FEBRUARY 8, 2013 WEEK 8 THIS WEEK IN AUSTIN

FEBRUARY 8, 2013 WEEK 8 THIS WEEK IN AUSTIN GOVERNOR PERRY Governor Rick Perry launched a 30-second radio spot running on six radio stations in the San Francisco, Sacramento, Los Angeles, Inland Empire and San Diego media markets, inviting California companies to check out the low taxes, predictable regulations, fair legal system and skilled workforce that have made Texas the best state in the nation to live, work and raise a family. The one-week ad buy is being paid for by TexasOne, a public-private partnership that markets Texas nationally and internationally as a prime business destination. The ad says, "Building a business is tough, but I hear building a business in California is next to impossible. This is Texas Governor Rick Perry, and I have a message for California businesses: come check out Texas. There are plenty of reasons Texas has been named the best state for doing business for eight years running. Visit texaswideopenforbusiness.com, and see why our low taxes, sensible regulations and fair legal system are just the thing to get your business moving to Texas." Governor Perry will travel to San Francisco, the Silicon Valley, Los Angeles and Orange County from Sunday February 10 through Wednesday, February 13 to meet with business leaders in the high-tech, biotechnology, financial, insurance and film industries. Texas Economic Development Corporation Chair Bruce Bugg and several local economic development officials and business representatives will accompany the governor and host a reception for some of the business leaders who have contacted the Governor s office through the TexasWideOpenForBusiness.com website since the radio ad began running. SENATE On Wednesday, the Senate unanimously passed its first bill of the session SB 135 by Senator Dan Patrick (R-Houston) Chair of the Senate Education Committee. SB 135 would eliminate the requirement that end-of-course exams make up 15% of high school student's final grades. Senator Patrick explained that it did not remove the requirement for an end-of-course exam, but it would let individual districts decide how much that exam affects a student's final grade. He said, This is an issue each of us has received overwhelming feedback. The request has been to leave this as a local option. The Texas Constitution prohibits lawmakers from taking up any bills on the floor of the Senate or House in the first sixty days of session, but that rule can be suspended if four-fifths of the membership agrees. SB 135 was approved unanimously by a vote of 29-0, easily meeting the threshold for consideration. The Senate adjourned until 2:00 p.m. on Monday, February 11, 2013. Total number of bills reported out of Senate Committees this week: 9 Total number of bills passed by the Senate this week: 1

HOUSE At the end of Thursday s session, Speaker Straus announced the House s meeting schedule for February the House will be in session Monday through Thursday every week starting at 2:00 on Monday afternoons and at 10:00 on Tuesday, Wednesday, and Thursday mornings. In addition to the House committee meetings discussed below, the House Human Services Committee, the House Homeland Security Committee and the House Public Safety Committee held organizational meetings this week. The House adjourned until 2:00 p.m. on Monday, February 11, 2013. BUDGET The Senate Finance Committee met Monday through Thursday this week. On Monday, they took up Article IV (Judiciary) and Article VII (Business and Economic Development); on Tuesday, they took up Article I (General Government agencies); on Wednesday, they continued discussion of Article I (General Government agencies) and Article VI (Natural Resources); and on Thursday, they continued discussion on Article I (General Government agencies) and Article V (Public Safety and Criminal Justice agencies). The House Appropriations Committee met Monday through Thursday this week. On Monday, they heard invited testimony on the state economy and the House budget recommendations. Ursula Parks, Director of the Legislative Budget Board gave an overview of the House appropriations bill (HB 1) and provided information on items in the supplemental appropriations bill (HB 10), which total $6,784 million including: Medicaid and CHIP: fully fund 24 months of payments - $4,523 million Foundation School Program: reverse deferral - $1,750 million Foundation School Program: fully fund FY 2013 - $317 million Texas A&M Forest Service: wildfire costs - $155 million Department of Criminal Justice: correctional managed care - $39 million On Tuesday, the Appropriations Committee continued consideration of the supplemental appropriation needs for state agencies. On Wednesday, they took testimony on the Cancer Prevention and Research Institute of Texas, Texas Department of Criminal Justice, higher education funding, and general revenue dedicated accounts. On Thursday, the committee continued discussion on Wednesday s agencies and also took up the Health and Human Services Commission, Department of Aging and Disability Services, Texas Education Agency, and Texas Public Finance Authority. At the end of Thursday s meeting Chairman Pitts announced that he wants HB 10, the supplemental appropriations bill voted out of committee on Monday morning in 2 83rd Legislative Session GHP Public Policy Division

