BILL ANALYSIS

C.S.H.B. 43

By: Kitzman

Agriculture & Livestock

Committee Report (Substituted)

BACKGROUND AND PURPOSE

The Texas Agricultural Finance Authority (TAFA) was created in 1987 within the Department of Agriculture to provide financial assistance for the expansion and development of Texas agriculture and agricultural products. The bill author has informed the committee that two of TAFA's most influential programs are the young farmer grant program and the young farmer interest rate reduction program, but that restrictions on these programs limit their effectiveness. According to the Texas Farm Bureau, Texas led the nation in agricultural losses related to weather in 2024 at over $3.4 billion, with drought and excessive heat contributing to more than 66 percent of Texas' losses. The bill author has informed the committee that these issues coupled with supply issues and inflation put Texas agriculture at risk. C.S.H.B. 43 seeks to address these issues by revising provisions relating to these programs and TAFA's board of directors.

CRIMINAL JUSTICE IMPACT

It is the committee's opinion that this bill does not expressly create a criminal offense, increase the punishment for an existing criminal offense or category of offenses, or change the eligibility of a person for community supervision, parole, or mandatory supervision.

RULEMAKING AUTHORITY

It is the committee's opinion that rulemaking authority is expressly granted to the board of directors of the Texas Agricultural Finance Authority in SECTION 15 and to the commissioner of agriculture in SECTION 17 of this bill.

ANALYSIS

C.S.H.B. 43 amends the Agriculture Code to revise the definition of "agricultural business" under the Texas Agricultural Finance Act by doing the following:

·removing the following as an agricultural business:

oa business that holds a deer breeder's permit; and

oa business, other than those listed in the definition, in a rural area of Texas;

·including as an agricultural business a nonprofit organization whose primary purpose is to maintain the agricultural use of land; and

·removing the specification that includes as an agricultural business that is an agriculture-related business in rural areas of Texas a business that provides recreational activities, including hiking, fishing, hunting, or any other activity associated with the enjoyment of nature or the outdoors on agricultural land.

C.S.H.B. 43 revises the composition of the board of directors of the Texas Agricultural Finance Authority (TAFA) and decreases from 11 to nine the number of members by doing the following:

·removing as a member the director of the Institute for International Agribusiness Studies at Prairie View A&M University;

·removing two of the four members appointed by the commissioner of agriculture who are knowledgeable about agricultural lending practices;

·removing the following members appointed by the commissioner:

oone member who is an elected or appointed official of a municipality or county; and

oone member who is a representative of agricultural businesses;

·increasing from one to two the number of appointed members who are representatives of agriculture-related entities, including rural chambers of commerce, foundations, trade associations, institutions of higher education, or other entities involved in agricultural matters and changing the appointer from the commissioner to the governor;

·changing from two members appointed by the commissioner who represent young farmers and the interests of young farmers to two members appointed by the governor who represent young farmers or ranchers and the interests of young farmers or ranchers; and

·adding two members appointed by the governor who each operate a family farm or ranch in Texas.

The bill establishes that its changes in the qualifications of board members do not affect the entitlement of a member serving on the board immediately before the bill's effective date to continue to carry out the board's functions for the remainder of the member's term. The changes apply only to a member appointed on or after the bill's effective date. The bill expressly does not prohibit a person who is a board member on the bill's effective date from being reappointed to the board if the person has the required qualifications as amended by the bill.

C.S.H.B. 43 requires TAFA to submit its annual report of its activities for the preceding fiscal year to the Legislative Budget Board (LBB) on or before January 1 of each year and specifies that the report's required complete operating and financial statement includes TAFA's revenues and expenditures for each program administered by the board.

C.S.H.B. 43 removes provisions that do the following:

·generally cap at $2 million the aggregate amount of loans made to or guaranteed, insured, coinsured, or reinsured under applicable TAFA-related provisions for a single eligible agricultural business by TAFA from funds provided by TAFA; and

·authorize TAFA to make, guarantee, insure, coinsure, or reinsure a loan for such a business that results in an aggregate amount exceeding $2 million, but not exceeding $5 million, if the action is approved by a two-thirds vote of the board members present.

