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Back to Basics 2014 Policy Guide


2014 Back to Basics PAC

The information in this policy guide has been compiled from numerous individuals that are experts in
legislative and policy research. Back to Basics would like to recognize and thank the following individuals
for their work: Joseph Carlos Madden, Jenny Casey, Jaclyn Uresti, Rahul Sreenivasan, Analiese Kornely,
Martin Golando, David Edmonson, Colin Meehan, Craig Adair, Luis Figeroa and Tyler James.

Table of Contents

State of the State .. 1
Texas Demographics 3
Education . 9
Public Education.. 11
Higher Education. 17
Health and Human Services .. 21
Texas Solution to Healthcare.. 23
Womens Health Program 29
Abortion 35
Institutional Failures of Texas Human Services . 39
Texas Budget and Taxes 51
Budget Primer .. 53
Tax Primer 61
Tax Loopholes .. 67
Rainy Day Fund 71
Texas Infrastructure 75
Transportation Overview . 77
Transportation Debt 81
Toll Roads 89
Water . 93
Energy and Environment . 105
Texas Energy . 107
Renewable Energy . 113
Hydraulic Fracture Drilling 117
EPA Summary 121
Texas Workforce and Economy .. 125
Texas Miracle.. 127
Economic Development Funds .. 131
Texas Workers .. 145
Minimum Wage .. 149
Equal Pay . 155
Insurance 161
Homeowners Insurance 163
TWIA 167
Criminal Justice 171
Criminal Justice . 173
Driver Responsibility Program .. 181
Immigration and the Border .. 187
Immigration and Border Security 189
Human Trafficking . 201










Texas Demographics Introduction

These demographic statistics are tied to socioeconomic characteristics, tied to the resources that people
have to buy goods and services in the private sector; they are tied to the resources that people have to
pay taxes in the public sector.
1
-Former State Demographer Steve Murdock

Texas grew by 4.3 million people between 2000 and 2010, more than any other state in the US over that
period. Most of that population growth occurred in its large cities, with 85% occurring in the 5 largest
metropolitan statistical areas (MSAs). 89 percent of that increase was due to increases in Texas racial
minority populations, with 65% from growth in the Hispanic population alone.

Data and research indicate that as these demographic shifts occur in Texas, if we do not change the
current socioeconomic characteristics of the growing populations, the economic base of Texas (and the
United States) will shift drastically.
2


Texas fares worse than the national levels of low-educational attainment, ranking last in 2010, 19.3%,
and next to last in 2011, 19.6%, in the percentage of adults over 25 that lack a high school diploma or
GED compared to 14.4% nationally.
3


Improving education attainment for minority populations will require more effort from the state to
produce an education system that meets the needs of its changing population to create a more skilled
population.

Continuing to ignore the realities of our state will leave us in 2050 with lower per capita income, lower
household income, lower consumer spending, even higher poverty, with state tax revenues shrinking
relative to the population.
4


1
http://www.texastribune.org/2010/03/11/former-census-director-talks-demographic-shift/
2
Texas in 2050: It's All Over for the Anglos," based on Dr. Murdock quote
3
American Community Survey, 2012, Table S1501
4
Population Change in Texas: Implications for Education and the Socioeconomic Future of Texas, presentation by
Dr. Steve Murdock to Texas Tribune and UTEP Symposium on Demographic Change, February 27, 2014, Slide #98-
104.
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Texas Demographics

Introduction
Recently, discussion on demographic shifts in Texas has focused on when Texas will start
electing Democrats statewide. These demographic shifts will also have real impact on the
future of the state, depending how we address them. As former state demographer Steve
Murdock noted recently, These demographic statistics are tied to socioeconomic
characteristics, tied to the resources that people have to buy goods and services in the private
sector, they are tied to the resources that people have to pay taxes in the public sector.
1


The data complied and analyzed by entities like the state demographers office, Dr. Murdock
and his team at Rice, the Census Bureau, and various federal agencies uniformly point to the
fact that the future of our state and country is tied tightly to the level of success experienced by
minority populations.

Growth of Texas and its Changing Ethnic Composition
Texas grew by 4.3 million people between 2000 and 2010, more than any other state in the US
over that period. Most of that population growth occurred in its large cities, with 85%
occurring in the 5 largest metropolitan statistical areas (MSAs). The top four areas comprise the
Texas Triangle, (Houston-The Woodlands-Sugarland, Dallas-Fort Worth-Arlington, Austin-
Round Rock, and San Antonio-New Braunfels), with the 5
th
largest increase being in the
McAllen-Edinburg-Mission MSA.

The more important aspect of that 4.3 million person increase was that 89% of it was due to
increases in Texas racial minority populations, with 65% from growth in the Hispanic
population alone.
2


There was a marked shift in the ethnic composition of Texas under 18 population over the
same 2000-2010 time period. Despite an actual decrease of 184,000 non-Hispanic (NH) white
minors, Texas under 18 population increased by nearly 1 million, with 95.1% of that growth
driven by young Hispanic Texans.
3


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3
Texas does line up with a more general national trend of minority-driven population growth
(92% nationally, 89% in TX), but its growth is driven to a greater degree than nationally by
Hispanics (65% in TX vs 55% nationally).
4
But Texas differs in that it is already one of only 4
majority-minority states in the country, with a Hispanic population expected to overtake the NH
white population in the next 15 years.
56


With urban areas experiencing the most population growth and minority populations driving
that growth, it followed that the percentage of NH white population decreased in the 4 top
MSAs (60.7 to 54.7 in Austin, 59.3 to 50.5 in DFW, 48.1 to 39.6 in Houston, and 40.7 to 36.1 in
SA), with the same trends occurring in the under 18 populations in the same areas.
7


Why are these changes noteworthy?
Data and research indicate that as these demographic shifts occur in Texas, if we do not change
the current socioeconomic characteristics of the growing populations, the economic base of
Texas (and the United States) will shift drastically.
8


Income Levels and Poverty
The average American household was poorer in 2010 than in 1999.
9
This trend held true within
the top 4 ethnic categories (NH White, Hisp, NH Black, and NH Asian).
10
Poverty rates increased
across the country as well, with NH Black and Hispanic populations experiencing poverty at
rates 150 and 130 percent respectively above the NH White population.
11


Similar median income trends were observed in Texas, except Texass NH white households still
had higher median income than their national NH White cohort, while the median income for
Texas Hispanics lagged significantly behind their national group.
12
Texas overall poverty rates
increased over the same time and were higher than the national average in both 1999 and
2010.
13
Texass NH Black and Hispanic population experience poverty at rates 160 and 182
percent above the states NH white population.
14


Education Attainment
Texas fares worse than the national levels of low-educational attainment, ranking last in 2010
(19.3%) and next to last in 2011 (19.6%) in the percentage of adults over 25 that lack a high
school diploma or GED compared to 14.4% nationally.
15
Among Hispanic adults over 25 in
Texas, this rate is an astonishing 40.4%, also higher than the 37.8% rate nationally.
16
Among
Texas largest MSAs, San Antonio, in both the city and MSA, shows a higher rate (albeit still poor
relative to other ethnicities) of Hispanic adults over 25 with at least a high school equivalent
education.
17
Dr. Murdock believed this may be due to the longer term establishment and
evolution of the Hispanic population in the city.
18


Projections Ethnic Composition Shifts, Even in Older Populations
Based on 2012 Census projections, minorities will constitute 116% of US population growth
between 2010 and 2060.
19
Hispanics will constitute 70% of that population growth, while the
projected decrease in NH White population represents a -16% section of the growth.
20


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Here in Texas, using the conservative zero net migration scenario, where all population growth
is from people already living here, Hispanics will be the majority population in Texas 2050.
21

When assuming the growth and net migration trends observed from 2000-10, Hispanics
become the majority population in the mid to late 2030s.
22
In the latter scenario assuming
recent net migration trends, the Hispanic population alone will number close to 31 million of
Texas 55 million people in 2050!
23


In discussions related to Medicare and Social Security, the inevitable aging of the U.S.
population is often brought up. Presently, in Texas and across the country, that aging
population is mostly White, with the median age of minority populations being younger than
White populations. By 2050 in Texas, the Hispanic population will still be younger than the NH
White and other minority populations, but they will represent the largest ethnic group among
people over the age of 65.
24


Health Care Coverage
The latest American Community Survey from 2012 showed that Texas continues to lead the U.S.
in the share of people who lack health insurance with 24.6%, or nearly 1 in 4, of all Texans
without health care coverage. The 2012 ACS also showed that Texas also has 852,000 children
without health insurance, good for the largest number in country ahead of California which has
2.2 million more kids than Texas.

To top it off, Texas also has the highest rate of poor adults without health insurance, with 55%
of adults below the 138% federal poverty line without coverage. This is the population that
would be served by the expansion of Medicaid in Texas.

Additionally, ACS data shows that even within Texas high rate of uninsured, there is significant
variance among Texas communities. For example, KilleenTempleFort Hood only had 15.9%
without coverage, whereas Laredo, McAllen-Edinburg-Mission, and Brownsville-Harlingen had
the worst uninsured rates in of all U.S. metropolitan areas in 2010 (36.4, 35.9, and 35.6 percent,
respectively). These 3 metropolitan areas of low health coverage also have some of the highest
poverty rates and lowest median incomes in the country.

Most adults over 64 in Texas have health coverage due to Medicare, which in tandem with
Social Security, combines to diminish poverty rates within the over-65 population. However,
when analyzing data by race, 34.4% of Hispanic Texans do not have health coverage.

Murdock: Education is the single best predictor of how one does socioeconomically
Bureau of Labor statistics from 2011 show that those with associates degree and higher had
lower unemployment rates than those without degrees.
25
Additionally, as expected, higher
educational levels correlated with higher median weekly salaries.
26


Uniformly, higher education levels translate to greater earnings across races and all
industries.
27
However, there are significant and alarming disparities in average income
between races within similar industries with similar educational backgrounds.
28

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High school graduation rates among adults over 25 have improved in Texas since 1990 among
all races.
29
But, as indicated earlier, Texas continues to lag behind the country in this measure
of educational attainment, with minorities performing worse than their NH white cohorts.
30

Texas college degree holders over 25 increased over the same 1990-2010 period, but the NH
White population still graduates at almost twice and three times the rate of NH Black and
Hispanic populations, respectively.
31


With respect to higher education, projections show Hispanic students maki ng up 50.1% of total
public college and university enrollment in 2050, a rate far short of their 64.2% in K-12 at the
time.
32


Further complicating things, per student state expenditures for Texas public college and
universities decreased by 28.1% between 2000 and 2010, due in large part to tuition
deregulation which in turn spiked tuition and fees for Texas college students.
33
It should come
as little surprise that financial aid per student is currently at its highest level ever in Texas.
34

The percentage of students needing financial aid is expected to increase more, outstripping the
expected enrollment growth over the next 50 years.
35


Moving Forward
The various data measures clearly spell out a picture in which our state must make efforts to
close the various socioeconomic gaps for our growing minority populations, with emphasis on
the future majority Hispanic population. As research has shown, improving education
attainment is the top way to close these socioeconomic gaps.

Improving education attainment for minority populations will require more effort from the
state to produce an education system that meets the needs of its changing population to create
a more skilled population. The state will need to improve their efforts, through increased
financial aid to students, and increased state expenditures to higher education institutions to
improve access to higher education.

Projections from the Hobby Center for the Study of Texas show that resting on our laurels at
present levels will leave our state in 2050 with lower per capita income, lower household
income, lower consumer spending, even higher poverty, with state tax revenues shrinking
relative to the population.
36
Conversely, if our state makes the policy changes necessary to
bring minority populations up to the socioeconomic levels of the White population, projections
show that per capita income and average household income would double, consumer spending
nearly double, poverty rates reduced by a third, with an effective doubling of the our states tax
revenue per capita.

It will also be important to maintain the policies that have effectively reduced poverty for the
elderly such as Social Security and Medicare. An important part of shrinking that
socioeconomic gap will also involve aggressive and complete implementation of the ACA,
including getting more eligible Texans enrolled in the exchanges and implementing Medicaid
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expansion. Affordable health coverage will mitigate the financial damage caused by the cost of
health care, and allow poor and near-poor families to spend money elsewhere.

Texas Facts:

2nd in Total Student Enrollment [4.9 million students (2010-11)]
37

1st in Total Student Enrollment Growth [1998-99 to 2008-09 (806,781)]
38

1st in Hispanic Student Enrollment Growth [1998-99 to 2008-09 (752,272)]
39

39th in Instruction and Instruction-Related Expenditures per Pupil ($5,661)
40

43rd in Total Per Pupil Expenditures ($8,685)2
41

28th in Pupils per Teacher (14.7)
42

28th in Average Freshman Graduation Rates for public secondary schools, 2008-09 (75.4%)
43

Ranked Last in the Percent of People 25 years and over Who have Completed High School
[81.4% (including Equivalency)]
44

31st in Percent of People 25 Years and Over Who Have Completed a Bachelors Degree
(26.7%)
45

12th in Percent of People below Poverty Level in the Past 12 Months (18.5%)
46

10th in Percent of Children below Poverty Level in the Past 12 months (26.6%)
47

41st in Percent of 18- to 24- Year Olds enrolled in Colleges and Universities (39.6%)
48

46th in the Percent of Public High School Teachers Teaching with a Major in their Main
Assignments (71.9%)
49

Between 2000 and 2010, Texas Student Age Population (Ages 5-17) Grew by a 67,522 People
Per Year (or 675,220 between 2000-10)
50

In 2010, 4,937,351 children were of school age (Age 5-17), up from 4,262,131 (a 15.8%
increase)
51



1
http://www.texastribune.org/2010/03/11/former-census-director-talks-demographic-
shift/
2
Population Change in Texas: Implications for Education and the Socioeconomic Future of
Texas, presentation by Dr. Steve Murdock to Texas Tribune and UTEP Symposium on
Demographic Change, February 27, 2014, Slide #10
3
Id at Slide 12
4
Id at Slide 10 and 17
5
id at Slide 59.
6
Texas in 2050: It's All Over for the Anglos," presentation by Steve Murdock, September
28, 2014, based on quote from Dr. Murdock
7
Population Change in Texas. . . at slides 22-31
8
Texas in 2050: It's All Over for the Anglos," based on Dr. Murdock quote
9
Population Change in Texas. . . at slide 33
10
Id.
11
Id.
12
Id. at Slide 34.
13
Id.
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14
Id.
15
Id at slide 40; American Community Survey, 2012, Table S1501

16
Id.
17
Id at slide 47-48
18
Texas in 2050: It's All Over for the Anglos," based on Dr. Murdock quote
19
U.S. Census Bureau, 2010 Census and 2012 National Projections
20
Id.
21
Population Change in Texas. . . at slide 58
22
Id.
23
Id at Slides 58-59
24
Id. at Slide 61.
25
Id at Slide 76
26
Id.
27
Id at 77.
28
Id.
29
Id.
30
Id.; American Community Survey, 2012, Table S1501
31
Id at 78.
32
Id at Slide 83 and 85.
33
Id at 79.
34
Texas in 2050: It's All Over for the Anglos," based on Dr. Murdock quote
35
Population Change in Texas. . . at slides 87-88.
36
Id at Slide 98-104.
37
National Center for Education Statistics, The Condition of Education, 2012
38
National Center for Education Statistics, The Condition of Education, 2012
39
National Center for Education Statistics, The Condition of Education, 2012
40
National Center for Education Statistics, Common Core of Data (CCD), National Public
Education Financial Survey, FY 2011.
41
National Center for Education Statistics, Common Core of Data (CCD), National Public
Education Financial Survey, FY 2011.
42
National Center for Education Statistics, The Condition of Education, 2012
43
National Center for Education Statistics, 2008-09 Core of Common Data (CCD)
44
American Community Survey, 2012, Table S1501
45
American Community Survey, 2012, Table S1501
46
American Community Survey, 2011, Table GCT 1701
47
American Community Survey, 2011, Table GCT 1704
48
United States Education Dashboard, Data Derived from 2006-08 American Community
Survey Public Use Microdata Sample (PUMS) data
49
National Center for Education Statistics, Schools and Staffing Survey, 2007-08
50
U. S. Census Bureau, 2000 & 2010 Decennial Census
51
U. S. Census Bureau, 2000 & 2010 Decennial Census
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Introduction to Education
Providing an education for every child is the most important thing we can do to ensure a safe, secure,
and prosperous future. However, Republican legislators have continued to ignore reality by maintaining
large budget cuts in public and higher education. 2011 was the first time in the history of the state of
Texas that Hispanics made up the majority of public school students. It was also the first time in the
history of the state of Texas that funding for public schools was cut and enrollment growth was not
funded.
1
Texas must plan for the future and build an education system to keep us competitive in a 21
st

century global economy.
Public Education
Texas public education system is at a crossroads: with diverse sets of students, advances in technology
and a global economy, we must work to make our public schools a model for the future.
The school finance system built by Republicans cannot keep up with the needs of school districts in Texas.
We must improve teacher pay and working conditions to attract and retain the qualified teachers our
children deserve.
Vouchers are not the answer. We cannot afford to take tax dollars from public schools to pay for a school
voucher program to allow a select few to attend private schools.
Higher Education
Since deregulation in 2003, tuition rates at Texas universities have skyrocketed. Middle income families
bear the brunt of these costs, as they are forced to take out private student loans. As a result, thousands
of students graduate and go into the workforce burdened by mountains of debt.

Every Texas student who works hard enough to excel in high school should be guaranteed access to the
very best college education in Texas at affordable prices.

It is harder to prepare our children for the higher education opportunities of tomorrow if we as a state
cannot meet the challenges of today.

The three keys to a successful state higher education policy are access, affordability, and quality. Failure
to provide young Texans access to an affordable, quality college education equates to giving up on our
future.

Skyrocketing tuition rates amount to a tremendous tax hike on middle-income families who earn too
much to qualify for financial aid but do not earn enough to fully finance their child's education. This leads
families to agonize about how they will be able to afford sending their children to college. Access to a
quality college education should not be determined by family income or whether a high school graduate
lives in a rural area, a suburb, or the inner city.

1
http://www.texastribune.org/2012/08/31/some-schools-texas-demographic-future-here-now/
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Public Education

According to the Texas Legislative Study Groups Texas on the Brink,
1
Texas ranks:
2
nd
of 50 states in public school enrollment
2


42
nd
of 50 in current expenditures per student based on average daily attendance
3

47
th
of 50 in average SAT scores
4

44
th
of 50 in high school graduation rate
5

30
th
of 50 in percentage of adults with at least a Bachelors Degree
6

50
th
of 50 in the percentage of the population that has graduated from high school
7

Providing an education for every child is the most important thing we can do to ensure a safe,
secure, and prosperous future. Texas public education system is at a crossroads: with diverse
sets of students, advances in technology and a global economy, we must work to make our
public schools a model for the future. The school finance system built by Republicans cannot
keep up with the needs of school districts in Texas. We must improve teacher pay and working
conditions to attract and retain the qualified teachers our children deserve. We cannot afford
to take tax dollars from public schools to pay for a school voucher program to allow a select few
to attend private schools.

School Finance
Rather than making the hard choices to create a real school finance plan that invests in our
childrens future, the Legislature created a failing plan that guarantees no new dollars ever
can be used to improve education. Additionally, Republicans built in a structural deficit that
ensures that state General Revenue dollars are used to fill in the massive shortfall, instead of
going to their intended areas such as energy, transportation, public safety, and other state
priorities.

Nearly 5 million Texas students attend classes in 1,030 independent school districts that are
funded with a combination of local property taxes, state funds that are distributed through
various formulas, and targeted federal funding.

Local districts vary tremendously both in terms of student population and the districts property
wealth, factors that have shaped Texas school finance debates for decades. However, by 2006
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the state share of education funding had fallen so dramatically that both rich and poor districts
challenged the state system in court because property tax rates had reached their legal limit,
which resulted in a Texas Supreme Court ruling and a new method of financing our schools.

In Texas, public schools are financed by property taxes, matching federal and state dollars, and
other general revenue dollars the state commits to public schools.

Prior to the 2006 school finance plan, each school district received money based on the
property tax rate of the district. Schools received a certain rate of money per $100 in taxable
property value. For example, a person who owned a home with $100,000 in taxable property
value and who lived in an area where the property tax rate was $1.00 would pay $1,000 to the
school district in which his or her home was located.

School districts and local governments had raised the property tax rates up to $1.50 to
maximize the amount of money schools could receive. When almost every school district had
reached this statewide $1.50 cap, it then became a de-facto statewide property tax, which is
illegal under the Texas constitution. Therefore, the Legislature was charged with comi ng up
with a new way to finance our public schools.

In 2006 a school finance plan passed that raised taxes on 90% of Texas families in order to cut
taxes for the wealthiest 10% of Texans and never actually put additional funds into addressing
the biggest issue: how to adequately invest in public education.

In order to meet the Supreme Court ruling that the effective statewide property tax was illegal,
Texas had to revamp the way it financed schools. Republicans came up with a new set of taxes
that bought down property taxes but put no new money into our public schools. The funds
were derived from the following sources:

House Bill 3 (New Business Tax, also called margins or franchise tax)
+ House Bill 4 (Motor vehicle tax which amounted to very little revenue)
+ House Bill 5 (New cigarette tax, which raised the price of cigarettes by $1.00)
= The 2006 Perry Tax Plan new revenue generated that failed to offset property tax cuts

All of these new tax dollars (collected from those three bills) then went into a new fund called
the Property Tax Relief Fund. Here, these dollars would be used to buy down property taxes
to $1.00 in 2007 and beyond.

No new dollars generated by these new taxes went to increase payments for education, they
only went to tax cuts.

Because the Legislature did not change the formula for funding schools they just swapped out
dollars Texas public schools are facing rising costs in transportation, utilities, and the general
increases that come from an ever-expanding student population.

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The tax swap turned out to not be a swap revenues generated by the new taxes fail to
offset the decrease in the state property tax cap. Billions of dollars from the states General
Revenue fund are needed to backfill that gap, meaning Texas has a structural deficit, or a
budget deficit that is not the result of changes in the economic cycle. The structural deficit will
exist even when the economy is not in recession.

Republican Budget Cuts to Public Education
In 2011, the state faced a multibillion dollar budget shortfall. Instead of tapping the Rainy Day
Fund or finding additional sources of revenue, the state chose to cut $5.4 billion from public
schools. This led to almost 21,000 fewer teachers and staff in our classrooms, three times as
many over-crowded classrooms in 2011-12 as in the prior year, and six lawsuits filed against the
state by parents, districts and education advocates.
8


Of those $5.4 billion in cuts, per-pupil formula funding was cut by $4 billion and discretionary
grants to school districts by $1.4 billion. In 2013, even with a budget surplus and a full Rainy
Day Fund, the Legislature failed to fully restore the cuts and fund enrollment growth in schools.
Formula funding was partially restored but left average per-pupil funding more than $500 short
of the level reached before the 2011 budget cuts. Though some grant funding was restored,
much of the cuts will continue for valuable programs such as full-day pre-k and the Student
Success Initiative, which helps students struggling to pass state exams.

It costs about $1.5 billion every two years to fund enrollment growth and the rising costs of
current services. To fully restore public schools to the pre-recession funding level of 2008
requires $5.9 billion per biennium in additional funding.

School Finance System in Court
Due to the Republican budget cuts and the failures in the school finance system, over two
thirds of the schools districts in Texas sued the state of Texas. A total of six different suits
brought by school districts, parents, business groups and charter schools were combined in
Austin. The school districts have sued the state on three different grounds: efficiency, adequacy
and meaningful discretion. The Texas Constitution requires that the state provide efficient and
adequate funding for public schools. It also says that school districts must have the ability to
choose how they spend money they bring in from property taxes.
9


The school finance system built by Republicans cannot keep up with the needs of school
districts in Texas. The Texas Tribune breaks down the details of the suits:

Efficiency: Three different plaintiffs are using this language to ask for three different
outcomes. The Equity Center lawsuit is using "efficiency" to argue that the inequity in
the school finance system is unconstitutional. Claims from the Mexican American Legal
Defense and Educational Fund and the Fort Bend ISD group also touch on this argument.
Charter schools take a slightly different approach. They argue the cap on charter
contracts and a lack of facilities funding impede their growth, which they believe makes
the system unconstitutional. Another party, Texans for Real Efficiency and Equity in
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Education, says that because the state doesnt know how much it costs to educate a
child, theres no way the system is efficient.

Adequacy: The adequacy argument is based on the charge that the state has failed to
dedicate enough money to public education for schools to meet increasingly rigorous
standards. Case in point? The 2011 Legislature cut roughly $5.4 billion from public
education and didn't fund an influx of 80,000 new students amid the rollout of a new
accountability system based on the STAAR exams. All of the lawsuits, except those
brought by TREE and the charter school association, bring up this argument.

Meaningful Discretion: In underfunding public schools, some plaintiffs argue, the state
has not given local districts enough choice in setting their own property taxes in
effect, instituting an unconstitutional statewide property tax. All of the groups except
for the charter schools and TREE, which dropped this part of their complaint in response
to a motion from MALDEF, make this argument.
10


In 2013, Austin District Court Judge John Dietz ruled in favor of the school districts because the
Legislature cut $5.4 billion from public schools while simultaneously raising accountability and
assessment standards.
11
The Legislature responded by only partially restoring the cuts while
making changes to charter school policy, high school curriculum and graduation and testing
requirements. Because of these changes, the judge reopened the case in January to hear
additional testimony. School districts responded by noting that the restored funds were
inadequate and that the problems inherent in the school finance system were still causing harm
to the districts and its students.

The trial ended on February 7
th
, and a ruling is expected sometime this summer. The case will
likely proceed to the Texas Supreme Court, with arguments in fall 2014 and a possible final
decision in early 2015. This means the Legislature will most likely be tasked with revisiting the
school finance issue in the next Legislative Session to comply with the decision of the Supreme
Court.
12

Teacher Pay
Texas lags the national average in teacher salaries by $8,273 according to the National
Education Association
13
. And, the average teacher salary in Texas has decreased by $528 a year
since 2010-11, partly because experienced teachers (some through budget-induced early
retirements) have left the profession and been replaced by new teachers. That change has been
coupled with salary freezes in many districts and minimal increases in others
14
.

The Texas State Teachers Association surveys its members periodically to ask them about
compensation, career expenditures, and supplemental incomes. From the 2013 TSTA Press
Release
15
:
The average salary of teachers participating in the latest survey was $50,967 a year, and
their average classroom experience was 16.9 years. Some 64 percent were the major
breadwinners in their households. Overall, the average teacher salary in Texas, based on
data for the 2012-13 school year, was $48,110. That was 38th among the states and the
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District of Columbia and was $8,273 below the national average, according to the
National Education Association.
The survey respondents also reported:
-Spending an average of $697 a year from their own pockets on school supplies, an
increase of more than $130 from three years ago.
-Spending an average of $408 each month on health insurance, an increase of almost
$200 from 2010.
-Working an average 18 hours a week outside the classroom on school related work in
addition to their moonlighting jobs
The online survey of 306 teachers was conducted last spring by Dr. Robert Maninger, Dr.
Sam Sullivan and Dr. Daphne Johnson of Sam Houston State University. Some 80 percent
of the participants were women, 48 percent had graduate degrees and they represented
all grade levels and urban, suburban and rural school districts.
The National Center for Education Statistics shows the average annual salaries from a report
compiled by NEA for Texas (and other states) in current dollars and constant dollars
16
.
According to the report, the average teacher salary in Texas for 2012-13 is less than it was the
two preceding years. And, if you look at the average teacher salary in terms of constant dollars,
the average teacher salary for Texas has declined by more than six percent. Its even less than
it was in 1989-90 and only $4,000 more than what it was in the late 60s.

Average teacher pay in Texas ranks 46th in the nation when measured against salaries for
similar occupations within the state (roughly 20 percent below pay for jobs demanding similar
levels of knowledge and skill). In large part because of lagging pay rates, districts routinely
assign roughly 50,000 educators outside their field, covering subjects they are not properly
prepared to teach.

Pre-K
During the 2011 budget cuts, Texas Republicans cut $1.4 billion in grants to public schools,
which included the $200 million Pre-K Early Start Grant. Due to the cuts, many districts cut
other programs so they could continue to provide some Pre-K services. The combined cuts to
Pre-K in 2011 resulted in a $288M cut to Pre-K for the 2012-2013 biennium. In 2013, the 83rd
Legislature failed to fully restore the funding, choosing the spend only $30M on the Pre-K Early
Start Program. Between 64% and 68% of low-income Texas children are not enrolled in Pre-K.
17




Private School Vouchers
Private-school voucher legislation would authorize the use of taxpayer dollars to send children
to private and religious schools. Tuition tax credits accomplish the same goal by giving
corporations tax relief in return for their funding of private-school scholarships. Both proposals
Back to Basics 2014 Policy Guide
15
would undermine the ability of public schools to provide for a quality education for all children
in Texas. Both would drain a public-school funding system ranked among the lowest in the
country and transfer taxpayer dollars from under-funded public schools to unaccountable
private schools, which do not serve all comers as public schools must do.

Texas cannot afford to take tax dollars from public schools to pay for a school voucher program
to allow a select few to attend private schools.





1
Texas Legislative Study Group, TexasontheBrink, March 2013, at http://texaslsg.org/wp-
content/uploads/2014/03/texasonthebrink.pdf
2
Texas Legislative Budget Board. 2012 Texas Fact Book. Online. Available at:
http://www.lbb.state.tx.us/Fact_Book/Fact_Book_2012.pdf. Page 18.
3
National Education Association. Rankings and Estimates: Rankings of the States 2012 and Estimates of School
Statistics 2013. Online. Available at: http://www.nea.org/assets/img/content/NEA_Rankings_And_Estimates-
2013_(2).pdf. Page 57.
4

9
Commonwealth Foundation. SAT Scores by State, 2011. Online. Available at:
http://www.commonwealthfoundation.org/policyblog/detail/sat-scores-by-state-2011.
5

10
Texas Legislative Budget Board. 2012 Texas Fact Book. Online. Available at:
http://www.lbb.state.tx.us/Fact_Book/Fact_Book_2012.pdf. Page 19.
6
Id.
7
Id.
8
http://forabettertexas.org/images/ED_2013_08_PP_publicedbudget.pdf
9
http://www.texastribune.org/2012/02/29/how-navigate-texas-school-finance-lawsuits/
10
http://www.texastribune.org/2012/07/03/an-updated-guide-to-texas-school-finance-lawsuits/
11
http://www.texastribune.org/2014/01/21/texas-school-finance-trial-enters-phase-two/
12

http://www.moakcasey.com/articles/viewarticledoc.aspx/TASBO%202014%20Conference%20Presentation.pdf?AI
D=6565&DID=6066
13
TSTA released the document How Texas Fares in New State Education Funding Rankings, which shows average
salaries in the US at $56,383 and in Texas at $48,110
14
Source: http://www.texasisd.com/artman/exec/view.cgi?archive=34&num=135743
15
Source: http://www.burntorangereport.com/diary/14272/texas-state-teachers-association-finds-more-teachers-
forced-to-moonlight
16
Source: http://nces.ed.gov/programs/digest/d13/tables/dt13_211.60.asp
17
http://www.aecf.org/~/media/Pubs/Initiatives/KIDS%20COUNT/F/FirstEightYears/AECFTheFirstEightYears2013.pdf
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16








Higher Education

A successful Texas higher education system is key to building an educated workforce and
securing continued economic prosperity for all residents of our state. An individual who
successfully obtains a postsecondary education has a greater opportunity for higher personal
incomes and is less likely to rely on public assistance. Further, highly educated communities
experience lower unemployment rates, a broader tax base, and reduced crime rates.

In 2000, the Texas Higher Education Coordinating Board launched Closing the Gaps by 2015, a
statewide strategic plan for higher education, in an effort to help Texas reach national parity in
participation, success, excellence, and research.

Research shows that if Texas meets its goals, the Texas economy will experience by 2030
estimated increases of:
$489 billion in total spending,
$194 billion in gross state product,
$122 billion in personal income, and
1 million new jobs.
1


However, after years of trying to open the doors of higher education to all students who sought
a postsecondary education, state policies are once again pricing out families who rely on
affordability and financial aid to realize that dream. Over the last decade, the cost of higher
education has skyrocketed and financial assistance has not kept pace with the need.

Tuition Deregulation
In 2003, the Texas Legislature passed legislation deregulating the cost of tuition for higher
education by allowing the governing boards of public universities to determine the designated
tuition rate with no limit. Community and technical college tuitions are also set by their
governing boards but within statutory requirements. Tuition deregulation legislation also
required higher education institutions to set aside a minimum amount for financial assistance
to students in need.

According to the Texas Higher Education Coordinating Board, the statewide average total
academic charges for a student taking 15 credit hours at a public university increased by 104
percent from fall 2003 through fall 2013.
2


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17
Accessibility to universities and financial aid
While enrollment growth continues, the pace has slowed. A major goal set for Closing the Gaps
is to increase enrollment rates for minority students. The THECB predicts that Texas will meet
2015 enrollment goals by number, but will fall short among Hispanic enrollment.
3
Trends are
also showing the gender gap is increasing. The overall female participation is 6.8% of their
population, which is 1.7 percentage points above the male rate for 2012 and is higher in
Hispanic and African American populations.
4


The Texas Higher Education Coordinating Board reported approximately 1.44 million students
were enrolled in fall 2012 in Texas public institutions of higher education, with over 51% in two-
year institutions.
5
However, in fall 2012, two-year public institutions showed a decrease in
enrollment for the first time since Texas adopted Closing the Gaps.

Advocates see affirmative action, the Top 10 percent rule, a culture of higher education, and
affordability as drivers that allow participation and success to increase.

Realizing population shifts and changes in the types of students entering higher education
institutions, the Texas Higher Education Coordinating Board is recommending greater
investment in higher education especially for financial aid programs. Texas continues to lag
behind others in investing in educational infrastructure with compared to other large states.
For every $1.00 invested in the federal Pell grant program, Texas only invests 32 cents,
compared to 56 cents in California and 88 cents in New York.
6


In order to continue to increase enrollment and success rates, Texas will need to broaden
financial assistance and recruitment to assist non-traditional students in attaining a
postsecondary education. Once enrolled, Texas students living in poverty struggle with the
highest level of unmet need compared to those living above the poverty threshold. Texas
undergraduates at four-year institutions living below poverty had annual unmet need reaching
$9,480, while higher-income students had less than $6,000 in unmet need.
7


With a higher unmet need, students from poverty must cover tuition through loans, work, and
other institutional aid. Even with financial aid, the gap between federal aid and college costs is
73 percent or more than $14,600 for students at public four-year institutions.

Workforce
Educational attainment for employment continues to increase. By 2020, the Center on
Education and the Workforce, estimate that approximately 65% of all jobs will require at least
some postsecondary education.
8


Higher Education Facts & Figures
1.44 million students enrolled in Fall 2012
9

51.4% of Hispanic high school graduates directly enter college
55.6% of White high school graduates directly enter college
50.1% of African American high school graduates directly enter college
10

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18


1
The Ray Perryman Group, A Tale of Two StatesAnd One Million Jobs!!: An Analysis of
the Economic Benefits of Achieving the Future Goals of the Closing the Gaps Initiative of
the Texas Higher Education Coordinating Board, March 2007. Figures are in 2006 Dollars.
2
Texas Higher Education Coordinating Board, Overview: Tuition Deregulation. March 2011.
Pg. 2. Available online at http://www.thecb.state.tx.us/reports/PDF/3369.PDF
3
Texas Higher Education Coordinating Board, Enrollment Forecast 2013-2020. January
2013. Available online at
http://www.thecb.state.tx.us/reports/PDF/2964.PDF?CFID=9960699&CFTOKEN=677896
89.
4
Texas Higher Education Coordinating Board, Closing the Gaps Spring 2013 Progress
Report. June 2013. Pg. 4. Available online at
www.thecb.state.tx.us/reports/PDF/3114.PDF
5
Texas Higher Education Coordinating Board, Enrollment Forecast 2013-2020. January
2013. Available online at
http://www.thecb.state.tx.us/reports/PDF/2964.PDF?CFID=9960699&CFTOKEN=677896
89.
6
Center for Public Policy Priorities, The Cost of College How Texas Students and Families
are Financing College Education. Pg. 6. Available online at:
http://forabettertexas.org/images/EO_2012_05_RE_FinancialAid.pdf
7
ID pg. 16
8
Center on Education and the Workforce, Recovery: Job Growth and Education
Requirements Through 2020. Available online at
https://cew.georgetown.edu/recovery2020.
9
Texas Higher Education Coordinating Board, Enrollment Forecast 2013-2020. January
2013. Available online at
http://www.thecb.state.tx.us/reports/PDF/2964.PDF?CFID=9960699&CFTOKEN=677896
89.
10
Texas Higher Education Coordinating Board, Closing the Gaps Spring 2013 Progress
Report. June 2013. Pg. 9, 11. Available online at
www.thecb.state.tx.us/reports/PDF/3114.PDF
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20
Introduction to Health and Human Services
The health of our children and loved ones is sacred and shouldnt be subject to the whims of politicians
and insurance bureaucrats. Nobody should be shoved off their insurance because they develop a
catastrophic illness like cancer, nobody should be denied coverage because of their previous illness, and
nobody should be subject to the terrible abuses of the insurance industry. All Texans should have access
to quality, affordable healthcare and the peace of mind that their insurance plan will work as planned
when we need it.

Medicaid Expansion
If Texas fails to accept those federal dollars, then Texans will be paying for a program that they do not
benefit from. Our tax dollars are being held hostage because of partisan politics that is not in the best
interest of Texans.

Texas should follow the bipartisan lead to craft a Texas Solution to Medicaid to ensure our Texas
veterans, children, elderly citizens and working families receive the health care they deserve.

Even without Medicaid expansion, we are currently paying for more expensive care for these
populations. When individuals get sick and seek treatment at the ER, those costs of uncompensated care
get passed along to us in the form of higher insurance premiums and higher taxes.

It costs a lot more to go to the ER than to go to a primary care physician.

Accepting the Medicaid dollars would allow us to provide more affordable care and better treatment to
low income Texas citizens, especially since you cant get chemotherapy or other treatments for chronic
illnesses in the ER.

Womens Health
Helping women and families prepare and plan for a family when they decide the time is right is critical to
a healthy pregnancy, a healthy baby and reducing unintended pregnancies.

By 2013, the massive budget cuts left over 170,000 low-income women without access to preventative
and family planning services.

Texas lawmakers need to fully support the efforts of these programs that are crucial to empowering
women to live healthier lives.

Institutional Failures
In recent years the state of Texas has systemically failed and forgotten the people that were supposed to
be helped by human services programs.
Some failures were well-publicized at the time, like the Texas Youth Commission (TYC) scandals, while
others have dragged on for years without much public attention, like the ongoing backlog and high
turnover in the Protective Services divisions at the Department of Family and Protective Services.





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22











Texas Solution to Healthcare

Introduction to the Affordable Care Act
The Affordable Care Act was designed to build off of the existing health insurance infrastructure
in our country while improving the system and extending access to affordable healthcare to the
millions of uninsured. The provisions in the ACA greatly benefit Texas, which had tried and
failed for years to protect consumers and address the problems with our health insurance
system. These common sense provisions had been difficult to pass on the state level, but are
key to ensuring access to affordable coverage for Texans. They include prohibiting
discrimination based on pre-existing conditions, ending the practice of dropping policyholders
when they become seriously ill, ending lifetime caps on coverage, reducing out-of-pocket
expenses, ensuring access to preventive care and expanding Medicaid coverage to all people
living in poverty.

Prior to the implementation of the ACA, in addition to the uninsured, there were millions of
underinsured Texans. Each day, 470 Texans lost their coverage because of rising premi ums,
being diagnosed with a catastrophic illness, and obscene out-of-pocket expenses. The ACA caps
consumer spending ensuring that no one has to fear bankruptcy to pay for care.

In 2008, 6.9 million Texans spent more than 10 percent of their income on health-related costs.
In 2007, 62 percent of personal bankruptcy filings were caused by medical problems. The large
majority of those filers - 78 percent - had health insurance when their illness started. Often it
takes a catastrophic illness or event -- like getting diagnosed with cancer -- for a family to
realize the problems that were inherent in our insurance system. Surveys show that 25 percent
of individuals with cancer report using all or most of their savings as a result of the financial
burden of treating it. Treatment is so costly that many patients wait, resulting in devastating
effects on their health. In Texas, 10 percent of people have diabetes and 28 percent have high
blood pressure. Insurance companies used the presence of these illnesses, and others like
cancer and mental illness, to charge higher premiums and deny coverage.

Many individuals with insurance face the same problems as those who lack coverage
altogether. More than half of underinsured individuals delay medical care because of costs,
and 45 percent of the underinsured have difficulty paying medical bills.
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23

Under the ACA, most Texans will continue to receive health insurance coverage through their
employer. For those that purchase their health insurance on the private market, plans are now
required to have standard minimum benefits, they cant charge more based on health status,
there are limits on premium increases as people age, there is no denial of coverage, no pre-
existing conditions discriminations and no annual or lifetime maximums.

States were given the option to create online exchanges, or marketplaces, where individuals
can shop for and compare private health insurance plans that meet certain minimum coverage
requirements. Those individuals under 400 percent Federal Poverty Level ($92,200 for family of
4) that purchase health insurance on the exchanges receive sliding scale deductibles and copays
and out-of-pocket caps in the exchange to increase affordability and reduce medical
bankruptcy.

Republicans and Democrats in the state legislature proposed plans to create a Texas based
exchange, but Governor Perry refused to move forward with the plans. As a result, Texans must
turn to the federally operated exchange, healthcare.gov, to seek and purchase care. 733,757
Texans enrolled in a health insurance plan through healthcare.gov before the open enrollment
period ended, exceeding expectation. Because Governor Perry refused to join with the
bipartisan coalition of lawmakers to craft a Texas based alternative to the federal governments
healthcare.gov website in 2011, hundreds of thousands of Texans have had to deal with weeks-
long website failures, delays in coverage, and hours on the phone to purchase insurance.

The ACA originally contained a provision to expand Medicaid to those individuals living below
133 percent FPL. This requirement for states to expand the program was struck down by the
Supreme Court, leaving states with the ability to opt out of the expansion. Texas is one of the
states that have thus far chosen to opt out of Medicaid expansion, depriving affordable health
insurance to over 1 million working Texans and passing the costs for uncompensated care on to
local taxpayers and individuals with insurance while sending the dollars earmarked for Texas to
other states.

Medicaid Expansion in Texas
Texas has the ability to lead the country through innovative reforms that will strengthen the
health insurance plans of Texans with insurance, lower costs, extend coverage to working
Texans without insurance and improve the health, wellbeing and financial security of all
citizens.

Medicaid expansion can provide coverage to those working Texans that fall between the cracks
and are denied or cant afford private coverage. It would keep those working Texans out of the
emergency room where they often cant afford to pay their bills and would stop those costs
from being passed on to Texans through higher insurance premiums and property taxes.
Expansion will keep the federal tax dollars of Texans in Texans instead of going to other states
and it will create jobs and spur economic development in our communities. Finally, bipartisan
proposals in the Texas House and Senate have demonstrated that compromise plans can be
Back to Basics 2014 Policy Guide
24
revenue neutral, requiring no additional general revenue to implement while achieving
significant cost savings to state and local governments, hospitals and private health insurance
plans.

The goal of Medicaid expansion should be to lower costs and strengthen and secure the existing
coverage of Texans with health insurance and provide quality coverage to the more than 1
million estimated Texans that would qualify for Medicaid expansion under the Affordable Care
Act. Further, any such plan should minimize the use of state dollars, bend the cost curve for
larger healthcare costs, reign in abuses, implement best practices and secure and strengthen
the existing plans of Texans with health insurance. Since Texans have to make federal tax
payments, they're still helping finance expansion in other states; they're just not seeing any
benefit at home.

Industry experts have predicted that states that do not expand Medicaid may see higher
premiums as hospitals shift the cost of uncompensated care to insurers.
1
This issue is
particularly acute in Texas, where Texas hospitals currently spend more than $5 billion in a
single year for uncompensated care, nearly all of which is supported by local property tax
dollars.
2


By choosing not to participate, Texas will forgo an estimated $9.58 billion in federal funding in
2022. Taking into account federal taxes paid by Texas residents, the net cost to taxpayers in the
state in 2022 will be more than $9.2 billion.
3


The federal government has demonstrated that it is willing to work with individual states to
craft compromises to Medicaid expansion. The first state to receive permission to build a locally
tailored program was Arkansas, which used Medicaid expansion dollars to help eligible
Arkansans purchase private health insurance plans, instead of enrolling in the states Medicaid
program.

After the Arkansas model was approved, many states including Texas began looking at ways to
tailor their approach to Medicaid expansion to better fit their specific policy and political
needs
4
. In 2013, Republicans and Democrats in the state legislature crafted a Texas Solution
to Medicaid expansion that built off the new alternative state approaches being pursued by
other states. Once again, Governor Perry defeated the proposals.

