receive voter approval in a special election in order to collect over 3.5% more property tax revenue than collected on the same property in the previous year, with certain exceptions. Many mayors, city council members and county officials voiced opposition to this bill, concerned that it may affect their ability to provide an adequate level of local public services.
Among the over 1,300 other bills passed into law were many of particular interest to the business community. These included the following measures:
General business-related legislation
- Senate Bill 1859 – Changes the Business
Organizations Code as it relates to advances in technology, Secretary of State
filings and LLCs, including:
- Authorizing the use of an electronic data system that employs blockchain and distributed ledger technology for the maintenance of books and records of a domestic entity;
- Ensuring that recordation dates for filings, including post-filing effective dates, are effectively administered by the Secretary of State;
- Conforming “winding up” procedures for Series LLCs to those applicable to regular LLCs; and
- Requiring a general partnership to indemnify a withdrawn partner whose interest is redeemed by the partnership except as to obligations incurred by the act of the withdrawn partner.
- Senate Bill 1971 – Made other substantive and
technical changes to the Business Organizations Code, including:
- Revising provisions relating to voting agreements that are not part of a domestic entity’s governing documents;
- Conforming provisions governing mergers to other recent changes in the similar Delaware laws; and
- Defining a “director” of a nonprofit corporation to exclude an honorary, ex-officio or similar non-voting member of the board of directors.
- House Bill 1074 – Repeals a statutory exemption on age discrimination to allow workers age 56 and older equal access to training programs in the workplace.
- House Bill 1152 – Clarifies price gouging during a disaster; defines an “exorbitant or excessive” price as one that is 15% or more over the normal price at which the goods or services were sold immediately prior to a declared state or local emergency.
- House Bill 1992 – Prohibits a telemarketer from transmitting misleading caller identification information or otherwise misrepresenting the origin of a telemarketing call.
- House Bill 2240 – Allows employers to pay wages to employees via a “payroll card account.”
- House Bill 3511 – Establishes the “Commission on Texas Workforce of the Future” to engage businesses, state agencies and local workforce system partners in efforts to build the state’s workforce talent pipeline.
- House Bill 4390 – Requires timely disclosure by companies of a security breach that compromises sensitive personal information; creates the “Texas Privacy Protection Advisory Council.”
- House Bill 3609 – Removes the duplicative local filing requirement for assumed name certificates for business entities, so the only requirement is at the state level with the Secretary of State.
- Senate Bill 2296 – Allows the practice of “common paymaster payrolling” in order to permit separate companies to establish one entity to handle payroll and personnel matters for members of that group.
Economic development
- House Bill 3143 – Renews the Chapter 312 tax incentive and economic development program for 10 years and increases transparency and public participation by imposing additional public notice, hearing and reporting requirements for certain agreements.
- House Bill 4347 – Authorizes certain cities to qualify for the tax rebate related to the construction of a qualified convention center hotel.
- House Resolution 1160 – Urges Congress to support the ratification of the United States-Mexico-Canada Agreement.
Infrastructure
- Senate Bill 7 – Establishes the “Flood Infrastructure Fund” to allow loans and grants to eligible political subdivisions for flood-related projects.
- House Bill 864 – Requires natural gas operators to notify the Railroad Commission within one hour of discovery of an incident (such as a gas explosion) and provide specific information related to the event; requires the RRC to perpetually keep all records related to incident investigations.
- House Bill 866 – Prohibits natural gas operators from installing cast iron, wrought iron or bare steel pipelines underground, and requires operators to remove all known underground cast iron pipelines by Dec. 31, 2021.
- Senate Bill 636 and House Bills 511, 695 and 917 – Allows for local enforcement of commercial motor vehicle safety standards in certain parts of the state.
- House Bill 1450 – Requires electric utilities in Texas to annually inspect their power lines for safety hazards and file reports with the Public Utility Commission.
- Senate Bill 198 – Provides uniformity among toll-road billing and payment practices across the state.
Many close followers of Texas state government have observed that this was a uniquely productive legislative session. Thanks to a combination of a strong economy and a higher level of bipartisan consensus on key policy priorities, the Legislature acted on many of the state’s most pressing needs and made significant investments in the future of Texas.
Rafael Anchia is of counsel in Haynes and Boone’s Dallas office, where he advises financial institutions and public and private funds in a variety of transactions. He represents District 103 in the Texas House of Representatives.
John Turner is a partner at Haynes and Boone in Dallas and co-chairs the firm’s trade secret litigation practice. He represents District 114 in the Texas House.