Office of House Bill AnalysisH.B. 2369
By: George
Financial Institutions


In 1989, a constitutional amendment was passed authorizing the issuance of
bonds for the initial funding of a product development fund and a small
business incubator fund.  The enabling legislation originally empowered the
Texas Department of Commerce (department ) to manage both funds, but when
the department was abolished, the enabling legislation was eliminated.
However, the funds are still authorized in the Texas Constitution and count
towards Texas' bond rating.  House Bill 2369  reauthorizes the bonds and
creates a board in the comptroller's office to administer the funds. 


It is the opinion of the Office of House Bill Analysis that rulemaking is
expressly delegated to the  Product Development and Small Business
Incubator Board in SECTION 1 (Sections 403.410 and 403.413, Government
Code) of this bill.  


House Bill 2369 amends the Government Code to set forth provisions relating
to state financing of the development and production of Texas
biotechnological and biomedical products and small businesses and provides
for the issuance of bonds.   

Product Development and Small Business Incubator Board

The bill establishes the Product Development and Small Business Incubator
Board (board) in the comptroller's office and requires the board to
administer the product development and small business incubator programs
(programs) and their respective funds (Sec. 403.402).  The bill sets forth
provisions for the appointment, terms of office, removal, and training of
the members of the board, which includes the comptroller of public accounts
(comptroller) (Secs. 403.403-404.405).  The bill requires the board to hold
regular meetings in Austin, as well as other meetings, and to develop and
implement policies that provide the public with a reasonable opportunity to
appear before the board and to speak on any issue under the jurisdiction of
the board (Sec. 403.406).  The bill requires the comptroller to select  and
supervise the staff of the board and perform other duties delegated to the
comptroller by the board (Sec. 403.408).   

The bill also requires the board to prepare and maintain a written plan
that describes how a person who does not speak English can be provided with
reasonable access to the board's programs and services (Sec. 403.409). 

The bill grants the board the powers necessary and reasonable  to issue
general obligation bonds to fund the program and authorizes the board to
adopt rules, policies, and procedures necessary or reasonable to implement
these provisions (Sec. 403.410). 

Texas Product Development Fund and Small Business Incubator Funds

H.B. 2369 provides that the Texas product development fund (product fund)
and the small business  incubator fund (small business fund) are revolving
funds in the state treasury.  The bill identifies the composition of the
respective funds and provides that money may only be used to provide
financing to aid in the development and production of new or improved
products in this state or to provide financing to foster and stimulate the
development of small businesses in this state (Secs. 403.411 and 403.412). 

The bill provides that financing may be made only for a product or small
business approved by the board. In determining eligible products and small
businesses, the board is required to give special preference to products or
businesses in the areas of biotechnology and biomedicine that have the
greatest likelihood of commercial success, job creation, and job retention
in this state.  The bill requires the board to give further preference in
providing financing to projects or businesses that are: 

 _grantees under the small business innovation research program;

 _companies formed in this state to commercialize research funded at least
in part with state funds; 

 _companies formed in this state and receiving assistance from designated
state small business development centers; or 

 _applicants who are residents of this state doing business in this state
and performing financed activities predominantly in this state. 

The bill requires the board to adopt rules establishing limits on the
amount of financing for each applicant and otherwise governing the terms
and conditions of the financing, equity interest, and the rights and
remedies of the board and the comptroller's office in the event of a
default on the loan.  The rules must include a requirement that applicants
report to the board on the use of money distributed through either fund.
The bill requires the board to enter into an agreement with a person to
obtain royalties, patent rights, equitable interest, or a combination of
these royalties, rights, or interest.  The board is authorized to appoint
an advisory committee of experts in the areas of biotechnology and
biomedicine to review projects and businesses seeking financing from the
board (Sec. 403.413). 

The bill establishes an application process for persons seeking to obtain
financing from the board (Sec. 403.414). 

The bill sets forth provisions relating to the confidentiality of applicant
information (Sec. 403.415). 

The bill requires the board and the comptroller's office to coordinate the
administration and the funding of the programs (Sec. 403.416). 


On passage, or if the Act does not receive the necessary vote, the Act
takes effect September 1, 2001.