Acting Texas comptroller ends MWBE certification for state contracts

Texas Comptroller's Office

Texas' Historically Underutilized Business (HUB) program, which is included in state guidelines for debt underwriting, will no longer consider minority- and women-owned business enterprises (MWBE) for preferences in state contracts and will focus exclusively on businesses owned and operated by veterans, according to emergency rules announced this week by Acting Texas Comptroller Kelly Hancock.

The rules significantly shrink the program, renamed Veteran Heroes United in Business, "bringing its administration into alignment with the Texas and U.S. constitutions by removing race- and sex-based preferences and adjusting the program's focus to service-disabled veterans who qualify under legislative guidelines established in 2015," according to a statement from the comptroller's office.

"VetHUB is Texas' way of stepping up for them — cutting red tape, restoring constitutional integrity and opening doors for the men and women who wore our nation's uniform," Kelly said in the statement. "These emergency rules ensure Texas' state contracting is free from gender or race discrimination and keep the program centered on those who earned this support through their service."

His office did not respond to questions about the rules' impact on state contracts related to municipal bond issuance. 

Texas Bond Review Board guidelines require state debt issuers to make good faith efforts to achieve 33% participation by HUBs in bond underwriting and encourage underwriters to make similar good faith efforts to include HUB participation in syndicates for competitive sales.

Previous HUB certifications by the comptroller's office based on race, ethnicity, or sex will be revoked "unless they demonstrate ownership and control by a service-disabled veteran," according to the comptroller's office statement. 

Public finance MWBE and veteran-owned firms contacted by The Bond Buyer did not immediately respond to requests for comment or declined to comment on the HUB changes.

Justin Marlowe, director of the Center for Municipal Finance at the University of Chicago, said issuers generally benefit when their roster of potential underwriters is longer, not shorter.

"(MWBE) underwriters/broker/dealers can bring new investors and new distribution channels to the table," he said in an email, adding they can also help bring new issuers to the market, "especially communities that have struggled with market access in the past." 

The rule changes came after Hancock in October froze the issuance of new and renewed HUB certifications for state procurement, "pending further action to ensure the program's administrative procedures and rules are constitutional." 

Hancock, a former Republican state senator, was tapped as an interim replacement for elected Comptroller Glenn Hegar, who left office at the end of June to become chancellor of The Texas A&M University System. In November, Hancock announced he will run for comptroller in 2026.