order to get it to the Calendars Committee to comply with House layout rules so it can be taken up by the full House early the following week. House Appropriations Committee s Subcommittees Announced On Thursday, Chairman Jim Pitts named five subcommittees: Subcommittee on Articles I (General Government), IV (Judiciary), and V (Public Safety and Criminal Justice) Chair Sylvester Turner, Vice-Chair Ruth Jones McClendon, Rob Orr, Susan King, Charles Perry, Larry Gonzales and Oscar Longoria. Subcommittee on Article II (Health and Human Services) Chair John Zerwas, Vice-Chair Dawnna Dukes, Sarah Davis, Four Price, Stefani Carter. Subcommittee on Article III (Education) Chair John Otto, Vice-Chair Myra Crownover, Helen Giddings, Donna Howard, Diane Patrick, Greg Bonnen, and Bennett Ratliff. Subcommittee on Articles VI (Natural Resources), VII (Business and Economic Development), and VIII (Regulatory) Chair Drew Darby, Vice-Chair John Raney, Bryan Hughes, Marisa Marquez, Trent Ashby, Sergio Munoz, Jr., and Cecil Bell. Subcommittee on Budget Transparency and Reform Chair Myra Crownover, Vice-Chair Oscar Longoria, Drew Darby, Bennett Ratliff, John Raney, and Donna Howard. Government Transparency Senate Finance Committee Chair Tommy Williams, House Appropriations Committee Chair Jim Pitts, and Comptroller Susan Combs announced the filing of legislation focused primarily on government transparency and empowering taxpayers. SB 14 by Williams and HB 14 by Pitts would provide taxpayers with information about government spending and debt; and would put limitations on certificates of obligation which governments use to issue debt without voter approval. Chairman Williams said, SB 14 will ensure the certificates of obligation process is not abused and will give the power back to the taxpayers, the people who are actually paying the freight, by requiring governments to tell voters how they can petition for an election, and by also reducing the number of voters required to petition for an election. Chairman Pitts added, When we write the budget each session, we require transparency and access to information. Texas taxpayers deserve the same level of transparency and openness, and HB 14 will deliver just that. In response, Texas Municipal League pledged that city officials would work with legislative leaders to minimize any unintended consequences that could result from SB14/HB 14. Bennett Sandlin, Executive Director of TML said, We are in full agreement that taxpayers need to be well-informed, especially when they have to make decisions at the ballot box. And, we want to work with the legislature to find ways to do that without adding more government bureaucracy, confusion and expense for taxpayers. What we don t want to have happen is a situation like the Florida ballot fiasco last November where their legislature put so much wording on the ballot and resulted in massive delays at the polls. It was intended to give 3 83rd Legislative Session GHP Public Policy Division

voters lots of additional information but had the consequence of confusing untold numbers of voters. Public Pension Fund Transparency - SB 13 by Senator Robert Duncan and HB 13 by Representative Bill Callegari would require increased reporting for all public pension systems and require actuarial information, including net investment returns for each of the last 10 fiscal years, to be posted online; and would require education for public pension system administrators. Senator Duncan said, It is important for taxpayers to feel confident that public pensions in Texas are being managed properly to ensure long term financial health. SB 13 aims to give citizens the information they need to feel secure about public pensions. Representative Callegari said, HB 13 is aimed at protecting the taxpayers who foot the bills for public pensions and the employees who deserve to know if their retirements are financially secure. Next Week: The Senate Finance Committee will meet in E1.036 of the capitol extension: Monday, February 11, 2013 at 9:00 a.m. to take up Article IV (Regulatory) agencies. Tuesday, February 12, 2013 at 9:00 a.m. to take up Article VIII (Regulatory) agencies. Wednesday, February 13, 2013 at 9:00 a.m. to take up all pending items. The House Appropriations Committee will meet in E1.030 of the capitol extension: Monday, February 11, 2013 at 7:30 a.m. to take up: HB 10 by Jim Pitts (R-Waxahachie) the supplemental appropriations bill. Monday, February 11, 2013 House Appropriations Committee Subcommittee on Article II will meet upon adjournment of the full committee in Room 120 of the John H. Reagan Building to consider health and human services agencies. Monday, February 11, 2013 House Appropriations Committee Subcommittee on Article III will meet upon adjournment of the full committee in Room 140 of the John H. Reagan Building to consider the Texas Higher Education Coordinating Board and the funds they administer. Monday, February 11, 2013 House Appropriations Committee Subcommittee on Articles I, IV, and V will meet upon adjournment of the full committee in E1.030 of the capitol extension to consider general government agencies. Monday, February 11, 2013 House Appropriations Committee Subcommittee on Article VI, VII and VIII will meet upon adjournment of the full committee in E2.030 of the capitol extension to consider energy and environmental agencies. Tuesday, February 12, 2013 Subcommittee on Articles VI, VII and VIII will meet at 7:00 a.m. in E1.026 to continue discussion of agencies in its jurisdiction. Tuesday, February 12, 2013 Subcommittee on Article VII will meet at 7:30 a.m. in Room 120 of the John H. Reagan Building to continue discussion of agencies in its jurisdiction. 