However, other states are moving forward with plans to build compromise Medicaid expansion
plans. From the Commonwealth Fund:
5


To fill the coverage gap and capture some of the lost revenue, some states that were initially hesitant to
expand Medicaid are now pursuing alternative approaches to cover more low-income residents. (See
interactive map). In order to receive federal matching funds, states must propose a pathway to coverage
for all adults in the newly eligible Medicaid group under the law (i.e., adults with incomes up to 138
percent of poverty). Arkansas, Iowa, and Michigan submitted so-called Section 1115 waivers to the
Centers for Medicare and Medicaid Services (CMS) and have received approval to customize their
expansions; Pennsylvania has applied for a similar waiver. Utah and New Hampshire are considering
Back to Basics 2014 Policy Guide
25
different options. The legislatures and governors in these states, which have wanted to make health
insurance available to their poorest residents but have not been able to agree on an approach, have
turned to the use of private insurance and greater cost-sharing as compromises.



The Medicaid expansion compromise proposed by Republicans and Democrats in Texas
included premium assistance for the purchase of private plans, cost sharing, health and
wellness incentives and other proposals that have traditionally been supported by conservative
lawmakers. However, instead of proposing these reforms to weaken coverage in existing
Medicaid populations, the proposals are used to extend coverage to the uninsured expansion
population. Based on LBB estimates, these Medicaid proposals should be cost neutral and
require no additional general revenue to implement while achieving significant cost savings to
state and local governments, hospitals and private health insurance plans.

Background Facts and Figures on Medicaid Expansion
HHSC estimates that with full Medicaid expansion the rate of uninsured In Texas would drop
from 24% to 12%.

Texas stands to lose more federal funds than any other state despite contributing the second
highest amount in federal income tax to the US general revenue fund.
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26

According to an economic analysis by the Perryman Group, Texas would see a return of $1.29
for every $1 spent on Medicaid expansion, and the burden on local governments would be
reduced by $1.21 for every dollar the state spent on expanding the program. According to
conservative estimates conducted by Billy Hamilton, the full amount of savings from expanding
Medicaid and drawing down this enhanced match could be almost $1.2 billion in general
revenue.

Medicaid expansion will reduce Texas hospitals bills for uncompensated care. Currently,
hospitals absorb more than $5 billion annually in uncompensated care, a loss that is passed on
in the form of higher prices, as well as direct tax areas that have hospital districts. Medicaid
expansion will cost us less in four years than what Texas hospitals spend on the uninsured
populations in one year.

Perryman further estimates that Medicaid expansion would generate over 300,000 Texas jobs
per year on average over 10 years, even netting out the impact diverting the state's requi red
matching contribution.

Billy Hamilton Consulting projects economic activity from Medicaid expansion would generate
an estimated 231,000 jobs by 2016, and several times that number in later years.

Texas currently has the highest uninsured rate in the nation, with more than 1 in 4 lacking
coverage, or over 6 million people. A Gallup poll reports that Texas has the highest percentage
of people ever recorded without health insurance at 28.8 percent. Medicaid expansion will
provide health insurance to approximately 1.5 million uninsured Texans.

The Legislative Budget Board estimated that a Medicaid expansion in Texas that follows current
guidelines would cost $50.4 million in GR for this biennium and draw down $4 billion in federal
matching funds. The state's share is half of the administrative cost for the first two years. The
compromise Medicaid expansion plan proposed by lawmakers in 2013 includes mechanisms
that should further reduce the cost to the state to the point of cost neutrality.

Since expansion would not be implemented until 2015 or 2016, Texas will receive a 100 percent
match from the federal government to pay for the first and/or second year and the match will
be gradually reduced to 90 percent of funding thereafter.

Conclusion
Texas has the ability to lead the nation and create state based solutions to the health insurance
problems facing our state. We can build off bipartisan proposals to create an alternative, cost
neutral program for low-income individuals in the coverage gap. Instead, our leaders have
failed to act and left millions of Texans either uninsured or underinsured. These actions have
led to higher taxes and higher insurance premiums to pay for the cost of uncompensated care
in our state. Texas should follow the example set by Republicans and Democrats in the
Legislature to craft a state based solution to Medicaid expansion, improve the existing Medicaid
Back to Basics 2014 Policy Guide
27
system by encouraging innovation, streamlining administrative hassles, incentivizing best
practices and cracking down on Medicaid fraud while holding state contractors accountable for
taxpayer dollars



1
http://www.modernhealthcare.com/article/20140422/NEWS/304229963?AllowView=VDl3UXk1TzlDUGFCbkJiYkY0M3hlMGVyalVVZERPVT0=#
2
http://forabettertexas.org/images/Medicaid_Overview_TMA_10_19_2012.pdf
3
http://www.pewstates.org/projects/stateline/headlines/private-option-for-medicaid-expansion-would-cut-some-benefits-85899542701
4
http://www.commonwealthfund.org/Blog/2014/Mar/Medicaid-Expansion-Alternative-State-Approaches.aspx?omnicid=20
5
http://www.commonwealthfund.org/Blog/2014/Mar/Medicaid-Expansion-Alternative-State-
Approaches.aspx?omnicid=20
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28











Womens Health Program

In 2011 the state legislature cut the state budget for family planning by two thirds to $37.9
million dollars and changed the way the funds were distributed.
1
After the 2011 legislative
session the Texas Health and Human Services Commission began enforcing the affiliate rule.
2

This effectively barred Planned Parenthood from receiving state funds for womens health
because of their affiliations with abortion performing clinics
3
.
76 medical facilities in the Valley have closed or stopped providing services due to a
lack of funding.
4
39% percent of the closure affected specialized family planning
clinics.
Clinics that didnt close were forced to make staff and other budget cuts resulting in
fewer services and an inability to meet the demand generated by closures.
5

28% of clinics funded by Texas Department of State Health Services closed by 2012.
Statewide in 2012, 144,000 less women were provided with family planning services
than in 2010. The number of women in the Valley seeking family planning services
from DSHS funded clinics fell from 19,595 in 2010 to 5,470 in 2012.
6


In, 2013 the state legislature passed HB2 which imposed harsh regulations on clinics that
provide abortions, forcing the closure of clinics in Texass rural and underserved area.
Regulations on doctor admitting privilege and strict standards on facilities have now removed
services provided by these clinics, not limited to abortion. The damage done by the 2011
legislative session has been staggering and results of the budget cuts are having real effects on
the lives of Texans, particularly those in medically underserved areas.

WHP Overview
The Womens Health Program (WHP) provides low-income, uninsured women who would
qualify for Medicaid if pregnant, with family planning services including well womens exams
and birth control. The purpose of the program is to help reduce the number of unintended
pregnancies through awareness and access to contraception.

The Medicaid WHP in Texas was started in January 2007. The 79th Texas Legislature passed SB
747 in 2005 directing the Texas Health and Human Services Commission to establish a five-year
demonstration project to improve and expand access to family planning services for women.
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29
The program was funded with a 9-to1 federal match through the Medicaid program. Since the
inception of the program, the WHP prohibited abortion providers from participating as a
contract provider of the program.

Helping women and families prepare and plan for a family when they decide the time is right is
critical to a healthy pregnancy, a healthy baby and reducing unintended pregnancies. In 2011,
prior to massive budget cuts taking effect, the Womens Health Program and the Department
of State Health Services (DSHS) Family Planning Program served over 330,000 low-income
women.

Provider Controversy
Primarily in an effort to eliminate Planned Parenthood from receiving any state dollars or
participating in state run programs, the state took shortsighted actions to strip funds from
family planning efforts in the 2011 Legislative Session. By 2013, the massive budget cuts in the
2012-13 biennium to DSHSs Family Planning Program left over 170,000 low-income women
without access to preventative and family planning services because of reduced capacity and
closure of at least 56 specialized clinics.
7







On top of the budget cuts, the state lost crucial federal matching funds to the WHP due to the
decision by the state to prohibit certain providers from participating in the program. After years
of attacking Planned Parenthood and similar entities and attempting to expel the organization
from the Medicaid Womens Health Program, the Republican led pressure prevailed in 2013.
Expanding on a budget requirement, S.B. 7, 82
nd
Legislature, First Called Special Session
included a change in statute to further prohibit any funds spent on the WHP or a successor
program from being used to perform or promote elective abortions or to contract or be
affiliated with an entity that performs such services officially banning Planned Parenthood
108522
127425
65000
202968
0 50000 100000 150000 200000 250000 300000 350000
2013
2011
2013 2011
Patients Served
WHP
DSHS Family Planning Program
Source: Texas Health & Human Services, Department of State Health Services, Legislative Budget Board
Estimates
Back to Basics 2014 Policy Guide
30
and other providers from the program.

Planned Parenthood provided services to over 40,000 patients through the WHP in 2012. The
last year the organization participated in the WHP.
8


The Texas Legislatures decision and state agency rules that were adopted as part of S.B.7
created a legal and public opinion battle that not only resulted in the state losing federal
matching funds for the WHP but also led to DSHS losing Title X funds for their family planning
programs. The federal government decided in 2013 to instead award Title X (Family Planning
Block Grant) to the Womens Health and Family Planning Association of Texas, a private
network of publicly funded family planning providers.

Transition to Texas Womens Health Program
In the aftermath of the states decision to expel Planned Parenthood from the WHP, the state
reworked the program as the Texas Womens Health Program and transitioned to state funding
only on January 1, 2013. The state also broadened the services covered under the new
program, which was underway prior to switching over to general revenue only, by adding
testing and some limited treatment for sexually transmitted diseases.
9


According to the Health and Human Services Commission and Department of State Health
Services, the agencies have been working overtime to increase recruitment of physician groups
to fill the provider void for family planning services. The state appropriated $71.3 million for
the program in the 2014-15 biennium, fully replacing lost federal funding with general revenue.
Although the WHP did not face major budget reductions, the overall reductions to family
planning services and ousting Planned Parenthood, the WHPs largest provider, damaged
capacity for services and the infrastructure of providers available to perform services, especially
in already underserved areas.

Obstacles for Family Planning
Family planning efforts have been a favorite target for extreme conservatives who deem family
planning programs and abortion services as one in the same.

Cost to the State
The states decision to strip money from family planning services and limit qualified providers
from the WHP and DSHS Family Planning Program not only harmed womens health but also
cost all Texas taxpayers. The state forfeited federal matching dollars in the Womens Health
Program (totaled approximately $32.4 million in calendar year 2011
10
) and another $32 million
was lost in the 2014-15 biennium for the DSHS Family program. Beyond the loss of federal
funds, the family planning budget cuts in the 2011 session increased general revenue costs to
Texas Medicaid by at least $136 million from 2013 to 2015 in increased cost of births covered
by Medicaid.
11




Back to Basics 2014 Policy Guide
31
FY 2010-11 FY 2012-13 FY 2014-15
* Millions Expended Estimated Projected
Women's Health Program $72.3 $69.2 $72.4
DSHS Family Planning $111.2 $36.4 $43.2
Expanded Primary Health Care ---- ---- $100.0
Title X- Womens Health and
Family Planning Association of
Texas $17.9 $21.7 $24.5
Total $201.4 $127.3 $240.1

Womens Health Network
Traditionally, Planned Parenthood had provided approximately 40 percent of the services of
Womens Health Program clients and acted as a key connector to enrolling clients into the
program.
12
HHSC and DSHS have the challenge of finding providers that can make up the gap
left by Planned Parenthood and other entities prohibited from participating in the program
along with the clinics that closed after the massive budget cuts.

While some funds were restored to the DSHS Family Planning Program in the 2014-15
biennium, most of the increased funding was shifted to a DSHS Expanded Primary Health Care
program. The Expanded Primary Health Care program is geared toward increasing womens
access to all health care services including but not limited to family planning.

With an already fractured effort to provide family planning services to women in need,
womens health advocates are concerned with the start up time of creating a new program and
with the program not explicitly prioritizing family planning.

Meeting the Demand
Many Texas low-income women depend on these programs for family planning services and
primary care services that include contraception, STD testing and physical exams that include
diabetes screening, mental health, and breast and cervical cancer exams.

The demand for services and strain on the health network will only continue as the Texas
population grows and the state continues to limit qualified providers. Texas lawmakers need to
fully support the efforts of these programs that are crucial to empowering women to live
healthier lives.

Texas should restore the funding to the Womens Health Program, remove the affiliate rule,
and reenroll in the federal program to again draw down the 9-1 match in dollars.



Back to Basics 2014 Policy Guide
32

1
Physicians who worry about Womens access to care;
www.texmed.org/template.aspx?id=24707#sstash.cp6romcl.dpuf
2
Act effective Sept. 1, 2005, ch. 816, 1(h), 2005 Tex. Gen. Laws 2818
3
Planned Parenthood Assn of Hidalgo Cnty. Texas Inc. v. Suehs, 828 F.Supp.2d 872
4
Legislature Restores some family planning cuts; NYT, nytimes.com/2013/08/09/us/legislature-
re-stores-some-family-planning-cuts.html
5
Texas Policy Evaluation Project; Survey of Reproductive Health Clinics in Texas,
www.utexas.edu/cola/txpep/_files/pdf/txpep-researchbrief-
surveyofreproductivehealthclinics.pdf
6
Texas Policy Evaluation Project
7
Pogue, Stacey. Sizing Up the 2014-15 Texas Budget: Family Planning. Center for Public Policy Priorities. 15
August 2013. Pg. 1. Accessed March 2014. Available online at
http://forabettertexas.org/images/HC_2013_08_PP_Budget_FamilyPlanning.pdf.
8
Aaronson, Becca. Interactive: Are There Enough Providers in the Texas Women's Health Program? Texas
Tribune. 21 January 2013. Accessed online March 2014. Available online at
http://www.texastribune.org/library/data/texas-womens-health-program-survey-providers/.
9
Aaronson, Becca. New Providers Face Obstacles in Texas Women's Health Program. Kaiser Health News and
Texas Tribune. 9 January 2014. Available online at
http://www.kaiserhealthnews.org/Stories/2014/January/09/providers-face-obstacles-in-texas-women-health-
program.aspx. Accessed March 2014.
10
Texas Health and Human Services, Texas Medicaid and CHIP in Perspective. January 2013. Pg. 6-13. Accessed
March 2014. Available online at http://www.hhsc.state.tx.us/medicaid/reports/pb9/pinkbook.pdf.
11
Center for Public Policy Priorities, Letter to Budget Conferees. 24 April 2014. Pg. 3. Accessed March 2014.
Available online at http://forabettertexas.org/images/CPPP_Letter_to_Budget_Conferees.pdf.
12
Texas Health and Human Services, Texas Womens Health Program Provider Survey Patient Report. January
2012. Pg. 2. Accessed March 2014. Available online at http://www.hhsc.state.tx.us/reports/2013/TWHP-capacity-
survey-results.pdf.
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Back to Basics 2014 Policy Guide
34












Abortion

National Background
An estimated 30% of U.S. women will have an abortion by age 45. In 2011, the abortion rate
among American women declined to its lowest level in more than three decades.
1
Researchers
primary attribute the decline to use of effective contraceptives. They found no evidence that
abortion restrictions affected the abortion rate between 2008-2011, but the study does not
include abortion measures implemented in the past three years.
2


In 1992, the Supreme Court expanded the ability of the states to enact restrictions on women's
access to abortion in Planned Parenthood v. Casey. Nationally, the most common restrictions
are parental notification or consent for minors, limitations on public funding, and burdensome
regulations on abortion facilities.
3


Major Texas Abortion Restrictions before House Bill 2

Women's Right to Know Act (2003): woman must receive state-directed counseling and
wait 24 hours before the procedure is provided.
4

Parental Consent (2005): the parent of a minor must consent before an abortion is
provided. Previously, parental notification was required.
5

Sonogram Bill (2011): woman must undergo an ultrasound before obtaining an
abortion; the provider must show and describe the image to the woman. If the woman
lives within 100 miles of an abortion provider, she must undergo the ultrasound at least
24 hours before the abortion.
6
Senator Davis voted nay and offered two amendments.
7

Texas follows the federal standard for public funding for abortions: only in cases of life
endangerment, rape or incest.
8


New Texas Abortion Restrictions House Bill 2, July 2013

Requires physicians who perform the procedure to have hospital-admitting privileges
within 30 miles of the facility.
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35
Increases restrictions on medical (non-surgical) abortions, including a ban after 7 weeks
and requirements for 4 separate visits (sonogram, first dose, second dose and follow-up
within 14 days).
Bans abortions after 20 weeks of gestation, with exemptions for fetal abnormalities and
threats to the womans life.
Requires abortion facilities to meet the regulatory standards of ambulatory surgical
centers in September 2014
9
; previously required for abortions after 16 weeks. Only 6
existing facilities in Texas currently meet these standards
10
.
* None of these requirements are medically necessary.
11


Access to Abortion in Texas

Abortion rights advocates challenged the constitutionality of two provisions in court: the
admitting-privileges and medication protocols. A U.S. district judge found both unconstitutional
and blocked implementation. The 5
th
Circuit Court of Appeals overturned the injection, allowing
the provisions to take effect. It held a hearing on the case in January 2014 but has yet to make a
final decision. The Supreme Court rejected a request by abortion providers to intervene.
12


Meanwhile, many clinics have discontinued abortion services or closed because they do not
have a physician with hospital admitting privileges. There were 44 abortion facilities in Texas in
2011; there are now 20. When fully implemented next September, that number could drop as
low as six.
13


Rio Grande Valley and Rural Texas: The last clinic that performed abortions in the Rio Grande
Valley, located in McAllen, closed in March 2014, resulting in increased costs, time and travel
distances for South Texas women seeking abortions. A clinic in Corpus Christi, the only
remaining clinic south of San Antonio, will close in September due to the ambulatory surgical
center requirement. A clinic in Beaumont also closed in March 2014; it was the final clinic in
rural Texas. After September, abortion providers predict the only remaining clinics will be in the
five largest cities: Dallas, Fort Worth, Houston, Austin and San Antonio.
14


Statistics
In 2011, 72,470 abortions occurred in Texas.
15


In 2013, the Texas Public Policy Evaluation Project at the University of Texas at Austin
calculated that the hospital-admitting privileges requirement would prevent at least
22,286 women from obtaining a safe and legal abortion in the year after
implementation.
16


In a poll of registered voters in February 2014, the University of Texas/Texas Tribune
found that 13 percent said abortions should never be permitted; 29 percent said they
should be legal only in cases of rape, incest or when the life of the mother is in danger;
17 percent said it should be allowed in other cases after the need for the abortion has
Back to Basics 2014 Policy Guide
36
been clearly established; and 37 percent said abortion should be available to any
woman as a matter of personal choice.
17


Messaging
Unsafe Abortions: HB 2 and other abortion restrictions reduce access to health services and
shutdown clinics across Texas. Taken together, the restrictions increase cost, time and travel
distances, but most frighteningly, they encourage women to seek alternatives to safe, legal
abortions. In McAllen, the closure of the last abortion clinic has caused some women to go to
Mexico for a widely available abortion pill that can induce miscarriages. Abortion providers
say it poses significant health risks.
18


Womens Health: Abortion restrictions are only the latest attack on womens health in Texas. In
recent years, Texas Republicans have devastated two programs that provi ded preventive health
care to low-income and uninsured women: the states family planning program and the
Womens Health Program.
19
In FY 2013, only 47,322 Texans received care under the family
planning program, down 77% from 202,968 clients in 2011.
20


Reduce Unplanned Pregnancies: To reduce abortions, we should reduce unplanned
pregnancies. Texas has the highest rate of uninsured in the nation: nearly 1 in 4 Texans lack
health insurance. It also has the fourth-highest rate of teen pregnancies in the country.
21

Instead of limiting access, Texas should reduce abortion by increasing access to affordable
health services, encouraging the use of contraceptives, and educating young people about
avoiding unplanned pregnancies.

Specific Policy Positions

ASC standards: Setting superfluous facility requirements do not improve the health and safety
of women. They are likely to close clinics and reduce a wide range of health services to
women.
22


Hospital-admitting privileges: This unnecessary regulation was intended to close clinics, not
protect women. Abortion and health clinics have closed because their doctors were unable to
obtain admitting privileges at nearby hospitals.
23


Medical abortion requirements: These regulations are clearly aimed to burden women seeking
abortion. Women should not be required to visit a doctor four times to receive a drug-induced
abortion.

20-week ban: The law allows for exceptions for fetal abnormalities and threats to the life of the
mother. Less than one-half of 1 percent of Texas abortions occur after 20 weeks of pregnancy,
and most involve one of these circumstances.
24
Lawmakers cannot foresee all circumstances
and should not legislate what must be a personal decision between a woman and her doctor.

Back to Basics 2014 Policy Guide
37

1
Erik Eckholm, Abortions Declining in U.S., Study Finds, New York Times (Feb. 2, 2014).
2
Rachel K. Jones and Jenna Jerman, Abortion Incidence and Service Availability In the
United States, 2011, Guttmacher Institute, pg. 1 & 10 (Mar. 2014).
3
State Facts About Abortion: Texas, Guttmacher Institute (last visited Mar. 10, 2014).
4
Woman's Right to Know, Texas Department of State Health Services (last visited Mar. 10,
2014).
5
Major Issues of the 79th Legislature, House Research Organization, pg. 76 (Nov. 9, 2005)
6
TRIBPEDIA: Abortion Sonogram Bill, Texas Tribune.
7
Proceedings of the Fifty-First Day, Senate Journal (May 2, 2011)
8
State Facts About Abortion: Texas, Guttmacher Institute.
9
The Reality of HB2: Texas Legislators Lock Women Out of Abortion Care, Whole Womans
Health (Mar. 6. 2014)
10
Becca Aaronson, After SCOTUS, Abortion Providers Work to Secure Access, Texas
Tribune (Nov. 20, 2013).
11
Abortion restrictions in context, The Texas Policy Evaluation Project (Last Visited Mar.
10, 2014).
12
Alexa Ura and Becca Aaronson, Abortion Provider Shutters McAllen and Beaumont
Clinics, Texas Tribune (Mar. 6, 2014).
13
The Reality of HB2: Texas Legislators Lock Women Out of Abortion Care, Whole
Womans Health (Mar. 6. 2014)
14
Manny Fernandez, Abortion Law Pushes Texas Clinics to Close Doors, New York Times
(Mar. 6, 2014).
15
Selected Characteristics of Induced Terminations of Pregnancy Texas Residents, 2011,
Texas Department of State Heath Services (Mar. 29, 2013)
16
Declaration of Dr. Joseph E. Potter, Planned Parenthood v. Abbott, pg. 4 (Oct. 1, 2013).
17
Ross Ramsey, UT/TT Poll: Few Texans Would Keep Marijuana Illegal, Texas Tribune
(Feb. 26, 2014).
18
Manny Fernandez, Abortion Law Pushes Texas Clinics to Close Doors, New York Times
(Mar. 6, 2014).
19
Jacqueline Murphy, How We Got Here: The Story of Women's Health in Texas, Planned
Parenthood (Feb. 20, 2014).
20
Council Agenda Memo for State Health Services Council-Amendments to rules, repeal of
rules, and a new rule concerning family planning services, Department of State Health
Services (Nov. 20, 2013).
21
Texas on the Brink, Legislative Study Group, pg. 7 & 16 (Mar. 2013)
22
Rachel Benson Gold and Elizabeth Nash, TRAP Laws Gain Political Traction While
Abortion Clinicsand the Women They ServePay the Price, Guttmacher Institute, pg. 4 &
5 (Spring 2013).
23
Manny Fernandez, Abortion Law Pushes Texas Clinics to Close Doors, New York Times
(Mar. 6, 2014).

24
Gromer Jeffers Jr.,Wendy Davis backs 20-week abortion ban that defers to women,
Dallas Morning News (Feb, 12, 2014).
Back to Basics 2014 Policy Guide
38












Institutional Failures of Texas Human Services

Overview
In recent years the state of Texas has systemically failed and forgotten the people that were
supposed to be helped by human services programs. Some failures were well -publicized at the
time, like the Texas Youth Commission (TYC) scandals, while others have dragged on for years
without much public attention, like the ongoing backlog and high turnover in the Protective
Services divisions at the Department of Family and Protective Services.

In looking forward, policymakers must understand the underlying circumstances that led to
these large-scale problems that often still fester on. Some of these scandals forced the State
to take relatively drastic actions. Given the recentness of the fiascos and their attendant
responses, there is still a clear need to determine if these responses were effective in dealing
with what caused the problems while also improving outcomes for vulnerable individuals
served by these programs.

Texas Youth Commission Scandal
In February 2007, the Dallas Morning News and Texas Observer sparked a statewide
investigation by exposing uninvestigated and unprosecuted allegations of sexual abuse and
brutality of inmates by TYC staff at West Texas State School. After public and private prodding
from the legislature, Gov. Rick Perry replaced TYCs board and top officials and put the agency
into conservatorship as additional abuse allegations from other TYC facilities across the state
and an agency culture discouraging whistle blowers surfaced.

In that 2007 session, the Legislature enacted laws requiring organizational changes, creating an
office of the ombudsman to monitor mistreatment and abuse allegations, and appropriating
additional money for treatment and rehabilitation programs.

Brief Timeline of Events Since 2007
2008: After three conservators and a bumpy implementation of legislative and
administrative reform, the agency is allowed to operate on its own again with a new
governing board.
Back to Basics 2014 Policy Guide
39

2009: A push by some legislators during the 2009 session to abolish the agency and
merge it with the Juvenile Probation Commission (TJPC) failed, although the agency is
downsized and its population drops by more than half. The trend of sending
incarcerated youths to community-based programs continues to increase.

2010: Ray Brookins, a former assistant superintendent at the West Texas State School, is
convicted of sexual abuse charges and sentenced to 10 years in prison for preying on
boys at the West Texas State School, which was closed in June. Allegations of continued
youth-on-youth violence, as well as poor mental health care, follow TYC.

2011: During a session where all agencies were expected to take huge budget hits, the
TYC and TJPC are abolished with the newly formed Texas Juvenile Justice Department
taking over for both agencies in December. Enabling legislation gave TJJD the purpose of
prioritizing community and family-based programs over commitment to a secure facility.
Average daily population at secure facilities has dropped to around 1200 from nearly
3000 in in 2007.
1
John Paul Hernandez, former principal at West Texas State School, is
acquitted of all charges.

2012: Reports of increased youth-on-youth violence with decreased incidence of sexual
assaults characterize TJJDs first year.
2


2013: Only 6 of 15 secure residential facilities from 2007 remain, with Corsicana to close
at the beginning of 2014. TJJD statistics and independent reports suggest youth on
youth violence still persists, but with variance from facility to facility.
3


2014: TJJD system wide census among 5 remaining residential facilities down to 1048,
due to the continued efforts toward community referrals.
4


What to Learn from TYC
This scandal was an example of gross negligence at the executive level of state government,
especially when the public came to know these allegations came before Governor Perry in
2005, despite claims to the otherwise 2 years later.
5
Despite the magnitude and nature of the
scandal, Perry continued to insist on keeping the top officials and board that allowed this mess
to persist, until pressure from the legislature forced him to replace the board and those top
officials. He later put the agency into conservatorship, again after legislative pressure, as
additional abuse allegations at other TYC facilities surface. Open records requests revealed the
Governors aides corresponded with TYC staff about the investigation during between February
and June 2005, but failed to check back with TYC until October 2006.
6
Another open records
request also produced written complaints to Rick Perrys office about abuse at TYC facilities
from 33 parents, two students, and two staff members.

Structural problems (overcrowded facilities at remote locations with grossly underqualified
and/or bad employees) created in part by the previous governor and the legislatures that
Back to Basics 2014 Policy Guide
40
oversaw the agency through the ramp up of youth confinement in the late 90s, followed by
drastic cuts in 2003 certainly share blame. But the Governor had myriad opportunities to
investigate these serious allegations further, but he didnt, and by not doing so he let the other
structural problems persist until the blow up in 2007. Even after, hes had a revolving door at
the top and in the Ombudsman/Inspector General positions since the scandal, until his
appointee in 2012, Michael Griffiths made a few actual improvements that juvenile justice
advocates hailed. Notably, the Governor took 5 years to find someone that did not have some
mix of poor judgment, incompetency, or inertia.

In regard to agency restructuring and policy changes instituted, given that a number of reports
suggesting that violence is still a problem at the state facilities, better oversight and more
qualified help is still needed to carry out some of the reforms started (like increased focus on
treating violence as a chronic problem needing careful management instead of a short-term
crisis that need to be solved) by the departing ED Michael Griffiths. At the March 25 hearing of
the Senate Committee on Criminal Justice, Senators grilled the retiring ED about new reports of
serious violent incidents that are still occurring in state facilities demands closer investigation
and a hastening of implementing more reform.
78
Additionally, while cheaper than state
programs, there is a need to ascertain the effectiveness of moving these lower-level offenders
to county and local programs, as well as improving recidivism rates among the higher risk
population at the state institutions. Reports also suggest that improved mental health services
still will go a long way toward creating positive outcomes for kids in the juvenile justice system.

DFPS/CPS Backlog
The childrens advocacy group Childrens Rights is currently suing the Department of Family and
Protective Services (DFPS) in a federal class action lawsuit on behalf of approximately 12,000
abused and neglected Texas children long-term foster care.

The purpose of the DFPSs Child Protective Services (CPS) Division is to:
Conduct civil investigations of reports of child abuse and neglect.
Protect children from abuse and neglect.
Promote the safety, integrity, and stability of families.
Find permanent homes or living arrangements for children who cannot safely remain
with their families.
9


Briefly, Childrens Rights charges that these childrens constitutional rights have been violated
when the Department fails to return kids in long-term foster care back to their families or to
permanent homes within a year. If caseworkers cannot reunite these kids with their families or
find them adoptive homes before the maximum 18 months, the child moves in to the
permanent managing conservatorship (PMC) of DFPS, where the children are essentially
trapped and very rarely ever find a permanent home.
1011
According to the Departments own
records, kids in PMC with the state bounce around from one foster placement to another and
often placed in group homes and institutional settings where they are at much higher risk of
abuse and neglect due to poor supervision and oversight of these group settings.
12


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41
While this litigation has been ongoing since 2011, many of the issues brought up in the case are
ones that have followed the agency for at least 20 years, namely the cyclical situation of high
caseloads and high turnover for caseworkers leading to inexperienced, overworked
caseworkers unable to keep up with their cases leading to negative outcomes for the children
they serve.
1314
Lower caseloads promote caseworker retention and allow caseworkers to do
higher quality casework, which benefits children directly through increased safety and better
outcomes.
15


Additionally, the state has a fiscal incentive to do well in this area: the Department will be
expected to meet increased federal standards for caseworker visits and, without continued
support, could be subject to financial penalties as it was in past federal reviews, if standards are
not met.
16


What to Learn from the Issues at DFPS
The agency and advocates agree that high caseloads and high turnover for caseworkers are bad
for producing positive outcomes for the vulnerable children served by the agency. However,
with the current litigation, the DFPS continues to awkwardly defend the effectiveness of their
chronically understaffed CPS system, while continually pleading the legislature and state
leadership for drastic increases to meet the explosive growth in the number of kids served by
the system (a 70% increase between 2002 and 2011!) and improvements in programming.

The state has never come close to the caseload standards recommended by the Child Welfare
League of America, or even the standards recommended by the agencys own Caseload
Standards Advisory Committee formed in 1998 to deal with this same problem.

While it is easy to assume progressive leadership would be more amenable to fixing this
problem, the victims are not high profile and are easily forgotten until a grisly story about a
child being molested in a group home becomes news. Even then, stories like this are often
quickly forgotten until the next particularly tragic incident. Between victims that are typically
not voting in elections or contacting their elected officials and the DFPS appointees weak
advocacy for fear of admitting programmatic failure, budgetary decisions can be done at arms
length from the vulnerable population served by their programs. The macro implications of a
plaintiff victory in the class action suit are that the state would have to implement the
appropriate policy changes and spend the appropriate money to adequately fix the program.

DADS/State School Scandal
State Supported Living Centers (SSLC) provide 24-hour residential services, day habilitation,
behavioral treatment, comprehensive medical care, and therapies for persons with an
intellectual disability or a related condition.
17
SSLCs have had a maligned recent history here
in Texas marked by federal investigations and media reports finding hundreds of incidents of
abuse, neglect, and inadequate health care for this vulnerable population.

Previously known as state schools, SSLCs are administered by the Department of Aging and
Disability Services (DADS). The Department of Justice (DOJ) first began its investigation in
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42
March 2005 pursuant to allegations of federal civil rights violations of institutionali zed
individuals at the Lubbock State School (LSS). In a scathing December 2006 letter to the
Governor, AG Abbott, and other agency officials, the DOJ noted 17 deaths in 18 months at the
LSS, finding that the facility failed to provide adequate health care . . . protect residents from
harm . . . provide adequate behavioral services, freedom from unnecessary or inappropriate
restraint . . . and provide services to qualified individuals with disabilities in the most integrated
setting appropriate to their needs.
18


Examples from LSS Investigation
LSS employees found a woman unresponsive but failed to perform CPR or call for help
for a half-hour. Paramedics determined she had been dead for hours because rigor
mortis had already set in. And, in that case, investigators found employees had falsified
reports to indicate someone had been checking on the woman.
19

A woman who was found with painful ulcers on her buttocks, the result of workers
leaving her "lying in urine-soaked diapers."
20

A case in which a 50-year-old man was continuously fed snacks before bedtime even
though he had a history of severe gastrointestinal problems that caused him to inhale
food. The man died of aspiration pneumonia.
21


The report noted a number of other inadequacies in health care and psychiatric services, while
suggesting improving staff-resident ratios, focusing on preventative care in adding to just
emergency care, more judicious use of restraints, and better tracking of information related to
injuries. Despite over 40 pages detailing deficiencies and threatening legal action if conditions
did not improve at the LSS, state leadership in 2007 minimized the impact given the blow up
over TYC facilities that occurred contemporaneously in the 80th legislative session. Perry
spokesman Robert Black remarked, "Some would like to ramp up another emotional issue. But
to compare [the state school system] to the TYC would be totally inappropriate. They're two
completely different situations; the only thing they have in common is they're both state
agencies."
22


Partially due to the inaction of elected officials on assurances that the pattern of problems
were limited to the Lubbock State School, the DOJ proceeded in 2008 to investigate the other
12 state schools on evidence and reports suggesting that problems actually were not be limited
to the Lubbock State School. The DOJ issued another findings letter in December 2008, finding
that serious problems and deficiencies in care similar to those found at Lubbock currently exist
throughout the Facilities, with 451 confirmed abuse or neglect incidents in their facilities in
Fiscal Year 2007 alone.
23
The report again noted that [t]he frequency and severity of critical
incidents at the facilities are disturbingly high and often directly related to insufficient staffing,
again suggesting better tracking of potential abuse, improved training for workers and more
careful use of restraints.
24
The report again threatened legal action, now implicating
improvement at all state schools.

In the subsequent 2009 session, nearly 4 years after the Department of Justice (DOJ) began its
investigation, Governor Perry finally declared reforms to the state schools an emergency
Back to Basics 2014 Policy Guide
43
legislative item.
25
Before the Governor got to proclaim a legislative victory, reports of Corpus
Christi State School employees forcing profoundly disabled residents into a late-night "fight
club." The lack of experience, checkered employment history, and criminal background of the
employees involved in this latest criminal episode drew attention to the agencys inability to
achieve or maintain the necessary quality or quantity of staff.

Governor Perry signed the state schools reform bill in June 2009, renaming them to their
current name of SSLCs.
26
Attorney General Abbott signed a 5-year, $112 million settlement
agreement where the state was to hire over 1000 new workers and drastically improve the
living conditions of the facilities. Despite the additional money to go toward improving the
SSLCs, many advocates for the disabled lamented that these resources were going toward
continuing the dated system of institutionalization in Texas.

Where State Supported Living Centers Are Today
Texas continues to operate the same 13 intermediate care facilities for individuals with
intellectual disabilities (ICF/IID), against 40-years of nationwide trends of deinstitutionalization
and expansion of community services, continuing quality of care concerns at the SSLCs, and a
decreasing populations at state facilities.
27


Pursuant to the 2009 settlement agreement, state facilities were supposed to fully comply
within 3 years with 171 provisions (ex: development and implementation of policies on use of
restraints, zero tolerance for abuse or neglect) deemed necessary for improvement by both the
federal and state governments.
28

29
As of September 2013, after 6 DOJ reviews and 50 threats
of cuts in federal funding, no center had ever managed to comply with just a third of the 171
provisions in the settlement.
30
The agencys own records suggest slightly less physical abuse in
the years after the settlement, but those records also reflected steady increases in abuse
allegations and confirmed abuse allegations.
31


What to Learn
The public blowup surrounding DADSs state schools occurred only two years after the TYC sex
abuse scandal where the Governor and AG Abbott knowingly failed to take action for a few
years (conveniently overlapping with their 2006 reelection campaign) until key news pieces
created a media firestorm that eventually exposed the pervasiveness of the abuse at all the TYC
facilities.

Unfortunately, reform for the DADS state school followed a very similar pattern of events and
lag time with reform occurring 2 years after problems were first identified. State leadership
had significant opportunities to investigate and address problems at the state schools in 2007
and 2008. Instead, litigation and the mitigation of embarrassment in the media drove the
Governor to finally declare this an emergency legislative item in 2009.
32


During this time in 2007 and 2008, the AG worked on behalf of DADS in defending the state in
the DOJ investigation. The AG representing a state agency in an investigation or lawsuit is not
peculiar in itself. Given the allegations and the evidence that emerged suggesting a potential
Back to Basics 2014 Policy Guide
44
statewide problem, it is arguable that Attorney General had a duty and interest to be proactive
in ensuring the states exposure to liability was minimized. Instead, AG Abbott and Governor
Perry, blindly abiding by the assurances of the Governors appointee running the agency, failed
to act when abuse and exploitation of the states most vulnerable populations occurred on the
dime of Texas taxpayers.

While one may believe that these timelines for action are typical at the highest levels of state
government, it is important to know that, as noted in the TYC section, the AG prioritized issues
like the threat of voter fraud throughout his tenure, devoting tremendous resources to
investigating and litigating this issue, yielding negligible practical results, over reports of abuse
at state institutions. In this case, thousands of institutionalized disabled Texans and their
families watched the AGs office come to DADSs defense and enable the agency to continue to
jeopardize the health and well-being of those in their care.

The continuing nature (and expense) of the problem has created the unusual partnership
between disability advocate groups and the conservative Texas Public Policy Foundation (TPPF)
in deinstitutionalizing Texas and moving toward community based care.
33
As expected, in
addition to improving outcomes and reducing incidents of abuse and neglect, TPPFs public
interest is likely driven by the possibility of shrinking state government with a community-based
approach. There continue to be some disability rights groups that still want some institutional
care, as they are satisfied with existing care and are concerned about the potential burden that
may be placed back on parents and guardian in a purely community-based system of caring for
the disabled.

Food Stamp Backlog
In another example of litigation being filed to force Texas to make necessary changes, in 2009,
Texas Legal Services Center (TSLC) and the National Center for Law and Economic Justice
(NCLEJ) filed a class action complaint in U.S. District Court against the Texas Health and Human
Services Commission (HHSC) for failure to process Food Stamp applications within the
timeframes required by federal law.
34


Federal law requires the state to render a decision on all Food Stamp applications within 30
days, and within seven days for expedited or emergency Food Stamps applications from
families without money for food or rent.
35
Texas has failed to meet these standards for more
than three years. In July 2009 alone, the state processed more than one-third of all Food Stamp
applications late, delaying critical nutrition assistance to more than 45,000 families across the
state.
36


When the state fails to take timely action on an eligible familys Food Stamp application, the
family suffers. Food stamps are the nations most important defense against hunger, helping
families weather crises and make ends meet when earnings alone are not enough. Delays in
Food Stamp application processing also place a strain on our local food pantries and other
charities, who struggle to fill the gap when needy families are delayed benefits.
37


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45
The vast majority of Texas families receiving Food Stamps include a provider who recently lost a
job or whose wages fell. More than half of Food Stamp recipients in Texas are children, who
need good nutrition to stay healthy, succeed in school, and grow into productive adults.
38


While the country was in the midst of the recession in 2008 and 2009 and families need for
food stamps was particularly acute, Texas problem with timeliness existed well before the
downturn. In the preceding 10 years, the Texas Legislature cut the number of eligibility staff at
HHSC by more than a third, despite a 50-percent increase in number of clients served by the
system.
39
As a result workload more than doubled and client services suffered.
40


Advocacy groups had been urging the state for years to correct the structural and technical
issues that plagued Texas system, in addition to policy changes that were needed.

In June 2010, the U.S. Department of Agriculture assessed a $3.96 million fine on Texas for the
states failures in administering the food stamp program, citing their high error rates.
41
Texas
had the distinction of being assessed the largest fine among the four states that were fined.
42


Response to Lawsuit
The lawsuit, as illustrated in the other embarrassing failures detailed above, appeared to spur
change and focused the agency on making needed change. In 2009, the Legislature authorized
the hire of 250 more staff, which the new commissioner took advantage of, hiring 850 by April
2010.
4344
In the meantime, the agency took action to build morale by scaling back mandatory
overtime and offering merit raises, while reassigning agency employees temporarily to keep the
backlog from going beyond its state-worst of processing 57.5% of new applications on time.

In 2003, the state began a privatization effort for the food stamp application process, which
involved poor training, poor planning, and poor technological implementation.
45
After cutting
ties with this disastrous conversion, an understaffed agency was still left with eligibility systems
operating on multiple dated IT systems with inadequate server capacity and incompatibility
between the systems, necessitating manual entry of data into a system when applications were
received in the other.
46
Agency staff in 2010, after the lawsuit, fixed the technological glitches,
implementing the states ability to track performance, while improving infrastructure like server
capacity and voice lines to handle increased traffic.
47
Texas improvement in payment
processing accuracy in FY2010 netted the state a $6 million award from the federal
government.

What to learn from Food Stamp Backlog and Fallout
Even though the SNAP program brings federal dollars to Texas to help this vulnerable
population, the state still needed its implementation of the program to go off the rails and a
lawsuit in order to make needed changes. The state has improved its application processing
timeliness from 68.3% of cases in 2009, ranking next to last among US states and territories, to
right at the median in 2012 with 88.6% of applications on time.
48


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46
Attorney General Abbott scored a temporary victory for the agency in the lawsuit in April
2013 when the lawsuit was sent back to the district court on jurisdictional issues.
49
Of course,
this is another instance of our states attorney general expending state resources to defend bad
policy and operational ineffectiveness against a class of citizen plaintiffs the agency was
supposed to help.