The bill specifies that the rural economic development for which TAFA may design and implement programs to further is agriculture-related rural economic development. The bill authorizes TAFA to provide financial assistance to the Texas Animal Health Commission (TAHC), Texas A&M AgriLife Extension Service, or Texas A&M AgriLife Research to design and implement programs to control agriculture-related diseases, pests, or predators under the pest and disease control and depredation program established by the bill.

C.S.H.B. 43 changes the young farmer interest rate reduction program to a farmer interest rate reduction program and removes the eligibility requirement that an applicant be at least 18 years of age but younger than 46 years of age to participate in the program. The bill authorizes the board to disperse a loan under the program quarterly, annually, or biennially, or on another disbursement schedule, as determined by the board after considering the needs of the recipient.

The bill removes the specification that an eligible lending institution under the program that is an institution of the Farm Credit System be such an institution headquartered in Texas. The bill, with respect to a linked deposit under the program that is a time deposit governed by a written deposit agreement between the state and an eligible lending institution that provides, in part, that the eligible lending institution agree to lend the value of the deposit to an eligible borrower at a maximum rate that is the linked deposit rate plus a maximum percentage, decreases from four percent to one percent that maximum percentage. The bill increases from $500,000 to $1 million the cap on a loan under the program.

C.S.H.B. 43 changes the young farmer grant program to an agriculture grant program and adds as applicable purposes for a program grant the maintaining of agricultural businesses, the maintaining of agricultural uses of land, and the fostering of supply chain resiliency. The bill changes the eligibility of an applicant to receive a program grant as follows:

·removes the restriction that the applicant be at least 18 years of age but younger than 46 years of age and provides for the person to be an agricultural business as an alternative to being an agricultural producer; and

·lowers the minimum amount of matching funds the applicant must provide from one dollar for each dollar of grant money received to 10 percent of the grant money received.

The bill increases the cap on a program grant from $20,000 to $500,000.

C.S.H.B. 43 sets out provisions establishing the pest and disease control and depredation program under which TAFA is required to provide financial assistance to the TAHC, Texas A&M AgriLife Extension Service, or Texas A&M AgriLife Research to implement programs to control agriculture-related pests, diseases, or predators. The bill requires such a program to be designed to mitigate agricultural losses by an agricultural business through the control of agriculture-related pests, diseases, or predators. The bill requires the TAHC, Texas A&M AgriLife Extension Service, or Texas A&M AgriLife Research to submit an application to receive financial assistance on a form approved by the board or the board's designee. The bill establishes that the source of funds for the financial assistance program is the Texas Agricultural Fund. The bill requires the board to adopt rules to implement such provisions, including rules governing the program's operation.

C.S.H.B. 43 requires the commissioner, as soon as is practicable after the bill's effective date, to adopt rules to implement the bill's provisions, including rules to implement the pest and disease control and depredation program.

EFFECTIVE DATE

On passage, or, if the bill does not receive the necessary vote, September 1, 2025.

COMPARISON OF INTRODUCED AND SUBSTITUTE

While C.S.H.B. 43 may differ from the introduced in minor or nonsubstantive ways, the following summarizes the substantial differences between the introduced and committee substitute versions of the bill.

The substitute includes provisions that were not in the introduced that revised the definition of "agricultural business" under the Texas Agricultural Finance Act.

Whereas both the introduced and the substitute revise the composition of TAFA's board, and both versions remove as board members the director of the Institute for International Agribusiness Studies at Prairie View A&M University and two of the four members appointed by the commissioner who are knowledgeable about agricultural lending practices, the revisions otherwise differ. The introduced decreased the number of board members from 11 to seven by also removing as a board member one of the two commissioner-appointed members who represent young farmers and the interests of young farmers. The substitute revises the composition of the board and decreases from 11 to nine the number of members by doing the following, in addition to its aforementioned removals:

·removing the following members appointed by the commissioner:

oone member who is an elected or appointed official of a municipality or county; and

oone member who is a representative of agricultural businesses;

·increasing from one to two the number of appointed members who are representatives of agriculture related entities, including rural chambers of commerce, foundations, trade associations, institutions of higher education, or other entities involved in agricultural matters and changing the appointer from the commissioner to the governor;

·changing from two members appointed by the commissioner who represent young farmers and the interests of young farmers to two members appointed by the governor who represent young farmers or ranchers and the interests of young farmers or ranchers; and

·adding two members appointed by the governor who each operate a family farm or ranch in Texas.