4 83rd Legislative Session GHP Public Policy Division

Tuesday, February 12, 2013 Subcommittee on Article III will meet at 7:30 a.m. in Room 140 of the John H. Reagan Building to continue discussion of agencies in its jurisdiction. Tuesday, February 12, 2013 Subcommittee on Articles I, IV, and V will meet at 7:30 a.m. in E1.030 to continue discussion of agencies in its jurisdiction. ECONOMIC DEVELOPMENT On Wednesday, the Senate Economic Development Committee met for an organizational meeting and to take invited testimony on economic development incentives. Aaron Demerson, Executive Director of the Governor s Office of Economic Development & Tourism discussed the economic development activities within his office. He told the committee that the Texas Enterprise Fund is a deal closing fund used primarily to attract new business to the state or assist with the substantial expansion of an existing business. As of December 31, 2012, since the inception of the program in 2003, the Texas Enterprise Fund has awarded over $425 million resulting in the announcement of 66,000 direct jobs and a combined investment of over $17 billion. He also talked about the Texas Emerging Technology Fund (ETF) saying, The ETF represents a major source of funding for start-up companies seeking to commercialize their products and universities seeking to expand translational research in Texas. The ETF is integral to the development and diversification of the State s economy by expediting innovation and commercialization of research, attracting, creating, or expanding private sector entities that will promote substantial increases in high-quality jobs, and increasing higher education applied technology research. The ETF has allocated more than $200 million in funds to 140 early stage companies, and approximately $216 million in grant matching and research superiority awards. At the end of Fiscal Year 2012, these awards attracted close to $1.7 billion in follow-on capital and funding, or about 4.5 times as much as the state s investment. Chairman Bob Deuell, and Senators Watson, Davis and Birdwell all expressed concerns about the state s economic development incentive programs: TEF, ETF and Chapter 313. Their concerns stemmed from issues raised in the state s 2011 audit report of ETF, the December NY Times article, the perceived low ROI, the use of taxpayer dollars with minimal transparency, and the poor management of CPRIT as the basis for their concern. Sunset review for TEF/ETF and auditing TEF were also discussed. Demerson said the governor s office is not interested in a sunset review for TEF/ETF. All expressed concerns about the transparency of these programs. Chairman Deuell stated, if the state is going to do economic development, we need to do it right. We don t need what happened to CPRIT to happen to the state s economic development programs. ENERGY Representative Brandon Creighton (R-Conroe) and Senator Robert Nichols (R- Jacksonville) have filed HB 898 and SB 349 which would add specific, separate definitions of transmission and distribution lines to the Utilities Code and would be consistent with definitions 5 83rd Legislative Session GHP Public Policy Division

used by the Public Utility Commission of Texas and the Electric Reliability Council of Texas. Representative Creighton said, Currently, transmission lines in the state of Texas are required to have a 22-foot clearance per the state s Utilities Code. In a recent court decision, that standard was applied to distribution lines, the lower-height power lines that you typically see along the street and that provide power to your homes and local businesses. The consequence of this decision would mean tens of thousands of miles of distribution lines that have been built according to the National Electrical Safety Code would be out of compliance with our state statute. And, that would mean many utilities, co-ops and even municipality-owned electric utilities would have to begin the daunting task of raising their distribution lines to 22 feet. This type of cost would eventually be recovered from utility customers, and would run into millions of dollars. Senator Nichols added, With distribution power lines criss-crossing the entire state of Texas, I would not even venture a guess at how much this could potentially cost the citizens of Texas. That is simply not acceptable. This solution provides for continued safe and reliable operation of