Despite the actual progress and the self-congratulations on the part of HHSC, there is still work
in to do in Texas. Texas ranks 3
rd
worst in the country in food insecurity with 18.4%, or roughly
1 out of 5, households in Texas in 2012 experiencing difficulty at some time during the year
providing enough food for all their members due to a lack of resources.
50
Advocates for the
poor call for improving Texas SNAP participation rate (the percentage of eligible food stamp
recipients who are actually enrolled in the program; most recent data shows Texas at 71%, 41
st

in the country).
51
Improvements may be achieved via better state eligibility rules that make it
easier to enroll or better outreach to subpopulations with low participation like the eligible
elderly or eligible working poor.
Back to Basics 2014 Policy Guide
47


1
Despite Reform, Violence Rises Among Youths at Juvenile Lockups, Brandi Grissom and
Becca Aaronson, Febrary 12, 2012, accessed at
http://www.texastribune.org/library/data/tjjd-youth-violence-up/#tabs-1
2
Id.
3
Understanding and Addressing Youth Violence in the Texas Juvenile Justice Department,
Special Report to the Office of the Independent Ombudsman by Michele Deitch, LBJ School
of Public Affairs, published May 2013, Page XI of Executive Summary
4
Statement of Senator John Whitmire, 3/25/2014 during Senate Criminal Justice Hearing.
5
Perry fires youth agency head 2 years after probe, RG Ratcliffe and Lisa Sandberg, March
1, 2007, accessed on March 14, 2014 at http://www.chron.com/news/houston-
texas/article/Perry-fires-youth-agency-head-2-years-after-probe-1529573.php
6
Id.
7
Dialogue between Senator John Whitmire and TJJD ED Michael Griffiths, March 25, 2014
hearing of Senate Committee on Criminal Justice
8
Evins Regional Juvenile Center, Site Visit Report OIO-SV-14-069, Independent
Ombudsman for the Texas Juvenile Justice Department, December 18-19, 2013, accessed
via Grits for Breakfast blog at
https://drive.google.com/file/d/0B6HJLeMEu3hlQW90OFNPVEZQT1E/edit?usp=sharing
on March 29, 2014
9
An Audit Report on Caseload and Staffing Analysis for Child Protective Services at the
Department of Family and Protective Services. State Auditors Office Report No. 13-036,
May 2013, Page i
10
Texas Family Code 263.401.
11
M.D. v. Perry pdf Fact Sheet published by Childrens Rights, accessed at
http://www.childrensrights.org/wp-content/uploads//2012/12/M.D.-v.-Perry-Fact-
Sheet.pdf on March 17, 2014
12
Id.
13
Using data sources from DFPS Data Books from 1993 to 2013 from
https://www.dfps.state.tx.us/About_DFPS/Data_Books_and_Annual_Reports/, accessed
March 23, 2014
14
House Committee on Human Services, Texas House of Representatives, Interim Report
2008, A Report to the House of Representatives 81
st
Texas Legislature, Chairman Patrick
Rose, Committee Clerk Jennifer Deegan, published December 17, 2008.
15
Legislative Appropriations Request for FY 2014 and 2015 for DFPS; Legislative
Appropriations Request for FY 2012 and 2013 for DFPS
16
Testimony to Texas House Human Services Committee by Ashley Harris, Texans Care for
Children, February 19, 2013
17
DOWNSIZING OF THE STATE SUPPORTED LIVING CENTER SYSTEM. Legislative Budget
Board issue brief, created by LBB staff, January 2013, accessed at
http://www.lbb.state.tx.us/Documents/Publications/Issue_Briefs/520_HHS_Downsize%2
0SSLCs.pdf on March 18, 2014
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48

18
Letter from Assistant Attorney General Wan J. Kim to Governor Rick Perry, Re: CRIPA
Investigation of the Lubbock State School, Lubbock, Texas, dated December 11, 2006, Pages
3-4.
19
Abuse reported at school for retarded; Inquiry sought at Lubbock facility for mentally
retarded; agency official says fixes made. Emily Ramshaw, Dallas Morning News, March 23,
2007
20
Id.
21
Id.
22
Id.
23
Letter from Acting Assistant Attorney Grace Chung Becker to Governor Rick Perry, Re:
Statewide CRIPA Investigation of the Texas State Schools and Centers, dated December 1,
2008, Page 5.
24
Id.; Feds blast state schools; U.S. vows to sue if Texas doesn't solve abuse, neglect
troubles. Emily Ramshaw and Robert T. Garrett, Dallas Morning News, December 3, 2008
25
http://governor.state.tx.us/news/press-release/12535, accessed March 24, 2013
26
Id.
27
DOWNSIZING OF THE STATE SUPPORTED LIVING CENTER SYSTEM.
28
Close Dangerous State Disabled Centers. Guest Column on Texas Tribune by Arlene
Wohlgemuth and Dennis Borel, September 24, 2013, accessed at
http://www.texastribune.org/2013/09/24/guest-column-close-dangerous-state-disabled-
center/ on March 24, 2013
29
Despite Reforms, Abuse Continues at Texas Institutions for Disabled. Emily Ramshaw
and Becca Aaronson, Texas Tribune, October 23, 2011, accessed at
http://www.texastribune.org/library/data/abuse-neglect-texas-disabled-institutions/ on
March 24, 2013
30
Close Dangerous State Disabled Centers.
31
Despite Reforms, Abuse Continues at Texas Institutions for Disabled.
32
Gov. Rick Perry Designates Emergency Items for Legislature. Press Release from
Governor Perry, February 03, 2009, Accessed at http://governor.state.tx.us/news/press-
release/11877/ on March 21, 2014
33
Close Dangerous State Disabled Centers. Wohlgemuth and Borel
34
Texas Health and Human Services Commission Sued for Failure to Meet Federal Food
Stamp Timeliness Guidelines, Center for Public Policy Priorities Press Release, August 3,
2009, accessed at http://library.cppp.org/research.php?aid=902&cid=3&scid=5
35
Id.
36
Id.
37
Id.
38
Id.
39
Id.
40
Id.
41
What Legal Aid Attorneys Should Know About Food Stamps, and Litigating for Systemic
Change, presentation to Poverty Law Section, First Friday CLE on July 9, 2010 accessed at
http://www.povertylawsection.com/uploads/FOOD_STAMPS--Orozco_handout.pdf
42
Id.
Back to Basics 2014 Policy Guide
49

43
Overcoming a Backlog: How Texas Conquered a Mountain of Food Stamps Applications,
Melissa Maynard, Stateline (a daily news service for Pew Charitable Trusts), December 15,
2011, accessed at http://www.pewstates.org/projects/stateline/headlines/overcoming-a-
backlog-how-texas-conquered-a-mountain-of-food-stamps-applications-85899375219 on
March 21, 2014
44
Legal aid attorneys expand lawsuit over Texas food stamp program, Robert T. Garrett,
Dallas Morning News Story, June 8, 2010, accessed at
http://www.dallasnews.com/news/state/headlines/20100608-Legal-aid-attorneys-
expand-lawsuit-over-9778.ece on March 21, 2014
45
Overcoming a Backlog . . .
46
Id.
47
Id.
48
U.S. Department of Agriculture statistics on payment processing timelines, accessed at
http://www.fns.usda.gov/snap/snap-program-improvement
49
Janek v. Gonzalez, No. 03-11-00113-CV, 2013 WL 1748795 (Tex. App. Austin Apr. 17,
2013, no pet.) (mem. op.).
50
Household Food Security in the United States in 2012. U.S. Dept. of Agriculture report
by Alisha Coleman-Jensen, Mark Nord, and Anita Singh, published September 2013
51
State Supplemental Nutrition Assistance Program Participation Rates in 2011. U.S.
Department of Agriculture, Food and Nutrition Service, published February 20, 2014
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50


Introduction to the Texas Budget and Taxes

The budget approved by the Texas Legislature is supposed to be a reflection of the priorities of the people
of this state. However, recent budgets passed by the Republican Legislature have betrayed our values by
failing students, teachers, the elderly and the most vulnerable among us. The Legislature needs to
change the way it budgets our taxpayer dollars to focus on our priorities.

Budget
The powers to tax, spend, and borrow for the public purpose of Texas lies in the hands of the Texas
Legislature. Unfortunately, over the last decade the Republican-led Texas Legislature with the urging of
Governor Rick Perry made budgetary decisions to starve neighborhood schools and higher education
institutions, underfund basic health care and human services, and neglect infrastructure demands.

Texas ranks amongst the lowest states in education spending per pupil and health care spending per
patient. During the last legislative session, the Legislature failed to restore all the of devastating budget
cuts to public education and failed to fund enrollment growth.

Change in spending per student, (inflation adjusted) FY 08- FY14
-$421
1
FY2013 ending balance in State Treasury
$8.5 billion
2
FY 2013 ending balance in Economic Stabilization Fund
$6.2 billion
3
Expected General Revenue-related ending balance for 2014-15
$2.6 billion, 63% greater than original estimate
4


1 in 4 of Texas children live in poverty
5

1 in 4 Texans do not have health insurance
6


Taxes
Even with significant gains and an economic outlook on the rise, the Republican leadership prioritized
increased tax exemptions over reinvestment in the 83rd Legislature, passing legislation granting
approximately $1.4 billion in additional tax exemptions.

In a report to the Texas Legislature in January 2013, the CPA had already reported that Texas will provide
nearly $38 billion in tax exemptions in fiscal year 2013, including $36 billion in sales tax exemptions and
$1.5 billion in franchise tax exemptions.
7


1
CBPP budget analysis and National Center for Education Enrollment Statistics enrollment estimates:
http://www.cbpp.org/cms/index.cfm?fa=view&id=4011
2
Comptroller of Public Accounts, State of Texas Annual Cash Report 2013.Figure includes General Revenue and General Revenue Dedicated.
Pg. 39. Available online at
http://www.texastransparency.org/State_Finance/Budget_Finance/Reports/Cash_Report/13/texas_annual_cash_report_2013.pdf .
3
Id, pg. iii
4
Id, The 2014-15 Certification Revenue Estimate. Available online at
http://www.texastransparency.org/State_Finance/Budget_Finance/Reports/Certification_Revenue_Estimate/cre1415/text.php.
5
US Census Bureau, 2012 American Community Survey 1-Year Estimates.
Available online at http://factfinder2.census.gov/faces/tableservices/jsf/pages/productview.xhtml?pid=ACS_12_1YR_S1701&prodType=table
6
Urban Institute and Kaiser Commission on Medicaid and the Uninsured estimates based on the Census Bureau's March 2012 and 2013 Current
Population Survey (CPS: Annual Social and Economic Supplements). Available online at http://kff.org/other/state-indicator/total-population/.
7
Texas Comptroller of Public Accounts, Tax Exemptions and Tax Incidence: A Report to the Governor and 83
rd
Texas Legislature. March 2013,
pg. 1. Available online at http://www.window.state.tx.us/taxinfo/incidence/incidence13/96-463_Tax_Incidence2013.pdf.
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Budget Primer
The powers to tax, spend, and borrow for the public purpose of Texas lies in the hands of the
Texas Legislature. Unfortunately, over the last decade the Republican-led Texas Legislature with
the urging of Governor Rick Perry made budgetary decisions to starve neighborhood schools
and higher education institutions, underfund basic health care and human services, and neglect
infrastructure demands.
The 2014-15 Texas Budget appropriates a total of $200.4 billion in All Funds. Specifically, the
budget appropriates $95.0 billion in General Revenue Funds, $7.3 billion in General Revenue-
Dedicated, $68.7 billion in Federal Funds, and $29.4 billion in Other Funds (e.g. RDF, State
Highway Fund, Property Tax Relief Fund).
1
In addition to the General Appropriations Act, the 83rd Legislature passed two supplemental
appropriations bills, House Bill 10 and House Bill 1025, to fund remaining obligations in the
2013 fiscal year. The two supplemental appropriations bills included measures to reverse
accounting tricks used in the previous biennium, which allowed known obligations to go
unfunded in the budget certified for the 2012-13 biennium. Primarily, the bills funded the
states Medicaid obligation, reversed a deferred payment to the Foundation School Program,
and paid for costs associated with wild fire recovery.
Where does our money go?
Even though education and health and human services account for over half of the states
spending, Texas ranks amongst the lowest states in education spending per pupil and health
care spending per patient.
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Every session public school funding is on the front line of budget attacks - from a structural
deficit that now towers at an estimated $10 billion per biennium
2
to a $5.4 billion cut in 2011
from direct school funding and grant programs, including early education and student success
initiatives. Even with litigation pending against the state that already found the states school
finance system unconstitutional, the 2014-15 budget failed to fully restore funding cuts to
public schools.

Structural Deficit
In 2006, the Texas Legislature was facing a deadline to overhaul the school finance system due
to Texas Supreme Court decision West Orange Cove ISD v. Neeley, which ruled the school
finance system in place as unconstitutional. The Texas Legislature responded by forcing school
districts to reduce their school property tax rates by one-third, but with promises to replace the
lost revenue with state funds.

The state intended to cover the cost of the lost revenue primarily with the new franchise tax,
and increased cigarette and used vehicle taxes. While acknowledged at the time the bill
passed, the revenue from the taxes did not fully cover the lost revenue that was estimated at
$14.2 billion
3
and, in the case of the franchise tax, has even underperformed original estimates.
Even today in the recovered economy, the amount of revenue needed to make up for the lost
revenue is not generated by the sources dedicated by the legislature. This created the $10
billion structural deficit that will appear in every state budget until the Legislature fills it with
additional revenue.
4


The new franchise tax was estimated to generate approximately $6.8 billion in 2008-09 and
$7.7 billion in 2010-11 but has fallen woefully short of those estimates. With the franchise tax
Agencies of
Education
Health &
Human
Services
Business &
Economic
Developme
nt
Public
Safety &
Criminal
Justice
Natural
Resources
General
Governme
nt
Other
Series 1 53.40% 31.20% 1% 9.60% 0.80% 2.70% 1.40%
0
0.1
0.2
0.3
0.4
0.5
0.6
General Revenue Funds 2014-15
Biennium
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54


continuing to underperform and the cost of compressing the local property taxes greater than
expected, the legislature was forced to appropriate general revenue to cover the deficit.

Tax
Collection
2008 2009 2010 2011
2012 2013
Franchise
Tax for PTRF
$1.58 $1.47 $1.21B $1.25B $1.86B $2.01B
Motor
Vehicle
Sales & Use
Tax
$12.04M $22.31M $1.31M $13.52M $15.67M $19.50M
Cigarette &
tobacco
$912.80M $976.97M $807.10M $939.23M $827.33M $945.15M
Interest-
Other
$6.61M $64.41M $7.64M $0.96M $0.97M $0.94M
TOTAL
$2.51B $2.54B
$2.02B
$2.21B $2.70B $2.97B
Source: Texas Comptroller of Public Accounts, Annual Cash Report 2008-2013

Over the last two legislative sessions, the Texas Legislature struggled to use funds available in
the Economic Stabilization Fund, commonly known as the Rainy Day Fund, due to political
pressure from outside groups and veto threats from Governor Perry. However, during the 83rd
Legislative Session, the Texas Legislature passed legislation that would allow $2 billion in water
projects and redirect funds previously dedicated to the Rainy Day Fund to transportation
allotments if approved by Texas voters. Voters did approve the water funding in November
2013, and the transportation funding will be the only proposed constitutional amendment on
the ballot in November 2014.

Unfortunately, monies from the Rainy Day Fund were not used to fully restore budget cuts to
education.

Federal Dollars
Federal Funds are the second largest revenue for the state and include grants, allocations, and
matching funds. The Federal Funds budget is critical in allowing Texas to fund vital health
services. The budget also provides considerable funding for education and economic
development.

The 2014-15 Federal Funds budget increased from the previous biennium by $3.9 billion and
accounted for 34% of funds appropriated. Looking back to 2009, the General Appropriations Act
for the 2010-11 biennium heavily relied on federal stimulus funds to maintain state services and
programs.


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55


Constitutional Limits
The Texas Constitution limits spending in four ways- pay-as-you-go, rate of growth, welfare
spending, and debt.

The pay-as-you-go limit requires the legislature to balance the budget each biennium by
certifying that the appropriations are within estimates of available revenue for the biennium.
However, accounting tricks are common practice to get around the limit, such as payment
delays and use of dedicated funds for other purposes. The Comptroller of Public Accounts (CPA)
certified in December 2013 that projected revenue will exceed amounts appropriated from the
General Revenue Fund for the 2014-15 biennium by $2.6 billion, over 2.5 times the original
estimate.
5


The Texas Constitution limits the biennial rate of growth of appropriations from state revenue
not constitutionally dedicated to the estimated rate of growth of the states economy. After
the Legislative Budget Board determined growth factors, the CPA determined the 2014-15
biennial limit on appropriations from state tax revenue not constitutionally dedicated is $85.2
billion.
6


The constitutional welfare spending limit prohibits spending in a biennium more than one
percent of the state budget on assistance grants to or on behalf of needy dependent children
and their caretakers. The current budget appropriates $200.4 billion, which sets the limit at
approximately $2 billion. The 83
rd
Legislature spent only a fraction of that amount at $132.5
million on TANF, the grants dedicated for that purpose.
7


The Texas Constitution also limits the authorization of additional debt if in any fiscal year the
annual debt service paid from the General Revenue Fund will exceed 5 percent of the average
annual General Revenue Funds for the last three years. According to Bond Review Board, the
debt service for debt authorities included in the Constitutional Debt Limit calculation is $510.6
million for fiscal year 2013.
8


Investing Today in Our Tomorrow
Texas population skyrocketed over the last decade, and with it so did demand. However, with
only modest investments, the state is funding only a fraction of the need projected. By 2016,
the state population is projected to be 26.5 million, with over 26% of the population under t he
age of 18.

The greatest demand on our budget for the foreseeable future will be education. Texas must
prioritize restructuring the business tax so that our school finance system does not start billions
behind every cycle but instead allows us to invest for the future.


2014-15 STATE BUDGET
Zero funds restored to Prekindergarten grants (Over $200 million cut in 2012-13
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56


biennium)
$3.4 billion (68%) more to school formula funding plus $3.5 billion hike in local property
taxes. (Note: The $3.5 billion hike in local property taxes yielded almost $150 more per
student in 2014-15, compared to 2012-13. But, will still be $800 per student lower than
before the recession.)
$330 million appropriated to offset TRS costs
$1.3 billion estimated Medicaid IOU bill in 2015
Most Medicaid rate and benefit cuts continue; more savings assumptions in budget riders
Zero funds for Medicaid cost growth and no rate increases for doctors
$98.2 million in All Funds for womens health care
$312.4 million in All Funds for Mental Health Services Expansion
At time of passage, $685 million in general revenue remained available for services.
Based on CPA revisions the amount has since increased to $2.6 billion

Public Education
$37.7 billion (39.7%) GR Spending
$56.3 billion (28.1%) of All Funds Spending
Higher Education
$13.1 billion (13.8%) GR Spending
$17.9 billion (8.9%) of All Funds Spending
Healthcare & Human Services
$29.7 billion (31.2%) GR Spending

$73.9 billion (36.9%) All Funds Spending
Natural Resources
$.72 billion (0.8%) GR Spending
$6.8 billion (3.4%) All Funds Spending
$2 billion in RDF for Water
Transportation
$1.38 billion estimated deposit to State Highway Fund for FY 2015
(Subject to voter approval in Nov. 2015)
9




TEXAS WELLBEING AND BUDGET FACTS & FIGURES

Texas state expenditures per capita, 2011
Ranks 48th at $3,796
10
Fiscal year 2013 shortfall as percent of general fund budget
24.4
11
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57


Change in spending per student, (inflation adjusted) FY 08- FY14
-$421
12
FY2013 ending balance in State Treasury
$8.5 billion
13
FY 2013 ending balance in Economic Stabilization Fund
$6.2 billion
14
Expected General Revenue-related ending balance for 2014-15
$2.6 billion, 63% greater than original estimate
15


1 in 4 of Texas children live in poverty
16

1 in 4 Texans do not have health insurance
17


1
Legislative Budget Board, Fiscal Size-Up 2014-15, February 2014
2
Lavine, Dick, How to Fill the Hole in the Tax Revenue System. Center for Public Policy
Priorities. February 2012.pg. 4. Assessed April 2014. Available online at
http://library.cppp.org/files/7/2012_01_BT_FixTexasRevenue.pdf
3
Legislative Budget Board. Fiscal Note for HB 2, 80
th
Legislative Regular Session. 23 May
2007. Pg. 1. Available online at
http://www.legis.state.tx.us/tlodocs/80R/fiscalnotes/pdf/HB00002F.pdf.
4
For an in depth discussion on solutions to the structural deficit, see
http://library.cppp.org/files/7/2012_01_BT_FixTexasRevenue.pdf
5
Texas Comptroller of Public Accounts, The 2014-15 Certification Revenue Estimate. Transmittal
Letter. Available online at
http://www.texastransparency.org/State_Finance/Budget_Finance/Reports/Certification_Revenue
_Estimate/cre1415/text.php.
6
http://www.lbb.state.tx.us/Documents/Publications/Fiscal_SizeUp/Fiscal_SizeUp.pdf at 12.
7
Id.
8
http://www.lbb.state.tx.us/Documents/Publications/Issue_Briefs/470_GG_ConstitutionalDebtLimit.pdf
9
Texas Comptroller of Public Accounts, The 2014-15 Certification Revenue Estimate. Pg. 7.
Available online at
http://www.texastransparency.org/State_Finance/Budget_Finance/Reports/Certification_Revenue
_Estimate/cre1415/text.php.
10
Calculations by Kaiser Family Foundation based on National Association of State Budget Officers
State Expenditure Report: Examining Fiscal 2010-2012 State Spending, 2012; Table 1 and the U.S.
Census Bureau Resident Population Data, 2010.
11
"States Continue to Feel Recession's Impact," Center on Budget and Policy Priorities, June 27, 2012.
12
CBPP budget analysis and National Center for Education Enrollment Statistics enrollment estimates:
http://www.cbpp.org/cms/index.cfm?fa=view&id=4011
13
Comptroller of Public Accounts, State of Texas Annual Cash Report 2013.Figure includes General
Revenue and General Revenue Dedicated. Pg. 39. Available online at
http://www.texastransparency.org/State_Finance/Budget_Finance/Reports/Cash_Report/13/texas_a
nnual_cash_report_2013.pdf.
14
Id, pg. iii
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58



15
Id, The 2014-15 Certification Revenue Estimate. Available online at
http://www.texastransparency.org/State_Finance/Budget_Finance/Reports/Certification_Revenue
_Estimate/cre1415/text.php.
16
US Census Bureau, 2012 American Community Survey 1-Year Estimates.
Available online at
http://factfinder2.census.gov/faces/tableservices/jsf/pages/productview.xhtml?pid=ACS_12_1YR_
S1701&prodType=table
17
Urban Institute and Kaiser Commission on Medicaid and the Uninsured estimates based on the
Census Bureau's March 2012 and 2013 Current Population Survey (CPS: Annual Social and
Economic Supplements). Available online at http://kff.org/other/state-indicator/total-population/.

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Tax Primer
The purpose of our tax dollars is to provide public services for the common good of Texas
residents. These public services, such as quality education, accessible health care services, and
adequate transportation infrastructure, require an ample investment to thrive.

However, after decades long of choosing to reject investment in sound public policy in favor of
inequity, legislators now budget in constant crisis management. Today we face a water crisis, a
transportation crisis, and yet another education crisis that will again be decided in the courts
due to the state neglecting its constitutional obligation to fund public schools equitably.

In the 2012-13 biennium, the legislature made steep cuts to services and programs that support
basic public services. Since then, Texas revenue collections have recovered and steadily
increased after the recession.

Tax collections are the states primary source of revenue, with sales tax collection chief among
them. According to the Texas Comptroller of Public Accounts (CPA), Texas sales tax collections
have increased for 47 consecutive months primarily due to the oil/natural gas and
manufacturing sectors, and to a smaller degree by retail sales activity. In fiscal year 2013, net
revenues for all funds, excluding trusts, totaled $99.0 billion, which is up 4.6 percent from fiscal
year 2012.

Tax Exemptions
Even with significant gains and an economic outlook on the rise, the Republican leadership
prioritized increased tax exemptions over reinvestment in the 83rd Legislature, passing
legislation granting approximately $1.4 billion in additional tax exemptions.

In a report to the Texas Legislature in January 2013, the CPA had already reported that Texas
will provide nearly $38 billion in tax exemptions in fiscal year 2013, including $36 billion in sales
tax exemptions and $1.5 billion in franchise tax exemptions.
1


Exemptions vary and some provide relief to consumers and others to the business community.
State tax exemptions include exemptions, exclusions, discounts, deductions, special accounting
methods, credits, refunds, and special appraisals. However, in an already low taxing state that
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heavily depends on regressive taxes for revenue, additional tax exemptions, especially from the
underperforming franchise tax, may cause crucial public services such as our neighborhood
schools to suffer. On the other hand, some exemptions help working families in their day-to-
day expenses - lowering food costs and helping to reduce property taxes on their home.

2014-15 Estimated Revenue
The states total estimated revenue collections for the 2014-15 biennium are $208.2 billion, a
7.5 percent expected increase over 2012-13 levels. Revenue collections include, but are not
limited to, state taxes, federal receipts, fees, and the lottery.
2


State Taxes
According to the CPA, state tax collections for 2014-15 are estimated to total $98.8 billion. The
highest revenue from state tax collections are sales tax, franchise tax (business or margins tax),
motor vehicle sales tax, oil and natural gas production taxes, and motor fuel taxes. The sales
and use tax accounts for most of the states tax revenue, estimated to bring in $54.6 billion. The
sales and use tax accounted for 55 cents of every state dollar collected in 2012.
3


Oil & Gas Taxes
Without the benefit of the oil and gas boom, Texas would be a very different place right now.
Revenue and economic development from the oil and gas industry sped Texas recovery from
the recession and replenished the states savings account, commonly referred to as the Rainy
Day Fund. In 2013, the state collected $4.5 billion in oil and gas taxes, of which $2.5 billion will
be deposited into the Rainy Day Fund.
4


Rainy Day Fund
State law requires 75% of oil and gas taxes collected in excess of the amount the state collected
in 1987 ($532 million for oil and $599 million for natural gas) to be deposited into the Rainy Day
Fund.
5
The fund also receives one-half of unencumbered general revenue at the end of a
biennium.

Although recent sessions have proven difficult politically to tap into the Rainy Day Fund, that
was not always the case. In fact, the fund was depleted, or expected to be depleted, in several
biennia and used for various projects. Specifically, the fund was depleted in 1991 to fund public
schools and again in 1993 for criminal justice. Over the next decade, the fund steadily grew
until 2003 when legislators appropriated $1.2 billion, which was near the estimated available
balance at the time, to cover shortfalls for the Children Health Insurance Program and Medicaid
and create the Governors Texas Enterprise Fund. In 2005, legislators again spent nearly all the
funds estimated available for shortfalls, child protective services reforms and the creation of
the Texas Emerging Technology Fund.
6


The CPA estimates at the end of the 2014-15 biennium, the Rainy Day Fund balance will total
$8.1 billion, which assumes passage of the constitutional amendment redirecting some oil and
gas revenue for transportation and not accounting for FY 2015 deposits made in Fall of 2015.
7

There is also a constitutional cap on the Rainy Day Fund limiting the balance to an amount not
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to exceed 10 percent of the total amount deposited into general revenue during the previous
biennium.
8


Given the political difficulty of using the Rainy Day Fund, the fund has reached hefty balances
that would potentially allow for a reinvestment into Texas infrastructure.

Regressive Tax System
Texas is considered a low tax state, ranking 40th nationally based on calculations from 2011
Census Bureau data that compares taxes collected as a share of personal income.
9

However, the states overall tax revenues give a skewed view of the Texas tax system. Without
a state income tax or well performing business tax, Texas depends on two highly regressive
taxes for revenue - sales taxes and property taxes. The poorest 20 percent (under $29,223) of
Texans pay more of their income (14.6 percent) in state and local taxes than other income
groups in the state. Unfortunately, for those least able to afford it, Texas is far from being a low
tax state. On the other side of the spectrum, the top 20 percent of Texas households (over
$126,460) pay only 3.6 percent of their income in Texas taxes.
10


83rd Session Major Tax Related Legislation
Any legislation raising revenue is constitutionally required to originate in the Texas House of
Representatives.

HB 500 (Franchise Tax Exemptions)
House Bill 500 made modifications to the states franchise tax.
Permanently exempted businesses with less than $1 million in revenue
Reduced the franchise tax rate by 2.5% in FY14. Provided for a 5% reduction, contingent
upon certain requirements in the 2015 Biennial Revenue Estimate
Various other exemptions from the franchise tax
2014-15 cost: $996 million
5-year cost: $2.2 billion
2014-15 Revenue loss to the Property Tax Relief Fund: $714 million
(Notes: Requires equal amount from GR to fund FSP; Assumes rate reduction for
2015)
11


HB 800 (Research & Development Tax Exemptions)
Provides certain entities engaged in research and development a sales tax exemption or
franchise tax credit.
2014-15 cost to state: $239 million
2014-15 cost, local govts: $60 m
5-year cost to state: $701 million
5-year cost, local govts: $176 million


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63

HB 1133 (Telecommunication Tax Exemptions)
Provides a sales tax exemption for providers of cable television services, Internet access
services or telecommunications services.
2014-15 cost: $100 million
(Capped)
5-year cost: $250 million (capped)

STATE TAX REVENUE FACTS & FIGURES
State Tax Revenue Collections per Capita (2011)
45th ($1,696)
12

State General Sales Tax Collections per Capita (2011)
18th ($856)
13

State and Local Tax Revenue, Per Capita (2011)
Tied 45th ($1,682)
14

State and Local Tax Burden (2010)
45th (7.9%)
15

Overall Tax Structure
5
th
most regressive
16


The poorest 20 percent (under $29,223) of Texans pay more of their income (14.6
percent) in state and local taxes than other income groups in the state.
17

According to the Texas Bond Review Board, the outstanding debt for Texas state
government totaled $41.0 billion, and outstanding local debt totaled $195.8 billion at
the end of fiscal 2012.
18

Debt per capita changed by +53% from 2003 to 2013.
19

Sales tax collections have increased for 47 consecutive months (year-over-year),
boosted by strong business spending in the oil/natural gas and manufacturing sectors,
and to a lesser extent by retail sales activity.
20



1
Texas Comptroller of Public Accounts, Tax Exemptions and Tax Incidence: A Report to the Governor and
83
rd
Texas Legislature. March 2013, pg. 1. Available online at
http://www.window.state.tx.us/taxinfo/incidence/incidence13/96-463_Tax_Incidence2013.pdf.
2
Texas Comptroller of Public Accounts, Biennial Revenue Estimate. Pg. 2. Available online at
http://www.texastransparency.org/State_Finance/Budget_Finance/Reports/Biennial_Revenue_Estimate/bre
2014/BRE_2014-15.pdf.
3
Texas Comptroller of Public Accounts, Tax Exemptions and Tax Incidence: A Report to the Governor and
83
rd
Texas Legislature. March 2013, pg. 3. Available online at
http://www.window.state.tx.us/taxinfo/incidence/incidence13/96-463_Tax_Incidence2013.pdf.
4
Texas Taxpayers and research Association, The Rainy Day Fund Flood: What the Oil and Gas Comeback
Means for Texas. Available online at http://www.ttara.org/files/document/file-52541a9f836e9.pdf.
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64


5
http://www.statutes.legis.state.tx.us/SOTWDocs/CN/htm/CN.3.htm#3.49-g
6
Center for Public Policy Priorities, Use All of the Rainy Day Fund: A Balanced Approach to Balancing the
State Budget. 5 April 2010. Pg. 3. Available online at http://library.cppp.org/files/6/441_rainyday.pdf
7
Texas Comptroller of Public Accounts, The 2014-15 Certification Revenue Estimate. Pg. 7. Available online
at
http://www.texastransparency.org/State_Finance/Budget_Finance/Reports/Certification_Revenue_Estimate
/cre1415/text.php.
8
http://www.statutes.legis.state.tx.us/SOTWDocs/CN/htm/CN.3.htm#3.49-g
9
Calculations based on Census Bureau Data 2011, Institute on Taxation and Economic Policy, Texas is a "Low
Tax State" Overall, But Not for Families Living in Poverty. September 2013. Accessed March 2014. Available
online at http://www.itep.org/pdf/TXLowHigh.pdf.
10
Center for Public Policy Priorities, Forward: BETTER TEXAS Budget & Tax Primer. Pg. 15. Available online
at http://forabettertexas.org/images/2013_02_RE_BudgetPrimer_FINAL_web.pdf.
11
Legislative Budget Board, Fiscal Note HB 500 Conference Committee Report. Available online at
http://www.capitol.state.tx.us/tlodocs/83R/fiscalnotes/pdf/HB00500F.pdf#navpanes=0.
12
U.S. Census Bureau; Tax Foundation, Facts & Figures: How does your state compare? Table 5. Available
online at http://taxfoundation.org/sites/taxfoundation.org/files/docs/ff2013.pdf.
13
U. S. Census Bureau, Tax Foundation. State General Sales Taxes Per Capita, Fiscal Years 2007-2011. Online
at http://taxfoundation.org/article/state-general-sales-tax-collections-capita-fiscal-years-2007-2011.
14
Calculations by Kaiser Family Foundation, State Government Tax Collections: 2011. U.S. Bureau of the
Census, available at http://www.census.gov/govs/statetax/ and the U.S. Bureau of the Census National and
State Population Estimates, available at http://www.census.gov/popest/data/state/totals/2011/index.html.
Available online at http://kff.org/other/state-indicator/state-collections-per-capita/
15
Tax Foundation calculations based on data from the Bureau of Economic Analysis, the Census Bureau, the
Council on State Taxation, the Travel Industry Association, Department of Energy, and others. Available
online at http://taxfoundation.org/article/state-and-local-tax-burdens-all-states-one-year-1977-2010
16
The Institute on Taxation & Economic Policy, Who Pays? A Distributional Analysis of the Tax Systems in All
50 States. Fourth Addition. 2013 March. Pg. 111. Available online at
http://www.itep.org/pdf/whopaysreport.pdf.
17
Center for Public Policy Priorities, Forward: BETTER TEXAS Budget & Tax Primer. Pg. 15. Available online
at http://forabettertexas.org/images/2013_02_RE_BudgetPrimer_FINAL_web.pdf.
18
Source: Texas Bond Review Board, Reported by Texas Comptroller of Public Accounts, Debt-at-a-Glance.
Available online at http://www.texastransparency.org/Special_Features/Debt_at_a_Glance/Texas.php.
19
Source: Texas Bond Review Board, Reported by Texas Comptroller of Public Accounts, Debt-at-a-Glance.
Available online at http://www.texastransparency.org/Special_Features/Debt_at_a_Glance/Texas.php.
20
Texas Comptroller of Public Accounts, Economic Outlook. Available online at
http://www.texasahead.org/economy/outlook.php.



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Tax Loopholes
Summary
According to the Comptroller's Tax Exemptions & Tax Incidence report, exemptions in Texas' tax
code total at least $43.9 billion per year.
1
This figure includes "the effect of exemptions,
discounts, exclusions, special valuations, special accounting treatments, special rates, and
special methods of reporting" the sales tax, franchise tax, school property tax, motor vehicle
tax, and any tax that generated more than five percent of state tax revenue in the prior fiscal
year (Section 403.014, Texas Government Code). That universe of taxes is not all-inclusive. In
fact, some very large taxes are not included in the report because exemptions from the tax pull
them under that statutory 5 percent threshold - e.g., the natural gas production tax.

Additionally, the only data point included in the Tax Exemptions report is the value of the
various exemptions. There is no regular assessment of tax exemptions to determine their
effect on economic development, their cost to the state, and whether they serve their intended
purpose. In fact, there's no comprehensive list of what tax exemptions currently exist in
statute.

State agencies are subjected to a sunset review every twelve years to determine their
effectiveness, whether they reach their intended goals, and if their functions need to be
continued. The Tax Code would benefit from a similar periodic review of all its exemptions,
discounts, exclusions, and special treatments to answer one simple question: are they working?

Examples of egregious tax loopholes
High Cost Natural Gas
The high cost natural gas rate reduction program is a tax loophole based on more than 30-year-
old production definitions and has no relationship to the actual cost of drilling a well.
2
As a
result, in 2009, 55 percent of gas production in Texas was considered "high cost." This has
reduced the 7.5 percent severance tax to an effective rate between 1.1 and 1.9 percent in
recent years. The Texas Legislative Budget Board has done a lot of excellent analysis of the
loophole. According to the LBBs January 2013 report on the subject, [t]he cost to the state of
high-cost gas tax-rate reductions reached a high of $1.97 billion in fiscal year 2008, and
averaged $1.17 billion during fiscal years 2004 to 2011. Since fiscal year 2004, the value of high-
cost gas tax-rate reductions has totaled $9.4 billion in forgone state revenue.
3

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67

Texas statute cites federal law to define high cost gas operations a federal law that was
written in 1978 and repealed by Congress in 1989.
4
The federal statute defines high cost gas
based on specific types of geological formations or the processes used to produce the gas,
including well completion locations greater than 15,000 feet; gas produced from Devonian
shale deposits; and geo-pressured brine operations. The Texas Railroad Commission uses this
definition to define specific geographic areas from which gas operations can be certified as high
cost gas. As a result, for example, drilling within the Barnett Shale qualifies as high cost
operations, regardless of the actual drilling costs. During fiscal year 2009, drilling and
completion costs for approved high cost gas operations ranged from a high of $14.7 million to a
low of $24,000.
5


The value of the loophole is highly dependent on the cost of natural gas. From the LBB: [f]rom
fiscal years 2004 to 2011, the maximum value of the rate reduction at the average effective tax
rate was $0.67 per Mcf(one thousand cubic feet) in July 2008 when the price of gas was at
historic highs and was at its lowest point in September 2009 at $0.17 per Mcf when gas prices
were at their lowest point. As a result, lost state revenue is also at its highest when natural
gas prices are at their highest: [w]hen the price of gas peaked at an average of $10.79 in July
2008, the cost to the state of the rate reduction also peakedcosting the state $280.8 million
in the same month. The average monthly price of natural gas exceeded $10.00 per Mcf three
times from 2004 to 2012, in October 2005, June 2008 and July 2008. In those three months,
the high-cost gas-rate reduction cost the state an average of $228.7 million per month in
foregone revenue.

Sales Tax Discounts
Consumers and businesses pay a state sales and use tax of 6.25 percent on the sales price for
certain products and services purchased or used in Texas. However, every year the state
foregoes sales tax revenue in the form of discounts. The collection process for the sales tax
allows retailers who pay all or a portion of their taxes on time to retain 0.5 percent of the taxes
due. In addition to the timely filer discount, retailers can retain an additional 1.25 percent
discount if they prepay their taxes.
6
In fiscal year 2014, it's estimated the state will give retailers
a sales tax break of $119 million to file their taxes on time.
7
They'll receive an estimated
additional $111.7 million for filing their taxes early.
8


Sales tax discounts have been available to retailers since the sales tax was first enacted in 1961
- a time when retailers kept paper records and manually remitted collections to the state. The
vendor discount was last adjusted in 1987 at which point the rate was reduced from 1.0
percent to the current 0.5 percent rate and the prepayment discount was reduced to 1.25
percent in 1983 from 2.0 percent.
9


The discounts primarily benefit large companies. In 2009, the 0.1% of sales taxpayers that took
in more than $32 million in taxable sales received more than 77% of the total sales tax
discounts. In contrast, the 86% of the sales taxpayers that took in less than $200,000 in taxable
sales only received took 1.5% of the total sales tax discounts.
10

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68

Country Club Greenspace Exemption
The Greenbelt Act provides a reduced valuation for property taxation purposes on land used
exclusively for recreational, park, or scenic uses and is applicable to private country clubs. The
owner must file a deed restriction with the county clerk's office limiting the use of the land to
recreational, park, or scenic purposes for at least a 10-year period. In addition, the land
identified in the deed restriction must be a minimum of five acres.
11


Although the law does not specify the amount of the reduction, the savings are often
substantial. In Harris County, 22 of 26 private country clubs take advantage of the special
appraisal. The land on River Oaks Country Club, the largest beneficiary, has a market value of
about $80 million but is assessed at only $4.2 million - resulting in a savings of nearly $2 million
per year in taxes.
12


Policy recommendations
In the 83rd Regular Session, Senator Ellis offered amendments to HB 500 and HB 3390.
13
The
amendments reflected the Senate committee report version of SB 140, joint authored by
Senators Ellis and Carona. Both amendments were approved by the Senate unanimously but
were stripped off of the bills in their respective conference committees.

Under the language of the amendments, the Comptroller is required to identify each state and
local tax preference authorized by state law and create a schedule under which they will be
reviewed every 6 years.
14
The Comptroller is given broad authority in developing the schedule,
and the language allows her to revise a schedule to add a new tax preference, delete one that
was repealed, update the review dates, or add newly-identified tax preferences.

Next, the LBB reviews each tax preference according to the Comptroller's schedule. In the
review, the LBB shall:
1. Summarize the legislative history of the tax preference;
2. Estimate the total amount of lost tax revenue during the previous 12 years;
3. Determine the effect of the tax preference on the distribution of the tax burden during
the previous 12 years; and
4. Evaluate the fiscal impact of the tax preference based on a cost-benefit analysis of the
tax preference on the state economy.



1
http://www.window.state.tx.us/taxinfo/incidence/incidence13/
2
http://www.lbb.state.tx.us/Other_Pubs/Natural%20Gas%20Tax%20Overview.pdf
3
http://www.lbb.state.tx.us/Documents/Publications/GEER/Government%20Effectiveness%20and%20Efficiency%20Report%202012.pdf#Modif
yTheHighCost
4
http://www.lbb.state.tx.us/Other_Pubs/Natural%20Gas%20Tax%20Overview.pdf
5
Id.
6
http://www.lbb.state.tx.us/Documents/Publications/GEER/GEER01012011.pdf#ReduceGenRevLossFromSalesTaxDiscount
7
http://www.window.state.tx.us/taxinfo/incidence/incidence13/96-463_Tax_Incidence2013.pdf page 14
8
Id.
9
http://www.lbb.state.tx.us/Documents/Publications/GEER/GEER01012011.pdf#ReduceGenRevLossFromSalesTaxDiscount

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10
Id.
11
http://www.window.state.tx.us/taxinfo/proptax/tc06/ch23f.htm
12
http://stateimpact.npr.org/texas/2013/03/11/teed-up-slicing-texas-tax-breaks/
13
HB 500 amendment vote: http://www.journals.senate.state.tx.us/sjrnl/83r/pdf/83RSJ05-21-F.PDF#page=181; HB 3390 amendment vote:
http://www.journals.senate.state.tx.us/sjrnl/83r/pdf/83RSJ05-21-F.PDF#page=168
14
HB 500 amendment language: http://www.capitol.state.tx.us/tlodocs/83R/amendments/pdf/HB00500S2F3.PDF; HB 3390 amendment
language: http://www.capitol.state.tx.us/tlodocs/83R/amendments/pdf/HB03390S2F8.PDF. Note that they are identical amendments.
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Economic Stabilization Fund
Article III, Section 49-g of the Texas Constitution established the Economic Stabilization Fund
also known as the (Rainy Day Fund) to prevent or eliminate a temporary cash deficiency in
general revenue.
1
State revenue would be set aside in the fund and saved for appropriation
when revenue short falls occur. Currently, whenever collections are sufficient, the Economic
Stabilization Fund receives an amount of the General Revenue equal to 75 percent of the
amount of oil production tax collections in excess of 1987 levels, and 75 percent of the amount
of natural gas collection in excess of 1987 levels. The fund also receives one-half of any
unencumbered General Revenue Funds balance at the end of each biennium.
2


Historic Balance
Historically, the Economic Stabilization Fund collected relatively little revenue until the boom in
in-state oil and natural gas production began in 2007. Since its creation, the balance has fallen
below $ 1 billion multiple times (including to create Governor Perrys Enterprise Fund), and has
ballooned from $405 million in 2006 to its current historically high balance.

This past November, Texas voters approved a plan authorizing $2 billion from the Economic
Stabilization Fund to finance 50 years worth of water infrastructure projects. The $2 billion will
be used to offer financing terms for public agencies pursing projects designed to conserve,
reuse water or create new taps of reservoirs designed to expand the water supply. The money
will be paid back as part of a revolving loan fund.

If the Transportation constitutional amendment is approved in November of this year,
beginning in fiscal year 2015, the current amount of General Revenue transferred to the
Economic Stabilization Fund would be split, with one-half transferred to the Economic
Stabilization Fund and one-half transferred to the State Highway Fund.
3
Such a constitutional
amendment would essentially dedicate one-half of the funds currently set aside for the
Economic Stabilization Fund for highway construction and maintenance moving forward.

The Legislature considers how the Economic Stabilization Funds are used. As such,
appropriations from the fund to help with budget deficits require three-fifth approval by
legislators and all other appropriations would require a two-thirds majority vote. The
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71
Legislature has only appropriated the Economic Stabilization Fund eight times for various needs
within the state.

Economic Stabilization Fund History
Fiscal Year Deposits Interest Expenditures
from ESF
Ending balance Where the Money
was Spent
1990 $18.5 $0.8 - $19.3
1991 $7.8 $1.9 -$29.0 0 TEA Foundation
School Program
1992 $156.6 $6.8 - $163.4
1993 - $7.4 -$119.0 $57.1 Texas Department of
Criminal Justice
($125.8M)
1994 $31.0 $3.0 -$56.6 $29.1 Texas Department of
Criminal Justice
($72M)
1995 - $ 0.6 -$21.5 $8.1 Texas Department of
Criminal Justice
1996 - $0.4 -$ 0.5 $8.0 Texas Department of
Criminal Justice
1997 - $0.4 - $8.5
1998 $47.5 $2.3 - $58.3
1999 $17.9 $3.8 - $80.0
2000 - $4.7 - $84.7
2001 $103.1 $8.7 - $196.5
2002 $685.8 $21.6 - $903.9
2003 $83.6 $19.4 -$446.5 $560.5 *HHSC Medicaid
Acute Care Cost
($406.7M)
*Department of
Health ($6.9M)
* HHSC CHIP (26.4M)
* Human Services
disaster asst.
payment ($6.4M)
* TRS Care ($ 516M)
* Enterprise Fund
($285M)
*Other Events Trust
Fund ($10M)
* Comptroller
healthcare judgment
($3M)
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72
*Comm. on Judicial
Conduct proceedings
($44K)

2004 $352.6 $5.5 -$553.0 $365.6 *TRS retiree health
($516M)
*Texas Enterprise
Fund ($285M
originally made by
HB7 2003)

2005 $594.5 $17.3 - $970.5 $6.9 *HHSC Medicaid
($92.4M)
*TEA FSP ($560M)
*TRS ($ 30.7M)
*DFPS CPS Reform ($
200M)
*TEA Textbooks
($175M 2005)
($ 164.6 2006)
*DFPS Foster Care
($265.3M)
*DFFS adoption
subsides ($ 126M)
* TEA Student
Success Initiative
($ 316.1M)
*Emerging Tech Fund
($100M)

2006 $905.0 $21.5 -$528.3 $405.2
2007 $1,551.9 $65.8 -$691.5 $1,331.4
2008 $2,978.5 $136.0 -$90.5 $4,355.4
2009 $2,241.9 $128.8 -$0.4 $6,725.7
2010 $869.9 $97.0 - $7,692.6
2011 $451.5 $66,994.777 -
$3,198,661,120

$5,012,389,537
Transfer to the
General Revenue
Fund
2012 $382,456,233 $33,347,254 - $6,133,372,568
2013* 701,140,834 $51,613,000 -
$1,936,225,854
$6.127,788,565 *WDB state water
Fund ($ 2.0B)
*TEA FSP ($ 1.75B)
*Wildfires and
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73
natural disasters
($ 185.3M)
*TPWD shortfall
($ 0.9M)

2014** $609,347,000 $47,375,000 -
$2,000,000,000
$6,540,672,565
(Based on
assumption the
Transportation
Amendment
passes this
November)

2015** $218,613,000 $108,722,000 - $7,528,040
(Based on
assumption that
upcoming
Transportation
Amendment
passes)


** 2014 and 2015 reflect deposits and interest forecast in the 2014 -2015 BRE adjusted for HB
1025 appropriations, CPA revenue updated to the 83
rd
legislature, 3
rd
session, and modified
GR transfer to the ESF proposed in SJR1, 83(3).


