April 12 , 2019

Inside this edition of Capitol Roundup:

Two major AGC-TBB bills pass the committee stage and await House floor votes

House and Senate delay votes on property tax reform 

Senate passes budget plan; House appoints conference committee members

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AGC Texas Chapters

Quote of the Week

" Right now, we have 18 (votes), and we are working on number 19... One way or the other, we will get to where we need to be."

-Lt. Gov. Dan Patrick
Lt. Gov. Dan Patrick made the comment Thursday morning on  KFYO New Talk Radio in Lubbock. The leader of the Texas Senate was referencing a stalled property tax reform proposal that the Legislature had planned to take up Thursday but ultimately postponed until next week.
Two major AGC-TBB bills advance from committee 

The House Judiciary and Civil Jurisprudence Committee on Wednesday passed two pieces of legislation touted by AGC Texas Building Branch that are key to reforming the construction industry in Texas. 

The two measures - House Bill 1734 and House Bill 1999 - address issues arising in lawsuits alleging construction defects in government projects, especially school districts. 

Rep. Justin Holland
House Bill 1734 , sponsored by Rep. Justin Holland (R-Rockwall), passed on a 6-2 vote with one member voting absent. Click here to track the progress of the bill as it advances through the legislative process.

Similarly, House Bill 1999 , sponsored by Rep. Jeff Leach (R-Plano), who also chairs the committee, passed on a 7-2 vote. Click here   to track the progress of the bill as it advances through the legislative process.
Rep. Jeff Leach

A special thanks is owed to those AGC members at the local chapter levels that have helped advocate on behalf of these critical pieces of legislation as they advance through the committee stage. We will continue to track the progress of these bills and keep you apprised of any updates as they head to the House floor for consideration by all elected members.

The following is a primer on the key details contained in the two pieces of legislation. 

House Bill 1734

The Issue: A handful of contingency-fee trial attorneys in Texas have begun pursuing lawsuits on behalf of school districts against contractors, architects, and engineers over alleged construction defects before actually notifying the parties of the defects or giving them a chance to inspect or fix them. In many cases, settlement funds awarded to the school districts are not actually being used to repair the defects. Most of the bill is already contained in state law as applied to Chapter 46 districts.  

The Legislation: The bill would require school districts to spend funds awarded from a verdict or settlement regarding construction to repair those defects. The bill also requires the districts to notify the Texas Education Agency (TEA) of the suit once it has been filed or face dismissal, and they would need to itemize any repairs made to the agency. The bill gives the Attorney General enforcement authority. 

House Bill 1999

The Issue: This issue is similar to the ones addressed in HB 1734, in that some attorneys in Texas have developed a cottage industry around getting local governments (mostly school districts) to sue contractors, architects, and engineers for alleged construction defects before actually notifying the parties of the defects or giving them a chance to inspect or fix them. These lawsuits quickly round up several insurance policies to effect a quick, nuisance settlement. Like the school construction defect lawsuits, there are many cases where the funds obtained are not actually used toward making repairs. 
The Legislation: The bill would allow those involved in
designing or constructing a public, commercial building a chance to inspect and repair alleged defects before being sued. The measure also provides that a licensed engineer complete an inspection and provide a report. The bill does not remove the right for anyone to file litigation. Note that this bill is based on the 2017 session's HB 2343, which passed committee on a 7-0 but ultimately failed to pass as the Legislature ran out of time. State lawmakers previously passed into law the right to repair ADA defects (2017) and condo defects (2015). 
Legislature stalls votes on property tax reform proposals

Lawmakers had expected to take up property tax bills in both chambers under the dome in Austin on Thursday, but after legislative leaders gathered to work out key sticking points on competing measures in the House and Senate, debate and any votes on the bills were were ultimately postponed. 

Slowing the growth of the state's ballooning property tax revenue has been a major priority for the Legislature this session, especially among conservatives and the state's top three legislative leaders. However, after closed-door meetings among the Big Three - Gov. Greg Abbott, Lt. Gov. Dan Patrick, and House Speaker Dennis Bonnen - it became apparent that the votes were not there.

House Speaker Dennis Bonnen
"Members, we are respectfully working with the Senate on this issue," Bonnen told the House after a vote on House Bill 2 - the lower chamber's vehicle for property tax reform - was delayed.

The Senate also adjourned Thursday without taking up its property tax bill, Senate Bill 2, signaling that Patrick had not yet secured the 19 votes needed to bring the bill to the floor for a vote. 