the electric system without costly rate hikes to Texas customers. Capacity Market The Texas Public Policy Foundation conducted an analysis of the Electric Reliability Council of Texas competitive electricity market and concluded that a shift to a capacity market would be an ineffective and costly approach to dealing with reliability concerns. Bill Peacock, Vice President of TPPF said, Concerns about reliability do need addressing. The answer, though, is not to abandon competition for the heavy regulation of a capacity market, but to decrease regulation in the Texas market so it can efficiently address the concerns. The TPPF study found that there is enough profit potential in the Texas market today to incentivize new generation. It said, As reflected in realistic reserve forecasts and the recent announcement of a new 800-megawatt natural gas generation plant in Brownsville, sufficient investment in generation in ERCOT is likely to continue and, as it has in the past, provide adequate reserves to maintain reliability. Economic Impact of Eagle Ford Shale On Thursday, Senator Judith Zaffirini hosted a legislative briefing to update policymakers regarding the economic impact of oil and gas development in the Eagle Ford Shale counties. Dr. Thomas Tunstall, Director of the Institute for Economic Development at The University of Texas at San Antonio, told the group, It has been 25 years since Texas produced this much oil. By 2021, we expect the shale to yield more than $90 billion in total economic output and support more than 116,000 full-time jobs. James LeBas, fiscal consultant for Texas Oil and Gas Association added, Development of the shale formation has been a big success, generating $2.5 billion in direct tax revenue to state and local coffers over the last three years alone. We look forward to a continuation of this great success story. Senator Zaffirini said, The Eagle Ford Shale is having a tremendous impact on the Texas economy, including by enhancing economic development and spurring investment throughout the region. What s more, 6 83rd Legislative Session GHP Public Policy Division

tax revenue generated because of shale development has helped improve the state s financial situation. As development in the shale continues, we must work with stakeholders to manage our natural resources responsibly, including not only our oil and gas reserves, but also our air and water. We also must continue to support funding for important transportation projects that enhance commerce and safe travel in Eagle Ford counties. Next Week: The House Energy Resources and House Natural Resources Committees will jointly meet in E1.004 of the capitol extension: Wednesday, February 13, 2013 at 2:00 p.m. to discuss and take invited testimony on the current status of water use in oil and gas production and to review various technologies associated with the recycle and reuse of water in oil and gas production. ENVIRONMENT On Tuesday, the Senate and House Natural Resources Committees held a joint meeting to take invited testimony on the ongoing statewide drought and the performance of state, regional and local entities addressing it and to review the status of the state water plan. State ecologist John Nielsen-Gammon told lawmakers that the current drought could soon be the second worst ever in the state of Texas, behind only the seven-year drought of record that happened in the 1950s. He said that last year was better than 2011, but the state has only received about two-thirds of normal rainfall levels over the last two years. Reservoir levels are at their lowest point since 1990, and the forecast is for a slightly drier than normal 2013. He added that the past two years are two of the three hottest ever and explained that the hotter it is, the faster water evaporates and the drier the climate gets. North Texas from the High Plains to Wichita Falls, and South Texas from the coastal bend to Mexico are in historic drought conditions, and only a few counties in east Texas are excluded from the drought. Next Week: The House Natural Resources Committee will meet in E2.010 of the capitol extension: Tuesday, February 12, 2013 at 2:00 p.m. for an organizational meeting and to hear invited testimony. HEALTH On Tuesday, the Senate Health and Human Services Committee received invited testimony on the Cancer Prevention and Research Institute of Texas and took up: SB 149 by Jane Nelson (R-Flower Mound) would make several reforms to the Cancer Prevention and Research Institute of Texas including increasing oversight over the $300 million state cancer research fund. Health and Human Services Committee Chair Jane Nelson, author of SB 149 and of the 2011 bill that created CPRIT, expressed her disappointment with misconduct at the agency. She said, "They interpreted policies in ways I don't think any reasonable person would. And in doing so they let us all down. We need to revamp our laws to prevent creative interpretations of what I believe was our clear legislative intent. SB 149, seeks to increase oversight by restructuring 7 83rd Legislative Session GHP Public Policy Division