Expected Future Balances
The Comptroller projects the balance will be over $8 billion by 2015, even after assuming the
fund will transfer funds for water and road projects
4
. In fact, most experts expect oil & gas
production to continue at high levels for the next 8-to10 years. As a result, the Texas Taxpayers
Research Association projects the following future balances, including $2 billion taken out for
water and the assumption of transportation money being drawn out:

2015- $8.2 billion
2016- $9.9 billion
2017-$11.6 billion
2018-$13.4 billion
2019-$15.3 billion
2020-$17.3 billion

1
http://www.statutes.legis.state.tx.us/SOTWDocs/CN/htm/CN.3.htm#3.49-g
2
Fiscal Size Up, 2014-15 Biennium. Texas Legislative Budget Board, February 2014. P.37.
3
Fiscal Size up 2014-15, see Note1.
4
https://www.texastribune.org/2013/12/12/comptroller-texas-surplus-bigger-than-expected/
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74





Introduction to Infrastructure

Texas needs to responsibly plan for its future, and that means it must address its infrastructure problems
head on, instead of continuing to kick that can down the road. Ignoring our infrastructure problems
directly impacts Texans and makes the state less attractive to businesses.

Transportation
In 2013, TxDOT announced that it would begin converting paved roads to gravel roads due to a lack of
funding.

Deteriorating conditions, increased congestion and lack of financing for maintenance and new projects
are leading to a decline in mobility and economic productivity. By 2015, TXDOT will be maxed out on
authorized debt their main source of funds. The yearly costs of simply maintaining roads & bridges at
their current state & adding minimum capacity is at least $6 billion a year , but the revenue from the
state highway fund cant keep pace.

the Texas economy will suffer an average of $20 billion a year over the next 15 years
commuter delay in metropolitan areas double from 37 hours to 74 hours in the next 15 years
the 74 hours of delay will cost the average household an additional $800 per year
bad pavement costs motorists $343 a year in wear and tear on vehicles (TRIP)
the total annual cost of accidents in Texas in which roadway design was a factor is $6.5 billion

Water
"In serious drought conditions, Texas does not and will not have enough water to meet the needs of its
people, its businesses, and its agricultural enterprises.

If Texas does not implement new water supply projects or management strategies, then homes,
businesses, and agricultural enterprises throughout the state are projected to need 8.3 million
acre-feet of additional water supply by 2060. Annual economic losses from not meeting water
supply needs could result in a reduction in income of approximately $11.9 billion annually if
current drought conditions approach the drought of record, and as much as $115.7 billion
annually by 2060, with over a million lost jobs.
1
-2012 Texas State Water Plan


1
http://www.twdb.state.tx.us/waterplanning/swp/2012
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Texas Transportation

Texas extensive and high-quality transportation system has helped fuel economic growth and
accommodated a growing population for the past decades. But deteriorating conditions,
increased congestion and lack of financing for maintenance and new projects are leading to a
decline in mobility and economic productivity. By 2015, TXDOT will be maxed out on authorized
debt
1
their main source of funds. The yearly costs of simply maintaining roads & bridges at
their current state & adding minimum capacity is at least $6 billion a year
2
, but the revenue
from the state highway fund cant keep pace. This is manifested in many ways:

Cost of congestion:
the Texas economy will suffer an average of $20 billion a year over the next 15 years
commuter delay in metropolitan areas double from 37 hours to 74 hours in the next 15
years
the 74 hours of delay will cost the average household an additional $800 per year
100 most congested roads, with costs: http://www.txdot.gov/inside-txdot/projects/100-
congested-roadways.html

Cost of deferred maintenance and safety improvements:
bad pavement costs motorists $343 a year in wear and tear on vehicles (TRIP)
the total annual cost of accidents in Texas in which roadway design was a factor is $6.5
billion
(these figures differ widely for different regions: for regional breakdowns, see
http://www.infrastructuretexas.org/wp-content/uploads/2012/09/80pager1206v9FINAL-
rotate.pdfreport, pages 22-24, 60, 63,)

Transportation needs in Texas have traditionally been funded with a pay-as- you go strategy,
with fund sources including the Federal Highway Trust Fund, the state motor fuels tax, motor
vehicle registration fees, title certificate fees and other fee or sales tax based sources. As
construction costs increased and demands grew, these sources became inadequate, the
Legislature authorized new methods of financing including bond issuance, use of
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77
comprehensive development agreements (CDAs) and toll revenues. An overview of these
sources:

State Highway Fund
Primary purpose is to fund highway construction; large expenditures also include TxDOT
employees wages, professional services, and repairs and maintenance. Roughly $750,000 a
year is diverted away from the fund for other uses, in the state budget. The fund consists of:

Motor fuels tax: applied to the sale of gasoline, diesel and liquefied gas
one-fourth of the total collected goes to the Available School Fund, per Texas
Constitutional amendment
current rate is $0.20/gallon, and was last raised in 1991. Purchasing power due to
inflation is now about $0.12/gallon, and the total amount collected will begin to level off
as cars become more fuel-efficient.

Federal Funds: Coming primarily through the Federal Highway Trust Fund, made up of
federal gas & diesel tax receipts and other sources. The Trust Fund is estimated to run out
by the end of fiscal year 2014
Texas had been a long-time donor state to the highway trust fund, remitting more than
we get back. This changed both with a new federal funds act in 2012 that guaranteed a
95% match rate, and with a transfer of federal funds into the trust fund, which was
about run empty.
Federal funds often require matching state funds, and are typically reimbursed to TXDoT
over the span of the project

American Recovery and Reinvestment Act funds: Texas received $2.25 billion in
stimulus funds for shovel-ready road & bridge projects, which has now all been obligated
the stimulus also included Building America Bond (BAB) funds, which hel ped offset the
interest costs of borrowing money

Revenue bonds: starting in 2003, the Texas Transportation Commission was
authorized to issue bonds backed by the state highway fund
The total amount of outstanding bond principal cant exceed $6 billion

Motor vehicle registration fees: Registration fees are based on the type, weight and age
of the vehicle, and are collected annually
Oversized, overweight and manufactured homes are required to pay extra
Counties retain a certain amount of registration fees for their County road & bridge
fund, but funds over the cap to the state highway fund
Certain counties have recently been authorized by the legislature to collect an additional
$10 per vehicle for local projects: Webb, Cameron, Hidalgo, El Paso, Bexar

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78
Toll Authorities: Texas authorizes certain toll roads to be operated under local tollway
authorities, which have some of the same financing tools as TXDOT. A county or local tolling
authority now has the same first option to develop, finance, construct and operate a toll
project

Comprehensive Development Agreements (CDA): a CDA is an agreement with a private
entity to design and construct a project but can also include financing, maintenance and
operation.
sections of SH 130 are being built using a CDA contract, with the costs

Pass-through tolling: Pass-through tolling is an agreement with TXDoT and a public or
private entity to develop, finance, build and operate a project (tolled and non-tolled).
TXDoT then reimburses the entity in periodic payments based on the number of vehicles to
utilize the road.

Proposition 14 General Obligation Revenue-backed bonds
Authorized by voters in 2003, these bonds are backed by funds in the state highway fund, and
cant exceed $6 billion in outstanding debt.
Projects have been prioritized by needed safety improvements, delayed projects, and
congestion issues in underserved parts of the state.

Texas Mobility Fund
Created in 2001, this was the first major deviation from the pay-as-you-go system. It allowed
for the issue of bonds to be backed by the faith & credit of the state of Texas, and for the
creation of Regional Mobility Authorities (RMAs)
funds can be used to pay for part of the cost of publicly owned toll roads and public
transportation
as of FY 2012, $7.2 billion worth of debt had been authorized, with $6.3 billion
outstanding.
No new revenues have been issued since 2010, but almost a $1 billion has been paid
in debt service

Proposition 12 General Obligation Bonds: authorized by voters in 2007, this allows the TTC to
issue up to $5 billion in bonds to be used for highway construction and improvement.
TXDOT worked with regional districts, cities, counties and metropolitan planning
organizations (MPOs) to identify priority
project tracker: http://www.txdot.gov/apps-cq/project_tracker/prop12projects.htm
funding allocation: http://ftp.dot.state.tx.us/pub/txdot-
info/prop12/program2/funding_allocation.pdf




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79
Recent Legislation

Highway Funding Constitutional Amendment
If approved by voters in November 2014, would siphon off half of future deposits to the
economic stabilization fund to the state highway fund, subject to maintaining a certain balance
in the ESF
This amount is estimated by the Comptroller to be $1.35 billion per year. (HJR 1/SB 1, 83
rd

legislature third called session)

County Energy Transportation Reinvestment Zones
In response to local official in the Eagle Ford Shale region raising the alarm about county roads
getting damaged due to the influx of heavy traffic, the legislature appropriated $450 million
over the biennium. To access these funds, counties had to form transportation reinvestment
zones, which work like tax increment financing: a county designates a zone around a
transportation project in capture the increase in appraised value through taxes. These funds
can be applied to matching TXDOT funds, or financing debt.

Limited approval for more CDA projects
As in past sessions, the Legislature gave limited approval to using the agreements for certain
projects, will the authority to expire in 2017. (SB 1730)



1
http://www.infrastructuretexas.org/wp-content/uploads/2012/09/80pager1206v9FINAL-rotate.pdf (page
7)
2
http://www.infrastructuretexas.org/wp-content/uploads/2012/09/80pager1206v9FINAL-rotate.pdf (page
8)
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Transportation Debt
Introduction
Texas has traditionally used a pay-as-you-go financing system in which roads are built as
funding becomes available. Funding for the pay-as-you-go system in Texas is generated from
user fees (i.e., motor fuels tax revenues and registration fees) and Federal Funds.
However, as the cost of constructing and maintaining transportation corridors has increased,
the capacity of the traditional pay-as-you-go system has been reduced. As a result, the
Legislature has authorized the issuance of debt and provided limited use of public-private
partnerships to generate additional revenue to fund the construction and maintenance of
highways.
1


Funding Problems
As the states population, economy, and vehicle miles traveled have increased, the cost of
materials for road construction has also increased. From 2002 to 2007, the highway
construction cost index increased at an abnormally fast rateincreasing by 62 percent.
2

In the 2011 Urban Mobility Report, the Texas Transportation Institute ranked several cities in
Texas as among the worst for annual hours of delay per traveler:
Houston area fourth in the country;
Dallas-Fort Worth-Arlington area ranked 10
th
;
Austin ranked 15
th
;
San Antonio ranked 34th.
3

Region Freeway
Planning
Time Index
2011 Hours of
Delay per Auto
Commuter
2011
Congestion
Cost per Auto
Commuter
Austin 4.26 44 $930
Beaumont 1.9 25 531
Brownsville 1.46 25 565
Corpus Christi 1.44 14 287
Dallas-Fort Worth 4 45 957
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El Paso 3.37 32 688
Houston 3.67 52 1,090
Laredo 2.07 19 418
McAllen 3.01 28 599
San Antonio 2.91 38 787
(Texas A& M Transportation Institute available at
http://d2dtl5nnlpfr0r.cloudfront.net/tti.tamu.edu/documents/tti-umr.pdf)
Texans living in Austin, Dallas, Fort Worth, Houston and San Antonio lost a full weeks work in
traffic every year.

Congestion Costs
Congestion costs the Texas economy $10.8 billion per year. By 2025, that number will reach
almost $30 billion.
4


Currently, the average Texas household will pay about $232 a year in state taxes and fees for
transportation. This includes fuel taxes, vehicle registration fees, tolls and other fees for
construction and maintenance of the transportation system.
5


Texans will pay almost $6,100 per year in vehicle maintenance and use cost because of:
Extra travel time associated with traffic congestion and detours around deficient
bridges;
Increased fuel purchases due to longer trips and stop-and-go traffic;
Additional vehicle maintenance expenses due to rough roads.

How much transportation infrastructure funding does Texas need?
In 2009, the 2030 Committee, a group of Texas business, academic and civic leaders,
determined that the state needed to invest some $315 billion over the next two decades to
maintain the existing transportation infrastructure, prevent worsening congestion in urban
areas and ensure rural mobility and safety.

The Texas A&M Transportation Institute (TTI) later updated that figure to about $370 billion
and expanded the needs outlook to 2035.
6

Worst Acceptable Conditions Competitive Transportation
Infrastructure
To Continue transportation
infrastructure at a 2010 level
$6.1 Billion per year $9.5 Billion per year $9.9 Billion per year
(Available at https://agctx.org/private/fourpager.pdf)

Why is current Funding Inadequate?
Current funding is lagging so far behind minimally necessary levels because of 5 main reasons:
Population Growth: Texas is growing very quickly, especially in highly congested
urban areas
Fuel Efficiency: Cars are far more fuel efficient and thus pay less per vehicle mile
traveled in gas tax
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82
Inflation: Construction materials cost more today because of rising fuel and
other costs
Federal Funding: Because of several factors, including the expiration of the
federal-aid highway program after 2014 and the need to infuse general funds
into the Federal Highway Trust Fund, federal funding is increasingly
unpredictable
Aging Infrastructure: Many Texas roads and bridges have exceeded their
intended lifespan and require extensive rehabilitation.
7


How has Texas dealt with this funding problem?
In order to deal with the dearth of transportation funding, Texans have been borrowing money
for the last decade to build their roads. The Texas Mobility Fund (TMF) was established in 2001
when voters approved Proposition 15, adding Article III, Section 49-k to the Texas Constitution.
The Mobility Fund may be used to finance the acquisition, construction, maintenance,
reconstruction, and expansion of state highways, including costs of design and right-of-way
acquisition.
8


Texas Transportation Commission is authorized to issue and sell obligations and enter into
related credit agreements payable from and secured by a pledge of money on deposit in the
Texas Mobility Fund.

Mobility Fund bonds are self-supporting General Obligation bonds; therefore, they are not
considered in calculating the states constitutional debt limit. As of the end of fiscal year 2012,
the Bond Review Board (BRB) had authorized the issuance of $7.2 billion in Texas Mobility Fund
bonds.
TEXAS MOBILITY FUND BOND ISSUANCES, CALENDAR YEARS 2005 TO 2012

Type of Bond Amount in Millions Date Issued
Series 2005A June 8, 2005 $900.0 June 8, 2005
Series 2005B $100.0 June 8, 2005
Series 2006 $750.0 June 8, 2006
Series 2006A $1,040.3 October 31, 2006
Series 2006B $150.0 December 13, 2006
Series 2007 $1,006.3 June 21, 2007
Series 2008 $1,100.0 February 28, 2008
Series 2009A $1,208.5 August 26, 2009
(Taken from Figure 30, Texas Highway Funding Legislative Primer, Legislative Budget Board,
March 2013, p. 18)





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83
TEXAS MOBILITY FUND BOND DEBT SERVICE EXPENDITURES, FISCAL YEARS 2006 TO 2013
FISCAL Year Debt Service in Millions Federal Funding
2006 $63.40 $0.00
2007 $137.20 $0.00
2008 $209.50 $0.00
2009 $266.00 $0.00
2010 $288.60 $13.90
2011 $309.70 $23.30
2012 $314.60 $23.30
NOTE: The federal subsidy refers to the Build America Bonds interest subsidy used for the
2009A series bond issuance.

Proposition 12 - General Obligation Bonds
On Nov. 6, 2007, Texas voters approved a constitutional provision authorizing the Texas
Transportation Commission to issue general obligation bonds of the State of Texas in an
aggregate principal amount not to exceed $5 billion to fund transportation improvement
projects. The general obligation bonds include the Highway Improvement General Obligation,
or "HIGO Bonds," also known as the Proposition 12, or "Prop 12 Bonds."
To date the Texas Bond Review Board has approved issuance of HIGO bonds in the aggregate
principal amount not to exceed $2.5 billion.

Its important to note that these general obligation bonds are not self-supporting, meaning they
have no dedicated revenue source to pay down their debt service.
Debt
Series
Par Amount
Issued
2012-A $818,635,000
2012-B* $99,570,000
2010-A** $815,420,000
2010-B $162,390,000

Debt Service on Proposition 12 issuances
Fiscal Year Debt Service
2011 $21,939,464
2012 $63,556,743
2013 (forecasted) $127,969,471
(July 2013 Cash Forecast, Texas Department of Transportation, p.3, available at
ftp://ftp.dot.state.tx.us/pub/txdot-info/fin/cash_forecast.pdf)





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84
Proposition 14 General Obligation Bonds backed by State Highway Fund
On Oct. 30, 2008, the Texas Transportation Commission directed TxDOT to issue an additional
$2.9 billion in Proposition 14 bonds, or revenue bonds backed by the state highway fund, to
advance the construction of several much needed projects across the state.
9

The commission has committed the entire authorized $6 billion to projects. State law limits the
issuance of Prop 14 debt to $6 billion, meaning more debt cannot be issued even once the
bonds are paid off.
10

Fiscal Year Debt Service
2010 $254,353,354
2011 $317,570,500
2012 $314,842,038
2013 (Forecasted) $315,122,918
2014 (Forecasted) $338,000,373
2015 (Forecasted) $432,015,350
2016 (Forecasted) $432,324,639

Short-Term Borrowing Commercial Paper Program
There are two short-term borrowing options also available to TxDOT to provide funds for
deposit into the State Highway Fund. Highway Tax and Revenue Anticipation Notes (TRANs)
were authorized in 2003, which Texas Transportation Commission is allowed to issue if a
temporary cash flow shortfall in the State Highway Fund is anticipated.
11
As of 2013, no
Highway TRAN has ever been issued.

Since 2003, TxDOT also has the authority to borrow money from any source to carry out its
functions. This loan may be an agreement, note, contract, or other form, and the term of the
loan is prohibited from exceeding two years.
12
This authority allows the TTC to establish a
commercial paper program in 2005 and authorize TxDOT to issue a maximum of $500 million in
notes.

The Complete Transportation Debt Picture
By the year 2020, TxDOT currently projects that we will be spending more on debt service than
on building all new transportation projects:
Expense
Category
2010 2011 2012 2013
(Forecast)
2014
(Forecast)
2015
(Forecast)
2016
(Forecast)
Transportation
Projects $1,318,439,204 $2,554,362,074 $2,394,007,783 $2,165,839,042 $3,239,085,875 $3,452,853,705 $2,509,255,583
Transportation
Debt
Short-Term
Borrowing $299,231,244 $70,862,552 $3,289,320 $2,529,782 $5,000,000 $5,000,000 $5,000,000
Proposition 14 $254,353,354 $317,570,500 $314,842,038 $315,122,918 $338,000,373 $432,015,350 $432,324,639
Texas Mobility
Fund $296,534,030 $327,004,614 $334,810,728 $341,534,476 $353,833,289 $396,078,801 $400,872,625
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85
Proposition 12 - $21,939,464 $63,556,743 $127,969,471 $193,558,493 $258,557,493 $323,559,493
Debt Total $850,118,628 $737,377,130 $716,498,829 $787,156,647 $890,392,155 $1,091,651,644 $1,161,756,757


2017
(Forecast)
2018
(Forecast)
2019
(Forecast)
2020
(Forecast)
2021
(Forecast)
2022
(Forecast)
2023
(Forecast)
Transportation
Projects $1,933,460,621 $1,593,973,122 $1,159,548,584 $1,017,939,733 $1,013,018,141 $985,917,696 $927,227,775
Transportation
Debt
Short-Term
Borrowing $5,000,000 $5,000,000 $5,000,000 $5,000,000 $5,000,000 $5,000,000 $5,000,000
Proposition 14 $432,331,151 $432,326,057 $432,317,413 $432,326,665 $432,333,693 $461,686,373 $432,538,714
Texas Mobility
Fund $443,263,703 $448,891,669 $453,897,662 $459,382,449 $464,806,446 $471,332,284 $477,943,293
Proposition 12 $323,556,743 $323,556,343 $323,557,343 $323,249,471 $322,914,912 $322,556,060 $322,179,587
Debt Total $1,204,151,597 $1,209,774,069 $1,214,772,418 $1,219,958,585 $1,225,055,051 $1,260,574,717 $1,237,661,594
(July 2013 Cash Forecast, Texas Department of Transportation, p.3, available at
ftp://ftp.dot.state.tx.us/pub/txdot-info/fin/cash_forecast.pdf)

Texas Debt Picture
From 2001 to 2010, state debt alone grew from $13.4 billion to $37.8 billion, according to the
Texas Bond Review Board. That's an increase of 281 percent. Over the same time, the national
debt rose almost 234 percent, with two wars, two tax cuts and stimulus spending.
13

At the end of FY2013, Texas had $43.54 billion in total debt outstanding. Of this amount $4.84
billion (11.0%) was non-self supporting (NSS) debt, and $38.69 billion (89%) was self-
supporting. The states total NSS debt outstanding has increased from $3.15 billion in FY2004 to
the current $4.84 billion as of August 31, 2013, an increase of 53.7 percent.

As of August 31, 2013 the Constitutional Debt Limit (CDL) for outstanding debt was 1.34
percent and 3.04 percent for outstanding and authorized but unissued debt.
14
The CDL limits
the amount of state debt that the Legislature can authorize.

Even though more debt issuance capacity exists, when combining State and Local debt, Texas
has the 4
th
most per capita debt in the Nation.
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(Debt Affordability Study, Bond Review Board, February 2014, p. 41)

Summary
Texas desperately needs more money for transportation projects. For many reasons, the
current rate of funding is inadequate. In order to deal with this problem, Texas Republicans
choose to borrow money at a rate that would make the federal government blush. As a result
today, Texans have the 4
th
highest per capita debt rate in the control (state and local debt
combined).

There are about $3 billion dollars in unissued Proposition 12 bond proceeds remaining that will
be appropriated. By 2020, the debt service on all of the issued debt by the Texas
Transportation Commission and Texas Department of Transportation will exceed the money
projected to build transportation projects.

More money and funding is needed, but more debt may not be the answer.

1
Texas Highway Funding Legislative Primer, Legislative Budget Board, March 2013, p. 1
2
Id at p. 2
3
Id at
4
http://transportationadvocatesoftexas.org/PDF%20Library/Texas%20Infrastructure%20folder2.pdf
5
The Cost of Doing Nothing available at https://agctx.org/private/fourpager.pdf
6
https://ftp.dot.state.tx.us/pub/txdot-info/fin/funding_sources.pdf
7
https://ftp.dot.state.tx.us/pub/txdot-info/fin/funding_sources.pdf
8
Texas Highway Funding Legislative Primer, Legislative Budget Board, March 2013, p. 18
9
http://www.txdot.gov/apps-cq/project_tracker/prop14projects.htm
10
TxDOT Funding: Educational Series, p. 8, available at http://ftp.dot.state.tx.us/pub/txdot-
info/sla/education_series/txdot_funding.pdf
11
TEXAS HIGHWAY FUNDING, LBB, March 2011, p. 10, available at
http://www.lbb.state.tx.us/Documents/Publications/Primer/Highway%20Funding%20Primer%20312012.pdf
12
Id.
13
Fort Worth Star Telegram 7/13/2011

14
Debt Affordability Study, Bond Review Board, February 2014, p. iii
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Texas Toll Roads

Texas has a fraught history with toll roads. As funds for new road construction have not kept
pace with demands, state and regional transportation planners are turning to public and private
toll roads more and more to solve mobility and congestion problems. The up-front financing
allows needs to be addressed quickly, but there are many issues, especially given Texans
fraught history with toll roads. Governor Perrys proposed Trans-Texas Corridor in 2002, a
mega-highway that would have crisscrossed the state, triggered intense backlash. The many
problems with the TTC included the conversion of certain existed roads to tolled roads, non-
compete clauses specifying TXDOT could not maintain any public alternative routes, and
nontransparent contracts with companies like Cintra that let them set the tolls. The legislature
started putting restrictions on toll roads in 2007, banning private ownership of roads, limiting
the number of comprehensive development agreements, and giving more tolls and authority to
local agencies to do their own projects. Since then, many other projects have moved forward:
since 2006, Texas has built over 150 miles of toll roads, with 100 more in the works.
1


Issues with toll roads
Nonpayment of tolls/collection methods
Toll payments can be hard to collect because of non-payment by drivers and issues with the
collection systems. Most electronic tolls read a toll tag or capture a photo of a drivers license
plate and bill the registrant, but the address or registration could be out of date. Drivers are
sent repeat notices and fines accrue until the bill goes to a collection agency and become a
traffic citation. The past session, lawmakers passed laws to help crack down on non-payment,
including publicly releasing the names of top toll scofflaws. Another problem is the contract
between several toll road authorities and payday lender ACE Cash Express.

Public sentiment
Not surprisingly, toll roads tend not to be popular, since people are al ready paying for mobility
through taxes and fees. Toll rates can be prohibitively expensive, leading some to see toll roads
as a luxury good.



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89
Methods of Financing
Much of the controversy surrounded toll roads comes from the involvement of the private
sector and concern over privatization over what has traditionally been a public asset.
Public-Private Partnership/ Comprehensive Development Agreements: The recent
shortage of road construction funds in Texas has extended the use of public-private
partnerships. These arrangements involve a public entity selecting a private firm to
complete part or all of a project:
Design-Build: winning contractor will design, acquire right of ways and build
Concessions: Can include development, financing, and operation on a contract
up to 52 years. Developer will collect revenue from tolls to recoup their
investment.

Toll facilities in Texas
Texas statute authorizes four types of toll roads (many localities have established an entity, but
havent undertaken any projects)
1) Projects operated by TXDOT:
o Central Texas Turnpike System:
SH-130, segments 1 4
SH-45
Loop 49 in Tyler
Camino Columbia near Laredo: Texas first privately funded toll road was
foreclosed on after three years due to drastically lower traffic than
projected and free alternative routes. The road was auctioned for $12
million in 2004 and later purchased by TxDOT for $20 million.
SH-99, the Grand Parkway outside Houston
o Under private construction/operation:
SH-130, segments 4-5: The final leg of SH-130, designed to alleviate
congestion from I-35, was a comprehensive development agreement
with TXDOT and the SH 130 Concession Company comprised of Zachry
Construction and Cintra SA. The company paid $25 million in concessions
to TXDOT, and will operate the road and collect tolls for fifty years,
sharing an increasing percentage with the state. The road has failed to
draw traffic, however, despite an 85 mile-per-hour speed limit, and a
discounted rate for trucks and extensive signage paid for by the state.
The low revenue caused Moodys to downgrade the companys debt
(including a Federal loan) twice, eventually to junk-bond status.
DFW Connector (managed lanes): Managed lanes are a popular option
for adding toll capacity to existing roads. They typically are separate but
parallel lanes that often have adjustable pricing, reflecting congestion.
North Tarrant Express (SH 183 managed lanes)
LBJ freeway (I-635 managed lanes): The huge, rehab project of the LBJ
expressway in North Texas is the first toll project in the US to have a
major public pension investor: the developer is a joint venture of Cintra,
Meridiam Infrastructure, and Dallas Police and Fire Pension System.
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2) Regional Mobility Authorities:
a. Central Texas RMA
i. 183A, north Austin to Leander
ii. North Mopac express lanes (under construction)
iii. Manor Expressway (median of 290, under construction)
b. Cameron County RMA
i. Spur 550/511
c. Northeast Texas RMA
i. Toll 49 extension
3) Regional Toll Authorities
a. North Texas Tollway Authority
i. Sam Rayburn Tollway/SH 121: The contracting of SH 121 highlighted the
controversy of private vs. public development of roads, and also at what
level of government decisions should be made. TXDOT first accepted a
bid for development & operation by Spanish company Cintra, until critics
questioned why public entity NTTA hadnt been allowed to bid. After the
planning of the road was underway, NTTA submitted & won the right to
develop the road. This lead to a series of reforms in the legislature
governing the process why which state & local entities develop projects.
ii. Dallas North Tollway
iii. President Bush turnpike
iv. SH 161
v. Addison Airport Toll tunnel
4) County Toll authorities
a. Harris County Toll Road Authority
i. Katy I-10 managed lanes
ii. Sam Houston Tollway
iii. Westpark Tollway
iv. Sam Houston ship channel bridge
b. Fort Bend County Toll Road Authority
i. Fort Bend Parkway Tollroad
ii. Westpark Tollway
5) Toll Bridges over the Rio Grande
a. Owned by various cities, or cities & private companies

1
http://www.nytimes.com/2012/11/30/us/texas-road-tolls-proliferate-as-public-
financing-dwindles.html?_r=0

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Water
Introduction
Due to an ongoing drought and a growing population, Texas faces a number of challenges in
ensuring that the state will have sufficient supplies of water in coming years. In fact, that is the
primary message of the 2012 State Water Plan that was adopted by the Texas Water
Development Board in December 2011: "In serious drought conditions, Texas does not and will
not have enough water to meet the needs of its people, its businesses, and its agricultural
enterprises."
1
Providing adequate water supplies is essential to protect Texas' continued public
health, safety, and economic development.

Big picture
The Executive Summary of the 2012 State Water Plan provides a good overview the growing
need for water and the potential cost of falling short:
The population in Texas is expected to increase 82 percent between the years 2010 and
2060, growing from 25.4 million to 46.3 million people. Water demand in Texas is
projected to increase by only 22 percent, from about 18 million acrefeet per year in
2010 to about 22 million acrefeet per year in 2060. Existing water suppliesthe
amount of water that can be produced with current permits, current contracts, and
existing infrastructure during droughtare projected to decrease about 10 percent,
from about 17.0 million acrefeet in 2010 to about 15.3 million acrefeet in 2060 ... If
Texas does not implement new water supply projects or management strategies, then
homes, businesses, and agricultural enterprises throughout the state are projected to
need 8.3 million acre-feet of additional water supply by 2060. Annual economic losses
from not meeting water supply needs could result in a reduction in income of
approximately $11.9 billion annually if current drought conditions approach the drought
of record, and as much as $115.7 billion annually by 2060, with over a million lost jobs.
2


State Water Plan
First published in 1961 following the "drought of record" in the 1950s, the State Water Plan
begins at the regional level with 16 regional water planning groups, 1 for each of the 16
designated planning areas in the state. Each planning group consists of about 20 members that
represent at least 11 interests, as required by
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93
Texas statute, including Agriculture, Industry, Public, Environment, Municipalities, Business,
Water Districts, River Authorities, Water Utilities, Counties, and Power Generation.

During each five-year planning cycle, planning groups evaluate population projections, water
demand projections, and existing water supplies that would be available during times of
drought. Planning groups identify water user groups that will not have enough water during
times of drought, recommend strategies
that could be implemented to address shortages, and estimate the costs of these strategies.
While carrying out these tasks, planning groups assess risks and uncertainties in the planning
process and evaluate potential impacts of water management strategies on the states water,
agricultural, and natural resources.
Once the planning groups adopt their regional water plans, they are sent to the Texas Water
Development Board (TWDB)the states water supply planning and financing agencyfor
approval. TWDB then compiles the state water plan, which serves as a guide to state water
policy.
3


Water needs
The TWDB reports that the states rapidly growing population will spur changes in our demand
for and use of water. In 2010, irrigation was projected to account for 56 percent of Texas water
use, followed by municipal use at 27 percent. By 2060, municipal water use is expected to
become the largest category, at 38.3 percent of all water use, followed closely by irrigation at
38.1 percent.


Source
4

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Although the population is projected to increase 82 percent over 50 years, water demand in
Texas is projected to increase by only 22 percent, from about 18 million acre-feet per year in
2010 to a demand of about 22 million acre-feet per year in 2060. Demand for municipal water
is expected to increase from 4.9 million acre-feet in 2010 to 8.4 million acre-feet in 2060.
However, demand for agricultural irrigation water is expected to decrease, from 10 million
acre-feet per year in 2010 to about 8.4 million acre-feet per year in 2060, due to more efficient
irrigation systems, reduced groundwater supplies, and the transfer of water rights from
agricultural to municipal uses. Water demands for manufacturing, steam-electric power
generation, and livestock are expected to increase, while mining demand is expected to remain
relatively constant.
5


Water supplies
Existing water suppliescategorized as surface water, groundwater, and reuse waterare
projected to decrease about 10 percent, from about 17.0 million acre-feet in 2010 to about
15.3 million acre-feet in 2060. We do not have enough existing water supplies today to meet
the demand for water during times of drought. In the event of severe drought conditions, the
state would face an immediate need for additional water supplies of 3.6 million acre-feet per
year with 86 percent of that need in irrigation and about 9 percent associated directly with
municipal water users. Total needs are projected to increase by 130 percent between 2010 and
2060 to 8.3 million acre-feet per year. In 2060, irrigation represents 45 percent of the total
needs and municipal users account for 41 percent of needs.
6

Recommendations
The State Water Plan includes 562 unique water supply projects designed to meet needs for
additional water supplies for Texas during drought. About 34 percent of the volume of these
strategies would come from conservation and reuse, about 17 percent from new major
reservoirs, and about 34 percent from other surface water supplies.
7


The estimated total capital cost of the 2012 State Water Plan is $53 billion, $45.8 billion of
which is for municipal water use. TWDB surveys indicate that water providers will need nearly
$27 billion in state financial assistance to implement strategies for municipal water user
groups.
8
Note that the $53 billion capital cost of the 2012 State Water Plan is about 23 percent
of the $231 billion in the total costs for water supplies, water treatment and distribution,
wastewater treatment and collection, and flood control required for the state of Texas in the
next 50 years.
9


Cost of doing nothing
If drought of record conditions recur and water management strategies identified in regional
water plans are not implemented, the state could suffer significant economic losses. If a
drought affected the entire state like it did in the 1950s, economic models show that Texas
businesses and workers could have lost almost $12 billion in income in 2010. By 2060 lost
income increases to roughly $116 billion. Foregone state and local business taxes associated
with lost commerce could amount to $1.1 billion in 2010 and $9.8 billion in 2060. Lost jobs total
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95
approximately 115,000 in 2010 and 1.1 million in 2060. By 2060, the states projected
population growth could be reduced by about 1.4 million people, wi th 403,000 fewer students
in Texas schools. If we do nothing, over 50 percent of the states population in 2060 would face
a water need of at least 45 percent of their demand during a repeat of drought of record
conditions.
10


Disagreement with the State Water Plan
In May 2014, the Texas Center for Policy Studies, a nonprofit environmental research group,
released a report that concludes that the state overestimates how much water it will need as its
population grows over the 50 years and underestimates the potential of conserving water in
dry times.
11
The State Water Plan estimated that Texas would face a shortfall of 2.7 trillion
gallons of water a year by 2060, but the report argues that Texas would only need an additional
1.1 trillion gallons of water a year by 2060.
12


Specifically, on the demand side, the report claims that the projected 2060 demand could be
reduced by 3.5 million acre-feet per year using reasonable municipal demand and conservation
projections in Region C; appropriate irrigation demand projections in Region O; and the
demand projections for steam electric generation statewide that the Bureau of Economic
Geology has developed. On the supply side, the report argues that available supplies could be
greatly extended or increased by reasonable drought contingency plan implementation
(providing an estimated 1.5 million acre-feet/year); and increased use of brackish water.
13
As
the report points out, the resulting reductions in demand-supply gap could significantly reduce
the price tag for the state water plan.
14


2011 drought
Beginning in October 2010, the 2011 drought was the worst one-year drought in Texas since at
least 1895 when statewide records begin. Fall of 2010, most of Texas experienced a relatively
dry fall and winter, but the record dry March 2011 brought widespread extreme drought
conditions to the state. A record dry March through May was followed by a record dry June
through August, and the 12-month rainfall total for October 2010 through September 2011 was
far below the previous record set in 1956. Average temperatures for June through August were
over 2 F above the previous Texas record and were close to the warmest statewide summer
temperatures ever recorded in the United States.
15


The Texas A&M AgriLife Extension Service estimates that Texas agricultural producers lost
nearly $7.6 billion due to the drought, including $3.2 billion in livestock and $2.2 billion in
cotton.
16
A December 2011 economic analysis by BBVA Compass Bank found that indirect
drought losses to the states agricultural industries could add another $3.5 billion to the toll.
17

In 2011, timber lost to drought and wildfire could have produced $1.6 billion worth of forest
products, resulting in a $3.4 billion economic impact in East Texas.
18

Status of the drought today
As of April 21, 2014, 66% of the state was in moderate to exceptional drought.
19

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Source
20

The latest drought outlook through the end of July shows improvements in east Texas
and along the coast but lingering and intensifying drought in much of the rest of the
state.
21

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97

Source
22

The U.S. Drought Monitor reports that Lubbock has experienced the nations worst
average level of drought since the beginning of 2011. McAllen, Harlingen, Brownsville
and Corpus Christi also ranked among the nine U.S. cities most affected by extreme
drought.
23

According to the Texas Commission on Environmental Quality (TCEQ), 46 of the state's
public water systems were at risk of running out of water within 180 days as of Jan. 8,
2014.
24

As of October 30, 2013, 26.5% of the states community water systems were under
voluntary or mandatory water restrictions.
25

As of April 30, 2014, the drought caused the average retail price of fresh beef prices to
climb to $5.28 a pound, up by 5.4 percent from that time last year.
26

John Nielsen-Gammon, the state's climatologist, recently stated that the drought could
last for 15 years: "The long-term Pacific and Atlantic Ocean temperature patterns still
favor drought in Texas, and probably will continue to do so for another 5-15 years.
Whether this drought will last that long or whether Texas will have an occasional wet
year within that stretch is impossible to say."
27

Real world effects of the drought
A few examples of how the drought is affected Texas and Texans:
May 7, 2014: "Austinites might soon see the cost of Texas prolonged drought directly
on their water bills. For the first time ever, the Austin Water Utility is considering
charging a 'drought fee' sometime [in 2014] if the drought gets even worse ... The ideas
range from charging every customer a flat fee to charging volume-based fees that would
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hurt heavy water users the most. The different options could raise the monthly bill of a
typical homeowner, who uses 7,000 gallons of water a month, by as much as $22.50."
28

May 6, 2014: "The city of Wichita Falls, Texas, may soon become the first in the country
where half of the drinking water comes directly from wastewater. Yes, that includes
water from toilets. The plan to recycle the water became necessary after three years of
extreme drought, which has also imposed some harsh restrictions on Wichita Falls
residents, says Mayor Glenn Barham. 'No outside irrigation whatsoever with potable
water,' he says. 'Car washes are closed, for instance, one day a week. If you drain your
pool to do maintenance, you're not allowed to fill it.' Barham says residents have cut
water use by more than a third, but water supplies are still expected to run out in two
years."
29

February 12, 2014: "Following hours of heated public testimony, the Texas Commission
on Environmental Quality on Wednesday determined it couldn't yet make a decision on
instituting a temporary emergency plan that would likely cut off the flow of water to rice
farmers in the Lower Colorado River Basin for the third straight year."
30

December 30, 2013: "In Plainview, the continuing drought forced Cargill to reorganize
plant strategies, while the Portales case involved a nationwide salmonella outbreak that
was tied back to the nation's largest organic peanut butter plant. In both instances
farmers and ranchers have been adversely affected and forced to make mid-season
changes in the way they farm and ranch. Also related to a third season of serious to
extreme drought conditions, cotton and grain growers from the Rio Grande Valley north
along the Texas coast to the cotton producing fields of the Coastal Bend, usually a major
cotton region, were forced to plow under what few crops managed to break ground.
The same can be said for many wheat growers and vegetable growers in west Central
Texas."
31

December 29, 2013: "A matrix of shallow, placid streams covers the vast, flat marshland
at the mouth of Texas Colorado River as it empties into the Gulf of Mexico. Chewing on
a plastic-tipped cigar, Buddy Treybig steers his shrimp boat through canals and into
Matagorda Bay. Treybig, 52, has been shrimping the bay a semi-salty body of water
nearly 30 miles wide, sheltered from open sea by the Matagorda Peninsula since high
school. And its never been harder, he said. Dwindling rains, a stubborn drought and
more demand for water upriver in Austin have taken a toll on the crabs, shrimp, oysters
and fish that provide livelihoods for coastal communities. 'Were in bad shape already.
The shrimp and oysters are almost gone,' said Treybig, a self-appointed defender of the
bay and an advocate for people who depend on it to make a living."
32

June 6, 2013: "Barnhart, a small community in West Texas, has run out of water. John
Nanny, an Irion County commissioner and an official with Barnharts water supply
corporation, said on Thursday that the situation was serious. When reached by
telephone, he was working on pumping operations and hoped to have a backup well in
service Friday morning. A load of bottled water was on its way to the community center,
he said."
33

February 3, 2012: "The water that once nourished this central Texas community never
traveled far: it came from a fenced-in well at the edge of Lake Travis, down a winding
street next to the golf course. These days, the water that flows from kitchen and
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bathroom faucets takes an extraordinary journey that can be measured not in feet but
in miles. This drought-stricken place in the scenic hills outside Austin has been forced to
bring in water by truck from more than 10 miles away because its sole well came close
to running out of water. Spicewood Beach is one of four subdivisions in Burnet County
that became the first communities in Texas to run so low on water that it had to be
hauled in by truck."
34


HB 4 and Proposition 6
In 2013, the Legislature made significant changes to TWDB and the financing of water projects
through HB 4 and Proposition 6.
TWDB structural changes
HB 4 changed the structure of the TWDB Board from six appointed, part-time volunteer
members to three appointed, full-time, salaried members. The three members must have
expertise in engineering, finance, law, or business, and they must represent the diverse regions
of the state. Additionally, HB 4 effectively fired the six previous members of the board and the
TWDB executive administrator, stating that they are not eligible to serve on the board if they
served in that position as of January 1, 2013.
35

Financing changes
On November 5, 2013, voters approved Proposition 6, which moved $2 billion from the Rainy
Day Fund to the newly-created State Water Implementation Fund for Texas (SWIFT) and the
State Water Implementation Revenue Fund for Texas (SWIRFT). The funds were created to
provide a revolving loan program to reduce borrowing costs for local entities. Without
assistance from the state, local water entities would have to borrow money or issue bonds
backed only by their own locally generated revenues, usually at a much higher cost.
36
Note that
TWDB does not loan SWIFT funds directly to local water entities. Instead, TWDB directs the
transfer of money from the SWIFT to the SWIRFT to support bonds, the proceeds of which are
used as loans to local water entities to lower interest rates, finance a facility with more
favorable repayment terms, defer loan repayments, and allow incremental repayments.
37

HB 4 also requires TWDB and the regional planning groups to prioritize their projects based on
criteria such as the size of the population the project will serve, the timeframe of the need, and
the feasibility of the project.
38


Is the $2 billion from Prop 6 sufficient funding?
The author reached out to knowledgeable water policy analysts to inquire as to whether the $2
billion in state funding secured through Proposition 6 would be sufficient to meet the projected
$27 billion in state funding discussed in the 2012 State Water Plan.
39
Independently, they
stated that there is not a current debate as to whether the $2 billion is a sufficient starting
investment. Instead, the key question is whether the TWDB invests first in the correct type of
projects to ensure that they money is there to revolve into subsequent loans. So, for example,
if the TWDB loans all of the available money on a really large, expensive project first (e.g., like a
big reservoir), it won't have time to let the $2 billion grow to support the long-term goals.
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Return on investment for water projects
According to the TWDB, the return on investment for water projects is significant:
"Construction projects provide a short-term boost to local economies through employment and
earnings. Expenditures on materials and labor as well as planning, design, and construction
services result in increased local income. After construction is complete, permanent
employment is supported by the operation and maintenance of water supply facilities."
40

Additionally, every $1 million invested in water projects creates:
$1.75 million sales revenues in construction, engineering, materials and supporting
sectors;
$889,000 in gross state domestic product;
$44,000 in state and local tax receipts; and
13 new jobs.
41


Policy recommendations from Comptroller Susan Combs
In January 2014, Comptroller of Public Accounts Susan Combs issued a report on Texas water.
42

The report listed a series of policy recommendations:

1. Grant program for water conservation. The Comptroller recommended a five-year, $25
million program to award grants to local water authorities, including cities, counties,
river authorities, water conservation districts, municipal water utilities, municipal utility
districts, irrigation districts and water supply corporations, as well as major industrial
water users, for improved water efficiency, particularly verifiable reductions in total
annual water use driven by conservation efforts.
43

2. Increased state funding for innovative demonstration projects. The Comptroller
recommended increasing state funding for projects to demonstrate the success of new
water technologies. This will help water planners make more informed decisions about
which type of technologies are worth adopting.
44

3. Prize framework to award research funding for innovative technology. More amorphous
than the other recommendations, the Comptroller recommends that a prize structure
for technologies should be awarded for innovations with direct and demonstrable
commercial applications in Texas. She argues that a prize structure will eliminate the
appearance of picking winners, something that she admits has dogged recent grant
programs.
45


Impact of hydraulic fracturing on water supplies
Hydraulic fracturing, or fracking, is the process of injecting a high-pressure water mixture into
rock to release the natural gas inside. The pressurized fracking fluid made up of water, sand,
and chemicals causes the rock layer to crack. These fissures are held open by the sand particles
so that the natural gas or oil from the shale can flow up the well.
46


Depending on the rock formation, a decent amount of fracking fluid along with other naturally
occurring materials are returned to the surface as flowback or wastewater. This wastewater is
typically stored on site in tanks or pits before treatment, disposal or recycling. In many cases, it
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101
is transported by overweight trucks to disposal injection wells. In areas where that is not an
option, it may be treated and reused or processed by a wastewater treatment facility and then
discharged to surface water.