While the House and Senate filed identical bills at the start of the session, points of contention have emerged surrounding the issue of how school districts - the state's primary beneficiary of property taxes - will fit into the equation, especially as both chambers have advanced separate bills that would reform how schools are funded across Texas. The House proposal  is expected to work in tandem with the House's school finance bill that reduces school district property taxes by 4 cents statewide.

The two chambers had agreed on a starting point for the threshold of revenue growth from property taxes - a 2.5 percent "rollback rate" - that would require local voters to approve such an increase. However, division among lawmakers became apparent when Rep. Dustin Burrows, the sponsor of the House plan, decided to exclude school districts from such local rollback election requirements. 

Gov. Greg Abbott's office has stated that he would support
Gov. Greg Abbott
a cap on school district property tax revenue growth in either a property tax bill or a school finance reform bill. But it's clear that Abbott sees the cap on school districts to be essential for wrangling in the property tax problem  - "Limiting school districts ability to raise property taxes is essential to achieve lasting property tax reduction, a spokesman for the governor said. 

The latest version of Burrow's proposal in the House  would require a vote if a local government seeks to increase its property tax collections by 2.5 percent or more over the prior year. However,  language added to the bill would allow local entities to go above that level in a given year as long as they average below 2.5 percent during a rolling five-year period.

Meanwhile, Burrows has also introduced an amendment to his bill that would tie the rollback rate to inflation rates. 
His office projects the idea would result in rollback rates between 2.5 percent and 4.94 percent over the last decade. The plan could gain traction since many lawmakers have suggested that the percent figure is untenable since the Legislature failed to approve similar plans in 2017 at the more palatable rates of 4 and 6 percent. 

It's unclear what form the House proposal could take on Monday when it plans to take up the bill, especially as over 180 amendments have been filed on the bill. Meanwhile, Abbott, Patrick, and Bonnen announced Wednesday that they would back a plan to increase the state sales tax by one percent to lessen the blow of property taxes. The plan is likely to be opposed by Democrats and would need to be approved statewide by voters via a constitutional amendment on the November ballot, taking effect in 2020.
Senate approves budget plan as conference committee members are chosen to work out final details

The Texas Senate on Tuesday approved its two-year budget plan, which matches House budget figures on school finance and property tax reform but varies on how to spend those funds. 

The 2020-21 $248 billion budget would spend roughly the same as the House proposal that passed last week, and the two chambers have agreed to spend $9 billion on public education, including $2.7 billion on property tax reform. However, where the House budget would advance $6.3 billion in new education spending, the Senate measure would use $4 billion on teacher and librarian pay raises and allow the districts to use the remaining $2.3 billion on other improvements. 

Senate Finance Chair Jane Nelson
While the plan sponsored by Senate Finance Chair Jane Nelson was approved by the body unanimously, the vote left unanswered the looming question of a vehicle to reduce property tax growth. Nelson said, that the $2.7 billion reserved for that effort  "will conform to whatever solution for tax relief is agreed to this session." 

Meanwhile, the House and Senate delayed votes on property tax reform that were expected to take place this week as leaders continue to meet and consider different ideas concerning how to fit school districts into the equation. 

Now that the two Legislative bodies have each passed their own budget plans, their respective leaders will assign members to a conference committee that will hash out their differences into a final version. 

House Speaker Dennis Bonnen has appointed the following members to the committee: Reps. John Zerwas, Greg BonnenSarah DavisOscar Longoria, and Armando WalleThe Senate has yet to officially announce its members, but they will likely be the same members who lead the budget working groups: Sens. Joan HuffmanLois Kolkhorst, Larry Taylor, Robert Nichols, and Paul Bettencourt. 

The Senate budget also $3.5 billion from the Rainy Day Fund for Hurricane Harvey relief; $4.1 billion toward behavioral services; $542 million to the Teacher Retirement System; $800 million on border security; $1 billion for Capital Complex construction costs; $27 billion for highway planning and construction; $230 million to maintain health benefits for retired teachers; $157 million to maintain graduate medical education opportunities for medical school graduates; and more than $1 billion across state agencies for cybersecurity and technological improvements.
April 2019
FRI 26th - TBB Board meeting
May 2019
MON 27th - Last Day of 86th Legislature
June 2019
WED 5th - SAT 8th - Convention @ Jackson Hole, WY
August 2019
THU 22nd - OCA awards @ Georgetown, TX
FRI 23rd - Board meeting
November 2019
FRI 15th - Board meeting