the leadership staff, implement a compliance program and ensure that every grant application undergoes rigorous peer review. It includes provisions to curb relationships between CPRIT employees and grantees, requires public reporting of CPRIT financial information, and clarifies legislative intent to prevent future misinterpretations. It was left pending. Medicaid Expansion - The Texas Medical Association Board of Trustees formally adopted a resolution calling upon the political leaders of Washington and Texas to immediately develop a bipartisan solution to reform and expand the state s Medicaid program. TMA President-elect Dr. Stephen Brotherton said, The Texas Medicaid system is broken. As a result, it is morally unconscionable for national-state public policy gridlock to deny proper medical care for over 1 million of our state s low income families and Texans with disabilities. While we expand the state s Medicaid system, we need to reform it to attract physicians back to the program. The current system offers the promise of coverage without adequate funding to ensure access to care. Additionally, we need to make sure Medicaid payments cover the real cost of health care. If we don t address these two critical reforms, our state s Medicaid physician participation crisis (only 3 out of 10 Texas physicians now accept all new patients) will worsen. TMA leaders called on state leaders and lawmakers to look beyond the federal government expansion solution and design a solution that works for Texas and for Texans. Dr Brotherton continued, Texas physicians share both the taxpayer concerns and those of our state leaders as well as the very realistic medical care concerns of our state s uninsured population. TMA is calling for a comprehensive solution that: Draws down all available federal dollars to expand access to health care for poor Texans; gives Texas the flexibility to change the plan as our needs and circumstances change; clears away Medicaid s financial, administrative, and regulatory hurdles that are driving up costs and driving Texas physicians away from the program; and relieves local Texas taxpayers from the unfair and unnecessary burden of paying the entire cost of caring for their uninsured neighbors. Commissioner Kyle Janek Reappointed - Governor Rick Perry reappointed former State Senator Kyle Janek as executive commissioner of the Texas Health and Human Services Commission (HHSC) for a term to expire February 1, 2015. The executive commissioner oversees the operations of the five health and human services agencies, with more than 55,000 employees and combined annual budgets of more than $30 billion, and the state s Medicaid program. Janek has served as executive commissioner of HHSC since his appointment in September 2012. He is a boardcertified anesthesiologist, and former director of anesthesia services at Lakeway Regional Medical Center. Commissioner Janek s appointment is subject to Senate confirmation. Texas Health Insurance Exchange On Wednesday, Representative Eric Johnson (D-Dallas) filed legislation to expand Medicaid eligibility for Texans and establish a statewide Health Insurance Exchange program under the parameters of the federal Affordable Care Act (ACA). Representative 8 83rd Legislative Session GHP Public Policy Division

Johnson said, The Medicaid eligibility expansion would take advantage of a provision in the ACA allowing states to increase the number of people covered by Medicaid. The federal government would fund 100% of the cost of the expansion for the first three years, after which it would provide $9 for every $1 spent by the state. This option would allow Texas to provide care for more people while decreasing the costs of paying for the uninsured. Millions of Texans remain uninsured. We must seize the opportunity that has fallen in our lap to remedy that problem. If we choose not to adopt Medicaid eligibility expansion, our federal tax dollars will effectively be spent on other states' health care programs. This is the right thing to do whether you're looking at it from a moral standpoint or a fiscal one. The Health Insurance Exchange would enable Texans to find the health care plan best for their individual needs by providing an online marketplace with clear, detailed information on each plan. The package of legislation includes: HB 999 would expand Medicaid eligibility for Texans in accordance with the Affordable Care Act covering approximately 1.5 million more Texans. HB 1001 would allow Dallas County to apply for a waiver to expand Medicaid eligibility for its residents. HB 1002 would establish a statewide health insurance exchange pursuant to the federal Affordable Care Act. Next Week: The Senate Health and Human Services Committee will meet in the Senate Chamber: Tuesday, February 12, 2013 at 9:00 a.m. to take up: SB 61 by Jane Nelson (R-Flower Mound) would allow the Texas Medical Board to issue a volunteer medical license for current and retired military physicians that volunteer services at charitable clinics. SB 67 by Jane Nelson (R-Flower Mound) would require institutions of higher education to report the amount of funds spent annually by the institution on human embryonic stem cell research and adult