Fracking requires a large amount of water, between 4 million to 6 million gallons per oil and gas
well.
47
With over 13,000 fracking wells drilled in Texas in 2012 alone, the amount of water used
is staggering.
48


A recent study by researchers at the University of Texas Bureau of Economic Geology found
that the vast majority of water, about 92 percent, used to frack Barnett Shale wells in 2011 was
"consumed" - never to return to the aquifer or reservoir again. Only around 5 percent of all the
water has been reused or recycled "for the past few years." The remainder, about 3 percent,
came from brackish water sources.
49

A separate study found that from 2011 to mid-2013, drillers used 3.9 billion gallons of water for
hydraulic fracturing in Dimmit County, which is in the heart of the Eagle Ford play.
50
In the 10
South Texas counties that make up the Eagle Ford Shale, close to 20 billion gallons of water
were used for fracking between 2011 and mid-2013.
51


Other than individual studies, there is no statewide data available, as nothing in state law
requires the industry to report the source of its water.
52




1
http://www.twdb.state.tx.us/waterplanning/swp/2012
2
http://www.twdb.state.tx.us/publications/state_water_plan/2012/00.pdf
3
http://www.twdb.state.tx.us/publications/state_water_plan/2012/01.pdf
4
http://www.twdb.state.tx.us/publications/state_water_plan/2012/03.pdf
5
http://www.twdb.state.tx.us/publications/state_water_plan/2012/00.pdf
6
Id.
7
Id.
8
Id.
9
http://www.twdb.state.tx.us/publications/state_water_plan/2012/09.pdf
10
Id.
11
http://www.texascenter.org/water/Learning%20From%20Drought%20Final.pdf
12
http://www.texastribune.org/2014/05/09/how-much-more-water-will-texas-really-need/
13
http://www.texascenter.org/water/Learning%20From%20Drought%20Final.pdf
14
Id.
15
http://climatexas.tamu.edu/files/2011_drought.pdf
16
http://www.window.state.tx.us/specialrpt/water/96-1746.pdf
17
http://www.bbvaresearch.com/KETD/fbin/mult/111209_EconomicWatchEEUU_136_tcm348-
282133.pdf?ts=19122011
18
http://www.window.state.tx.us/specialrpt/water/96-1746.pdf
19
http://waterdatafortexas.org/drought/twdb-reports/twdb_drought_report_2014-04-21.pdf
20
Id.
21
Id.
22
Id.
23
http://www.window.state.tx.us/specialrpt/water/96-1746.pdf at 8.
24
Id.
25
Id.
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26
http://www.texastribune.org/2014/04/30/record-drought-takes-toll-dinner-tables/
27
http://tamutimes.tamu.edu/2013/09/26/drought-here-to-stay-could-last-another-15-years-says-texas-am-expert
28
http://www.statesman.com/news/news/local/austin-might-add-drought-fee-to-water-bills/nfrFc/
29
http://www.npr.org/2014/05/06/309101579/drought-stricken-texas-town-turns-to-toilets-for-water
30
http://www.texastribune.org/plus/water/vol-2/no-5/farmers-in-lower-colorado-will-be-cut-off/
31
http://southwestfarmpress.com/management/best-and-worst-southwest-ag-stories-2013?page=3
32
http://www.dallasnews.com/news/state/headlines/20131229-texas-matagorda-bay-suffering-from-drought-water-
use.ece
33
https://www.texastribune.org/2013/06/06/west-texas-oilfield-town-runs-out-water/
34
http://www.nytimes.com/2012/02/04/us/texas-drought-forces-town-to-haul-in-water-by-truck.html
35
http://www.capitol.state.tx.us/BillLookup/History.aspx?LegSess=83R&Bill=HB4
36
http://www.window.state.tx.us/specialrpt/water/96-1746.pdf
37
Id.
38
http://www.capitol.state.tx.us/BillLookup/History.aspx?LegSess=83R&Bill=HB4
39
http://www.twdb.state.tx.us/publications/state_water_plan/2012/00.pdf
40
http://www.twdb.state.tx.us/newsmedia/featured/stories/2013/11/index.asp
41
Id.
42
http://www.nacubo.org/Documents/BusinessPolicyAreas/WaterReportTexas.pdf
43
Id.
44
Id.
45
Id.
46
http://www.ncsl.org/research/energy/natural-gas-development-and-hydraulic-fracturing.aspx
47
http://www.texastribune.org/2013/03/08/texas-water-use-fracking-stirs-concerns/
48
http://www.environmentamerica.org/sites/environment/files/reports/EA_FrackingNumbers_scrn.pdf at 20
49
http://www.texasobserver.org/study-little-progress-made-recycling-water-fracking/
50
http://www.texastribune.org/2014/02/05/report-water-use-risk-oil-and-gas-drillers/
51
Id.
52
http://www.texasobserver.org/study-little-progress-made-recycling-water-fracking/
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Introduction to Energy & Environment

For the past decade, deregulation has had mixed outcomes for Texas consumers. Texans in the
competitive residential market often pay a higher monthly average energy bill. Recently, prices for most
investor owned utilities have increased, while some MUNIs & Coops have experienced reductions in
rates.
Since 2010, the prospect for blackouts in Texas increased after extreme weather and drought strained
generating resources in 2010 and 2011. Coupled with the slow pace of new power-plant construction,
Texans are in danger that electric supply will not keep pace with rising demand in the $29 billion
wholesale market.
1


In the past five years, renewable energy (both wind and, more recently, solar) has crossed a key
threshold in Texas: it can now compete and win in the marketplace against most conventional resources.

With over 12,000 MW, Texas has more wind power installed than any other state in the U.S. If
Texas were a country, it would be 6
th
in the world for installed wind power.
According to the National Renewable Energy Laboratory, Texas is ranked 3
rd
in the nation for
installed renewable energy capacity of any type, driven mostly by wind.
On a cumulative basis, Texas doesnt even rank in the top 10 states of total solar installed
coming in below northern states like New Jersey, North Carolina, and New York.
Texas has the most renewable energy potential of any state in the U.S., mostly due to our
immense solar and wind potential.




1
Texas Struggles to Keep Up With Power Demand, Texas Tribune, Galbraith, 7/20/2012, available @
http://www.texastribune.org/2012/07/20/texas-struggles-keep-power-demand

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Texas Energy
The Texas Legislatures deregulation of the retail electricity market, which began in 2002,
applies only to investor-owned utilities (IOUs) within the ERCOT, the entity that controls the
power grid for most Texans.

ERCOT by the numbers:
1


85% of Texas Load
24 million Texans
Competitive-choice customers: 73% of load
6.7 million electric-service IDs (premises)
41,500 circuit miles of high-voltage transmission
550 generating units
74,000 megawatts (MW) capacity for peak demand (one megawatt of electricity can
power about 200 Texas homes during periods of peak demand)
Record peak demand: 68,305 MW (Aug. 3, 2011)
New monthly peaks in October, November, and December 2013
Energy used in 2013: 331 billion kilowatt-hours
A nearly 2.1 percent increase compared to 2012 Market participants: >1,100 active
entities that generate, move, buy, sell or use wholesale electricity

Utilities owned by cities and rural cooperatives may join the deregulated market but are not
required to do so.

For the past decade, deregulation has had mixed outcomes for Texas consumers. Texans in the
competitive residential market often pay a higher monthly average energy bill. Recently, prices
for most investor owned utilities have increased, while some MUNIs & Coops have experienced
reductions in rates.



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107
ELECTRIC UTILITY BILL COMPARISON
February 2014
RESIDENTIAL RESIDENTIAL Last year's avg. kWh usage
TEXAS 500 kWh 1000 kWh paired with current rates
UTILITIES February % Rank February % Rank February Average Rank
2014 2013 Change Low=1 2014 2013 Change Low=1 2013 Bill Low=1
INVESTOR OWNED ($) ($) ($) (kWh) ($)
Sharyland (Cap Rock
Energy) $59.09 $53.39 10.7% #N/A $108.19 $96.79 11.8% #N/A 1,178 $123.63 #N/A
El Paso Electric $57.24 $55.73 2.7% 4 $109.43 $106.40 2.8% 4 553 $62.77 1
Entergy Texas $59.67 $46.18 29.2% 5 $113.35 $86.34 31.3% 5 1,067 $120.31 5
Southwestern Public
Service $50.54 $46.98 7.6% 2 $93.50 $87.97 6.3% 2 891 $84.13 2
Southwestern Electric
Power $46.24 $39.97 15.7% 1 $78.97 $67.78 16.5% 1 1,130 $84.41 3
Average $54.56 $48.45 12.6% $100.69 $89.06 13.1% 964 $95.05
COOPERATIVES
Magic Valley EC $59.35 $62.35 -4.8% #N/A $98.70 $104.70 -5.7% #N/A 1,034 $115.37 #N/A
Upshur Rural EC $59.88 $56.50 6.0% 1 $103.75 $97.99 5.9% 1 1,217 $116.00 1
Victoria EC $65.39 $65.39 0.0% 3 $112.28 $112.28 0.0% 3 1,126 $124.10 3
Average $61.54 $61.41 0.2% $104.91 $104.99 -0.1% 1,126 $118.49
TEXAS MUNICIPALITIES
Austin Energy (City of
Austin) $44.85 $42.27 6.1% #N/A $98.68 $93.54 5.5% #N/A 647 $60.67 #N/A
CPS Energy (San
Antonio) $53.30 $55.07 -3.2% 3 $97.84 $101.88 -4.0% 3 877 $86.88 3
City of San Marcos $50.31 $48.22 4.3% 2 $91.33 $87.94 3.9% 1 805 $73.10 1
Average $49.49 $48.52 2.0% $95.95 $94.45 1.6% 776 $73.55
Texas Average
(Surveyed) $55.08 $52.00 5.9% $100.55 $94.87 6.0% 957 $95.58
(Available at http://www.puc.texas.gov/industry/electric/rates/NCrate.aspx)


Current State of Texas Energy
Texas likes to be No. 1 at everything. However, since 2010, the prospect for blackouts in Texas
increased after extreme weather and drought strained generating resources in 2010 and 2011.
Coupled with the slow pace of new power-plant construction, Texans are in danger that
electric supply will not keep pace with rising demand in the $29 billion wholesale market.
2


In the summer of 2012, Texas was ranked dead last when it comes to the reliability of its
electrical system.
3
Despite modernizing its electric grid in 2013,
4
ERCOT again was projected to
have a smaller reserve margin of electricity than expected putting Texas consumers at risk for
rolling blackouts and sustained and costly outages.
5
In fact, in 2013, the Texas power grid had
the lowest projected percentage of power reserves of any region of the country.
6


How has Texas avoided disaster? Household energy use has declined nationally for two
decades.
7
In addition, wind producers increased their power generation by 20% in 2013.
8


Back to Basics 2014 Policy Guide
108
Even though demand has substantially lessened, Texas is still at risk for not having enough
energy to meet our future demands.

Historically low natural gas prices, a more efficient generating fleet, and a boom in wind
power have combined to shrink power plants investment returns and lower Texas generation
capacity.

ERCOT, the entity that maintains the electricity grid that manages 85% of Texas energy load,
currently projects that by 2023 our summer reserve margin will be reduced to 5.8%.
9


Current Energy Consumption in ERCOT
Alarmingly, in 2014, Texas current energy use is out-pacing projected use, because of an
abnormally cold winter experienced throughout most of Texas.


(2014 Demand and Energy Report, ERCOT, TAB available @
http://www.ercot.com/news/presentations/)

Recent Energy Issue: Capacity v. Energy-Only
The shrink in return on investment for energy generation and the booming population growth
of Texas have created a policy question. Does the wholesale energy market need to be altered
to spur power generation?
Currently, the reserve margin (the amount of excess energy in generational capacity at any
time) is a goal not a mandate. There is no way to ensure that there is enough energy at peak
usage.
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
MW
Actual Peak Demands and Forecasted Peak Demands
2014 Actual 2014 Forecast
Based on Hourly Intervals
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109
Under the market current setup, utilities are paid only for the energy they generate. In a
capacity model, the companies get paid for maintaining backup capacity.
On October 25
th
, the Public Utility Commission adopted a non-binding 2-1 vote to mandate a
reserve margin, which would be the first step in converting to some form capacity market.
Recent modeling by ERCOT suggests that Texas is currently generating enough energy to meets
its reserve margins and that there is more time to determine whether a capacity market will be
necessary.
Business and consumer advocates are largely against a capacity market, because it essentially
pays energy producers for excess unused energy. PUC Commissioner Ken Anderson has
suggested that a capacity market is a subsidy to power generators and would cost ratepayers
$3.6 billion dollars.
10

Bottom Line
Texas has a complicated deregulated energy market that has produced mixed results
consumers. There is genuine concern that this deregulated market does not sufficiently
incentivize new power generation. In other words, Texas is not sure that we will have enough
energy in the future to meet our needs.

Texas has been an energy center for the globe. There are reasons to believe that it will be in the
future. Wind generation has continued its steady progression as a leading source of energy for
Texas consumers. However, to prepare for the coming power generation needs, there will be
outages, blackouts, and economic danger.

1
ERCOT Quick Facts, http://www.ercot.com/content/news/presentations/2014/ERCOT_Quick_Facts_February%2027%202014.pdf

2
Texas grid agency to delay 2014 reserve-margin report, Reuters, Eileen OGrady, available @
http://www.reuters.com/article/2013/11/21/utilities-ercot-reserve-idUSL2N0J522L20131121

3
Texas Struggles to Keep Up With Power Demand, Texas Tribune, Galbraith, 7/20/2012, available @
http://www.texastribune.org/2012/07/20/texas-struggles-keep-power-demand

4
Texas Ranks High for Electric Grid Improvements, Texas Tribune, Satija, 7/23/2013, available @
http://www.texastribune.org/2013/07/23/texas-scores-high-electric-grid-improvements

5
2013 Summer Reliability Assessment, North American Electric Reliability Corporation, May 2013, p. 1 (The Anticipated Reserve Margin for
ERCOT is 12.88 percent for summer 2013. This is below the 13.75 percent target for ERCOT. Sustained extreme weather could be a threat to
supply adequacy this summer. ERCOT may need to declare Energy Emergency Alerts (EEA) if there are higherthannormal forced generation
outages or if recordbreaking weather conditions similar to the summer of 2011 lead to higherthanexpected peak demands.)

6
Texas Power Grid Poised to Be Put to the Test Again, Texas Tribune, Galbraith, 5/21/13, available @
http://www.texastribune.org/2013/05/21/texas-power-grid-faces-strains-summer-and-beyond/


7
ERCOT: Growth in Texas Energy Demand Slows, Texas Tribune, Malewitz, 2/28/2014, available @
https://www.texastribune.org/2014/02/28/ercot-growth-texas-energy-demand-slows; See Also Residential Energy Consumption Survey, U.S.
Energy Information Administration, 6/6/2012, available @ http://www.eia.gov/consumption/residential/reports/2009/consumption-
down.cfm?src=%E2%80%B9%20Consumption%20%20%20%20%20%20Residential%20Energy%20Consumption%20Survey%20(RECS)-b5

8
Wind Generation Surges in Texas, Dallas Morning News, Osborne, 9/20/2013, available @
http://www.dallasnews.com/business/energy/20130920-wind-power-generation-surges-in-texas.ece

Back to Basics 2014 Policy Guide
110

9
Report on the Capacity, Demand, and Reserves in the ERCOT Region, ERCOT, February 2014, Tab Summer Summary, available at
http://www.ercot.com/gridinfo/resource
10
Texplainer: What's an Energy Capacity Market? Texas Tribune, Malewitz, 10/30/2013, available @
http://www.texastribune.org/2013/10/30/texplainer-texas-capacity-market-debate
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112











Renewable Energy in Texas
ERCOT Electric Reliability Council of Texas, responsible for managing electric reliability and
wholesale markets for about 85% of Texas electric customers; provides near and long term
forecasting.

$/MWh the all-in, long-run cost of electricity from a power plant or the wholesale market,
includes fuel and capital costs

Summary
In the past five years, renewable energy (both wind and, more recently, solar) has crossed a key
threshold in Texas: it can now compete and win in the marketplace against most conventional
resources. Two recent Austin Energy contracts, which are some of the few that are discussed
publicly in detail, highlight this fact. The chart below illustrates how competitive renewables
are -- both pre- and post-subsidy -- with fossil fuel generation based on Austin Energy
1
and
DOE
2
information.

$-
$20
$40
$60
$80
$100
$120
$140
$160
Wind Solar Natural
Gas -
Baseload
Natural
Gas -
Peaking
Coal Coal with
carbon
capture
Nuclear
$
/
M
W
h

Without Federal Subsidies
With Federal Subsidies
Back to Basics 2014 Policy Guide
113

Coastal wind and solar power provide electricity during peak hours, and even wind from West
Texas, which generates mostly at night, provides about 14% of its total capacity during peak
times.
3
Wind and solar both offer power into the real time energy market at zero or near zero
prices because they have no fuel cost. This helps to reduce overall market prices,
4
although its
important to keep in mind that there is some cost associated with renewable energy subsidies
(mostly federal).

Currently ERCOT receives about 10% of its energy from almost 11,000 MW of wind installed
throughout ERCOT (theres another ~1,000 MW more wind in non-ERCOT areas of Texas).
5

While solar doesnt yet play a noticeable role (theres about 200 MW installed and another 500
MW or so in the pipeline), steep cost reductions over the past few years will probably change
that soon.

Other Renewables
Texas has ample biomass and geothermal resources, as well as offshore wind. Those resources
are less well understood by the public and in general, polling seems to favor the use of wind
and solar specifically rather than a more complicated set of technologies.

Renewable Energy Subsidies
Renewable energy has received federal support in the form of Production Tax Credits for wind
and Investment Tax Credits for solar. Wind energy has received the bulk of the benefit from
Texas Renewable Portfolio Standard.

Wind Production Tax Credit
The wind subsidy expired at the end of 2013 and is not likely to be renewed; while the Austin
Energy deal did include the tax credits, even backing out those subsidies its clear that wind is
the cheapest technology available today. Its possible that the tax credits are responsible for
continued wind development despite low power prices. The subsidy is a ~$22 tax credit given
to wind producers for each MWh produced, reducing the price of output. In some cases this
means wind producers are willing to take extremely low or even negative prices in the market
just to produce so they can receive the tax credit.

The Texas Public Policy Foundation and PUC Chair Donna Nelson have occasionally attributed
the resource adequacy problems to this tax credit, however that is a completely unfounded
statement based on no analysis. The first Brattle Report shows that negative prices from wind
impact the non-western zones of ERCOT (where over 90% of the power plants are located in TX)
less than 0.4% of the time.
67
In the ERCOT Independent Market Monitors State of the Market
Report released in 2013 they found that coal and gas set the price of energy 80-90% of the
time, playing a much larger role in investment decisions for building new power plants.
8


Solar Investment Tax Credit
Solar receives an Investment Tax Credit, which reduces total installation cost by 30%. In 2016
this number will go down to 10%. However given recent solar deals even if the tax credit were
Back to Basics 2014 Policy Guide
114
to go to zero solar would be cheaper than a new coal, nuclear, or a peaking natural gas power
plant.

TX Renewable Portfolio Standard
At this point the Texas RPS goal of 5,880 MW by 2015 has been met more than 2x over, and its
real function is to provide a tracking and valuation mechanism for those customers (like Wal -
Mart, sports stadiums, and customers who want to be more energy independent/sustainable)
who voluntarily choose to receive some portion of their electricity from wind and solar. The
RPS goal has a minimal impact on ERCOT, however the tracking and valuation function is very
important based on my experience.

Natural Gas Subsidies
Wind and solar subsidies should be considered in the context of state natural gas subsidies.
While the RPS goal of 5,880 MW could be said to cost in the range of $30-$50M annually (costs
are not public), as stated above thats mostly voluntary rather than strictly compliance
payments. As the LBB reported, natural gas received $1.2B in high cost (i.e. hydraulically
fractured) natural gas tax exemptions in 2009. High cost gas in 2009 represented 55% of gas
production in the state.
9


Helpful Stats
With over 12,000 MW,
10
Texas has more wind power installed than any other state in
the U.S. If Texas were a country, it would be 6
th
in the world for installed wind power.
11

According to the National Renewable Energy Laboratory, Texas is ranked 3
rd
in the
nation for installed renewable energy capacity of any type, driven mostly by wind.
12

Last year Texas ranked 7
th
in solar capacity installed for the year
13
, due mainly to
projects and rooftop solar incentives from San Antonios CPS and Austin Energy.
14

On a cumulative basis, Texas doesnt even rank in the top 10 states of total solar
installed coming in below northern states like New Jersey, North Carolina, and New
York.
15

Texas has the most renewable energy potential of any state in the U.S., mostly due to
our immense solar and wind potential as seen in the chart below.
16


Back to Basics 2014 Policy Guide
115


Source: http://www.nrel.gov/gis/re_potential.html

1
Two AAS articles: Why Austin Energys next big wind contract could be the last, (2/20/14) and Austin
Energy close to signing cheapest solar power deal experts have seen (3/7/14)
2
http://www.eia.gov/forecasts/aeo/er/electricity_generation.cfm see Table 1
3
http://www.ercot.com/content/meetings/gatf/keydocs/2013/0405/Analysis_of_Wind_Data_in_2012_LOLE
v_Study_v3.ppt, see p. 2
4
http://www.ercot.com/content/meetings/gatf/keydocs/2013/0405/Analysis_of_Wind_Data_in_2012_LOLE
v_Study_v3.ppt, see p. 66
5
http://www.ercot.com/content/news/presentations/2014/ERCOT_Quick_Facts_February%2027%202014.
pdf
6
http://www.ercot.com/content/news/presentations/2013/Brattle%20ERCOT%20Resource%20Adequacy
%20Review%20-%202012-06-01.pdf, see p. 20
7
For more detail, see http://blogs.edf.org/energyexchange/2012/09/13/chasing-red-herring-on-the-wind-
2/
8
http://www.potomaceconomics.com/uploads/ercot_reports/2012_ERCOT_SOM_REPORT.pdf, see p. 62
9
http://www.lbb.state.tx.us/Other_Pubs/Natural%20Gas%20Tax%20Overview.pdf
10
http://en.wikipedia.org/wiki/Wind_power_in_Texas
11
http://en.wikipedia.org/wiki/Wind_power_by_country
12
http://www.nrel.gov/docs/fy14osti/60197.pdf, see p. 30
13
http://www.seia.org/research-resources/solar-industry-data
14
Im positive this is true but dont have a citation yet, contact me if it becomes important and I havent
updated the document.
15
http://www.seia.org/research-resources/solar-industry-data
16
http://www.nrel.gov/gis/re_potential.html
0
5
10
15
20
25
30
35
C
a
p
a
c
i
t
y

(
M
i
l
l
i
o
n

M
W
)

Top 10 US States Renewable Energy Potential Capacity
Solar Wind
Biopower Geothermal
Back to Basics 2014 Policy Guide
116












Hydraulic Fracture Drilling

Background
The process of hydraulic fracture drilling (fracking) has been used for over 60 years to enhance
the production of natural gas and oil from more than one million wells in the U.S. For years, oil
and gas deposits in certain rock formations, like Texas shale formations, were thought to be
inaccessible and/or uneconomical, but recent technological advances in the fracking process
have changed that perception and allowed operators to develop these natural resources.
1

Fracking is now performed in nine out of ten of the countrys natural gas wells and has led to a
rapid and successful increase in energy production in Texas. Currently, the majority of fracking
is occurring in the Permian Basin (Cline Shale and Wolfcamp Shale) and the Eagle Ford Shale,
with smaller plays in the Granite Wash Formation, Barnet Shale, and Haynesville/Bossier Shale.

The Railroad Commission (RRC) and the Texas Commission on Environmental Quality (TCEQ) are
the two state agencies with the most responsibility for establishing standards and enforcing
regulations for oil and gas exploration and production. With the prevalence of fracking in urban
areas in recent years, some local municipalities have added additional regulations relating to
site location, operational limitations, noise levels, water management, waste disposal, etc.

Process
Fracking is a drilling process by which natural gas and oil are mined from the earth. It involves
the injection of water, sand, and chemicals, commonly referred to as fracking fluid, at high
pressure down and across into horizontally drilled wells. The pressurized fracking fluid causes
the rock layer to crack. These fissures are held open by the sand particles so that the natural
gas or oil from the shale can flow up the well.
2


Depending on the rock formation, a decent amount of fracking fluid along with other naturally
occurring materials are returned to the surface as flowback or wastewater. This wastewater is
typically stored on site in tanks or pits before treatment, disposal or recycling. In many cases, it
is transported by overweight trucks to disposal injection wells. In areas where that is not an
option, it may be treated and reused or processed by a wastewater treatment facility and then
discharged to surface water.
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117

Current Issues - Specific to Fracking
Transportation Issues
As hydraulic fracture drilling is a water-intensive process, high-salinity wastewater
containing chemicals, sand, and other minerals is a prevalent byproduct. Presently, large
trucks and overweight vehicles are the primary source for removing oil and gas
wastewater from production sites and transporting it to disposal injection wells. The use
of these large trucks causes heightened emissions, noise pollution, increased traffic, and
extensive road damage.
According to figures from TxDOT for the Barnett Shale in 2010:
o The average well was producing about 4,200 gallons of wastewater per day, which
equates to 353 truckloads a year or roughly one truck load per day per wellhead.
o In April of 2010, there were 13,740 active well sites in just Tarrant County, which
equates to millions of overweight truck trips per year.
o The average empty water tanker weighs 35,000 lbs. and a loaded tanker weighs
80,000 lbs.
According to a report released at the end of 2012 by the State's Task Force on Texas'
Energy Sector Roadway Needs, rebuilding the infrastructure in regions with increased
energy-related activities will cost approximately $2 billion per year for state highways
and another $2 billion per year for city streets and county roads.
3

At present, the majority of hydraulic fracking is occurring in rural parts of the state
where the roads and bridges are designed for lower volumes of traffic. According to
DPS, crashes involving commercial trucks are up 1,000 percent in Karnes, La Salle and
Dimmit counties, all of which are seeing a dramatic increase in energy production.
4

A report by State Impact Texas cited a dramatic increase in illegal dumping of oil and gas
waste in West Texas. Under Texas law, wastewater from drilling operations is supposed
to be taken to a state-permitted disposal site. Because disposal sites charge hundreds of
dollars in fees per load and can be many miles from a drilling location, some bad actors
in the industry are dumping the drilling waste on or along roadways as a fast and cheap
alternative. Unfortunately, the RRC and local law enforcement lack sufficient resources
to effectively target the illegal dumping.
5

Water Use
The surge in exploration and production in the shale plays around Texas has created
concerns in recent years over the amount of water being used in fracking and its impact
on local water supplies. With Texas' population expected to reach 46.3 million people
over the next 50 years, drought conditions over the past three years and water
shortages over the past five years, the amount of water used by the oil and gas has
come under scrutiny.
6

Water usage varies on the size and conditions of the shale formation, with Haynesville
shale requiring close to 8 million gallons per well, followed by the Eagle For d play at 5
million and Barnett shale at over 4 million gallons.
7

According to the Texas Water Development Board's 2012 State Water Plan, water used
in oil and gas exploration, development, and extraction represented only 1.6 percent of
Back to Basics 2014 Policy Guide
118
Texas' total water use. However, he report doesn't take into account the effects of
drilling in drought-ridden parts of the state like the Permian Basin. A recent report
found that more than 70 percent of the Permians oil wells are in areas of extreme
water stress.
8

There has been a recent push by certain sectors of the industry and elected officials to
increase water recycling and/or use brackish water for drilling practices, but no big or
lasting moves have been made yet.
Seismic Activity
A recent increase in seismic activity in part of North Texas have raised questions among
the general public and elected officials regarding certain human activities' ability to
trigger earthquakes. On the other hand--much like climate change--the scientific
community has known for decades that injection wells used to dispose of oil and gas
drilling waste have been found to cause seismic events.
9

Recently, the Texas Railroad Commission hired a state seismologist to investigate
seismic events in this state and advise the Railroad Commission.
10

Understanding the potential for inducing seismicity at levels noticeable to the public and
limiting their impacts is desirable for the state. Work is needed to build robust
prediction models, assess potential hazards, and help relevant agencies coordi nate to
address them.
11

High Cost Gas Tax Loophole
The high cost natural gas rate reduction program is a tax loophole based on 30-year-old
production definitions and has no relationship to the actual cost of drilling a well.
12
As a
result, in 2009, 55 percent of gas production in Texas was considered "high cost."
This has reduced the 7.5 percent severance tax to an effective rate between 1.1 and 1.9
percent in recent years. The Texas Legislative Budget Board has done a lot of excellent
analysis of the loophole.
According to the LBBs January 2013 report on the subject, [t]he cost to the state of
high-cost gas tax-rate reductions reached a high of $1.97 billion in fiscal year 2008, and
averaged $1.17 billion during fiscal years 2004 to 2011. Since fiscal year 2004, the value
of high-cost gas tax-rate reductions has totaled $9.4 billion in forgone state revenue.
13

The value of the loophole is highly dependent on the cost of natural gas. From the LBB:
[f]rom fiscal years 2004 to 2011, the maximum value of the rate reduction at the
average effective tax rate was $0.67 per Mcf in July 2008 when the price of gas was at
historic highs and was at its lowest point in September 2009 at $0.17 per Mcf when gas
prices were at their lowest point.
As a result, lost state revenue is also at its highest when natural gas prices are at their
highest: [w]hen the price of gas peaked at an average of $10.79 in July 2008, the cost
to the state of the rate reduction also peakedcosting the state $280.8 million in the
same month.
The average monthly price of natural gas exceeded $10.00 per Mcf three times from
2004 to 2012, in October 2005, June 2008 and July 2008. In those three months, the
high-cost gas-rate reduction cost the state an average of $228.7 million per month in
foregone revenue.
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119



1
http://www.ncsl.org/research/energy/natural-gas-development-and-hydraulic-fracturing.aspx
2
http://www.ncsl.org/research/energy/natural-gas-development-and-hydraulic-fracturing.aspx

3
http://ftp.dot.state.tx.us/pub/txdot-info/energy/final_report.pdf
4
http://ftp.dot.state.tx.us/pub/txdot-info/energy/final_report.pdf
5
http://stateimpact.npr.org/texas/2013/04/10/texas-county-tries-to-stop-illegal-dumping-of-oil-waste/
6
http://www.rigzone.com/news/oil_gas/a/125794/Legislation_Targets_Mandates_for_Water_Recycling_in_Oil_Gas
_Industry
7
http://www.rigzone.com/news/oil_gas/a/125794/Legislation_Targets_Mandates_for_Water_Recycling_in_Oil_Gas
_Industry
8
https://www.hcn.org/blogs/goat/permian-basin-in-new-mexico-and-west-texas-americas-newest-fracking-boom;
http://www.rigzone.com/news/oil_gas/a/125794/Legislation_Targets_Mandates_for_Water_Recycling_in_Oil_Gas_
Industry

9
http://dels.nas.edu/report/induced-seismicity-potential-energy-technologies/13355
10
http://www.timesrecordnews.com/news/2014/mar/31/seismologist-hired-study-impact-oil-gas-extraction/
11
http://dels.nas.edu/report/induced-seismicity-potential-energy-technologies/13355
12
http://www.lbb.state.tx.us/Other_Pubs/Natural%20Gas%20Tax%20Overview.pdf
13
http://www.lbb.state.tx.us/Documents/Publications/GEER/Government%20Effectiveness%20and%20Efficiency%20Report%202012.pdf#Modi
fyTheHighCost
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120












Texas vs. EPA Litigation & EPA Action Summary

This brief documents high profile cases in which the state of Texas is a litigant against the U.S.
Environmental Protection Agency (EPA), most of which focus on Greenhouse Gas (GHG)
regulations and climate science. Two lawsuits focus on air quality vis--vis the Cross-State Air
Pollution and Mercury Air Toxics rules. Good link for quick summaries:
http://www.texastribune.org/library/about/texas-versus-federal-government-lawsuits-
interactive/#dodd_frank-multi_state-challenge

For a full list of cases, see: http://www.texasahead.org/texasfirst/news_impact/lawsuits.php

The EPA is in the process of developing several rules that may be proposed or finalized during
the campaign, including rules for power plants on mercury emissions, GHG standards, and
water use. The EPA has adamantly stated that in cases where their regulations might impact
electric reliability they have and will continue to develop reasonable exemptions.
1


EPA Litigation and Rules Likely to be in the News during the 2014 Election Cycle
EPA Finalization of GHG Standards for New Power Plants (Possibly before the election
comment period closes May 9)
EPA Proposed Rule for GHG Standards for Existing Power Plants (June 1 deadline)
EPA Rule on Water use for Cooling in Power Plants (April 17 deadline)
2

Supreme Court Rulings on 2 EPA rules (May July)
o GHG Regulations
o Cross-State Air Pollution Rule
DC Court of Appeals ruling on the Mercury Air Toxics Rule (ruling expected during the
current session)

Background on GHG Related Litigation in TX
GHG Endangerment Finding
In 2007, the United States Supreme Court ruled in Massachusetts v. EPA that, if EPA concludes
that GHGs endanger public health, the agency must regulate GHG emissions under the Clean Air
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121
Act. EPA subsequently found that GHGs do endanger public health. Texas has joined other
states in challenging EPAs finding in court.

GHG Regulation
From the Texas Tribune:
After issuing the Endangerment Finding, the EPA established three rules to regulate greenhouse gas
emissions. The "tailpipe rule" established regulations on motor vehicle manufacturers that would reduce
greenhouse gas emissions in new cars. The "timing rule" said that other facilities would also be subject to
greenhouse gas regulations when the tailpipe rule started in January 2011. And the "tailoring rule"
targeted large polluters by requiring only the permitting of facilities that meet or exceed a threshold for
greenhouse gas emissions.
3


TX Regulation of GHG Rules
Under the Clean Air Act, states have the authority to regulate air pollution, but the EPA has
approval/oversight responsibilities. Because TX refused to implement GHG rules, the EPA
ordered TX to change their rules within one year to meet the new standards. When TX did not
comply, the EPA took over the issuing of GHG permits in TX, leading TX to sue the EPA, with
Abbott calling it unlawful overreach. A federal appeals court denied TXs request to
temporarily halt the EPA from intervening in the permitting process. Ultimately pressure from
businesses wanting regulatory certainty lead to legislation last session ordering the TCEQ to
issue GHG permits, as has been reported in the news lately.
4


Summary of GHG Litigation
The DC Circuit Court found that 1) the Endangerment Finding and the Tailpipe Rule were not
arbitrary and capricious, 2) EPA's interpretation of the Clean Air Act as it applies to stationary
sources is "unambiguously correct" and 3) the petitioners lacked standing to challenge the
Timing and Tailoring Rules.
5
In October 2013, the Supreme Court accepted six petitions for
review (incl. TX v. EPA), but said it would consider only a single question for all of them. The
granted issue is: Whether EPA permissibly determined that its regulation of greenhouse gas
emissions from new motor vehicles triggered permitting requirements under the Clean Air Act
for stationary sources that emit greenhouse gases. Find a more detailed analysis at
SCOTUSBlog.
6


In February oral arguments, the Court and US DOJ recognized that even if the Court rules
against the EPA on this, the EPA will still have the ability to regulate GHG emissions. EPA
believes this is the best and most effective way to do so but they apparently have other
avenues. The Court has narrowed the issue down so much that a negative ruling would mean
they could only reach 83% of industrial sources, rather than 86%.
7


Cross-State Air Pollution Rule (CSAPR)
Also called the Good Neighbor Rule. From the Texas Tribune:
[it] imposes a harsher cap on sulfur dioxide and nitrogen oxide emissions, which can cause acid rain and
heavy smog. The rule applies to power producers and companies whose emissions cross state lines and
cause pollution in other states.
8

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122
The rule applies to most states east of the Rockies and is the result of a DC Circuit Court ruling
in 2008 that the original version of the rule (the 2005 Clean Air Interstate Rule - CAIR) did not
do enough to reduce cross-state pollution of NOX & SO2. While the CSAPR case is pending,
CAIR (which included TX) is in effect. The US Court of Appeals for DC remanded the rule
without vacature, and the EPA has appealed it to the Supreme Court.

From the NYT:
Rather than apportion the reductions according to the amount of pollution that each upwind state was
contributing, the E.P.A. was seeking to require cleanup according to the cost of the reductions, so that the
work would get done in the places where the cost of capturing a ton of sulfur or nitrogen oxides was the
lowest. The agency was seeking to create a trading system in which the states could buy and sell pollution
credits, with the actual work being done in the places where it was easiest to do it.

But the court said that under this scheme, the agency had improperly required states to reduce their
emissions by more than their own significant contribution to a downwind states nonattainment.
9


Mercury and Air Toxics Rule (MATS)
This hasnt received as much press but will have a significant effect both on human health and
power production in Texas by reducing mercury and other toxins (acid gases, arsenic, etc.)
emitted by power plants. Mercury is a neurotoxin that affects early childhood brain
development, reducing childrens IQ and ability to learn. The rule has been in some stage of
development for over 20 years, and the EPA estimates this rule will prevent over 1,000
premature deaths in TX annually.
10


Conclusion
Discussion of environmental policies should center around 3 main messages: education, health,
and economic development.

The science on climate change is sound, and contrarians seem to misunderstand how scientific
consensus works, and in turn they devalue the benefit of STEM education. Recently in Houston
the CEO of the worlds largest mining company, BHP Billiton acknowledged that climate change
is real and we need to reduce carbon emissions to counteract its effects,
11
and Exxons CEO has
made similar statements.
12
In all at least 29 major US companies use an internal price on
carbon either to meet internal sustainability goals or to prepare for what they see as inevitable
carbon regulations.
13
These include most major oil and gas companies, electric utilities, Wal-
Mart, ConAgra Foods, Walt Disney, and DuPont.

Rules like the Cross-State Air Pollution Rule and Mercury and Air Toxics Rule are intended to
protect human health. In a state with inadequate health care coverage rules like this become
even more valuable. Together they are expected to prevent almost 3,000 premature deaths
annually in Texas, as well as preventing heart attacks, hospitalizations and ER visits - preventing
in total over 100,000 lost work days due to illness.
14


Finally, on economic development, the states that can succeed with these new rules will have
one of three things: substantial renewable energy resources, substantial natural gas resources
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123
and infrastructure, or the right geographic formations and industry expertise to sequester
carbon dioxide safely and securely. Texas of course is uniquely blessed with all three of these.


1
http://www.usclimatenetwork.org/resource-database/epa-rules-and-reliability-fact-sheet/
2
This is a rule that is primarily intended to reduce water-intake at power plants to preserve wildlife, however
it does have the impact of reducing water use at power plants, which would be beneficial in our continuing
drought. Let me know if more information is needed. Factsheet:
http://water.epa.gov/lawsregs/lawsguidance/cwa/316b/upload/factsheet_proposed.pdf
3
http://www.texastribune.org/library/about/texas-versus-federal-government-lawsuits-
interactive/#greenhouse-gas-regulation
4
http://www.texastribune.org/2014/02/02/anti-regulation-politics-may-have-hurt-energy-indu/
5
Center for Energy and Climate Solutions, Clean Air Act Cases: http://www.c2es.org/federal/courts/clean-
air-act-cases, see Coalition for Responsible Regulation v. EPA (United States Court of Appeals for the
District of Columbia Circuit, June 26, 2012).
6
http://www.scotusblog.com/2013/10/analysis-greenhouse-gases-case/
7
http://www.scotusblog.com/2014/02/argument-recap-five-the-number-that-counts/
8
http://www.texastribune.org/library/about/texas-versus-federal-government-lawsuits-
interactive/#cross-state-air-pollution-rule
9
http://www.nytimes.com/2012/08/22/science/earth/appeals-court-strikes-down-epa-rule-on-cross-
state-pollution.html
10
http://www.epa.gov/mats/whereyoulive/tx.html
11
Energy CEO: Climate change is real, driven by humans
12
Exxons CEO: Climate, energy fears overblown
13
http://big.assets.huffingtonpost.com/22Nov2013-CDP-InternalCarbonPriceReprt.pdf, see p. 3
14
http://www.edf.org/sites/default/files/EDF%20CSAPR%20Fact%20Sheet_TX.pdf
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Introduction to the Texas Workforce and Economy
Texas has the largest percentage of workers earning the minimum wage or less.
1

Texas boosters like to call the state a low-tax haven, pointing to the lack of a state income tax. But high
sales and property taxes fall disproportionally on low-income workers in families. Households earning
income of $31,771 or less pay 15.6% of their income in sales and local tax.
2
These kind of regressive taxes
mean that lower and middle-income people pay a much a higher effective tax rate than those with
higher incomes.
And although there are plenty of incentives and tax breaks for businesses
3
, especially ones lured from out
of state, most Texas businesses have struggled with the franchise tax. Many contend that the tax is
unfair, confusing, and costly to comply with.
4

Texas policymakers are not only undermining its future workforce, but also very clearly ignoring
significant sectors of its current workforce. This systemic disrespect for workers is most apparent in the
construction industry in Texas. Whether its the misclassification of employees, low wages, poor
regulations for workplace safety, or a workers comp system where participation is optional for
employers, Texas is a great place for employers, but not so much for the employees working for them.
In Texas, nearly twice as many women as men are paid at or below the minimum wage. In 2013, 8.4
percent of women workers earned the minimum wage or less, compared with 4.6 percent of men.
5

When broken down, full time, year round Texas women are paid about 82 cents for every dollar paid to
men, amounting to a yearly gap of $7,859 between men and women.
6


1

1
http://www.bls.gov/ro6/fax/minwage_tx.htm
2
http://forabettertexas.org/images/BT_2013_03_PP_WhoPaysTaxes.pdf
3
http://forabettertexas.org/images/BT_2013_05_PP_2013TaxGiveaways.pdf
4
http://taxfoundation.org/article/texas-margin-tax-experiment-failing-due-collection-shortfalls-perceived-unfairness-
taxing
5
http://www.houstonchronicle.com/business/economy/article/Texas-ranks-high-for-number-of-minimum-wage-
5393464.php
6

http://factfinder2.census.gov/faces/tableservices/jsf/pages/productview.xhtml?pid=ACS_11_1YR_B20017&prodTy
pe=table
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Back to Basics 2014 Policy Guide
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The Texas Miracle

The so-called Texas Miracle of economic growth and prosperity has been a staple of
Republican talking points and the centerpiece of Rick Perrys failed run for president. Politicians
have pointed to the Texas model as a winning public policy formula and proof that their
philosophy of low taxes, low regulation, tort reform, and low government spending works.
While Texas has been relatively fortunate in the economic downturn, the Texas Miracle isnt all
its cracked up to be and, more importantly, cant be attributed to conservative policies alone.

Jobs
Perry and other Republicans claim that Texas has created a disproportionate share of new jobs,
both since the start of Perrys tenure in 2001 and since the end of the recession in 2009. On its
face, this claim is true: from 2003-13, Texas gained 1.75 million net new jobs, about a third of
the national total.
1
And since the end of the recession, Texas has added a net 297,000 jobs.
2


But it is Texas growing population that has driven the growing economy
Texas population has grown from 20,851,820
3
in 2000 to an estimated 26,448,193 in 2013. The
labor force alone grew by 35%
4
. And contrary to popular opinion that people from liberal states
like California are pouring into Texas for jobs, the majority of the increase was natural
population growth, followed by international and domestic migration.
5
A large population
drives demand for goods and services that cause job creation, and Texas grew at twice the rate
than the rest of the country. The job boom hasnt quite kept up with the number of Texans
seeking work, however. Although below the national average, the unemployment rate is 6%
overall, and as high as 10% in the Rio Grande Valley. (Find more regional indicators
www.texasregionalopportunityindex.org.)

The jobs boom can also be explained by high oil prices and the huge growth in the oil & gas
industry in the past few years, driven by new oil plays in the Barnett & Eagle Ford Shale, among
others. Oil production increased 126% between 2010 and 2013, to almost a third of US oil
exports. This has caused a huge boom not just directly in energy sector jobs, but for related
industries like construction and service. And one growing sector that doesnt get a frequent
mention from Perry et al is the government: 1,809,200 Texans were employed in the
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127
government sector at the end of 2013
6
, with growth of about 165,500 jobs since 2003 (despite
large job losses after 2011 state budget cuts).
7


The quality of Texas jobs matters as well. We have the largest percentage of workers earning
the minimum wage or less.
8
Only 4.8% of the workforce is a member of a union, less than half
of the national total.
9
With laws restricting collective bargaining, workers have a harder time
organizing in Texas to realize many of the benefits of a union like higher wages, health
insurance, and benefits. Many jobs in Texas dont provide health insurance, leading to the
largest share of uninsured adults in the country.

Low Regulation
Texas is often cited as an attractive place for doing business because of the friendly regulatory
climate. But at least in the case of mortgage lending regulation, restrictions helped Texas fare
better than most of the country during the housing bust. Because of low labor costs, few
building regulations and plentiful land, housing has traditionally been fairly cheap. Home equity
loans, however, are capped at 80% of the houses appraised value, preventing homeowners
from using the rising value of their house like a piggy bank. Likewise, cash-out refinancing,
taking out a loan larger than the balance on a mortgage, was also restricted. As a result, far
fewer houses went into foreclosure or delinquency than in other states.
10


In most other ways, though, Texas industries enjoy a light regulatory burden, which often can
be unfortunate for consumers:
worker safety
clean air & water
payday lending
file and use insurance rates

Low Taxes
Texas boosters like to call the state a low-tax haven, pointing to the lack of a state income tax.
But high sales and property taxes fall disproportionally on low-income workers in families.
Households earning income of $31,771 or less pay 15.6% of their income in sales and local
tax.
11
These kind of regressive taxes mean that lower and middle-income people pay a much a
higher effective tax rate than those with higher incomes.

