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Seal of the Senate of the State of Texas
Welcome to the official website for the
Texas Senate
January 9, 2002
(512) 463-0300

Business and Commerce Subcommittees Review Lending Practices and State Contracts in Texas

AUSTIN - Two subcommittees of the Senate Committee on Business and Commerce met today, January 9, 2002, in the Texas Capitol. The committee is divided in five groups to better focus on each of the charges they must examine during the legislative interim.

Business and Commerce Subcommittee on Charge #4

The subcommittee studying Charge # 4 met in the morning. The subgroup must monitor trends in local lending practices in all regions of the state, determine if the legislature should develop strategies to retain bank deposits made by public institutions in Texas communities, increase the number of bank "decision making" centers in Texas, increase the loan-to-deposit ratio in Texas, and develop incentives for lending institutions to locate in all areas of the state.

Dr. Steve Murdock, State Demographer at Texas A&M University, opened the invited testimony with an extensive study of present and future demographic and socioeconomic trends in Texas, and how they would affect lending needs and practices. Murdock focused on three demographic trends: the state's rapid population growth, the high increase of the non-Anglo population and the aging of the population. Second only to California, Texas saw a population growth of 3.9 million in the last decade, primarily in urban and suburban areas of Houston, Dallas/Fort Worth and communities along the border. The Panhandle, and part of the West and Southeast regions showed the lowest population increase. With rapidly changing demographics, Texas faces a future with an Anglo population as a minority by 2005. By 2040 the number is more dramatic with Anglos as only 21 percent of the population.

Reflecting the national trend of the aging of the baby-boomer generation, 72 percent of people older than 65 are Anglos and only 18 percent are Hispanic. At the opposite end of the spectrum, the young population in Texas is increasingly Hispanic. In terms of per capita income, Hispanics and African Americans earn 55 to 65percent of the amount earned by Anglos. Murdock indicated that as consequence of these trends, if Texas does not solve socioeconomic differences among racial and ethnic groups, through an increase in education and training, the state will confront a higher poor population, with an increase of needs in social programs and loans.

Second to testify was Dr. Ray Perryman, President of The Perryman Group, with a discussion of economic consequences of inadequate bank credit in Texas. Perryman also referred to the great opportunities and challenges of such a young population. One of the financial challenges is the low loan to deposit ratio in Texas, indicating a low flow of capital to society compared to its deposits. In the 48th position among the states, Texas has a capital access problem, an important consideration for companies choosing to relocate here. All the biggest banks operating in Texas are based in other states, making the state an importer rather than generator of capital.

The committee received testimony from a panel of four members: James Pledger, Commissioner of the Texas Savings and Loan Department; Randall James, Commissioner of the Texas Department of Banking; Leslie Pettijohn, Commissioner of the Office of Consumer Credit; and James Deese, Deputy Commissioner of the Texas Credit Union Department. Discussing credit availability issues, Pledger concurred in the need to increase state-based banking institutions. Senator Carona said the high regulations applied to the industry in Texas could be a factor in the low attraction of banks. James also referred to the lack of credit card companies based in the states. Pettijohn testified about the heavy activity in the last decade in terms of payday loans, home equity lending, check cashiers and pawn shops. She pointed to the higher delinquency in loan repayment, predatory practices in mortgage and home lending, and disparities in lending rates and fees. Deese testified that credit unions--operating as nonprofit cooperative financial institutions--saw a 12 percent increase in deposits last year, in part as a consequence of transfers from a lower stock market. Texas has 250 state credit unions. In those cases, the deposits do stay in the community. Deese said the department is working to increase service in underserved areas.

The meeting followed with public testimony, and recessed at 1:30 p.m. subject to the call of the chair. Business and Commerce is chaired by Senator David Sibley and Vice-chaired by Senator Troy Fraser. Other members are Senators Leticia Van de Putte, John Carona, Mike Jackson, Eddie Lucio, Jr. and Eliot Shapleigh.

Business and Commerce Subcommittee on Charge #5

The Business and Commerce Subcommittee on Interim Charge #5 reconvened at 2:00 p.m. Its members must assess the existence of prevailing wage rate differences in state procurement contracts. The group should determine if identified variances justify the use of additional methodologies to determine prevailing wage rates.

Invited testimony was provided by John Davenport, Director of Construction Procurement of the General Services Commission/Texas Building and Procurement Commission; Mark Hughes, Workforce Information, Analysis & Reporting Division Director of the Texas Workforce Commission; and Thomas Bohuslav, P.E., Construction Division Director of the Texas Department of Transportation.

The witnesses presented separate wage rate surveys conducted by their commissions around the state, covering all industries and obtaining high employers' participation. Other issues discussed were wage differences between health care employees and construction workers among others, as well as cost of living disparities in different regions of the state.

There was no public testimony in today's meeting. The committee recessed subject to the call of the chair.

Session video and all other Senate webcast recordings can be accessed from the Senate website's Audio/Video Archive.