stem cell research. SB 141 by Joan Huffman (R-Houston) would clarify requirements for issuance of a license to practice orthotics and prosthetics. SB 149 by Jane Nelson (R-Flower Mound) would make several reforms to the Cancer Prevention and Research Institute of Texas. SB 153 by Jane Nelson (R-Flower Mound) would increase the maximum amount of administrative penalties that may be assessed or imposed against hospitals from $1,000 to $25,000. SB 406 by Jane Nelson (R-Flower Mound) would create a standardized prescriptive authority agreement through which a physician may delegate the authority to prescribe and order a drug or device to an advanced practice registered nurse or a physician assistant. The House Human Services Committee will meet in E2.030 of the capitol extension: 9 83rd Legislative Session GHP Public Policy Division

Tuesday, February 12, 2013 at 10:30 a.m. to receive testimony from the Health and Human Services Commission, Department of Family and Protective Services, Department of Aging and Disability Services, and Department of Assistive and Rehabilitative Services. HIGHER EDUCATION On Monday, the Rio Grande Valley Legislative delegation filed legislation to create a new University of Texas System university with a medical school in South Texas. SB 24 authored by Senators Eddie Lucio, Jr. (D-Brownsville), Juan "Chuy" Hinojosa (D-McAllen), Judith Zaffirini (D-Laredo), and Kel Seliger (R-Amarillo); and HB 1000 by Representatives Rene Oliveira (D- Brownsville), Dan Branch (R-Dallas), Ryan Guillen (D-Rio Grande City), Armando Mando Martinez (D-Weslaco), Eddie Lucio III (D-Brownsville), Sergio Muñoz, Jr. (R-Mission), Bobby Guerra (D- Mission), Terry Canales (D-Edinburg), and Oscar Longoria (D-Mission). Senator Lucio said, This is a historic day for the Rio Grande Valley. Today s filing is the first important step toward creating the Valley s only Tier One research university, with state-of-the-art facilities and the ability to attract top-notch faculty. The inclusion of the future South Texas school of medicine as part of this new university is the culmination of a decade of work expanding medical education in the region. The Rio Grande Valley will soon become a center for multinational education, medicine, and industry. Representative Oliviera added, "This bill is the framework that will legally create the new university, and allows us, if passed by a two-thirds majority, to access the Permanent University Fund (PUF), and other state and federal research dollars. It will combine existing resources to create a new university maximizing efficiencies in facilities and administration." Senator Hinojosa concluded, This legislation, creating a new university in South Texas by merging UT-Pan American and UT- Brownsville and establishing a free standing medical school, has the potential of providing endless educational and healthcare benefits for our families in the Rio Grande Valley. I am proud that we stand united as a delegation embracing a regional mindset to draft the legislation we are filing today. INSURANCE On Tuesday, SB 112 by Senator Eddie Lucio, Jr. (D-Brownsville) which would create more transparency for Texas property insurance consumers, unanimously passed out of committee. SB 112 would require all Texas insurance companies' declaration pages to include a list and explanation of each deductible selected by the insured, as well as the dollar amount of each deductible. Senator Lucio said, Under current law, insurers are permitted to list deductibles as percentages, which can be confusing for consumers. For example, consumers often assume that these deductible percentages are applied to the amount of the claimed loss. In fact, these deductible percentages apply to the insured value of the home covered by the policy, meaning consumers end up paying more money in premiums than they might have anticipated. SB 112 is intended to help consumers make responsible purchasing decisions by providing clear information about the true cost of homeowners' insurance. Homeownership is the American dream. We 10 83rd Legislative Session GHP Public Policy Division

should arm consumers with the best information possible so they can make this dream a reality for their families." PROPERTY: Next Week: The House Land and Resource Management Committee will meet in E2.016 of the capitol extension: Monday, February 11, 2013 at 2:00 p.m. for an organizational meeting and to take invited testimony from the School Land Board, Board of Lease of University Lands, and the General Land Office. PUBLIC EDUCATION Governor Rick Perry reappointed Barbara Cargill (R-The Woodlands) as chair of the State Board of Education for a term to expire February 1, 2015. Cargill is a former teacher, and founder and director of Wonders of the Woodlands (WOW!) Science Camp. She is an elected member of the State Board of Education, and has served as chair since her original appointment in July 2011. Cargill s appointment is subject to Senate confirmation. Governor Rick Perry Addressed the SBOE At its first meeting of 2013, Governor Rick Perry spoke to State Board of Education on February 1st. He said, You have a tough job, because, in