And although there are plenty of incentives and tax breaks for businesses
12
, especially ones
lured from out of state, most Texas businesses have struggled with the franchise tax. Many
contend that the tax is unfair, confusing, and costly to comply with.
13


This trend is also evident with small businesses in Texas. As a piece in Washington Monthly
recently explained, according to a joint study by the accounting firm Ernst & Young and the
Council on State Taxation, in fiscal year 2012 state and local business taxes in California came to
4.5 percent of private-sector gross state product. This compares with a 4.8 percent average for
all fifty statesand a rate of 5.2 percent in Texas. With the exception of New York, every major
state in the country, including New Jersey, Massachusetts, Pennsylvania, Ohio, Michigan,
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128
Indiana, Illinois, Wisconsin, and Minnesota, has a lower total effective business tax rate than
Texas.
14


Government Spending
Texas is indeed a low-spending state
15
, but that also means its a low-services state. That has
both the short-term effect of not getting services to people who need them, and the long-term
effect of not investing for the future. Gov. Perrys refusal to expand Medicaid, for example,
leaves almost a million Texans who would have qualified for the program without that low-cost
option. The legislature in 2011 slashed the state budget across the board, with $5.4 billion in
education funding lost, fewer students able to access student loans, and more. In
transportation, Texas essentially has no money to pay for new roads, jeopardizing future
economic growth. The lack of state spending also has the effect of shifting the burden to local
governments: Texas has the second highest per capita local debt among the 10 most populous
states.
16



1
http://www.politifact.com/texas/statements/2013/may/09/rick-perry/rick-perry-says-texas-accounted-33-percent-
nations/
2
http://money.cnn.com/2011/08/12/news/economy/perry_texas_jobs/
3

http://txsdc.utsa.edu/Resources/Presentations/OSD/2011/2011_08_19_Texas_Association_Healthcare_Interpreters_
Translators.pdf
4
http://data.bls.gov/timeseries/LASST480000000000003?data_tool=XGtable
5
http://www.factcheck.org/2011/08/texas-size-recovery/
6
http://www.bls.gov/eag/eag.tx.htm
7

http://online.wsj.com/news/articles/SB10001424053111903999904576470232177476242?mod=WSJ_hp_MIDDLE
NexttoWhatsNewsFifth&mg=reno64-
wsj&url=http%3A%2F%2Fonline.wsj.com%2Farticle%2FSB10001424053111903999904576470232177476242.ht
ml%3Fmod%3DWSJ_hp_MIDDLENexttoWhatsNewsFifth
8
http://www.bls.gov/ro6/fax/minwage_tx.htm
9
http://www.bls.gov/ro6/fax/union_tx.pdf
10
http://www.washingtonpost.com/wp-dyn/content/article/2010/04/03/AR2010040304983_2.html
11
http://forabettertexas.org/images/BT_2013_03_PP_WhoPaysTaxes.pdf
12
http://forabettertexas.org/images/BT_2013_05_PP_2013TaxGiveaways.pdf
13
http://taxfoundation.org/article/texas-margin-tax-experiment-failing-due-collection-shortfalls-perceived-
unfairness-taxing
14

http://www.washingtonmonthly.com/magazine/march_april_may_2014/features/oops_the_texas_miracle_that_is049
289.php?page=all
15
http://kff.org/other/state-indicator/per-capita-state-spending/
16
http://www.texastransparency.org/Special_Features/Your_Money/pdf/TexasItsYourMoney-LocalDebt.pdf
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Texas Enterprise Fund/Emerging Technology Fund

Overview
Two cornerstones of Governor Perrys strategy on economic development are the Texas
Enterprise Fund (TEF) and the Texas Emerging Technology Fund (ETF). Established by the
Legislature at the Governors request and administered by his office, these funds are
distributed as grants to companies, institutions of higher education and other entities for the
purpose of incentivizing economic growth. Long criticized by many Democrats for evidence of
cronyism and a lack of transparency, they have become increasingly unpopular with
Republicans who opposing picking winners and losers or corporate welfare
1
.

Economic Investment for All Texans
Throughout their histories, the TEF and ETF have been plagued by accusations of cronyism and
inefficiency. While Texas has spent millions on economic development incentives, it has failed
to develop fair and honest systems of reporting, evaluation and distribution of these funds.
Democrats believes that a strong economy requires smart investments by the state. Texas must
use all available tools to attract and retain jobs, including economic incentives. One key
element that has been missing from these funds is a real commitment to serve all Texans,
rather than just political insiders. Texas should reform the states economic incentive programs
to increase transparency, accountability and equity.

Today, every state in the nation has at least one tax incentive program, most have at least
several, and they are often used as part of a bidding war between states.
2
In 2012, states
added more than 180 new incentives and business assistance programs to some 1,700 already
existing programs.
3
Democrats should continue the Texas Enterprise Fund and the Texas
Emerging Technology Fund if improved reporting and evaluation of the funds demonstrate
proven and cost-efficient returns. If not, funding would be moved to other proven economic
incentives.

Texas Enterprise Fund
Purpose
Created in 2003, the Texas Enterprise Fund awards grants for economic development,
infrastructure development, community development, job training programs, and business
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131
incentives to attract new jobs and business investment to the state.
4
It is called a deal closing
incentive and can be used in combination with other incentives to attract and encourage
businesses.
5


Funding
In 2003, $285.0 million was appropriated from the Economic Stabilization Fund as the initial
grant funding for the 2004-05 biennium.
6
In subsequent years, it received state funds from
General Revenue ($160.8 million, total), transfers from the Employment and Training
Investment Assessment ($161.5 million), unexpended balances and interest earnings, as well as
gifts, grants, and donations.
7
For the first time, the 2011 TEF appropriation included only
unexpended balances and interest earnings with no new appropriation from the state.
8
Its
201415 biennial appropriation of $120.0 million also consisted only of unexpended balances
and interest earnings.
9


Awards
In Feb. 2014, the Legislative Budget Board reported that the Texas Enterprise Fund has awarded
a total of approximately $500.0 million in grants to 114 entities. The report also states that the
Governors Office estimates 68,753 jobs have been created.
10


Grant Process
The Texas Enterprise Fund is administered through the Economic Development and Tourism
division of the Office of the Governor.
11
An applicant submits a completed request, and the
Governors Office reviews and negotiates the grant with the applicant.
12
According to the
Governors Office, each project completes an application and undergoes an 11-step due
diligence process. Each applicant must demonstrate they will meet the following criteria:
13

Significant rate of return on the public dollars
No location decision made; competition with another state for the project
Significant projected new job creation - typically creating more than 75 jobs in urban
areas or more than 25 in rural areas
Creation of high-paying jobs - above the average wage of the county where the project
would be located
Significant capital investment by the company
Community involvement from the city, county and/or school district, primarily in the
form of local economic incentive offers
Financial soundness
Business sector must be an advanced industry
14

The Governor, Lieutenant Governor, and the Speaker of the House must unanimously agree to
support each project.
15
If the Lt. Governor or Speaker have not given their approval within 90
days of receiving the request from the Governor, the application is considered disapproved;
one may request an additional 14 days to consider an application.
16
The amount of each award
is determined by standardized analytical model, influenced by the number of jobs to be
created, the expected timeframe for hiring and the average wages to be paid.
17


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132
Enforcement
If approved, the applicant enters into a contract with terms including the amount of the grant,
the minimum number of jobs that will be created, the date those jobs will be created, and the
average wages to be paid.
18
The contract also must contain clawback provisions describing
how grant funds will be repaid to the State in the event that an applicant fails to live up to the
negotiated terms.
19


Reporting
An entity that receives a TEF grant must submit an annual progress report to the Governor, Lt.
Governor and Speaker of the House with information on each performance target specified in
the contract.
20
The Governors Office is statutorily required to submit a biennial report to the
Legislature containing all of the following elements:
Number of net new jobs created
Average wage per job created
Change in capital investment by company
Additional amounts of tax revenues to be generated by governmental entities in the
state from ad valorem taxes, sales and use taxes and fee revenues
Amounts of tax credits, local incentives and other money or credits estimated to be
distributed to the grant recipient from local and State governmental entities
Any other information deemed necessary by the Office of the Governor to include in the
economic and fiscal impact statement.
21


Support
Supporters claim the Texas Enterprise Fund allows the state to respond quickly and aggressively
to bring jobs and employers to Texas.
22
They believe it helps Texas remain at the top of national
surveys for business relocations and expansions; without it, Texas could lose out to other states
on major projects.
23
They argue that the application process maximizes the benefit to the state
by allowing for flexibility in contracts.
24


Opposition/Effectiveness
Critics also argue the fund has not proved its effectiveness. A 2011 report by Texans for Public
Justice found that companies getting money from the fund created 22,349 jobs by the end of
2013, or roughly 37 percent of the 59,100 jobs that the governor's office says the participating
firms had promised to create as of that summer.
25


TEF Audit
In 2013, Senator Davis passed the bipartisan Senate Bill 1390 to independently audit the Texas
Enterprise Fund for the first time.
26
Due to House amendments, the state auditor has discretion
to establish the scope and objectives of the audit, but may examine specific issues including
the efficiency and effectiveness of the fund
27
and ensure it has adequate financial controls to
maintain accountable of public dollars.
28
The Legislative Budget Board estimated the cost of the
audit at $537,688.
29
The Texas Conservative Coalition Research Institute is one conservative
group that supports regular SAO audits.
30
The TEF audit must be submitted by January 2015.
31

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133

Worst Cases of the Cronyism Texas Enterprise Fund
A 2013 report by Texans for Public Justice found that Governor Perry received over $2
million in direct campaign contributions from donors affiliated with TEF awardees.
32
A
2011 report found that 43 of the 90 companies that received TEF grants have given
money either to Governor Perrys campaigns or a political organization tied to him.
Those 43 companies received $333 million in public money; they donated nearly $7
million to Perrys campaign account or to the Republican Governors Association.
33

In 2004, Governor Perry awarded TEF grants of $20 million to Countrywide and $15
million to Washington Mutual, for which the two mortgage companies pledged 11,000
new jobs. Both were out of business within four years. Bank of America acquired
Countywide in 2007, ended its TEF contract early and returned $8.45 million for failing
to create 7,500 jobs as required by the contract. JP Morgan Chase acquired Washington
Mutual in 2008 and maintained its contract. The companies gave more than $15,000 in
total contributions to Governor Perrys re-election campaign. Attorney General Abbott
later investigated whether Countrywide Financial encouraged homeowners to borrow
more than they could afford; Countrywide agreed to give millions to customers who lost
their homes to foreclosure.
34

Sanderson Farms, a Laurel, Mississippi-based poultry producer, received $500,000 in
fiscal 2007 to help build a plant in Waco. Joe Sanderson Jr., chairman and chief
executive officer, gave $100,000 to Perrys campaign committee in two $50,000
contributions, in 2009 and 2010. Bloomberg News
35
.
In 2008, Caterpillar Inc., a heavy equipment and engine manufacturer, received a $10
million award from the Enterprise Fund to expand its facilities near San Antonio. Peter
Holt, the CEO of HoltCat, the authorized Caterpillar dealer for 118 Texas counties, has
contributed more than $612,000 to Perrys campaigns since 2000. HoltCat became a
member of TexasOne (a quasi-governmental agency that has become the governors
chief marketing tool to tout the states wide open for business model and that funds
his regular promotional trips) in 2013 at the $100,000-per-year level. A HoltCat
spokesman said the company became a member because it is interested in the states
economic development, and for no other reason. HoltCat and Caterpillar Inc. are
separate entities.- Texas Tribune
36

Motiva Enterprises, a joint venture between Shell and Saudi Refining Inc., received a $2
million grant through the Texas Enterprise Fund in 2006. Shell, which contributes
$50,000 annually to TexasOne, became a member in 2008.

- Texas Tribune
37


Proposed Reforms
Since 2011, there has been more interest in abolishing the Texas Enterprise Fund
38
or passing
reforms to create a more transparent and accountable process for selecting grant recipients,
determining the terms for the grants, and setting eligibility requirements for funds received
from the TEF.
39
One specific example is a 2011 bill by Sen. Corona that would have replaced the
Governors role in the administration of both the TEF and the TETF with an oversight
committee.
40
In 2010, the Texas Comptroller recommended that the Texas Enterprise Fund
submit semi-annual or quarterly reports with summaries of new contracts, details about
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134
amended contracts with a description of the amendment, and tables with ongoing summary
information.
41
This is supported by the Texas Conservative Coalition Research Institute.
42


Texas Emerging Technology Fund
Purpose
Created in 2005, the Texas Emerging Technology Fund awards grants to facilitate
commercialization, increase the number of high-quality jobs in Texas, and expand higher
education technology research.
43
The ETF provides grants for three programs, each with a
statutory allocation: (1) Commercialization Program (50% of the fund): Awards finance early
stage ventures focused on bringing high technology products or processes to market. (2)
Research Matching Program Grants (16.67%): Institutions of higher education and companies
receive state funding to acquire federal research and commercialization grants. (3) Research
Superiority Program (33.33%): Grants are awarded that allow higher education-private sector
partnerships to develop research centers and attract prominent scientists.
44


Funding
In 2005, it received approximately $100.0 million from the Economic Stabilization Funds and
$100.0 million of General Revenue for initial grant funding.
45
In subsequent years, it received
state funds from General Revenue ($199.0 million including the initial appropriation), a Federal
Emergency Management Agency reimbursement ($70.0 million), unexpended balances and
interest earnings, as well as gifts, grants, donations and benefits realized from ETF projects.
46

For the first time, the 2011 TEF appropriation included only unexpended balances and interest
earnings with no new appropriation from the state.
47
Its 201415 biennial appropriation of
$57.2 million consists of approximately $0.1 million in interest earnings, $7.1 in unexpended
balances, and $50.0 million in General Revenue Funds.
48
The Governors had requested $132
million in new appropriations to Emerging Technology Fund.
49


Awards
In Feb. 2014, the Legislative Budget Board reported that the Emerging Technology Fund has
awarded $421.7 million in grants to 178 entities.
50
Over 60% of these grants were awarded to
the biotechnology and life sciences industry.
51


Grant Process
The Office of the Governor Economic Development and Tourism Division operates the Texas
Emerging Technology Fund (TETF).
52
Final investment decisions and approval of awards are
made by unanimous consent of the three trustees: the Governor, Lieutenant Governor and
Speaker of the House.
53
The Emerging Technology Fund Advisory Committee, statutorily
composed of 17 members (13 Governor-appointees, 2 Lieutenant Governor-appointees and 2
Speaker appointees), evaluates ETF applications and makes recommendations to the trustees.
54

Regional Centers of Innovation and Commercialization (RCIC) (currently 7 regional offices and 1
statewide Texas Life Science Center) act as the regional agent for the Advisory Committee to
identify, evaluate, and submit proposals.
55
To be eligible for funding, a company should be part
of a designated list of emerging technology industries, be able to create new high-quality jobs,
or have the potential for a medical, scientific, or clean energy breakthrough.
56

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135

Enforcement
Once approved, the Governor negotiates the proposed financial and other terms for the deal.
57

Similar to the TEF, a grant agreement must also contain provisions requiring the creation of a
minimum number of jobs and must specify when those jobs will be created.
58
If the recipient of
an award fails to fulfill their obligations under the grant agreement, the grant must be repaid to
the state but may be prorated.
59


Reporting
The Governor must submit to the Legislature a report on the Fund for the preceding three scal
years with information on awards made, amount of awards and the types of awards, as well as
a brief description of expected outcomes as well as actual outcomes, and the equity position
taken by the governor (on behalf of the state).
60
The statutes provide no specific reporting
requirements for the recipients of ETF.
61
The Comptroller reports that research does not
typically translate to jobs in the short or mid-term; therefore job creation gures are not
available to report.
62


Support
Supporters say that the states economic prosperity depends on creating new businesses and
funding research and development programs at universities and private companies. They point
to the lack of available federal funds for R&D, the effect of the recession on private capital
investment, and the repeal of the states R&D tax credit in 2006 as proof of the need for the
ETF.
63


Opposition/Effectiveness
Opponents of both parties question the wisdom of investing public dollars in risky startup
businesses and cite failed companies.
64
It is difficult to evaluate the success of the fund because
not all companies provide employment data in a timely way (see Comptrollers report
mentioned above).
65
It is reported that at least 16 fund recipients have filed for bankruptcy or
shut down, and those still in business reported modest overall job growth.
66


Opposition/Lack of Transparency
In 2010, a state audit that found the Emerging Technology Fund lacked sufficient transparency
and oversight.
67
Some reforms were passed by the Legislature in 2011, such as changes to the
ETF Advisory Committee.
68
One example: in 2010, a Perry friend and political donor, Austin
businessman David Nance, received the state's second largest grant at the time $4.5 million
for his company, Convergen Lifesciences. He sued the state to keep confidential the details
from his company's application. Attorney General Greg Abbott deemed it public information.
69


Worst Cases of the Cronyism
An investigation by The Dallas Morning News found that more than $16 million from the
Emerging Technology Fund has been awarded to companies with investors or officers who are
large campaign donors to Perry.
70
This is about 4% of all awards.
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136
In 2010, Convergen LifeSciences received a $4.5 million grant from the ETFthe second
largest grant in the history of the fund. The founder and executive chairman, David G.
Nance had donated $75,000 to Mr. Perry's campaigns between 2001 and 2006. A
regional panel had turned down Convergen's application, but Mr. Nance appealed that
decision directly to a statewide advisory committee (of which Mr. Nance was once a
member) appointed by Mr. Perry. Eight days later, a subcommittee unanimously
recommended approval by the full statewide committee. The full advisory committee
unanimously recommended the approval of Convergen's application.
71

ThromboVision received $1.5 million from the ETF in 2007. Charles Tate, a major Perry
contributor, served as the chairman of a state committee that reviewed
ThromboVision's application for state funding, and Mr. Tate voted to give
ThromboVision the public money. One month after ThromboVision received notification
that it would receive a $1.5 million state grant in April 2007, Mr. Tate invested his own
money in ThromboVision. ThromboVision failed to submit required annual reports to
the fund from 2008 through 2010, when the company went bankrupt. Bankruptcy filing
revealed Tate owned a total of 200,000 preferred shares in ThromboVision and
prominent Perry supporter Charles Miller, who has donated $125,000 to the governor's
campaigns, owned 250,000 preferred shares in the company.
72

John McHale, an Austin high-tech millionaire who for several years has contributed to
Democratic candidates, agreed to invest $2 million for 200,000 shares in Gradalis. Perry
announced a $1.75 million tech fund award to Gradalis on March 5, 2009. Four days
later, McHale signed the stock purchase agreement. McHale made a $50,000
contribution to Perry's re-election campaign later that year.
73

In 2009, Texas A&M University received a $50 million grant from the ETF to build a
health-research facility. This grant was five times larger than the largest previous grant
and required state leaders to shift $50 million from the Texas Enterprise Fund, an
unprecedented action. Many pointed to a cronyism because the A&M PAC and affiliated
donors had given approximately $1.4 million to the top three state leaders during the
2006 and 2008 cycles, among other campaign contributions. In addition, members
questioned whether the A&M grant was a bailout for two troubled biotech companies,
Introgen Therapeutics and XOMA, Ltd, that had signed a memorandum of
understanding with A&M about potentially participating in its new research center.
74

In April 2006, Sematech Corporation, a semiconductor research coordinator that is not a
member of TexasOne, donated $50,000 to the program to support the Emerging Tech
Initiative. One month after the $50,000 gift, the company received a $5 million award
from the Emerging Technology Fund. Sematech contributed an additional $27,000 to
TexasOne in March 2007. - Texas Tribune
75








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137
Proposed Reforms
In 2011, Sen. Corona filed a bill that would have replaced the Governors role in the
administration of both the TEF and the TETF with an oversight committee.
76
The Texas
Comptroller has made recommendations to improve reporting.
77


Transparency
Texans do not currently have enough information to evaluate whether these programs are
properly managed or cost-effective. This knowledge gap could lead to unwise spending or
missed opportunities to create jobs. Furthermore, both Funds are widely criticized as crony
capitalism and part of a pay-to-play political system.
78
Transparency reforms would reduce
corruption and improve outcomes.
Reform 1: Annual/Biennial Audits: In 2013, Senator Davis passed a bill to audit of the Texas
Enterprise Fund for the first time.
79
The state auditor released an audit of the Texas Emerging
Technology Fund in 2011.
80
If the programs continue, these audits would be made permanent
or updated annually/biennially, and the state auditor would be given specific instructions of
scope so the public can evaluate effectiveness and efficiency.
Reform 2: Annual/Biennial Comptroller Reports on Texas Economic Development Incentives:
One widely-cited report is the Comptrollers An Analysis of Texas Economic Development
Incentives 2010.
81
This report evaluated both funds and made program recommendations to
the Legislature. This should be updated annually/biennially.
Reform 3: Frequent Reporting from the Governors Office: In addition to the Governors
biennial report on the Texas Enterprise Fund and his annual report on the Emerging Technology
Fund, semi-annual/quarterly reports could provide up-to-date information to lawmakers and
the public about the progress of the program goals.
82

Reform 4: Report Campaign Contributions: The Governors office should include in all regular
reports on the Funds information about contributions received in the past five years by
individuals/PACs associated with companies receiving economic development grants.

Accountability
The lack of accountability measures is one of the major problems facing the funds. Reforms are
needed to protect the integrity of the Funds and improve results.
Reform 5: Sunset the Funds: While both programs are subject to legislative oversight each
biennium during the appropriations process, they do not face the systematic review and
scrutiny of the Texas Sunset Commission. Economic incentives should have clear and
measurable goals, such as targeting a particular industry, geographic area, or certain cri teria,
such as hiring new workers. The Funds should have to demonstrate their effectiveness every six
years.
Reform 6: Connect audits/reports to reforms: The Governor has failed to connect audit and
agency recommendations with policy changes. All audits, agency studies and reports should be
used to improve the Funds.

Equity
The critical element that has been missing from these funds is a real commitment to serve all
Texans, rather than just political insiders.
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138
Reform 7: Open and standardize the application processes: Most decisions related to the
Funds, including approving awardees and determining grant amounts, are made behind closed
doors without transparency or accountability. The Governors Office largely established its own
application processes without review and is not closely monitored by any agency. The
applications and grant processes must be made more public and accessible by all businesses
interested in relocating or expanding to Texas.
Reform 8: Explore Targeted Incentives: Texans should be interested in exploring incentives for
Historically Underutilized Businesses and incentivizing economic growth in all regions of the
state (see figures below). Neither was a priority to the past administration.

Texas Enterprise Fund Expenditures by Region, FYs 2004-2013
83



Texas Emerging Technology Fund Expenditures by Region, FYs 2006-2013
84




1
Kiah Collier, Abbott dislikes business incentive program, Houston Chronicle (Jul. 15,
2014)
2
Evidence Counts: Evaluating State Tax Incentives for Jobs and Growth, Pew Center on the
State (Apr. 2012).
3
Catherine S. Renault and Kenneth E. Poole, Prove it!: States offer many incentives to
promote economic development, but seldom evaluate their effectiveness, Conference of
State Legislatures (Feb. 2014).
4
Overview of the States Major Economic Development Programs, Legislative Budget
Board, pg. 4 (Mar. 8, 2013).
5
A Review of Select Texas Economic Incentives, Texas Conservative Coalition Research
Institute, pg. 11 (Feb. 2013).
6
Overview of the States Major Economic Development Programs, Legislative Budget
Board, pg. 7 (Mar. 8, 2013).
Back to Basics 2014 Policy Guide
139

7
Overview of the States Major Economic Development Programs, Legislative Budget
Board, pg. 5-7 (Mar. 8, 2013).
8
Overview of the States Major Economic Development Programs, Legislative Budget
Board, pg. 7 (Mar. 8, 2013).
9
Fiscal Size-up: 2014-15 Biennium, Legislative Budget Board, pg. 154 (Feb. 2014).
10
Fiscal Size-up: 2014-15 Biennium, Legislative Budget Board, pg. 154 (Feb. 2014).
11
Texas Enterprise Fund: 2013 Legislative Report, Office of the Governor: Economic
Development and Tourism, pg. 4 (Last Viewed: March 13, 2014).
12
Economic Development in Texas: Programs and Incentives, Texas Taxpayers and
Research Association, pg. 56 (Sept. 2011).
13
Texas Enterprise Fund: 2013 Legislative Report, Office of the Governor: Economic
Development and Tourism, pg. 4 (Last Viewed: March 13, 2014).
14
Economic Development & Tourism - Texas Enterprise Fund, Office of the Governor, Rick
Perry (Last viewed: Apr. 8, 2014).
15
Economic Development & Tourism - Texas Enterprise Fund, Office of the Governor, Rick
Perry (Last viewed: Apr. 8, 2014).
16
Economic Development in Texas: Programs and Incentives, Texas Taxpayers and
Research Association, pg. 56 (Sept. 2011)
17
Economic Development & Tourism - Texas Enterprise Fund, Office of the Governor, Rick
Perry (Last viewed: Apr. 8, 2014).
18
Economic Development in Texas: Programs and Incentives, Texas Taxpayers and
Research Association, pg. 56 (Sept. 2011).
19
Economic Development in Texas: Programs and Incentives, Texas Taxpayers and
Research Association, pg. 56 (Sept. 2011).
20
Economic Development in Texas: Programs and Incentives, Texas Taxpayers and
Research Association, pg. 56 (Sept. 2011).
21
Texas Enterprise Fund, Texas Comptroller of Public Accounts (2010).
22
Interim Report to the 83rd Texas Legislature, Texas House Committee on Economic and
Small Business Development, pg. 81 (Dec. 2012).
23
CSSB 1: The House Appropriations Committees Proposed Budget for Fiscal 2014-15,
House Research Organization, pg. 12 (Apr. 1, 2013).
24
Texas Enterprise Fund, Texas Comptroller of Public Accounts (2010).
25
Con Job: Most Enterprise Fund Grantees Failed to Deliver in 2010, Texans for Public
Justice (Nov. 9, 2011).
26
Press Release, State Senator Wendy Davis, Senate Overwhelmingly Passes Pair of
Bipartisan Reform Bills by Sen. Wendy Davis (Apr. 16, 2013)
27
Enrolled version of CSSB 1390.
28
Editorial, Audit of Texas Enterprise Fund finds bipartisan favor, Fort Worth Star-
Telegram (Apr. 11, 2013).
29
Editorial, Audit of Texas Enterprise Fund finds bipartisan favor, Fort Worth Star-
Telegram (Apr. 11, 2013).
30
A Review of Select Texas Economic Incentives, Texas Conservative Coalition Research
Institute, pg. 12 (Feb. 2013).
31
Press Release, State Senator Wendy Davis, Senate Overwhelmingly Passes Pair of
Bipartisan Reform Bills by Sen. Wendy Davis (Apr. 16, 2013)
Back to Basics 2014 Policy Guide
140

32
David Saleh Rauf, Study: Perry, Dewhurst and Straus Reap Millions from TEF donors,
Houston Chronicle (Apr. 8, 2013).
33
Dave Mann, Report: Nearly Half of Enterprise Fund Companies Gave to Perry, Texas
Observer (Oct. 13, 2011).
34
Jack Gillum, Perry bet big on tax grants to subprime lenders, Associated Press (Oct. 3,
2011).
35
Darrell Preston, Perrys Pay-to-Play Job-Incentive Funds Miss Targets in Texas,
Bloomberg News (Aug. 31, 2011).
36
Alexa Ura, Prolific Donors Are Behind Perry's Marketing Tool, Texas Tribune (Apr. 8,
2014).
37
Alexa Ura, Prolific Donors Are Behind Perry's Marketing Tool, Texas Tribune (Apr. 8,
2014).
38
Legislative Wrap Up Report, Texas Economic Development Council (Last Viewed: Apr. 8,
2014).
39
CSSB 1: The House Appropriations Committees Proposed Budget for Fiscal 2014-15,
House Research Organization, pg. 12 (Apr. 1, 2013).
40
Text of Senate Bill 991 (82R-2011).
41
An Analysis of Texas Economic Development Incentives 2010, Texas Comptroller of
Public Accounts, pg. 10 (Last Viewed: Apr. 9, 2014).
42
A Review of Select Texas Economic Incentives, Texas Conservative Coalition Research
Institute, pg. 12 (Feb. 2013).
43
Overview of the States Major Economic Development Programs, Legislative Budget
Board, pg. 9 (Mar. 8, 2013).
44
Overview of the States Major Economic Development Programs, Legislative Budget
Board, pg. 10 (Mar. 8, 2013).
45
Overview of the States Major Economic Development Programs, Legislative Budget
Board, pg. 11 (Mar. 8, 2013).
46
Overview of the States Major Economic Development Programs, Legislative Budget
Board, pg. 11-13 (Mar. 8, 2013).
47
Overview of the States Major Economic Development Programs, Legislative Budget
Board, pg. 13 (Mar. 8, 2013).
48
Fiscal Size-up: 2014-15 Biennium, Legislative Budget Board, pg. 154 (Feb. 2014).
49
CSSB 1: The House Appropriations Committees Proposed Budget for Fiscal 2014-15,
House Research Organization, pg. 12 (Apr. 1, 2013).
50
Fiscal Size-up: 2014-15 Biennium, Legislative Budget Board, pg. 154 (Feb. 2014).
51
Fiscal Size-up: 2014-15 Biennium, Legislative Budget Board, pg. 157 (Feb. 2014).
52
Texas Emerging Technology Fund: FY 2013 Legislative Report, Office of the Governor,
Economic Development and Tourism, pg. 3 (Last Viewed: Apr. 9, 2014).
53
Texas Emerging Technology Fund: FY 2013 Legislative Report, Office of the Governor,
Economic Development and Tourism, pg. 3 (Last Viewed: Apr. 9, 2014).
54
Texas Emerging Technology Fund: FY 2013 Legislative Report, Office of the Governor,
Economic Development and Tourism, pg. 3 (Last Viewed: Apr. 9, 2014).
55
Texas Emerging Technology Fund: FY 2013 Legislative Report, Office of the Governor,
Economic Development and Tourism, pg. 3 (Last Viewed: Apr. 9, 2014).
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141

56
Economic Development in Texas: Programs and Incentives, Texas Taxpayers and
Research Association, pg. 77 (Sept. 2011).
57
Economic Development in Texas: Programs and Incentives, Texas Taxpayers and
Research Association, pg. 77 (Sept. 2011).
58
Economic Development in Texas: Programs and Incentives, Texas Taxpayers and
Research Association, pg. 77 (Sept. 2011).
59
Economic Development in Texas: Programs and Incentives, Texas Taxpayers and
Research Association, pg. 77 (Sept. 2011).
60
An Analysis of Texas Economic Development Incentives 2010, Texas Comptroller of
Public Accounts, pg. 78 (Last Viewed: Apr. 9, 2014).
61
Economic Development in Texas: Programs and Incentives, Texas Taxpayers and
Research Association, pg. 77 (Sept. 2011).
62
An Analysis of Texas Economic Development Incentives 2010, Texas Comptroller of
Public Accounts, pg. 80 (Last Viewed: Apr. 9, 2014).
63
Interim Report to the 83rd Texas Legislature, Texas House Committee on Economic and
Small Business Development, pg. 14-16 (Dec. 2012).
64
Laylan Copeline and Lori Hawkins, Is startup investing too risky for Texas taxpayers?,
Austin American Statesman (Feb. 1, 2014)
65
Paul J. Weber, Perrys tech fund shows gains despite bankruptcies, Associated Press
(Feb. 4. 2014).
66
Paul J. Weber, Perrys tech fund shows gains despite bankruptcies, Associated Press
(Feb. 4. 2014).
67
Laylan Coplin and Kirk Ladendorf, State audit faults Emerging Technology Fund's
transparency, Austin American-Statesman (Apr. 28, 2011).
68
James Drew, After scrutiny and changes, Emerging Technology Fund returns to the
street, Dallas Morning News (Mar. 22, 2012).
69
Laylan Coplin and Kirk Ladendorf, State audit faults Emerging Technology Fund's
transparency, Austin American-Statesman (Apr. 28, 2011).
70
James Drew, et al., Perry's tech fund aided firms with ties to his donors, Dallas Morning
News (Jan.18, 2011).
71
Charles Dameron, Rick Perry's Crony Capitalism Problem, Wall Street Journal (Aug. 13,
2011).
72
Charles Dameron, Rick Perry's Crony Capitalism Problem, Wall Street Journal (Aug. 13,
2011).
73
James Drew, et al., Perry's tech fund aided firms with ties to his donors, Dallas Morning
News (Jan.18, 2011).
74
Did Aggie Contributions Grease $50 Million Enterprise Fund Deal?, Lobby Watch, Texans
for Public Justice (Mar. 25, 2009).
75
Alexa Ura, Prolific Donors Are Behind Perry's Marketing Tool, Texas Tribune (Apr. 8,
2014).
76
Text of Senate Bill 991 (82R-2011).
77
An Analysis of Texas Economic Development Incentives 2010, Texas Comptroller of
Public Accounts, pg. 80 (Last Viewed: Apr. 9, 2014).
78
Alexa Ura, Prolific Donors Are Behind Perry's Marketing Tool, Texas Tribune (Apr. 8,
2014).
Back to Basics 2014 Policy Guide
142

79
Enrolled version of CSSB 1390.
80
An Audit Report on the Emerging Technology Fund, State Auditors Office (Apr. 2011).
81
An Analysis of Texas Economic Development Incentives 2010, Texas Comptroller of
Public Accounts (Apr. 2011).
82
An Analysis of Texas Economic Development Incentives 2010, Texas Comptroller of
Public Accounts (Apr. 2011).
83
Fiscal Size-up: 2014-15 Biennium, Legislative Budget Board, pg. 155 (Feb. 2014).
84
Fiscal Size-up: 2014-15 Biennium, Legislative Budget Board, pg. 157 (Feb. 2014).
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Texas Workers

In recent years, Republican state leaders have touted how business friendly Texas is in pitches
to attract some of the largest companies in the world to set up shop here. Unfortunately, many
of the Republican policies have actually had the effect of reducing Texas attractiveness to
future employers. Whether its our inadequate school funding system, rapidly rising costs of
higher education, or the refusal to give young families access to quality health care, we are
shorting the potential of our future labor force and its ability to fill out these new jobs.

Texas policymakers are not only undermining its future workforce, but also very clearly
ignoring significant sectors of its current workforce. This systemic disrespect for workers is
most apparent in the construction industry in Texas. Whether its the misclassification of
employees, low wages, poor regulations for workplace safety, or a workers comp system
where participation is optional for employers, Texas is a great place for employers, but not so
much for the employees working for them.

Worker Misclassification/Payroll Fraud
Payroll fraud (also called worker misclassification and workplace fraud) is the illegal practice of
designating an employee as a "1099 worker or an independent contractor. The 1099
classification (named so for the IRS form used to report various types of income other than
wages, salaries, and tips - income earned from independent contractor services), is used by
employers to avoid paying payroll taxes, overtime, unemployment taxes and workers'
compensation. In the construction industry, this enables unscrupulous contractors to submit
low bids for projects, undercutting their responsible competitors. The 1099 classification
additionally enables employers to hide whether their employees are legally authorized to work
in this country.

Several states have already passed laws to penalize those who cheat workers and taxing
agencies in this way, and a number of federal proposals have been considered which would
outlaw this practice and that of wage theft in federal law.

Senator John Carona and Representative John Davis authored bills in 2013 to restrict this
practice, proposing fines of up to $1000 per misclassified employee on offending employers.
Their bills were stalled largely due to the efforts of large builders like Perry Homes and David
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145
Weekley Homes, despite acknowledgement of the problem from even Republican contractors
like Representative John Davis who passed the bill unanimously out of his committee.

Facts:
Payroll fraud in the Texas construction industry shortchanges the UI fund by
$54.5 million.
1

Payroll fraud in the Texas construction industry alone accounts for $1.06 billion
of lost federal income tax revenue.
2


Wage Theft
A related issue, wage theft, is also a common occurrence in many sectors. Wage theft occurs
when an employer fails to properly pay their employee by paying less than promised, failing to
pay the legal minimum or overtime in accordance with the law, or simply not paying the worker
at all. The Texas Workforce Commission (TWC) is charged with investigating wage claims. In FY
2012, the TWC received 17,138 wage claims and awarded wages to workers in 6,392 cases.

Wage theft has an impact on the economic stability of Texas working families by leaving them
to face unexpected economic hardship when they are not paid their wages in accordance with
the law. Workers who experience wage theft may be forced to rely on public safety nets to
make ends meet. Additionally, wage theft also negatively impacts responsible employers who
are undercut by companies that lower their costs by failing to pay workers their wages.

Texas construction workers are forced to fall back on public safety nets to support their
families. Low wages and wage theft contribute to economic instability for construction workers
and their families.

Facts:
Wage theft results in lost tax revenue. At least $117 million in lost wages and
$8.8 million in lost sales tax revenue impact cash-strapped state and local
governments.
3


Worker Safety
The issues of workplace safety and how injuries sustained in the course of work are handled are
universal to all industries.

With construction levels rebounding to near pre-recession levels, Texas construction workers
and their families are often set up for failure, dealing with dangerous worksites, poor wages,
bad training, and labor rights violations. In fact, Texas continues to lead the country outright in
annual construction fatalities.
4


Federal regulations from the Occupational Safety and Health Administration (OSHA) provide
some protections, but OSHA is stretched very thin already, with one inspector for every
103,899 workers in Texas.
5
Many states have implemented OSHA state laws to complement
the federal law (21 states plus Puerto Rico have done so, as well as 5 states for just their public
Back to Basics 2014 Policy Guide
146
employees
6
). States that have implemented such laws generally have more OSHA inspectors to
inspect worksites (*a preliminary scan of the DOL data suggests a correlation of lower rates of
construction fatalities in states with their own OSHA laws implemented).

Texas must make improvements to ensure safety at worksites, including requiring health and
safety training and providing proper safety equipment for employees.

Workers Compensation
The role of workers' compensation is also particularly important for these construction workers
(and those in other dangerous industries). Workers' compensation provides a means for
injured workers to pay medical bills resulting from workplace injuries and make up for lost
income until they return to full employment. Workers' compensation also serves the families
of workers killed on the job, providing a portion of the lost wages to surviving family members.

Texas is currently the only state in the nation that does not require workers' compensation
coverage for private employers, including construction companies. In fact, since 1913, Texas
employers have been allowed to opt out of workers compensation coverage. Civil legal action
is frequently the only path of redress for an injured employee against their potentially negligent
non-subscribing employer.

Unfortunately, even when a civil lawsuit is litigated in favor of a plaintiff employee, the practical
benefits of the favorable judgment can often be low compared to a similar claim going through
the workers comp system. To illustrate, when a construction worker severely injures his back
from a work-related fall working for a non-subscriber, he will probably at least get the minimal
care provided by an emergency room (typically resulting in uncompensated care costs being
passed to the local taxpayer). However, there will be no mechanism by which he can access
rehabilitative services that would have been covered by some sort of workers comp or other
insurance to help him get healthy and return to work. Instead, if he can afford a lawyer, he
must often wait months or years for a final judgment, during which time he sits unemployed or
underemployed with an unaddressed injury preventing a timely return to work.

There is a growing trend of larger non-subscribing employers providing their employees with a
system of self-insured coverage in lieu of workers compensation. Some of these self-insurance
plans drawn up by employers may best be described as a diet version of workers
compensation, especially with the inclusion of strict damage caps and restrictive arbitration
clauses. However, some semblance of coverage is much better than the zero coverage
currently permitted here in Texas. Ultimately, folks hurt on the job must have some assurance
from their employer that workplace injuries will be treated in a timely manner to make sure the
injured employee can get healthy and return to work.

Facts
Studies by the Division of Workers Compensation show that approximately one-
third of Texas employers do not provide workers compensation coverage for
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147
their employees, and that approximately 19% of employees work without
workers compensation protection.
Recent UT survey showed that only 40% of construction workers had workers
compensation coverage
7



1
Build a better Texas January 2013 Report, Page 56
2
Build a better Texas 1/2013 Page 57
3
BBT 1/13 page iii
4
Census of Fatal Occupational Injuries 2012 Fatal Injury Rates, US Department of Labor,
BLS, accessed March 12, 2014,
http://www.bls.gov/iif/oshstate.htm.
5
BBT 1/13, Page 2
6
https://www.osha.gov/dcsp/osp/faq.html, accessed March 12, 2014
7
BBT 1/13
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148












Minimum Wage
Overview
Federal
At the current federal minimum wage of $7.25, a parent who works full time, year round, does
not earn enough to be above the federal poverty line.
1
This was not always the case.
Throughout the 1960s and 1970s, a full-time, full-year minimum-wage income was above the
poverty line for a family of two.
2
At its high point in real value in the late 1960s, a full-time, full-
year minimum-wage income was enough to keep a family of three above the poverty line,
although it still fell shy of the poverty line for a family of four.
3
An increase would return a full-
time minimum wage income to a level sufficient to protect a family of three from poverty.

Today, with a minimum wage of $7.25 per hour, working 40 hours per week, 52 weeks
per year yields an annual income of only $15,080, which is below the federal poverty
line for families of two or more.
4

The minimum wage has failed to maintain its buying power. The minimum wage of
$1.60 an hour in 1968 would be $10.75 today when adjusted for inflation.
5

A bill pending in Congress would increase the minimum wage to $10.10 by 2016 and
index it to inflation to ensure it preserves its value.
Texas
The minimum wage in Texas is currently $7.25 per hour - identical to the federal minimum
wage.
6
The Texas minimum wage law does not contain dollar minimums; instead the state
adopts the federal minimum wage rate by reference.
7
Therefore, as the federal minimum wage
increases, so does Texas'. Since 2002, Texas' minimum wage has been equal to the federal
minimum wage.
8
Prior to 2002, Texas' minimum wage was actually below the federal level (and
thus the federal level applies).







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149
Minimum wage - Texas vs. federal
9

Year Texas Federal
2014 $7.25 $7.25
2013 7.25 7.25
2012 7.25 7.25
2011 7.25 7.25
2010 7.25 7.25
2009 6.55 6.55
2008 5.85 5.85
2007 5.15 5.15
2006 5.15 5.15
2005 5.15 5.15
2004 5.15 5.15
2003 5.15 5.15
2002 5.15 5.15
2001 3.35 5.15
2000 3.35 5.15


Ten largest states and the minimum wage
10

State Minimum wage
2011 2012 2013 2014
Federal $7.25 $7.25 $7.25 $7.25
California 8.00 8.00 8.00 9.00*
Texas 7.25 7.25 7.25 7.25
New York 7.25 7.25 7.25 8.00
Florida 7.25 7.67 7.79 7.93
Illinois 8.25 8.25 8.25 8.25
Pennsylvania 7.25 7.25 7.25 7.25
Ohio 7.40 7.70 7.85 7.95
Georgia 7.25 7.25 7.25 7.25
Michigan 7.40 7.40 7.40 7.40
North Carolina 7.25 7.25 7.25 7.25
* effective 7-1-14

In 2013, Texas had 6.27 million workers paid by the hour.
11
Of that total, 400,000 were paid at
or below the federal minimum wage (223,000 at and 177,000 below). The next highest total
was 189,000 in Pennsylvania.
12
In percentage terms, Texas was fifth highest in the nation in the
percent of workers making at or below the federal minimum wage at 6.4%.
13


In Texas, nearly twice as many women as men are paid at or below the minimum wage.
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150
In 2013, 8.4 percent of women workers earned the minimum wage or less, compared with 4.6
percent of men.
14


Current proposals
Texas
Last session, two bills were filed to increase the minimum wage, and neither received a
hearing. The first, HB 3082 by Rep. Nicole Collier, would have increased the minimum wage to
$7.75.
15
The second, HB 3740 by Rep. Lon Burnam, would have indexed the amount of the
minimum wage to the Consumer Price Index.
16


On February 18, 2014, Sen. Rodney Ellis and Rep. Senfronia Thompson published an op-ed in
the Austin American-Statesman calling for an increase to the state's minimum wage.
17


Other states
Since the year began, these states have approved minimum wages that are higher than the
current federal level: Connecticut ($10.10), Delaware ($8.25), Maryland ($10.10), Minnesota
($9.25) and West Virginia ($8.75).
18
When these measures go into effect next year, half the
states will have minimum wage rates higher than the federal level.
19
So far this year, 34 states
have or are now considering increases to their minimum wage, according to the National
Conference of State Legislatures.
20


In Arkansas, proponents are trying to put a minimum wage increase on the November ballot.
21

The increase would boost the minimum wage to $8.50 by 2017. Give Arkansas a Raise Now,
which submitted the ballot proposal, has until July 7 to collect 62,507 signatures of registered
Arkansas voters in order to qualify the proposed initiated act for the general election ballot.
22


Federal
The Fair Minimum Wage Act of 2013, a bill introduced by Sen. Tom Harkin (D-Iowa) and Rep.
George Miller (D-Calif.), would raise the federal minimum wage in three incremental increases
of $0.95 from its current level of $7.25 per hour to $10.10 per hour.
23
Also, the tipped
minimum wage (the minimum wage paid to workers who earn a portion of their wages in tips)
would be increased in $0.85 increments from its current value of $2.13 per hour, where it has
stood since 1991, until it reaches 70 percent of the regular minimum wage.
24


Impact of minimum wage increase to $10.10 on Texas
A recent study by the Economic Policy Institute performed a state-by-state analysis of the
impact of increasing the federal minimum wage to $10.10.
25
This provides a snapshot of who
would be helped by the increase and how.