The substitute includes provisions that were not in the introduced that establish the following:

·the bill's changes in the qualifications of board members do not affect the entitlement of a member serving on the board immediately before the bill's effective date to continue to carry out the board's functions for the remainder of the member's term;

·the changes apply only to a member appointed on or after the bill's effective date; and

·the bill expressly does not prohibit a person who is a board member on the bill's effective date from being reappointed to the board if the person has the required qualifications, as amended.

With respect to the introduced version's requirement that TAFA's annual report of its activities for the preceding fiscal year be submitted to the LBB, the substitute provides for a deadline for such submittal of on or before January 1 of each year, whereas the introduced did not provide a deadline. With respect to the inclusion in the report of applicable program revenues and expenditures, the substitute specifies such inclusion as part of the report's complete operating and financial statement, whereas the introduced did not provide such specification.

The substitute omits the provisions from the introduced that did the following:

·specified that the programs for which TAFA is required to design and implement to provide financial assistance to eligible agricultural businesses include programs to administer or participate in programs with other state entities that study issues impacting agricultural producers, such as plant diseases and pest outbreaks; and

·included state agencies as alternatives to eligible agricultural businesses as entities for which TAFA's programs are required to be designed and implemented to provide financial assistance so that the entities are enabled to finance or refinance costs incurred in connection with the development, increase, improvement, or expansion of production, processing, marketing, or export of Texas agricultural products and for the development of rural agriculture-related businesses.

The substitute includes provisions that were not in the introduced that do the following:

·specify that the rural economic development for which TAFA may design and implement programs to further is agriculture-related rural economic development; and

·authorize TAFA to provide financial assistance to the TAHC, Texas A&M AgriLife Extension Service, or Texas A&M AgriLife Research to design and implement programs to control agriculture-related diseases, pests, or predators under the pest and disease control and depredation program established by the substitute.

The substitute does not include a provision included in the introduced that required TAFA's board to accept applications under the farmer interest rate reduction program on a biennial basis, but includes a provision not included in the introduced that authorizes the board to disperse a program loan quarterly, annually, or biennially, or on another disbursement schedule, as determined by the board after considering the needs of the recipient.

Whereas the introduced provided as an applicable purpose of a grant under the agriculture grant program supply chain resiliency, the substitute provides as such a purpose the fostering of such resiliency and includes as an applicable purpose, which was not included in the introduced, the maintaining of agricultural uses of land.

The substitute does not include temporary provisions set to expire January 31, 2028, that were included in the introduced that did the following:

·required the Department of Agriculture to partner with the Texas A&M AgriLife Extension Service or the TAHC, as appropriate, to annually conduct a study of each existing or emerging plant disease and pest outbreaks in Texas;

·required the extension service or the TAHC, in conducting the study, to determine the following for each outbreak of a plant disease or pest:

othe outbreak's duration;

ohow the outbreak was resolved, if applicable; and

oany other information the extension service determines is relevant;

·required the extension service to do the following:

onot later than January 1 of each year, prepare and publish on its website a report of the previous year's study; and

onot later than January 1, 2028, prepare and publish on its website a report summarizing each published annual report and providing policy recommendations to address outbreaks of plant diseases and pests; and

·required the extension service to provide the summarization report to the LBB.

The substitute includes provisions that were not in the introduced that establish the pest and disease control and depredation program.

The substitute includes a provision that was not in the introduced that requires the commissioner, as soon as is practicable after the bill's effective date, to adopt rules to implement the bill's provisions, including rules to implement the pest and disease control and depredation program.