terms of philosophy, this is really where the rubber meets the road in our ongoing efforts to improve our public education system. Over the past 10 years, you all have helped us vastly improve the rigor of our courses and the accountability of schools. We can't let up now. Students have different goals after graduation and not every child thrives in the same settings and schools. Texas' academic future must be built with the flexibility necessary to serve those different students, producing workers ready to step into any occupation or role necessary. That future will, by necessity, involve more public charter schools which offer parents a tuition-free alternative to their neighborhood school. It's also time to introduce scholarship programs that give students a choice, especially those who are locked into low-performing schools. At the same time, we have to continue encouraging teachers and administrators in traditional schools to produce excellent students. While we're giving students a choice of schools, we should also give them more flexibility in the courses they take in high school to prepare them for whatever their goals may be without sacrificing our rigorous academic standards. We also need to allow students access to additional Career Tech courses. We need to continue working to find innovative, smart ways to educate our children for the future, because the future is already here. I wish you all the best of luck in your terms and encourage you to continue doing all you can to make a Texas education the best education available. Court Ruling on Constitutionality of School Finance System On Monday, Travis County 200th District Court Judge John K. Dietz ruled in the case of The Texas Taxpayer & Student Fairness 11 83rd Legislative Session GHP Public Policy Division

Coalition, et al; Calhoun County ISD, et al; Edgewood ISD, et al; Fort Bend ISD, et al; and Texas Charter School Association, et al vs. Education Commissioner Michael Williams, Texas Comptroller Susan Combs, and Texas State Board of Education. Judge Deitz declared that the school finance system violates the Texas Constitution in several ways including: it fails to provide substantially equal access to revenues necessary to provide a general diffusion of knowledge in violation of the efficiency provisions of the Texas Constitution (Article VII, Section 1); the school finance system is not adequately funded and therefore fails to make suitable provision for the support and maintenance of the system as required by the Texas Constitution (Article VII, Section 1) because it is not structured, operated, and funded so that it can accomplish the general diffusion of knowledge; the school finance system has created a state ad valorem tax in violation of the Texas Constitution (Article VIII, Section 1-e) because low wealth school districts have been forced to tax at or near the cap of $1.17 merely to fulfill State mandates and no longer have meaningful discretion in setting their tax rates, so as to constitute a statewide ad valorem tax; the public school finance system is financially and quantitatively inefficient under the Texas Constitution (Article VII, Section 1); and the public school finance system is constitutionally unsuitable for the provision of a general diffusion of knowledge for low income and English Language Learner students under the Texas Constitution (Article VII, Section 1). Judge Deitz ruling is expected to be either appealed by the state to the Third Court of Appeals or directly to the Texas Supreme Court. Lt. Governor Dewhurst on School Finance Court Ruling - Lt. Governor David Dewhurst commented on the ruling saying, I disagree with today's school finance ruling by the district court in Austin, but I expect an immediate appeal to the Texas Supreme Court. While we await their final ruling, I will continue to work with Governor Perry, Speaker Straus, and the Legislature to continue to support our students and improve public education. Together we will ensure that Texas continues to have an accountable, efficient system of public education that produces graduates ready to compete in college and in our global economy." Democratic Legislators Respond to Court Ruling - Senator Judith Zaffirini (D-Laredo) said, "Judge Dietz's ruling that Texas' school finance system is unconstitutional is no surprise. The system is broken, and our children deserve a permanent solution to the problem. Now is the time to work swiftly and purposefully to arrive at a school finance solution that is fair and equitable for all Texas children. Today's decision also reflects the need to fund our public schools more adequately and 12 83rd Legislative Session GHP Public Policy Division