Gender
o 53% of workers in Texas that would be affected are women. While raising the
minimum wage would benefit both men and women, it would disproportionately
affect women.

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151
Age
o Perhaps the most common incorrect perception of low-wage workers is that
they are largely teenagers and almost entirely young people. While there
certainly are a number of low-wage workers who fit this description, young
workers comprise only a small fraction of the workers who would be affected by
an increase to $10.10.
o 89.9% of those affected are over the age of 20. 55.7% over 30.

Race
o Hispanic Texans would make up 55.8% (1.59 million) of those affected by the
$10.10 minimum wage increase. White Texans would make up 28.6% (819,000),
with Blacks and Asians coming in at 10.7% (307,000) and 4.9% (140,000),
respectively.

Family income
o Those who would be affected come largely from families with low to moderate
income levels.
o 74.7% percent of affected workers have total family incomes of less than
$60,000 per year, 74.7% less than $40,000, and over a quarter (26%) have family
incomes below $20,000 per year.
o Children with at least one parent affected 25.7% (highest in US)

Primary Wage Earners
o Low- and minimum-wage workers are often dismissed as secondary earners,
implying that the income earned by these workers is primarily discretionary
income, unessential to their familys well-being. This is patently false: the
workers who would be affected by increasing the minimum wage to $10.10 earn,
on average, 56% of their familys total income (7th highest in US).
o 55 percent of minimum wage workers in Texas have children.

Work Hours Full time vs. Part time
o 64% in Texas are full-time workers (3
rd
highest rate in US). 90.5% work over 20
hours a week.

Education
o 63.4% of those affected have a high school education or less, 29.4% have
attended some college, and 7.2% have a bachelors degree or higher.

Estimated economic effects in Texas of proposed federal minimum wage increase to $10.10
by 2016
26

Workers directly affected: 1,945,000
Workers indirectly affected: 920,000
Total workers affected: 2,865,000
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152
Share of workforce affected: 26.2%
Increased wages for all affected workers: $4,977,598,000
GDP impact: $3,150,819,000
Jobs impact: Full-time 11,000

Effect on Texas SNAP enrollment
27

Decrease SNAP expenditures: $447.90 million
Decrease in percent of expenditures: 7.5%
Decrease in SNAP enrollment: 318,607-362,017
Percentage decrease in SNAP enrollment: 11.1% to 12.6%

CBO analysis of federal legislation
On February 18, 2014 the Congressional Budget Office (CBO) released a study on the impacts of
raising the federal minimum wage to $10.10 by 2016.
28
In short, the CBO estimated the
proposal would increase earnings for 16.5 million low-wage Americans and lift 900,000
Americans out of poverty but cost the nation about 500,000 jobs. Any push to increase Texas'
minimum wage will immediately be met with quotes from this CBO report.

Good news, per CBO
About 15 percent of the nations workforce would see wages rise under the proposal. In
addition to the 16.5 million people who earn less than $10.10 an hour, as many as 8 million
workers whose earnings hover above that level could also benefit, according to the report. The
higher wages would lift about 900,000 people out of poverty. Finally, the report pushed back
on critics' claims that only teenagers would benefit: the CBO estimates that only 12 percent of
the workers likely to benefit from a minimum wage increase would be teenagers.

Bad news, per CBO
The CBO estimates that the proposal would reduce employment by roughly 500,000 workers in
the second half of 2016, relative to what would happen under current law. Directly from the
report: "That decrease would be the net result of two effects: a slightly larger decrease in jobs
for low-wage workers (because of their higher cost) and an increase of a few tens of thousands
of jobs for other workers (because of greater demand for goods and services)."

Pushback from the White House
The White House aggressively pushed back on the bad news portion of the report, posting a
lengthy rebuttal on the White House website.
29
In part, they argued that the CBO "estimates
do not reflect the overall consensus view of economists, which is that raising the minimum
wage has little or no negative effect on employment." The White House cited "[s]even Nobel
Prize Winners, eight former Presidents of the American Economic Association, and over 600
other economists [who] recently summarized the literature on the employment effects of the
minimum wage in this way: 'In recent years there have been important developments in the
academic literature on the effect of increases in the minimum wage on employment, with the
weight of evidence now showing that increases in the minimum wage have had little or no
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153
negative effect on the employment of minimum-wage workers, even during times of weakness
in the labor market.'"

Messaging
Here are the key arguments to make. An increased minimum wage:
Rewards workraising the minimum wage shows that we value hard work over
welfare;
Boosts the economythe public already believes this, so say it loudly;
Saves taxpayer moneyif families make a decent wage, it diminishes the need for
government benefits; and
Promotes fairnesspeople remain quite angry about CEO pay and the unfairness that
pervades todays economy; workers deserve a fair share.


1
Economic Policy Institute, http://s1.epi.org/files/2014/EPI-1010-minimum-wage.pdf, page 4
2
Id.
3
Id.
4
http://www.epi.org/publication/minimum-wage-workers-poverty-anymore-raising/
5
http://www.bls.gov/data/inflation_calculator.htm
6
Texas Labor Code Sec. 62.051
7
Id.
8
http://www.dol.gov/whd/state/stateMinWageHis.htm
9
http://www.dol.gov/whd/state/stateMinWageHis.htm
10
http://www.dol.gov/whd/state/stateMinWageHis.htm and individual states' websites
11
http://www.bls.gov/cps/minwage2013.pdf, table 3
12
Id.
13
Id.
14
http://www.houstonchronicle.com/business/economy/article/Texas-ranks-high-for-number-of-minimum-wage-
5393464.php
15
http://www.legis.state.tx.us/billlookup/text.aspx?LegSess=83R&Bill=HB3082
16
http://www.legis.state.tx.us/billlookup/text.aspx?LegSess=83R&Bill=HB3740
17
http://www.mystatesman.com/news/news/opinion/its-time-to-raise-the-minimum-wage/ndRFG/
18
http://www.washingtonpost.com/politics/voters-in-states-and-cities-are-considering-proposals-to-raise-the-
minimum-wage/2014/04/20/1d30ab72-c8be-11e3-a75e-463587891b57_story.html
19
Id.
20
Id.
21
http://www.npr.org/2014/04/02/297885468/in-arkansas-voters-may-get-chance-to-raise-minimum-wage
22
http://arkansasnews.com/news/arkansas/ag-certifies-ballot-proposal-raise-minimum-wage
23
https://www.govtrack.us/congress/bills/113/s460
24
Id.
25
http://s2.epi.org/files/2013/minimum-wage-state-tables.pdf
26
http://www.epi.org/publication/raising-federal-minimum-wage-to-1010/
27
http://www.americanprogress.org/issues/economy/news/2014/03/05/84752/raising-the-minimum-wage-to-10-10-
would-cut-taxpayer-costs-in-every-state/
28
http://www.cbo.gov/publication/44995
29
http://www.whitehouse.gov/blog/2014/02/18/congressional-budget-office-report-finds-minimum-wage-lifts-
wages-165-million-worker
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154




Equal Pay
Background
Women make up nearly half the workforce in the United States. They are the equal or main
breadwinner for four out of ten families.
1
For women In Texas, the median pay for a woman
working full time, year round is $33,689 per year, while the median yearly pay for a man is
$42,044.
2
When broken down, full time, year round Texas women are paid about 82 cents for
every dollar paid to men, amounting to a yearly gap of $7,859 between men and women.
3
The
gap is even more pronounced when race is added as a factor - African-American women earn
59 cents per dollar
4
and Hispanic women earn just 45.3 cents per dollar when compared to
men.
5

The pay gap has been consistent for years despite the fact that there are both federal and state
laws in effect to attempt to alleviate the issue. Nationally, the wage gap has remained virtually
unchanged over the past decade - it was 76% in 2003 and is 77% in 2013.
6
In fact, according to
the Institute for Women's Policy Research, if the pay gap continues to close at the same slow
pace it has done for the last 50 years, it will take until 2058 for women to finally reach pay
parity.
7
To make matters worse, gender segregation across occupations has been stagnant
since the mid 1990's, which results in barriers to entry to occupations that would suit them
best, worsens skill shortages, and reduces economic growth.
8

Myths Dispelled
There is some disinformation in the public sphere that the pay gap has to do with job
opportunities or can be explained by education, work experience, child-bearing or women
simply picking lower salaried careers. In 2012, the American Association of University Women
commissioned a study to look at college graduates who had full-time employment one year
after graduation. These individuals provided a look at educated workers when they are most
similar - comparable undergraduate studies, lacking vast experience, and unlikely to be married
or have kids. This study showed an 82 percent gap between males and females - just one year
out of college.
9
This is especially disappointing because it sets a career trajectory of
discriminatory pay coupled with additional college loan debt burden. Even when controlling for
hours, occupation, college major, employment sector and other factors associated with pay,
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155
there is still an unexplained gap. Moreover, there are a litany of instances one year out of
college where the pay gap persists in similar circumstances: business majors - 84 percent gap
between male and females; teachers - 89 percent gap; business/management - 86 percent gap;
sales - 77 percent gap; workers over 40+ hours per week - 84 percent gap; workers at 45 hours
per week - 82 percent gap.
10
The point is that the gap is real, it's persistent, and it will not go
away without government intervention.
Need for policy solutions
This overall lack of progress highlights the need for states to step in and fill the gap where
federal law is not doing enough. Bills such as the "Texas Equal Pay Act," HB 950 83R by Rep. S.
Thompson and Sen. Davis, are more necessary now than ever to give Texas women another
tool to fight wage discrimination. Unfortunately, as we we've seen at the national level since
2009, the Fair Pay Act will not be enough by itself. It is not uncommon for employers to
maintain policies that punish employees who voluntarily share salary information with their
coworkers - some employers even explicitly forbid sharing this information in employee
contracts. Surveys have shown that about half of all workers report that discussion of wage and
salary information is either discouraged, prohibited, and/or could lead to punishment.
11

Currently, only six states have laws on the books to prohibit employers from firing employees
who discuss their wages (CA, CO, IL, ME, MI, VT).
12
Texas should unequivocally follow suit - a
law barring employers from these practices would go a long way in strengthening pay equality
laws in the state.
Commonsense solutions such as these will put us on a path to a more equitable and less
discriminatory Texas - something most individuals would agree is better for every Texan.
Possible Changes to Current Law
(Again) pass the "Texas Equal Pay Act," affording victims of wage discrimination the
ability to seek restitution in less expensive state court in front of a locally elected judge
and jury of your peers.
Pass an Employee Retaliation Protection law that forbids employer retaliation for
employees discussing their wages. This type of workplace secrecy only serves to further
exacerbate the pay gap.
Pass a state minimum wage law. States with higher-than-federal minimum wages have
smaller wage gaps - states at or above $8.00 have a wage gap 22 percent smaller than
the average wage gap in states with a $7.25 minimum wage (18.1 cents compared to
23.3 cents).
13

HB 950 83(R): The Texas Equal Pay Act
Background
During the 83rd session, Sen. Wendy Davis and Rep. Senfronia Thompson filed the Texas Equal
Pay Act (TEPA) in the form of companion bills - SB 248 and HB 950. The bills aimed to align
Chapter 21 of the Texas Labor Code with the federal Title VII of the Civil Rights Act. In fact,
Chapter 21 of the Labor Code was created with the explicit purpose to "provide for the
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156
execution of the policies of Title VII of the Civil Rights Act of 1964 and its subsequent
amendments."
14
In 2009, the federal Lilly Ledbetter Fair Pay Act was passed by Congress. The
TEPA was an attempt to duplicate the changes made by the federal act in state law.
Changes made by the Lilly Ledbetter Act
Prior to the implementation of the Lilly Ledbetter Act in 2009, both state and federal law stated
that the statute of limitations for a pay discrimination case started when the decision to pay an
individual less was made, and ended 180 days after that decision.
15
Unfortunately, this law does
not reflect the realities of the workplace, where employee pay is generally kept secret, many
times by employee contract.
16


Since 2009 and the passing of the Lilly Ledbetter Act, federal law now states that the statute of
limitations for pay discrimination starts when the decision to pay an individual less is made AND
is renewed for 180 days each time a discriminatory payment is made to the individual including
wages, benefits, or other compensation.
17

Attempted Changes by the Texas Equal Pay Act
Under the Texas Equal Pay Act, Chapter 21 of the Labor Code would have stated that the
statute of limitations for pay discrimination starts when the decision to pay an individual less is
made AND is renewed for 180 days each time a discriminatory wages are paid to the
individual.
18
In a bi-partisan compromise, HB 950 was amended on the floor to only apply to
wages, not benefits or other compensation.
19
It was amended again to only apply to
discrimination cases moving forward after the effective date.
20
Finally, the bill only allowed for
up to two years of back pay, regardless of how long the discrimination lasted.
21


The bill passed both chambers with bipartisan support: Senate - 21-10,
22
House - 79-50.
23

Veto of the Equal Pay Act
On June 14, 2013, Governor Perry signed a veto of HB 950.
24
Unfortunately, Governor Rick
Perry did not see the need to conform state law with federal law, even though it is the express
purpose of Chapter 21 of the Labor Code. Governor Perry also advocated for the use of the
federal courts to settle wage discrimination cases, which is more costly for both parties, known
to be business friendly, and many times not in the community in which the discrimination is
alleged to have occurred. The TEPA would have allowed individuals to file wage discrimination
cases in a local court, in front of a locally elected judge and a jury of their peers.
Veto Statement
"Texas' commitment to smart regulations and fair courts is a large part of why we continue to
lead the nation in job creation. House Bill 950 duplicates federal law, which already allows
employees who feel they have been discriminated against through compensation to file a claim
with the U.S. Equal Employment Opportunity Commission."
25

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157

Common Misinformation Spread about the Texas Equal Pay Act
These are a few of the blatantly false statements that recur from conservatives trying to argue
their case against the TEPA.
- "There is an unlimited statute of limitations. You can go back 20 or 30 years "
False. The statute of limitations is clearly stated as 180 days after the initial discriminatory
decision is made and renews each time a discriminatory wage is received.
- "You can go back 20, 30 years against an employer based on alleged pay discrimination
and the people who made the decisions are long gone from the company."
False. Sen. Davis agreed to work with Sen. Duncan (R) on a floor amendment, which limited the
TEPA strictly to cases moving forward after the Act's effective date. Further, current
management has the ability to look at all employees pay. If they find discriminatory pay, they
can correct it and are no longer liable 180 days from the last discriminatory paycheck. The bill
actually encourages employers to fix discriminatory pay without needing court intervention.
- "You would have to pay for the decisions of people made years ago."
False. The TEPA only allows for a maximum of two years of backpay.


1
http://www.pewsocialtrends.org/2013/05/29/breadwinner-moms/
2
http://go.nationalpartnership.org/site/DocServer/Wage_Gap_tx.pdf
3
http://factfinder2.census.gov/faces/tableservices/jsf/pages/productview.xhtml?pid=ACS_11_1YR_B20017&prodT
ype=table
4
http://www.nwlc.org/resource/wage-gap-state-african-american-women
5
http://www.nwlc.org/resource/wage-gap-state-hispanic-women
6
http://www.nwlc.org/sites/default/files/pdfs/wage_gap_is_stagnant_2013.pdf
7
http://www.iwpr.org/initiatives/pay-equity-and-discrimination
8
http://www.iwpr.org/publications/fall-2010/separate-and-not-equal-gender-segregation-in-the-labor-market-
and-the-gender-wage-gap
9
http://apps.washingtonpost.com/g/documents/local/graduating-to-a-pay-gap/95/
10
http://www.aauw.org/files/2013/03/Graduating-to-a-Pay-Gap-The-Earnings-of-Women-and-Men-One-Year-
after-College-Graduation-Executive-Summary-and-Recommendations.pdf
11
http://www.iwpr.org/publications/pubs/pay-secrecy-and-wage-discrimination-1
12
http://www.nwlc.org/sites/default/files/pdfs/paysecrecyfactsheet.pdf
13
http://www.nwlc.org/sites/default/files/pdfs/green_minimumwageandwagegapfebruary_2014_update.pdf
14
Labor Code, Chapter 21.001(1)
15
http://www.nwlc.org/resource/lilly-ledbetter-fair-pay-act-0
16
http://www.iwpr.org/publications/pubs/pay-secrecy-and-wage-discrimination-1/at_download/file
17
http://www.nwlc.org/resource/lilly-ledbetter-act-2009-emerging-issues
18
http://www.capitol.state.tx.us/tlodocs/83R/billtext/pdf/HB00950F.pdf#navpanes=0
19
http://www.journals.senate.state.tx.us/sjrnl/83r/pdf/83RSJ05-21-F.PDF#page=147
20
http://www.journals.senate.state.tx.us/sjrnl/83r/pdf/83RSJ05-22-F.PDF#page=2
21
http://www.capitol.state.tx.us/tlodocs/83R/billtext/pdf/HB00950F.pdf#navpanes=0 (SECTION 2 of the bill)
22
http://www.journals.senate.state.tx.us/sjrnl/83r/pdf/83RSJ05-21-F.PDF#page=147
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158

23
http://www.journals.house.state.tx.us/hjrnl/83r/pdf/83RDAY58FINAL.PDF#page=17
24
http://governor.state.tx.us/news/veto/18661/
25
http://governor.state.tx.us/news/veto/18661/
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Introduction to Insurance in Texas
Texas consumers need a watchdog when it comes to regulating and monitoring insurance. The authority
and scope of the Texas Department of Insurance is insufficient to do this job. Until the system sees a
substantial change Texans will continue to be charged exorbitant rates for their homeowners insurance
and continue to see the quality of their policies decline.
Homeowners Insurance
Texas consumers pay homeowners insurance premiums that, on average, are higher than the rates paid
by consumers in 47 other states. A typical policy holder in Texas pays an average premium of $1672.
At the start of 2014, the three biggest insurers announced that they would be raising their rates. Allstate
will increases their rates an average of 6.5%, State Farm 9.8%, and Farmers 14.9%. From 2003 through
2012 the average dollar increases per policy in Texas was $640 dollars with more than half of the
increase due to higher company expenses and higher expected profit. Insurers target profit margins rose
from 5% in the early 2000s to 11% in 2012.
1

TWIA
1.8 million People live in 14 coastal counties covered by the Texas Windstorm Insurance Association.
2
The
residents of these counties and parts of Harris County are not eligible for insurance through companies
like Farmers, and State Farm that cover damage to their home as a result of catastrophic weather
events like hurricanes. TWIA was created after insurance companies quit writing policies to this region. In
2013 TWIA had 265,852 policies written on the Texas coast. TWIA pays the highest sales commission of
in any wind pool in the nation, and pays it to agents from private insurers
3
. In 2013 TWIA paid over $20
million in commissions and in a ten year period between 2000 and 2009 TWIA paid out $218 million in
commissions.



1
Office of Public Insurance Counsel;
http://www.opic.state.tx.us/images/Why_Is_Texas_Homeowners_Insurance_So_Expensive.pdf
2
2010 US Census
3
http://www.khou.com/news/investigative/I-Team-IS-AN-ELECTED-INSURANCE-WATCHDOG-PROFITING-OFF-
YOUR-RISING--RATES----115436069.html
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Texas' Property and Automobile Insurance Ratemaking
Overview
According to a report by the National Association of Insurance Commissioners released in
December 2013, Texas consumers pay homeowners insurance premiums that, on average, are
higher than the rates paid by consumers in 47 other states. A typical policyholder in Texas pays
an average premium of $1672. Only Louisiana and Florida have higher average premiums. At
the start of 2014, the three biggest insurers announced that they would be raising their rates.
Allstate will increase rates an average of 6.5%, State Farm 9.8%, and Farmers 14.9%. According
the Office of Public Insurance Counsel, from 2003 through 2012, the average dollar increase per
policy in Texas was $640 dollars - with more than half of the increase due to higher company
expenses and higher expected profit. Insurers target profit margins rose from 5% in the early
2000s to 11% in 2012.
In 2003, Texas had skyrocketing premiums purportedly due to mold. Many also associate the
rise with a large percentage of insurers operating under a loophole known as the "Lloyd's
Loophole", whereby the circumvented regulation and were free to overcharge policyholders at
will.
1
The Legislature set about overhauling our rate making system in order to address the
highest insurance premiums in the country that were still rising. Unfortunately, the legislature
took the approach of low regulation, which has resulted in Texas maintaining rates that are
consistently top three most expensive in the nation. The annual cost for the most commonly
sold policy in Texas was listed at $1578 in 2013 according to the National Association of
Insurance Commissioners.
2


Types of Ratemaking Systems
Before covering the changes of the insurance market, it is important to understand the
different available systems for insurance companies setting their premium rates. Of course, this
is all tackled from a Texas point of view, and how the system would operate in the state.
"File and Use" System - This is Texas' current system.
o After changes made in the 78th Legislature: Texas switched to a form of "File-
and-Use" ratemaking system. Under this system, which we currently are
operating under, insurers inform TDI of any rate changes along with supporting
documentation, and then immediately begin charging that rate. Rate filings are
THEN reviewed by TDI, who may request additional information. If the new rates
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163
are found to be "excessive, inadequate of unfairly discriminatory" according to
statute, the commissioner has two options:
If the rate has not gone into effect, which typically doesn't happen since insurers are
allowed to start using the rates immediately upon notification to TDI, the commissioner
can disapprove the rate. This is not the typical situation.
In the real world, insurers usually notify TDI and immediately begin charging the new
rate. In this case, the commissioner must call for a hearing and, after the hearing, can
disapprove the rate. The insurer then has the ability to appeal to court, all while the new
rates are still in effect. State Farm has ongoing litigation from a challenged rate hike in
2003, while the new rate has been in effect for the entire decade the case has carried
on.
3
The system is especially untenable because insurance companies make their profits
from investments -- therefore, while they've owed Texans hundreds of millions of
dollars in refunds, they've been investing and making profit from that money over the
10 year court battle. The system literally fiscally incentivizes the companies to not settle
and continue court battles.

"Prior Approval" System:
o In a "Prior Approval" ratemaking system, insurance companies would submit any
rate changes to the Texas Department of Insurance (TDI), and the rates were not
allowed to go into effect until the insurers gained approval from the department
and Insurance Commissioner.
o This system provides the most consumer protection - it puts the onus of proving
that rate hikes are legitimate and necessary before getting to charge consumers
that rate. This is unquestionable the system Texas should operate under. It
requires the Insurance Commissioner to make a decision on each and every rate
hike, and therefore would ensure someone in state government would be
publicly accountable for changes in rates. It would also ban insurers from foisting
new rates onto consumers before the rates are even reviewed.

"Flex Band" System:
o Prior to the change in 2003, and going all the way back to 1999, Texas operated
under a flex band regulatory system. In a flex band system, the insurance
Commissioner sets a benchmark rate for the industry. Insurers are free to
deviate above and below this rate at a set percentage - 30% for Texas. If the
insurer wanted to go outside of this range (i.e., flex band), they had to seek and
receive approval from the commissioner.
o This system dated back to Governor Richards' time in office. It allowed flexibility
to adapt to changing market conditions while also protecting policyholders from
rate shock (on the high end) and avoiding insurer insolvency (on the low end,
caused by the potential for carriers to dangerously undercut one another on
price). It also meant that the commissioner was actively minding the store, as
they had to investigate market conditions in setting the benchmark rate.


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164
Making the Change to File and Use
In the 78th session (2003), Senator Jackson and Rep. Smithee passed SB 14 78r to address
skyrocketing premiums. Because of all the mold claims in the state, insurers convinced the
insurer-friendly TDI to adopt a rule that allowed insurers to dramatically reduce the coverage in
the policies they were offering, in part because of an increase in mold claims. Once session
began, insurers agreed to allow the Lloyd's Loophole to be closed in exchange for switching
over to a file-and-use system, among other changes. The big changes from SB 14 78r include:
1. Switching to a file-and-use rate approval system
2. De-regulating standard forms
3. Insurers obtained permission to begin using policyholders' credit scores to determine
insurance premiums
Some Results of SB 14 changes:
At the most basic level, consumers are paying more money for less coverage -- TDI's SB
310 report published on March 2003 estimated that after TDI began approving non-
standard forms in 2002, the coverage Texas homeowners policies provided was
reduced by between 15 and 45 percent (PG 6), depending on the form. This followed on
the heels of homeowners rates that had spiked 45 percent in the three years before the
2003 reforms.
4

Texas consistently having one of the top three highest premiums in the nation. From the
latest information from NAIC, the average annual cost of the most commonly sold policy
in Texas is $1,578, while the national average is $978 -- a full $600 -- or 61% above the
national average for the same coverage.
5



1
http://www.bizjournals.com/dallas/stories/2003/01/20/story8.html?page=all
2
http://www.dallasnews.com/news/local-news/20131216-texas-home-insurance-rates-are-no-longer-no.-1.ece
3
http://insurancenewsnet.com/oarticle/2013/07/17/texas-rate-dispute-with-state-farm-passes-10-year-mark-a-
387540.html#.U1qHPPldU1I
4
http://www.hro.house.state.tx.us/pdf/focus/HOI81-14.pdf
5
http://www.dallasnews.com/news/local-news/20131216-texas-home-insurance-rates-are-no-longer-no.-1.ece
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Texas Windstorm Insurance Association
TWIA History
In 1971, Texas created the Texas Catastrophe Property Insurance Association, now called Texas
Windstorm Insurance Association ("TWIA"), when insurance carriers stopped writing policies
along the coast of Texas following Hurricane Celia. TWIA is a pool of property and casualty
insurance companies that provide wind and hail damage coverage to Texas property owners in
14 coastal counties and parts of Harris County. Since insurers refused to cover wind and hai l
damage, property owners were forced to obtain basic coverage from a regular provider and a
policy from TWIA for wind and hail damage.
1


In 2008, hurricanes Dolly and Ike resulted in $2.5 billion in losses to home and business owners
located along the coast. TWIA ultimately paid for these claims from $1.5 billion in reinsurance
proceeds, the totality of TWIA reserves in its catastrophe reserve trust fund (CRTF), and $530
million in assessments to TWIA insurer members. Of the total assessed to insurers, $230 million
will be repaid to insurers in premium tax credits over a five-year period.
2


Policy holders encountered difficulty during the claims process. It soon became apparent that
persons within TWIA conspired with adjusters to deny properly covered claims for policy
holders. Faced with the potential liability of actual damages and damages for violations of
unfair insurance practice and of prompt payment of claims, TWIA began to settle the claims.
However, the claims paid out have depleted the resources of TWIA. Instead of using its
statutory authority to levy assessments on the insurance companies that benefit from TWIA,
the agency sought legislative changes to pass on the cost and responsibility of funding future
losses to the consumer. The four members of the TWIA board representing private insurance
companies voted against the assessment motion, while the four members representing coastal
counties voted for it. The ninth board member abstained thereby defeating the motion and
declining to assess private insurers.
3


Overview
In 2008, Hurricane Dolly and Hurricane Ike caused $2.5 billion in losses along the Texas Gulf
Coast. These losses depleted the reserves of TWIA that were available to pay for future storms.
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TWIA had the option to levy an assessment on the private insurance companies to pay for
claims but instead chose to pursue legislative changes to pass on costs to policyholders.

During the claims process after the storms, it became evident that TWIA was not paying claims
according to the law or its contracts with consumers. Litigation demonstrated failed leadership
within TWIA and mishandled claims processing.
4
Instead of cracking down on the insurance
provider to address the multiple allegations against unfair claims handling practices, lawmakers
passed HB 3, which restricted the legal rights of policyholders by removing key penalties for
wrongdoing by TWIA, protecting insurance companies and passing on costs to consumers.

Under HB 3, changes are made to the way in which excess losses in the event of a catastrophe
will be paid. Now, prior to a catastrophic event, up to $1 billion in Class 1 Public Securities can
be issued, and up to $1 billion in Class 2 Public Securities, then $500 million in Class 3 Public
Securities are permitted if the Texas Public Finance Authority is unable to issue all or any
portion of the Class 1 Securities. Additionally, Class 2 Securities will now be repaid by the state
with a surcharge on the premiums of property and automobile insurance policies in the
catastrophe area.
5


The Texas Department of Insurance is considering a rule change to implement this proposal,
including the automobile insurance surcharge. The Department had previously delayed
implementation at the request of legislators, but since the Legislature did not act to properly
fund TWIA, the department is now carrying on with implementing the law.

Instead of forcing insurance companies to honor their word and provide for quality coverage
along the coast, the Department and the Legislature are pushing to continue to subsidize these
companies and socialize their risks. Unfairly targeting individuals along the coast hurts middle
income and low income families, harms small businesses and has the potential to negatively
impact the economy of the region. Further, levying a surcharge on drivers forces coastal
residents that may not even be homeowners to further subsidize the insurance companies.


Most Recent Changes Made to TWIA Funding - HB 3 82(1)
In a special session in 2011, the Legislature passed HB 3. Rather than crack down on the
insurance provider to address the multiple allegations against unfair claims handling practices,
lawmakers restricted the legal rights of policyholders by removing key penalties for wrongdoing
by TWIA. Additionally, the legislature stripped judges and juries of their power, giving it to an
unelected expert panel, required policyholders to pay extra to retain their full constitutional
rights, and forced claimants into a complicated claims process.

The following anti-consumer provisions were included in HB 3:

1) Expert panel: The bill creates a so-called expert panel to establish guidelines upon which
claims will be handled. These guidelines are presumed to be accurate and correct, unless clear
and convincing evidence supports a deviation from the guidelines, creating a virtually
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168
insurmountable legal burden on policyholders who dispute the panels findings. This
represents an unprecedented amount of power for an unelected, unaccountable panel.

2) Damages: The bill severely restricts protections that are guaranteed for all other insurance
customers for TWIA policyholders. In order to force TWIA to pay penalties for unfair claims
handling, policyholders must overcome a legal hurdle that is much higher than all other
policyholders must meet.

3) Retroactive: This legislation takes the exceptional step of upsetting current contracts. It
states that limitations on lawsuits will apply to any cause of action that accrues on or after the
effective date of the bill, regardless of the date on which the policy was delivered, issued for
delivery, or renewed. So if a policyholder bought a TWIA policy today, which incorporated
claims handling deadlines and policyholder protections on par with those provided in the
private market, those contract terms could be trumped by this legislation. The coverage
purchased by their hard-earned dollars would be undone by state action. Through this
legislation, the state is effectively confiscating their property rights and providing no benefit in
return.

4) Binding Arbitration: The bill includes a provision that is likely to result in most policyholders
waiving their legal rights before a dispute arises. Additionally, the legislation creates a de facto
binding arbitration process through appraisal for many claims.

In addition to these provisions, the bill also changed the way that future catastrophic losses
would be paid. Ultimately, HB 3 did not address the problems that existed when TWIA abused
its policy holders.
6


Automobile Surcharge
The Legislature passed HB 4409 in 2009 to provide funding for losses up to $2.5 billion and
change the way TWIA funded its losses in excess of premium and other revenue by establishing
public securities to pay for excess losses in the event of a catastrophe. Any surplus revenue in
TWIA from premiums not used to pay losses will be deposited in the Catastrophe Relief Trust
Fund (CRTF). If no catastrophic events occur, the CRTF could increase annually up to $240
million as TWIA places its profits from premiums not used to pay losses or expenses into the
CRTF. HB 4409 established three classes of public securities to pay for losses that exceeded the
associations premium and other revenue, available reserves, and amounts in the catastrophe
reserve trust fund. In the event of a catastrophe, excess losses will be paid in the following
sequence:

Level 1 - Any available TWIA premium and other revenue;
Level 2 - Any available funds in the CRTF;
Level 3 - Public securities (Class 1 Public Securities) not to exceed $1 billion with
repayment not to exceed 10 years by payment from TWIA available revenues;
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Level 4 - Public securities (Class 2 Public Securities) not to exceed $1 billion with
repayment not to exceed 10 years. Thirty percent or $300 million of the public
securities will be repaid by insurers assessments and seventy percent or $700
million will be repaid by surcharges on coastal property and casualty policies.
Level 5 - Public securities (Class 3 Public Securities) not to exceed $500 million with
repayment not to exceed 10 years paid by assessments on insurers or via the
purchase of reinsurance by insurers to cover the assessment.
7


In 2011, the Legislature passed HB 3 which stripped away many consumer protections in TWIA
and made changes to the way the securities in Level 4 would be funded. Now, TWIA was
authorized to issue Class 1 public securities prior to a catastrophic event and to permit the
issuance of class 2 and class 3 public securities if TPFA is unable to issue all or any portion of the
class 1 public securities. The commissioner is authorized to order the issuance of class 2 public
securities if the commissioner finds that all or any portion of the total principal amount of class
1 public securities cannot be issued.

The cost of Class 2 public securities are paid by member insurer assessments and premium
surcharges on policyholders in the catastrophe area. 30 percent of the cost of Class 2 public
securities is to be paid by member insurer assessments and 70 percent of the cost is to be paid
by a premium surcharge assessed on property and all policyholders of policies that cover
insured property that is located in the catastrophe area, including automobiles principally
garaged in a catastrophe area.
8
The expansion of surcharge policies to automobile insurance is
an especially unfavorable proposal.


1
http://www.twia.org/Portals/0/Documents/PolicyholderBroch_TWIA_Flat.pdf
2
http://www.insurancejournal.com/news/southcentral/2009/07/30/102629.htm
3
http://www.insurancejournal.com/news/southcentral/2009/07/30/102629.htm
4
http://www.insurancejournal.com/news/southcentral/2009/07/30/102629.htm
5
http://www.twia.org/Portals/0/Documents/PolicyholderBroch_TWIA_Flat.pdf
6
http://www.texaswatch.org/2011/06/lege-passes-twia-bill-punishing-coast-for-twia-abuses/
7
http://www.tdi.texas.gov/pubs/pc/pctwiabrief.ppt
8
http://www.tdi.texas.gov/pubs/pc/pctwiabrief.ppt
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Introduction to Criminal Justice

Long known as a tough-on-crime state, Texas is building a different reputation today by prioritizing
smart-on-crime strategies like implementing alternatives to incarceration, increasing probation and
parole programs, and creating specialized courts for repeat offenders and drug users.
1


Texas has the 4
th
highest incarceration rate in the country. In 2011, the national average was 492
prisoners per 100,000 people; Texas was 632.
2


With 13 exonerations in 2013, Texas had more exonerations than any other state last year.

According to the National Registry of Exoneration, 133 people in Texas convicted of serious crimes have
been exonerated (between January 1989December 2013) due to mistaken witness identification (63),
false or misleading forensic evidence (38), and official misconduct (42).

DNA evidence played a role in 54 cases.
3




1
Brandi Grissom, Will Federal Moves Spur Texas Criminal Justice Change?, Texas Tribune (Aug. 21, 2013).
2
Editorial: Transforming Texas criminal justice landscape, Dallas Morning News (Aug. 31, 2013).
3
Exonerations in 2013, National Registry of Exonerations, pg. 1 (Feb. 4, 2014).
4
Exonerations in 2013, National Registry of Exonerations, pg. 1 (Feb. 4, 2014).
5
Texas Death Penalty Fact Sheet, Texas Coalition to Abolish the Death Penalty (Mar. 10, 2014).
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Criminal Justice

Introduction to Criminal Justice
Long known as a tough-on-crime state, Texas is building a different reputation today by
prioritizing smart-on-crime strategies like implementing alternatives to incarceration,
increasing probation and parole programs, and creating specialized courts for repeat offenders
and drug users.
1
Although sentencing reform began in 2003, a major shift in approach occurred
in 2007 after Texas lawmakers received alarming prison projections.
2
The new approach
receives praise from both political parties, including two influential policy groups, the liberal -
leaning Texas Criminal Justice Coalition and the conservative-leaning Texas Public Policy
Foundation.
3


More recently, some lawmakers have been focused on reducing wrongful convictions, largely
sparked by the Michael Morton case and other exonerations; the closure of two privately-
operated state jails and one juvenile detention center due to reduced prison population; and
mental health care as it relates to the death penalty, prison violence and public safety.
4


Criminal Justice Statistics
Texas has the 4
th
highest incarceration rate in the country. In 2011, the national average
was 492 prisoners per 100,000 people; Texas was 632.
5


There are approximately 151,000 individuals currently incarcerated in Texas
Department of Criminal Justice (TDCJ) facilities.
6


Of all individuals incarcerated by TDCJ in August 2012:
o 35.7% were Black, 31.0% were White, and 32.8% were Hispanic. These numbers
do not reflect the demographics of Texas.
o 55.3% were incarcerated for a violent offense, 16.1% for a property offense,
16.7% for a drug offense, and 12.0% for another offense. See more about drug
offenses below.
7


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173
With 13 exonerations in 2013, Texas had more exonerations than any other state last
year.
8
According to the National Registry of Exoneration, 133 people in Texas convicted
of serious crimes have been exonerated (between January 1989December 2013)
9
due
to mistaken witness identification (63), false or misleading forensic evidence (38), and
official misconduct (42). DNA evidence played a role in 54 cases.
10


Texas has the highest number of executions in the nation: 16 in 2013
11
(See more
below.)

The crime rate dropped 18.6% between 2007 and 2012 in Texas,
12
during criminal
justice reform.

Messaging
Effective Justice: Liberal and conservative policy groups agree that Texas should continue
effective and less costly criminal justice measures, such as drug courts and probation.
13
Lower
incarceration rates have lead to low crime rates in Texas.
14


Innocence: In recent years, Texas has passed several criminal justice reform measures aimed at
reducing wrongful convictions. However, improvements can be made by utilizing better
scientific standards for evidence and law enforcement procedures, creating an innocence
commission,
15
and adequately funding public defense resources.
16


Drug Offenses
Approximately 90% of drug-related arrests in Texas are for possession not delivery or
distribution.
17
Of drug offenses, 57.7% were for possession, 40.0% for delivery

, and 2.3% for
other.
18
According to the Texas Criminal Justice Coalition, individuals who entered TDCJ in 2011
for a drug possession oense are costing Texas taxpayers nearly $700,000 every day.
19


Marijuana Reform
Long ignored in Texas, marijuana decriminalization has gained traction in recent months. In
March, Governor Perry expressed support for reducing criminal penalties for marijuana use for
economic reasons.
20
The conservative Texas Public Policy Foundation Center for Effective
Justice supported legislation to make possession of up to one ounce of marijuana a Class C
misdemeanor, punishable by a fine of up to $500.
21
Polls show Texans attitudes are shifting
toward support of decriminalization and even legalization for different reasons, including
economic, medical, or personal liberty.

Penalties
Possession of up to two ounces of marijuana is a Class B misdemeanor, punishable by up to 180
days in jail and a $2,000 fine; drug court diversion programs are available for nonviolent
offenders.
22




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174
Arrests
In 2012, there were 73,036 arrests for marijuana possession in Texas; this is about 52.5% of all
drug-related arrests. There were only 1,655 arrests for marijuana manufacture,
approximately 1.2% of drug-related arrests.
23
An annual Texas Department of Criminal Justice
report does not report specifically marijuana possession incarceration rates (see drug offense
section above) or the severity of marijuana possession arrests.

Costs
It is difficult to isolate the cost of marijuana enforcement (see above for drug possession costs).
According to the ACLU, $251,648,800 was spent on enforcing marijuana possession in 2010.
24
A
2005 report by NORML found that marijuana arrests cost approximately $10,400 per arrest
nationally.
25
Some argue these dollars could be better spent on public health and safety
measures, schools, treatment programs, etc.

Inequality
Marijuana possession and sales arrest disproportionately impact young males and black adults.
According to the ACLU, blacks are 2.3 times more likely than whites to be arrested for
marijuana possession.
26


Related Issues
Decriminalization could improve border security, reduce strain on law enforcement, and
improve addiction treatment.
27


Death Penalty
Statistics
In 2013, the State of Texas executed 16 people and accounted for 41% of executions
nationwide. There are currently 274 individuals on death row in Texas (266 men and 8 women).

In 2013, 9 individuals were sentenced to death; new death sentences in Texas have dropped
more than 75% since 2002.
28
Texas juries didn't have the option of life without parole until
2005.
29


Race
While African-Americans comprised only 12.3% of the population of Texas in 2013, they
currently comprise 40.9% of death row inmates. Hispanics comprise 38.2% of the states
population and 28.8% of the death row population. Non-Hispanic whites comprise 44.5% of the
population and 28.5% of the death row population. Sources: United States Census Bureau
30
and
the Texas Department of Criminal Justice
31
.

Wrongful Convictions
Since 1973, 144 people have been released from U.S. death rows due to evidence of their
wrongful conviction. There have been 12 individuals released from Texas death row, as well as
strong evidence of wrongful executions.
32



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175
Cost
Each Texas county pays for its own death penalty trials and the state appeals process. However,
every Texas resident contributes to death penalty appeals because state tax dollars fund the
federal habeas corpus process.
33
Texas death penalty cases cost more than non-capital cases.
The most commonly cited statistic is from the Dallas Morning News in 1992: The average cost
of a Texas death penalty case is $2.3 million vs. $750,000 for life in prison. Expenses include
longer and more complex original trials, an automatic appeals process, and the costs of housing
and executing death row inmates. Individual cases demonstrate the incredible cost of a death
penalty case to a county.
34


Deterrence
The Texas Coalition to Abolish the Death Penalty points to these studies about deterrence and
the death penalty: (1) A 2009 national poll commissioned by the Death Penalty Information
Center found police chiefs ranked the death penalty last among ways to reduce violent crime.
The police chiefs also considered the death penalty the least efficient use of taxpayers money.
(2) A 2012 report from the National Research Council found that while the subject of
deterrence has been exhaustively studied and debated over the last 35 years, essentially none
of this research can be considered useful or informative in determining whether the death
penalty has any impact on homicide rates. (3) Consistent with previous years, the 2010 FBI
Uniform Crime Report showed that the South had the highest murder rate. The South accounts
for over 80% of executions. The Northeast, which has carried out less than 1% of all executions,
again had the lowest murder rate.
35


Newspaper
The following newspapers have called for the abolition of or moratorium on the death penalty
in Texas:
Abolition: Austin American-Statesman, Dallas Morning News, Fort Worth Star-Telegram,
Houston Chronicle
Moratorium: Abilene Reporter-News, Bryan-College Station Eagle, Corpus Christi Caller-
Times, Daily Texan, El Paso Times, Galveston Daily News, San Antonio Express-News,
Texas Monthly, Victoria Advocate, Wichita Falls Times Record
36


Domestic Violence
In Texas in 2012, there were nearly 200,000 instances of family violence, and 114 women were
killed by a partner.
37
In 2013, the Legislature continued funding of more than $50 million for
victims of family violence, restored $2.5 million in funding for the Battering Intervention
Prevention Program and creating a task force to recommend improvements to health care
services for women in violent relationships.
38
General Abbott has pledged to create Domestic
Violence High Risk teams that unite law enforcement, medical professionals and crime-victim
advocates at the local level and spend nearly $11 million to address the backlog of sexual
assault kits.
39




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176
Prostitution
Prostitution became a focus of criminal justice reform in 2010. Dallas and Houston set up
special courts to address child prostitution.
40
The Dallas County Prostitution Diversion Initiative
gives people arrested for prostitution the choice between jail time and rehab. In 2013, the
Legislature passed a bill passed a bill to require large counties to create prostitution prevention
programs, a move praised by the Texas Criminal Justice Coalition and Texas Public Policy
Foundation.
41


Introduction to Juvenile Justice
In 2007, reports of sexual and physical abuse and mismanagement at state juvenile detention
centers and a cover-up by authorities of the Texas Youth Commission (TYC) caused the
Legislature to overhaul the Texas juvenile justice system. Reforms included limiting admission
to youth under 19 convicted of a felony oense, mandating a 1:12 sta-to-youth ratio, and
establishing an Oce of Inspector General and Oce of Independent Ombudsman.
42
In 2011,
the TYC and Texas Juvenile Probation Commission were merged into the Texas Juvenile Justice
Department and focus was placed on community-based programs over incarceration.
43
These
reforms have greatly reduced the number of youth residing in Texas juvenile detention
facilities.
44


School Discipline
School police officers had been able to give students tickets for offenses committed in school
deemed Class C misdemeanors. Last session, lawmakers passed a bill that requires a prosecutor
to decide whether to charge the student with a crime. Experts expect it will lower the number
of students charged with Class C misdemeanors.
45


Juvenile Justice Statistics

Today, there are approximately 1,100 youths in TJJD institutions.
46
This is
down from 8,247 in 2006.
47


Messaging
Texas youth facilities are too large and remote, leading to staffing problems, low family
involvement, high youth-on-youth violence and ineffective rehabilitation. Efforts should be
made to avoid incarceration when possible. Early intervention is key, and funding should be
increased to Communities-in-School and other programs that target at-risk youth. Recidivism is
also a problem in juvenile justice; the state should take serious steps to improve treatment and
increase reentry assistance.
48



1
Brandi Grissom, Will Federal Moves Spur Texas Criminal Justice Change?, Texas Tribune
(Aug. 21, 2013).
2
Adult Criminal Justice System- 1993Present, Texas Criminal Justice Coalition (Last
visited: Mar. 11, 2014).
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177

3
Nate Blakeslee, Why Fewer Prisons Are Good for Texass Economy, Texas Monthly (Mar.
11, 2014).
4
Brandi Grissom, Year in Review: Criminal Justice, Texas Tribune (Dec. 26, 2013).
5
Editorial: Transforming Texas criminal justice landscape, Dallas Morning News (Aug. 31,
2013).
6
Monthly Tracking of Adult Correctional Population Indicators (February 2014),
Legislative Budget Board (Last visited: Mar. 11, 2014)
7
Statistical Report (FY 2012), Texas Department of Criminal Justice, pg. 10 & 18 (Last
Viewed: March 12, 2014).
8
Exonerations in 2013, National Registry of Exonerations, pg. 1 (Feb. 4, 2014).
9
Exonerations in 2013, National Registry of Exonerations, pg. 1 (Feb. 4, 2014).
10
Texas Death Penalty Fact Sheet, Texas Coalition to Abolish the Death Penalty (Mar. 10,
2014).
11
Number of Executions by State and Region Since 1976, Death Penalty Information Center
(Last visited: Mar. 12, 2014).
12
Uniform Crime Reports, U.S. Department of Justice (Last Viewed: Mar. 12, 2014).
13
Nate Blakeslee, Why Fewer Prisons Are Good for Texass Economy, Texas Monthly (Mar.
11, 2014)
14
Vikrant Reddy, Criminal justice reforms in Texas can set tone for U.S., Houston Chronicle
(Aug. 23, 2013)
15
Senator Rodney Ellis, Texas still has a ways to go for fair justice, San Antonio Express-
News (Nov. 1, 2013).
16
Solutions for Pretrial, Defense & Innocence, Texas Criminal Justice Coalition (Last
Visited: Mar. 12, 2014).
17
Crime in Texas 2012: Texas Arrest Data. Texas Department of Public Safety (Last Viewed:
Apr. 2, 2014)
18
Statistical Report (FY 2012), Texas Department of Criminal Justice, pg. 10 & 18 (Last
Viewed: March 12, 2014).
19
Caitlin Dunklee, et al, Effective Approaches to Drug Crimes In Texas: Strategies to Reduce
Crime, Save Money, and Treat Addiction, Texas Criminal Justice Coalition (Jan. 2013).
20
Kolten Parker, Texans' attitudes shifting along with U.S. on legalizing pot, San Antonio
Express-News (Feb. 26, 2014).
21
Julian Aguilar, Expecting Pot Penalties to Decrease? Slow Your Roll, Texas Tribune (Feb.
14, 2014).
22
Julian Aguilar, Expecting Pot Penalties to Decrease? Slow Your Roll, Texas Tribune (Feb.
14, 2014).
23
Crime in Texas 2012: Texas Arrest Data. Texas Department of Public Safety (Last Viewed:
Apr. 2, 2014).
24
The War on Marijuana in Black and White, American Civil Liberties Union, pg. 180 (Jun.
2013).
25
Allen St. Pierre, Crimes of Indiscretion: Marijuana Arrests in the United States Executive
Summary, NORML (May 19, 2005).
26
The War on Marijuana in Black and White, American Civil Liberties Union, pg. 180 (Jun.
2013).
27
Texas Legislators Education Package, Texas NORMAL (Last viewed: Apr. 3, 2014).
Back to Basics 2014 Policy Guide
178

28
Texas Death Penalty Fact Sheet, Texas Coalition to Abolish the Death Penalty (Mar. 10,
2014).
29
E.G. Austin, The political calculus on capital punishment, The Economist (Jul 6, 2011).
30
State & County QuickFacts: Texas, United States Census Bureau (Mar. 27, 2014).
31
Gender and Racial Statistics of Death Row Offenders, Texas Department of Criminal
Justice (Apr.4, 2014).
32
Texas Death Penalty Fact Sheet, Texas Coalition to Abolish the Death Penalty (Mar. 10,
2014).
33
What makes the death penalty so expensive? Texas Coalition to Abolish the Death
Penalty (Last viewed: Apr. 7, 2014).
34
What makes the death penalty so expensive? Texas Coalition to Abolish the Death
Penalty (Last viewed: Apr. 7, 2014).
35
Texas Death Penalty Fact Sheet, Texas Coalition to Abolish the Death Penalty (Mar. 10,
2014).
36
Texas Death Penalty Fact Sheet, Texas Coalition to Abolish the Death Penalty (Mar. 10,
2014).
37
Facts and Statistics, Texas Council on Family Violence (Last Viewed: Mar. 18, 2014).
38
Jeff Temple, Violence against women hurts us all, Houston Chronicle (Mar. 9, 2014).
39
Gromer Jeffers Jr., Abbott unveils $300 million policy on border security, other safety
issues, Dallas Morning News (Feb. 4, 2014).
40
Ramit Plushnick-Masti, Houston Tries Prostitution Rehab for Women in Jail, Associated
Press (Jun. 26, 2013).
41
Tristan Hallman, Texas bill on prostitution diversion modeled on Dallas County, Dallas
Morning News (June 5, 2013).
42
Texas Youth Commission, Texas Juvenile Probation Commission, Oce of Independent
Ombudsman, Sunset Advisory Commission (Feb. 2009).
43
Juvenile Justice Agencies: S.B. 653, Sunset Advisory Commission (Jul. 2011).
44
Youth Residing In Juvenile Detention And Correctional Facilities, KIDS COUNT Data
Center (Last Visited: Mar. 12, 2014).
45
Jody Serrano, School Officers Can No Longer Issue On-Campus Citations, Texas Tribune
(Aug. 29, 2013).
46
Monthly Tracking of Juvenile Correctional Population Indicators (February 2014),
Legislative Budget Board (Last visited: Mar. 12, 2014).
47
Detailed Offense Profile for Texas, 2006, Easy Access to the Census of Juveniles in
Residential Placement (Last Viewed: Mar. 12, 2014)
48
Solutions for Youth Justice, Texas Criminal Justice Coalition (Last Viewed: March 12,
2014).
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Driver Responsibility Program

Summary
Created in 2003 to help fill a $10 billion budget shortfall and to encourage more responsible
driving, the Driver Responsibility Program (DRP) requires drivers convicted of a certain traffic
offenses to pay annual surcharges to maintain their drivers licenses. Failure to pay the
surcharge, which is assessed on top of court fines and criminal penalties, results in automatic
license suspension.
1


The DRP has created more problems than it has solved. While the DRP has provided much-
needed revenue for Texas trauma centers (hospitals), it is plagued by unintended
consequences. It has generated far less revenue than anticipated; it has not improved public
safety; and it has compounded financial hardship for low-income households. Only 39% of
assessed surcharges have been collected, despite attempts to incentivize surcharge payments
and to alleviate the burden on low-income Texans.
2
The DRP has undermined opportunities to
reduce drunk driving and led to more uninsured drivers on Texas roads, since many of the
approximately 1.4 million Texans whose drivers licenses have been suspended due to unpaid
surcharges continue driving with invalid licenses.
3


History
The Texas Legislature created the DRP in 2003. Bipartisan efforts to repeal the program in 2011
and 2013 were unsuccessful. In 2009, the Legislature directed DPS to make the following
changes to the DRP in attempt to boost collections and alleviate the surcharge burden on the
poorest Texans:

The Indigence Program, which took effect in 2011, offers reduced surcharges to drivers
earning less than 125% of the Federal Poverty Guideline ($29,812 per year for a
household of four in 2014).
The Amnesty Program was a one-time program in 2011 allowing drivers with past-due
surcharge debt the ability to reinstate their licenses in exchange for paying reduced
amounts.

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How the Program Works
Under the DRP, DPS assesses annual, administrative surcharges against persons convicted of
certain traffic offenses, above and beyond any criminal penalties and court fines.
4
Surcharges
are levied every year for three years. If a driver fails to pay surcharges, DPS automatically
suspends the persons drivers license until the debt is paid.

The DPS levies surcharges through:

1) A point system, after conviction for several lower-level traffic violations, and
2) A conviction-based system, based on commission of other, specific traffic offenses.

Under the point system, drivers that accumulate six or more points during a three-year period
are assessed annual surcharges in order to maintain their drivers licenses: $100 for the first six
points, and $25 for each additional point. Under the conviction-based system, DPS
automatically levies the following surcharges, annually for three years, upon conviction of these
traffic offenses:

Driving While Intoxicated (DWI) -- $1,000 to $2,000
Driving While License Invalid (DWLI) -- $250
No License -- $100
Failure to Maintain Financial Responsibility (FMFR) (or No Insurance) -- $250

Benefits of the Program
Revenue for Texas hospitals
Approximately 40% of DRP surcharge revenue goes to Texas hospitals to help cover
uncompensated care costs.
5
While these funds only cover 25% to 30% of hospitals total
uncompensated care costs, as of the end of FY 2012, DRP had generated over $500 million for
Texas trauma centers.
6
As the primary beneficiaries of the program, Texas trauma centers and
health care advocates, are the principal supporters of the DRP.

Problems with the Program
Failure to improve public safety
There is no evidence that the DRP has increased driver responsibility or public safety.
7
Despite
levying surcharges between $3,000 and $6,000 (over 3 years) on drivers with DWI convictions,
the share of traffic fatalities involving alcohol in Texas increased between 2003, the year prior
to the creation of the DRP, and 2011.
8
According to Texas judges and prosecutors, the DRP has
also led to fewer DWI convictions.
9
Fewer convictions means fewer offenders participate in
court-mandated programs that are proven to change behavior and reduce recidivism, making
roads less safe by putting more drunk drivers back on the road.

Low surcharge collection rates
A majority of violators are unable or unwilling to pay surcharges assessed under the program.
As a result, since the DRPs inception, 61% of the surcharges assessed under the DRP have not
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been collected, despite the 2011 changes to the program that sought to increase surcharge
collections.
10


More uninsured motorists
Because many drivers whose licenses have been suspended due to unpaid DRP surcharges
cannot obtain insurance, the DRP has undoubtedly increased the number of uninsured
motorists on Texas roads. A leading criminal justice advocacy group estimates that accidents
involving uninsured motorists costs Texans as much as $300 million per year in damages.
11


Thwarting Criminal Justice
DRP surcharges are distorting the criminal justice system, with costly and dangerous
consequences. The DRP has led to fewer DWI convictions as DWI cases are increasingly
prosecuted as reckless driving and other, lesser offenses in order to avoid exorbitant DWI
surcharges.

Clogging county courts
Many DWI defendants who would normally accept plea bargains now choose to go to trial in
hopes of avoiding the DRP surcharges, adding thousands of additional cases to courts already
backlogged caseloads.
12
DRP license suspensions have also significantly increased courts
misdemeanor caseloads--Driving While License Invalid (DWLI) and No Insurance (FMFR), in
particular-- since many Texans are unable to pay the surcharges required to maintain their
drivers licenses.
13
District attorneys estimate that one in five misdemeanor cases in Texas
involve drivers with suspended licenses.
14
This puts more pressure on already crowded jails
and needlessly fills court dockets with petty cases, both of which increase the financi al burden
on counties.

Financial blow to low-income Texans
Survey data indicates that surcharge programs like the DRP cause significant financial hardship
for poor households. A 2006 study of New Jerseys surcharge program, similar to Texas DRP,
revealed that low-income drivers are more likely to lose their jobs, less likely to find a new job,
and less able to afford increased insurance premiums once their drivers licenses have been
suspended for unpaid surcharges.
15


Double Jeopardy
Levying an administrative penalty on top of a criminal penalty for the same offense violates the
spirit of the 5
th
Amendment to the U.S. Constitution prohibiting being punished twice for the
same offense. A federal lawsuit was filed in 2010 claiming the program violates the 5
th

Amendment. This author was unable to determine the outcome of that case.

Surcharges Diverted to Bolster State Budget
To date, most of the surcharges collected under the DRP have not been disbursed to hospitals,
but instead have been allowed to build up in a General Revenue-Dedicated account (the
Designated Trauma Facility and Emergency Medical Services Account) to help state leaders
balance the biennial budget. As of the end of FY 2013, the account had amassed a balance of
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$382 million.
16
In the 2014-2015 budget, the 2013 Legislature appropriated most of the
accumulated DRP funds to pay for Medicaid-related hospital expenses and graduate medical
education, eliminating a potential funding source to replace lost DRP revenue in future years if
the program were to be eliminated.
17


Key Quotes
I think its past time to either revise or repeal the program. Former State Rep. Mike Krusee
(R-Round Rock), author of the 2003 bill creating the DRP.
18


It is important for us to recognize when government programs have not worked. State Rep.
Larry Gonzales (R-Round Rock), co-author of 2013 bill to repeal the DRP.
19


This program is a severe and unjust blow to Texans already struggling to keep their heads
above water. State Rep. Lon Burnam (D-Fort Worth), co-author of 2011 and 2013 bills to
repeal the DRP.
20


We can't point to anything that says that law has caused a decline in alcohol -related fatalities.
-- Bill Lewis, Public Policy Liaison, Texas Chapter of Mothers Against Drunk Driving
21


1
Texas Transportation Code, Chapter 708. Also see http://www.txdps.state.tx.us/DriverLicense/drp.htm.
2
The Driver Responsibility Program: A Texas-Sized Failure, Texas Criminal Justice Coalition, February 2013, p. 11.
Online at: http://www.texascjc.org/sites/default/files/uploads/Driver%20Responsibility%20Program.pdf ; updated
figures obtained from Texas Department of Public Safety.
3
Interim Report to the 82
nd
Texas Legislature House Committee on Public Safety, January 2011, p. 19. Online at:
http://www.house.state.tx.us/_media/pdf/committees/reports/81interim/House-Committee-on-Public-Safety-Interim-
Report-2010.pdf; updated figures obtained from Texas Department of Public Safety.
4
Texas Transportation Code Chapter 708. Also see http://www.txdps.state.tx.us/DriverLicense/drp.htm.
5
Texas Criminal Justice Coalition, February 2013.
6
Designated Trauma Facility and Emergency Medical Service Account: FY05 - FY12 Disbursements, prepared by the
Texas Department of State Health Services.
7
Bill Seeks Repeal of Driver Responsibility Program, Texas Tribune, November 15, 2012. Online at:
http://www.texastribune.org/2012/11/15/texas-doctors-decry-use-ems-fund-balance-budget/
8
DUI (Alcohol) Crashes and Injuries by County (2003 - 2011), prepared by the Texas Department of Transportation.
Online at: http://www.txdot.gov/txdot_library/drivers_vehicles/publications/crash_statistics/default.htm
9
David Hodges (Judicial Resource Liaison, Texas Center for the Judiciary), oral testimony provided before the Senate
Committee on Criminal Jurisprudence, July 8, 2010. See the Senate Committees Interim Report, p. 22. Online at:
http://www.senate.state.tx.us/75r/senate/commit/c590/c590.InterimReport81.pdf.
10
Texas Criminal Justice Coalition, February 2013.
11
Texas Criminal Justice Coalition, February 2013.
12
David Hodges (Judicial Resource Liaison, Texas Center for the Judiciary), oral testimony provided before the Senate
Committee on Criminal Jurisprudence, July 8, 2010. See the Senate Committees Interim Report, p. 22-23. Online at:
http://www.senate.state.tx.us/75r/senate/commit/c590/c590.InterimReport81.pdf.
13
Texas Criminal Justice Coalition, February 2013.
14
Brandi Grissom, Many Texans lose licenses in driver points program, El Paso Times, August 19, 2007
15
Motor Vehicles Affordability and Fairness Task Force Final Report, February 2006. Online at:
http://www.state.nj.us/mvc/pdf/About/AFTF_final_02.pdf
16
State of Texas Annual Cash Report, Revenues and Expenditures of State Funds for the Year Ended August 31, 2013,
prepared by the Texas Comptroller of Public Accounts. Available online.
17
Report on the Regular Session of the 83rd Texas Legislature From a Trauma/EMS Perspective, Texas EMS Trauma & Acute
Care Foundation. Available online: http://www.tetaf.org/TETAF_Docs/legislativereport2013.pdf.
18
Critics: Law puts drivers on road to ruin, Houston Chronicle, March 21, 2010. Online at:
http://www.chron.com/disp/story.mpl//metropolitan/6922979.html.
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184


19
Texas lawmakers want brakes put on driver surcharges for road violations, Dallas Morning News, March 24, 2013. Online
at: http://www.dallasnews.com/news/politics/state-politics/20130324-texas-lawmakers-want-the-brakes-put-on-
driver-fees-for-road-violations.ece
20
Lawmakers trying to kill driver surcharge program, Houston Chronicle, March 22, 2011. Online at:
http://blog.chron.com/texaspolitics/2011/03/lawmakers-trying-to-kill-driver-surcharge-program/
21
http://www.chron.com/news/houston-texas/article/Critics-say-costly-DPS-fines-put-drivers-on-road-1623025.php
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Introduction to Immigration and Border Security

Enforcement only solutions exacerbate the problem by ignoring US labor needs, demonizing immigrant
and Latino communities, and increasing costs off unrealistic and futile enforcement.

State enforcement of immigration law in Texas would be disastrous for moral, legal, and economic
reasons.

In 2010, there were an estimated 1.65 million undocumented immigrants in Texas, making up 6.7% of
the population. They represented 9% (1.1 million) of the states labor force.

The Texas Comptrollers office issued a report in 2006 stating undocumented immigrants produced $1.58
billion in state revenues, which exceeded the $1.16 billion in state services they received.

Between 50%-75% of unauthorized immigrants pay local, state, and federal taxes.

Texas is a hub for international human trafficking because of its many busy interstate highways,
international airports, bus stations, the shipping commerce through the Gulf of Mexico, and its shared
border with Mexico.




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Immigration and Border Security

Fixing a broken immigration system is good moral sense and good business sense. Texans value
hard work. If youre here to work hard, provide for your family, pay your taxes, then you should
have an opportunity to become a United States citizen.

This is a nation of immigrants. Every wave of new immigrants regardless of where they came
from has made this nation stronger and better. Yet, the status quo fights it every single time.
That wont do anymore.

Effective Border Security must include the economic development of the border region
and a federal solution that provides a legal path for immigrant labor to come out of the
shadows.
Were all unique individually, geographically and culturally. But, at the end of the day,
were all Texans and, by birth or by choice, thats a very special thing to be.
Enforcement only solutions exacerbate the problem by ignoring US labor needs,
demonizing immigrant and Latino communities, and increasing costs off unrealistic and
futile enforcement.
State enforcement of immigration law in Texas would be disastrous for moral, legal, and
economic reasons.

Broken Immigration System
There is no viable means of legal immigration available to a great number of undocumented
persons living in the U.S. or for non-citizens abroad seeking to come to the U.S. to work.
Without immediate family ties, tremendous monetary resources, or extreme hardship to
certain family members in the U.S., there are almost no paths to legal immigration. Even with
an employment- or family-based immigrant visa available, many people are unable to legally
immigrate. For those rare immigrants fortunate enough to have a path to immigrate, the
process is difficult, extremely time consuming, expensive, and even minor immigration or
criminal violations can render a person ineligible for lawful permanent residency.
1


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189
Family-based immigration, designed to unify families, is not immediately available to many.
With an annual ceiling of 226,000 on the number of persons allowed to immigrate to the
U.S. through the family preference system, the demand for family-based visas exceeds the
supply and each family preference category is backlogged. Current wait times for a first
priority family based petition from Mexico could more than 25 years.
2


Even immediate relatives, such as spouses and minor children exempt from the family-
based visa quotas, are still subject to bars to immigrating to the U.S. For example, the
undocumented spouse of a U.S. citizen who entered the U.S. without permission is ineligible
to process her permanent residency application within the U.S.

The immigration system prevents employers from acquiring needed labor. The certification
process for employment-based immigration is expensive and difficult to navigate for most
U.S. employers. Approximately 140,000 employment-based visas are available in a fiscal
year.
3
Current employment-based visas do not fill the need of U.S. or Texas employers.

Recent Migration Trends
In 2010, there were an estimated 1.65 million undocumented immigrants in Texas, making
up 6.7% of the population.
4
They represented 9% (1.1 million) of the states labor force.
5


Net migration from Mexico is at zero, but migration from Central and South American
countries continues.
6
According to a 2013 study by the New York-based Center for
Migration Studies, the number of undocumented immigrants entering Texas has
plummeted to its lowest point in more than two decades thanks to the nation's wounded
economy and beefed-up border security.
7


But crossings in South Texas appear to be increasing. From an April 10, 2014 New York
Times article: After six years of steep declines across the Southwest, illegal crossings have
soared in South Texas while remaining low elsewhere. The Border Patrol made more than
90,700 apprehensions in the Rio Grande Valley in the past six months, a 69 percent increase
over last year.
8
There has also been an uptick in unaccompanied minors from South and
Central America, which could be related to violence in their home countries.
9


"After four decades that brought 12 million current immigrantsmost of whom came
illegallythe net migration flow from Mexico to the United States has stopped and may
have reversed, according to government data from both countries by the Pew Hispanic
Center."
10


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Source
11


The general assessment is that unlawful crossings at the border have decreased due to
increased enforcement and economic downturns in the U.S.
12
Don't forget that border
crossings are only part of the equation, because unlawful immigration includes immigrants
that overstay their visas.
13


In general, the safe bet is that illegal immigration rates will follow labor conditions in the
U.S.
14
Studies show that immigrants, both legal and unauthorized, come for jobs first and
foremost.
15
As economic conditions improve in the U.S., so will immigration flow,
regardless of enforcement. The main result of enforcement is that it reduces the back and
forth flow of undocumented immigrants, so instead of returning home for holidays or when
seasonal jobs end, undocumented immigrants stay in the U.S. to prevent the risk of
deportation or detention.
16


Economics of Immigration
Benefits of Comprehensive Immigration Reform
In a report issued in August 2013, the White House provided an analysis of the impact that
comprehensive immigration reform would have on Texas, including strengthening the
economy.
17
A set of reforms that provides a pathway to earned citizenship and expands a
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191
high-skilled and other temporary worker programs would together boost Texass economic
output by $3.8 billion and create approximately 43,097 new jobs in 2014. By 2045, the
boost to Texass economic output would be around $18.9 billion, in 2012 dollars.
18


Providing a pathway to earned citizenship and expanding high- and low-skilled visa
programs will increase total personal income for Texas families by $15.2 billion in 2020,
according to Regional Economic Models, Inc.
19


Noncitizen farmworkers accounted for 35% of all farmworkers in Texas between 2007 and
2011. According to one study, in 2020 an expanded temporary worker program like the
one provided by the Senate bill would mean 4,721 new jobs for U.S. citizens and
immigrants (including jobs not only in agriculture, but also retail trade, construction, and
other sectors) in Texas, and increase Texass real personal income by $286 million in 2012
dollars.
20


Tax Implications Undocumented Immigrants
The Texas Comptrollers office issued a report in 2006 stating undocumented immigrants
produced $1.58 billion in state revenues, which exceeded the $1.16 billion in state services
they received.
21
No subsequent report by the Texas Comptroller has been issued and this
report represents the best attempt at an unbiased account on the true costs of
undocumented immigrants in TX.
22


Between 50%-75% of unauthorized immigrants pay local, state, and federal taxes.
23


Undocumented immigrants have do have a local cost to taxpayers, which is highlighted in
the 2006 Comptroller report.
24
The costs include healthcare costs - because undocumented
and some lawful immigrant classes are not eligible for healthcare, prison costs because
increased enforcement results in more detained immigrants, and education costs because
schools are constitutionally required under Plyer v Doe to provide an education to
undocumented students, which is why we need the DREAM Act to allow these students to
obtain permanent work authorization.

Undocumented Immigrants are an Integral Part of the Workforce
The immediate negative effect on the United States of eliminating the undocumented
workforce would include $1.757 trillion in annual lost spending, $651.511 million in annual
lost output, and 8.1 million lost jobs. Even after the economy adjusted, job losses would still
exceed 2.8 million. Texas would have the fourth largest losses after California, Arizona, and
Nevada
25


States with the largest shares of immigrants in the labor force are Nevada (9.4%), California
(9.3%), Texas (8.7%) and New Jersey (8.7%).
26


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In the construction sector alone, more than 1.62 million construction jobs would be lost in
the initial static effects estimate by eliminating the undocumented workforce. Even after
the market adjusted, losses in the construction segment would approach 230,000.
27


Without the undocumented immigrant population, the Texas workforce would decrease by
6.3 %.
28


The foregone economic activity (based on the size of the national economy in 2008)
resulting from the loss of the undocumented workforce would include some $551,569
billion in annual spending, $244,971 billion in annual output, and more than 2.8 million lost
jobs.
29


In 2005, eliminating 1.4 million undocumented immigrants would generate a 2.1% decline
in the Texas gross product or $17.7 billion. This is the broadest measure of the value of
goods and services produced in Texas.
30


Border Security: Enforcement-Only Approaches Don't Work
Border infrastructure spending is more effective than fences and militarizing the border
Background
Texas border security operation, in the larger scheme of the border security build up, is on
such a small scale, it makes an insignificant impact on smuggling or cartel capacity and
represents more of the same failed strategies.

Various aspects of Governor Perrys border security and intelligence efforts have received
critical coverage.
31


The Texas Border Coalition supports alternatives to fencing that are smart and effective and
ultimately achieve true security, such as the Vega Project in Webb County, the Eagle Pass
Park project, the Brownsville Weir and Reservoir project and the clearing of the Rio Grande
of vegetation such as Carrizo Cane that provides hiding places for illegal border-crossers.
They support physical barriers in remote areas where they make sense and are agreed to by
elected county and municipal officials. (See also HCR 75 2009 81st Regular Session)

Costs of a nationwide mass deportation effort would be at least $206 billion over five years
($41.2 billion annually) and could be as high as $230 billion or more. Spending $41.2 billion
annually would exceed the entire budget of the Department of Homeland Security for FY
2006 ($34.2 billion) and more than double the annual cost of military operations in
Afghanistan. ($16.8 billion).
32


El Paso has consistently ranked as city with the lowest crime rate for major metropolitan
cities in America despite its proximity to Juarez.
33
El Paso County Sheriff Richard Wiles
(former police chief) credits community relations with immigrant populations for part of
success.
34

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193
o Sheriff Wiles strongly advocates for community policing.
35
Sheriff Wiles strongly
condemned sanctuary cities legislation in 2011 and beyond.
36


Local and state enforcement of immigration laws undermines community policing and
increases the underreporting of crimes especially domestic violence. Hans Marticiuc,
President of the Houston Police Officers Union stated it best, saying, Its very difficult in the
immigration communities to get information from folks, and if theres a fear of being
reported to the INS because of illegal status, then it just makes our job that much more
difficult and it makes the city have that much more criminal activity.
37



DPS lacks the proper protocols to operate safely in populated areas.

o DPS border operations have resulted in several deadly high-speed chases in
Hidalgo County alone, the most recent resulting in the death of six local
residents.
38
Between January 2005 and July 2010, there were 656 high-speed
chases in Hidalgo County, 13 percent of the total DPS high-speed chases
statewide. Troopers were 30 times more likely to engage in a high-speed chase
in Hidalgo County than they were on average.
39
These chases put local residents
and vehicle drivers and passengers at an unnecessarily high risk of injury or
death.

o DPS uses more aggressive chase tactics than other law enforcement in Texas.
DPS should change its training and protocols to adjust to conditions in Hidalgo
County and other higher population locals, if they are going to continue to
engage in high-speed chases in high population areas.
40


o South Texas residents live with the inconvenience and indignity of frequent
traffic stops, as a result of local law enforcement, DPS, and U.S. Border Patrol
vehicle patrols. Local law enforcement increase traffic enforcement with border
security funding, further inconveniencing local residents.
41
This is in addition to
the U.S. Border Patrol interior check points, through which many border
residents travel on their way home, to work or school.
Legal Challenges
Anti-immigrant legislation often leads to an illegal conflict with federal laws and
enforcement. See Farmers Branch v. Villas
42


Anti-immigrant legislation or policies may lead to racial profiling and due process violations.
See Lopez v. City of Rogers No. 01-5061 (W.D.Ark. 2002).

Moral Impact
Anti-immigrant legislation sends an anti-Latino and anti-diversity message to the media,
businesses, and community.
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194

Laws aimed at undocumented immigrants wrongly burden citizens and residents.

o A native Texan spent the night in an Arlington jail, missed her childrens first day of
school and feared deportation after authorities mistook her for an illegal immigrant.
43


o Tulsa US citizen wife and kids are unable to pay the bills after her political asylee
husband was deported after a sheriff reported him to ICE.
44


Pushing immigrants further into the shadows results in fear driven behavior.

o 2 month old child of immigrants dies due to parents fear of taking their sick child to the
hospital in Oklahoma after the passage of anti-immigrant legislation.
45


Data from the census and other sources show that for every ethnic group without
exception, incarceration rates among young men are lowest for immigrants, even those
who are the least educated. This holds true especially for the Mexicans, Salvadorans, and
Guatemalans who make up the bulk of the undocumented population.
46


Texas Legislation Overview
In 2001, Texas was the first state to pass in-state tuition for undocumented students. Now
15 states have passed similar legislation.
47


In 2001, Governor Perry Vetoed legislation that would have allowed undocumented
immigrants access to Texas ID. Legislation had bipartisan support.
48


2007: Over 60 anti-immigrant bills introduced. Nearly all fail to move.

2009: Over 100 immigration related bills. Only 24 receive hearings and none are passed.
2011: 94 immigration bills are introduced. Legislation tying immigration status to state
identification documents is passed as an amendment to the fiscal matters bill in special
session.

2011: HB 11 Governor Perrys so called anti-sanctuary city legislation was opposed by law
enforcement, faith based groups, the business community, the Latino and Black community,
civil rights and the legal community.
49


2013: Attempt to provide driver's permits gets passed out of House State Affairs Committee
and has some bi-partisan support.
50
Resolutions to support Immigration Reform get passed
out of House committee.
51


Other immigration related legislation: Denial of birthright citizenship, e-verify, fees on wire
transfers (remittances), denial of public benefits, denying bail, local law enforcement of
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195
immigration through MOU's, secure communities, or Criminal Alien Programs (CAP).

Proactive Policy Solutions

Fund the infrastructure needs of the border. Border communities are the lifeblood of Texas
in terms of trade, labor, and economic growth. Militarizing the border sends the wrong
message to investors and trade partners. We can secure the border and invest in it - its not
mutually exclusive.

Provide drivers permits to those without the necessary documentation to get a state-issued
ID. A permit would allow workers to get car insurance and stop the clogging of local jails
with non-violent immigrants that need to drive to survive. This approach is supported by
members of both parties, including Republicans: House State Affairs Chairman Byron Cook,
Houston Republican activist Norman Adams, and former House member Aaron Pena.

Stop the attacks on DREAMers. Texas was right to pass HB 1403 and allow students that
have graduated from a Texas high school to receive in-state tuition. One day they will
achieve their dream of U.S. citizenship and they will invest in Texas like we invested in
them.

Focus law enforcement resources on the types of violent crime the cartels create. Train
local law enforcement teams with the expertise to investigate these incidents and respond
to emergency situations like safe houses with large groups of human trafficking victims.

o The violence and instability created on the US side of the border by the cartels is
generally in the form of extortion kidnappings, murders (which are rare), other
intimidation and threats, and human trafficking and related violent crimes (rape,
prostitution).

o To target this violence, you need law enforcement with expertise, investigative
resources and the ability to gain the trust of vulnerable communities, including
unauthorized immigrants. Local law enforcement is in the best position to do this, in
collaboration with local social services and legal services providers, including
domestic violence shelters and legal aid.

Dedicate law enforcement resources to anti-corruption efforts - both investigation and
developing prevention strategies. Work with federal law enforcement and local law
enforcement to identify ways to decrease corruption.

Dedicate resources to child abduction in Mexico

o When a relationship ends and there are children involved, sometimes one partner
leaves to Mexico with the children and without the legal right to do so. There is an
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international treaty that governs how the parent whose rights and access to his or
her children have been harmed can get relief and private attorneys can help folks
figure this out. Theres also a project at the legal aid program in South Texas that
helps low income residents get their kids back.

o Dedicate resources to this problem in the Attorney Generals office, CPS, DPS or
other departments, to aid parents in recovering their children.

Summary
The ineffectiveness of our current immigration system is apparent. The evidence is all around
us: millions of undocumented immigrants, exploited workers, divided families, deaths in the
desert, fake documents, criminal smugglers, community tensions, and public frustration. State
legislation, however, cannot address the complexity of the federal system and is not the
solution to dysfunctional immigration laws. The blame lies with Congress and the Republican
Texas delegation that has hindered every attempt at progress, despite being in leadership
positions to act. Anti-immigrant legislation in Texas is opposed by law enforcement, faith based
and business leaders because it further divides our communities, places additional burdens on
law-abiding legal immigrants and U.S. citizens, and adds significant costs to state and local
budgets that are already overwhelmed.

1
See, e.g.,
http://immigrationpolicy.org/sites/default/files/docs/Problem_Paper_FINAL_102109_0.pdf
2
http://travel.state.gov/content/visas/english/law-and-policy/bulletin/2014/visa-bulletin-for-
march-2014.html. For calculator see http://www.myprioritydate.com/
3
http://travel.state.gov/content/visas/english/immigrate/types/employment.html
4

http://www.slate.com/articles/news_and_politics/map_of_the_week/2013/02/map_illegal_immig
rant_population_by_state.html
5
Id.
6
http://www.nytimes.com/interactive/2013/09/22/world/americas/migration-to-mexico.html
7
http://www.mysanantonio.com/news/local_news/article/Undocumented-immigration-in-Texas-
falls-to-its-4291515.php
8
http://www.nytimes.com/2014/04/11/us/poverty-and-violence-push-new-wave-of-migrants-
toward-us.html
9
http://www.latimes.com/nation/la-na-texas-young-migrants-
20140222,0,2803253,full.story#axzz2uNOSqJk4
10
Available at http://www.pewhispanic.org/2012/04/23/net-migration-from-mexico-falls-to-
zero-and-perhaps-less/
11
Id.
12
http://www.mysanantonio.com/news/local_news/article/Undocumented-immigration-in-
Texas-falls-to-its-4291515.php
13
http://www.politifact.com/truth-o-meter/statements/2010/jul/12/luis-gutierrez/democratic-rep-
gutierrez-says-40-percent-illegal-i/
14
http://www.pewhispanic.org/2013/09/23/population-decline-of-unauthorized-immigrants-
stalls-may-have-reversed/
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197

15
The conclusion that employment is the main incentive for illegal migration from Mexico has
been consistently agreed upon. The undisputed testimony to this effect at trial is supported by
every source this court has consulted. Plyler v. Doe, 458 F.Supp. 569, 578 n.14
16
However, while fewer migrants enter the United States illegally, those who do may stay
longer, to recoup the higher entry cost. Moreover, higher enforcement may lengthen the stay of
seasonal and repeat migrants already living in the U.S.A., as the costs of future migrations will
be higher... If tougher border enforcement lengthens migration duration, patrolling the border
might, to some extent, indirectly encourage the formation of a more permanent undocumented
resident community. http://www-personal.umich.edu/~mangeluc/EDCC-enforcement.pdf at 2
17
http://www.whitehouse.gov/sites/default/files/docs/state-
reports/The%20Economic%20Benefits%20of%20Fixing%20Our%20Broken%20Immigration%
20System_Texas.pdf
18
Id.
19
Id.
20
Id.
21
Undocumented Immigrants in Texas: A Financial Analysis of the Impact to the State Budget
and the Economy, Texas Comptroller Carol Keeton Strayhorn, December 2006. See also,
New Mexico Fiscal Policy Project, Undocumented Immigrants in New Mexico, finding the
state collects about $1-2 million more annually from unauthorized immigrants than it spends on
education for unauthorized children; Congressional Budget Office, The Impact of Unauthorized
Immigrants on the Budgets of State and Local Governments, 2007, finding that the Social
Security Administration reports that it holds approximately $420 billion from the earnings of
undocumented immigrants who are not in a position to claim benefits
22
Carole Keeton Strayhorn, Undocumented Immigrants in Texas: A Financial Analysis of the
Impact to the State Budget and Economy, 2006
23
(Congressional Budget Office, The Impact of Unauthorized Immigrants on the Budgets of
State and Local Governments, 2007)
24
Carole Keeton Strayhorn, Undocumented Immigrants in Texas: A Financial Analysis of the
Impact to the State Budget and Economy, 2006
25
The Perryman Group, An Essential Resource: An Analysis of the Economic Impact of Undocumented Workers on
Business Activity in the U.S. with Estimated Effects by State and Industry, 2008
26
Passel, Jeffrey and Cohn, D'Vera, Pew Hispanic Center U.S. Unauthorized Immigration
Flows are Down Sharply Since Mid-Decade. Sept. 1, 2010.
27
The Perryman Group, An Essential Resource: An Analysis of the Economic Impact of Undocumented Workers on
Business Activity in the U.S. with Estimated Effects by State and Industry, 2008
28
Carole Keeton Strayhorn, Undocumented Immigrants in Texas: A Financial Analysis of the
Impact to the State Budget and Economy, 2006
29
The Perryman Group, An Essential Resource: An Analysis of the Economic Impact of
Undocumented Workers on Business Activity in the U.S. with Estimated Effects by State and
Industry, 2008
30
Carole Keeton Strayhorn, Undocumented Immigrants in Texas: A Financial Analysis of the
Impact to the State Budget and Economy, 2006)
31
Elizabeth Pierson, Opponents Knock Perrys Border Security Plan, Brownsville Herald,
Sept. 10, 2006, http://www.brownsvilleherald.com/news/local/article_baa1b0f6-883f-5154-8fba-
094fc984a847.html; Brandi Grissom, Linebacker plan catches more immigrants than
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198

criminals, El Paso Times, Nov. 20, 2006, http://www.elpasotimes.com/news/ci_4689708; Jake
Bernstein, The Governors Database, Texas Observer, Apr. 20, 2007,
http://www.texasobserver.org/2472-the-governors-database-texas-is-amassing-an-
unprecedented-amount-of-information-on-its-citizens/
32
Center for American Progress, Deporting the Undocumented: A Cost Assessment, 2005
33
See http://os.cqpress.com/citycrime/2012/CityCrime2013_CityCrimeRankingsFactSheet.pdf
but also see
http://www.politifact.com/texas/statements/2013/may/30/veronica-escobar/el-paso-leader-says-
el-paso-safest-city-its-size-c/
34
See statement from Richard Wiles and other local law enforcement opposing so called "anti-
sanctuary city legislation" http://reformimmigrationfortexas.org/2011/whats-so-wrong-with-sb-
9-and-hb-12/
35
http://homeland.house.gov/sites/homeland.house.gov/files/Testimony%20Wiles_0.pdf
36
http://www.mysanantonio.com/news/local_news/article/Sanctuary-city-vote-expected-today-
1368063.php
37
Houston police stick to hands-off immigrant policy. (Houston Chronicle March 3, 2003).
38
Ildefonso Ortiz, DPS: 6 killed in western Hidalgo County wreck after high-speed chase, The
Monitor, Aug. 12, 2013, http://www.themonitor.com/news/local/article_7fe45c34-039b-11e3-
aaa7-0019bb30f31a.html; Jason Buch, DPS helicopter fires on suspected illegal immigrants, 2
killed, San Antonio Express News, Oct. 25, 2012,
http://www.mysanantonio.com/news/local_news/article/DPS-helicopter-fires-on-suspected-
illegal-3982867.php
39
John Tedesco, Investigative Reporter, San Antonio Express News, Nov. 10, 2012,
http://www.johntedesco.net/blog/2012/11/10/everything-you-need-to-know-about-dps-police-
pursuits-and-why-troopers-shoot-at-vehicles/
40
A great deal of work has gone into making high-speed chases in urban areas safer, to prevent
the deaths of bystanders. It is likely that policies in existence in Houston, Dallas, Austin, El Paso
or other police departments in Texas could provide a model for DPS chase protocol in more
populated areas. This is a disaster that has both already happened and will lead to additional
unnecessary deaths in Hidalgo County and perhaps other parts of the Rio Grande Valley, without
policy change.
41
Martin, Operation Border Star,
http://www.aclutx.org/reports/2009OperationBorderStarReport.pdf.
42
See also Lozano v. Hazleton 496 F.Supp.2d 477, 555 (M.D.Pa. 2007); Garrett v. City of
Escondido, 465 F.Supp.2d 1043 (S.D.Cal. 2006). See also
http://www.bloomberg.com/news/2014-03-03/top-court-won-t-revive-undocumented-immigrant-
housing-ban.html

43
Patrick McGee, Texan is jailed as illegal immigrant, Star Telegram, August 30, 2007.
44
David Crenshaw, Deportation of Husband Devastates Tulsa Catholic Family, Catholic News
Service February 5, 2008.
45
Justin Juozapavicius, Oklahoma Law Blamed For Death, USA Daily, January 25, 2008.
46
Ruben G. Rumbaut, Ph.D. and Walter A. Ewing, Ph.D. The Myth of Immigrant Criminality and the Paradox of Assimilation. Incarceration
Rates among Native and Foreign-Born Men (Spring 2007)

47
http://www.ncsl.org/research/immigration/in-state-tuition-and-unauthorized-immigrants.aspx
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48
http://www.legis.state.tx.us/BillLookup/History.aspx?LegSess=77R&Bill=HB396
49
See http://www.hro.house.state.tx.us/pdf/ba82r/hb0012.pdf#navpanes=0; See also,
http://www.capitol.state.tx.us/tlodocs/821/witlistbill/html/SB00009S.htm
50
See http://www.legis.state.tx.us/BillLookup/History.aspx?LegSess=83R&Bill=HB3206
51
See http://www.legis.state.tx.us/BillLookup/History.aspx?LegSess=83R&Bill=HCR44
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Human Trafficking

Background
Trafficking of persons is one of the largest criminal industries existing today, superseded only by
drug and arms dealing. It is the fastest growing criminal industry in the world, and generates
billions of dollars in profits for its perpetrators every year. Traffickers employ various tactics for
luring and enslaving their victims. Traffickers also resort to kidnapping or purchasing a victim
from the persons family or significant other. The perpetrators of these crimes instill fear in
their victims in order to keep the victims from leaving or reporting the crimes they endure. Fear
is instilled through actual harm, the threat of harm or the believed threat of harm to the victim
or to another person connected to the victim.

The criminal industry of human trafficking is driven by high demand, the enormous profit
available due to that demand, and a negligible-to-low risk of prosecution. Trafficking in persons
is an underground crime, for several reasons. Many, if not most, victims will not seek help.
Many victims fear imprisonment or deportation by law enforcement. They may also fear
retaliation by the trafficker if they report the crimes they suffer. Moreover, victims may
experience difficulty communicating in the language of the country in which they are ensl aved.
Lack of awareness among the general public, law enforcement and other professionals who
may unknowingly serve trafficked persons also contributes to the persistence of human
trafficking. Prosecutions of human traffickers, especially in state court, remain low. This can be
attributed to lack of education within law enforcement, problems with the wording of the
statute and the lack of special prosecutors.
1


Texas
Texas is a hub for international human trafficking because of its many busy interstate highways,
international airports, bus stations, the shipping commerce through the Gulf of Mexico, and its
shared border with Mexico.
2


In 2003, Texas was the first state to pass legislation criminalizing human trafficking. In Texas, a
person commits an offense of human trafficking if the person knowingly traffics another person
with the intent or knowledge that the trafficked person will engage in forced labor or services.
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Under Texas law, trafficking of a minor is a first-degree felony, but trafficking of an adult is a
second-degree felony.
3


In 2009, the Texas Legislature created the human trafficking prevention task force in an effort
to create a statewide partnership between law enforcement agencies, social service providers,
nongovernmental organizations, legal representatives, and state agencies that fight against
human trafficking. The task force works to develop policies and procedures to assist in the
prevention and prosecution of human trafficking crimes and to propose legislative
recommendations that better protect both adult and child victims.
4


In 2011, the legislature passed two bills creating stiffer penalties for individuals who commit
human trafficking in TexasHB 3000 and SB 24. HB 3000 creates a new first-degree felony in
the Penal Code called Continuous Trafficking of Persons, which applies to individuals who
commit two or more acts of human trafficking in a period of 30 days or more. Under HB 3000,
the punishment range for a first time offender is 25-99 years or life imprisonment, and a fine up
to $10,000. If convicted a second time, the offense carries a punishment of life without parole.
HB 3000 also adds Continuous Trafficking of Persons to the list of offenses that do not have a
limitation period for filing charges, alters parole consideration and requires a vote of two-thirds
of the members of the Board of Pardons and Paroles before release, and further limits bail and
bond considerations for a person charged with Continuous Trafficking of Persons.
5


SB 24 contains proposals from the Task Force on Human Trafficking, including creating a new
offense for compelling prostitution for adult and child victims, stronger parole requirements for
trafficking offenses that require offenders to serve longer prison time, eliminating release on
mandatory supervision, and stronger restrictions on bond release. The bill also designates two
prosecutable forms of human trafficking forced labor and forced sexual acts and applies the
first degree felony punishment of 5-99 years or life and a fine up to $10,000 if a child is the
victim of either form of trafficking.
6









1
Children at Risk The State of Human Trafficking in Texas
http://childrenatrisk.org/wp-content/uploads/2013/05/02_The-State-of-Human-Trafficking-in-
Texas.pdf
2
Id.
3
HB 2096 78(R)
http://www.legis.state.tx.us/BillLookup/History.aspx?LegSess=78R&Bill=HB2096
4
HB 4009 81(R)
http://www.legis.state.tx.us/BillLookup/History.aspx?LegSess=81R&Bill=HB4009
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5
HB 3000 82(R)
http://www.legis.state.tx.us/BillLookup/history.aspx?LegSess=82R&Bill=HB3000
6
SB 24 82(R)
http://www.legis.state.tx.us/BillLookup/history.aspx?LegSess=82R&Bill=SB24

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