fairly. To remedy the situation immediately, legislators should restore the $5 billion cuts from public education in 2011." Senate Democratic Caucus Chair Kirk Watson (D-Austin) added, This ruling shows we need to start working, right now, to find a permanent solution to Texas' school funding crisis. Judge Dietz is right to recognize that those in control of the Capitol have turned their back on our most precious assets our children for years. His ruling supports more than 600 public school districts that felt they had no choice but to sue the state. It's sad, honestly, that it takes something like this to force the legislature to honor its constitutional responsibility to our children. But hopefully, we're now headed toward a better system. From its declaration of independence, one of Texas' proudest legacies has been its commitment to schools, children and the future of the state. The truth, which this ruling makes clear, is that Texas can do much better when it comes to providing essential economic infrastructure such as schools. Those in control of the Capitol should recognize this truth and start working immediately to find a permanent solution to fund our schools. Texas kids and parents deserve a fair system that produces truly excellent schools and opportunities, not excuses or delays. House Democratic Caucus Leader Representative Yvonne Davis commented on behalf of House Democrats saying, This ruling reaffirms what the House Democratic Caucus has been saying for years. Our school finance system is broken. The Legislature must now act to fix it. Members of the House Democratic Caucus strongly urge Attorney General Greg Abbott to accept the ruling. Texas school children should not be forced to wait for relief while the state pursues a lengthy and costly appeal process. House Democratic members intend to offer an amendment to the supplemental budget to utilize the budget surplus and restore $5.4 billion in funding to public education that was cut last session and to pursue ways to fund education this biennium. Testing and Accountability Reform On Wednesday, Representative Jimmie Don Aycock (R- Killeen), Chair of the House Public Education Committee filed HB 5, which would make several changes to required curriculum, testing and evaluating student performance and school ratings. Chairman Aycock said, This bill gives students more options and educators more flexibility. Students will be better prepared to continue their education after high school or begin promising careers in cutting-edge fields. Students will have more freedom to select courses that reflect their interests and talents. HB 5 will improve education in Texas by better equipping schools to meet students individual needs. The filing of this bill is the first step in a very important conversation about the quality of both our schools and our workforce. This bill is a direct response to employers concerned about the quality of our workforce and parents concerned about excessive testing. It will ensure that all students have the opportunity to excel in school and beyond. Specifically, HB 5 would: 13 83rd Legislative Session GHP Public Policy Division

Coursework create one diploma and allow students to earn an additional endorsement in one of four areas STEM, Business and Industry, Public Services, and Arts and Humanities; allow districts to partner with community colleges and industry to develop courses that address workforce needs, provide technical training that counts towards graduation; and eliminate the requirement that all students must pass Algebra II and English/Language Arts III to receive a high school diploma. Assessment reduce the number of end-of-course assessments from 15 to 5; allow students to meet their graduation assessment requirement by passing English/Language Arts II (reading and writing), Algebra I, biology and U.S. History; eliminate the requirement that the end-of-course assessments determine 15% of a student s course grade; eliminate the cumulative score requirement; and allow satisfactory performance on Advanced Placement exams, SAT exams and the ACT to satisfy graduation requirements. Accountability establish a new three-category rating system that evaluates schools on academic performance, financial performance and community and student engagement using labels of A, B, C, D and F; direct the Texas Education Agency and school districts to release all three ratings at the same time to provide an understanding of overall school performance; and require school districts to set goals and evaluate performance locally in addition to state ratings. Next Week: The Senate Education Committee will meet in E1.028 of the capitol extension: Tuesday, February 12, 2013 at 9:00 a.m. to take up: SB 3 by Dan Patrick (R-Houston) would provide curriculum flexibility in high school graduation requirements. SB 172 by John Carona (R-Dallas) would require the Commissioner of Education to include on the commissioner s list at least two multidimensional assessment tools for use in diagnosing the reading development and comprehension of kindergarten students. The House Public Education Committee will meet in E2.036 of the capitol extension: Tuesday, February 12, 2013 at 2:00 p.m. for an organizational meeting and to take invited testimony on issues related to school finance litigation, student assessment and school accountability. TECHNOLOGY: Next Week: The House Technology Committee will meet in E2.010 of the capitol extension: Monday, February 11, 2013 at 2:00 p.m. for an organizational meeting and to take invited testimony. 14 83rd Legislative Session GHP Public Policy Division