LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE 75th Regular Session April 16, 1997 TO: Honorable Steven Wolens, Chair IN RE: House Bill No. 2416 Committee on State Affairs By: Danburg House Austin, Texas FROM: John Keel, Director In response to your request for a Fiscal Note on HB2416 ( Relating to the creation of the Texas Real Estate Inspector Licensing Board and the regulation of real estate inspectors; providing a criminal penalty.) this office has detemined the following: Biennial Net Impact to General Revenue Funds by HB2416-As Introduced FN Revision 1 Implementing the provisions of the bill would result in a net negative impact of ($157,600) to General Revenue Related Funds through the biennium ending August 31, 1999. The bill would make no appropriation but could provide the legal basis for an appropriation of funds to implement the provisions of the bill. Fiscal Analysis This bill would create a new state agency, the Texas Real Estate Inspector Licensing Board (TREILB) and amend Article 6573a, Section 23 of The Real Estate License Act to transfer the authority to regulate real estate inspectors from the Texas Real Estate Commission (TREC) to the (TREILB). The board would be composed of nine members: five professional inspectors, three public members, and one real estate broker. The board would be authorized to adopt rules relating to the licensing and regulation of inspectors, to hire employees to administer the bill, and to contract with another agency for services. This bill would require the administrator of TREC to identify records and property relating to the licensing of inspectors, including any money in the real estate inspector regulation account and the real estate inspection recovery fund, and transfer the records and property to the new board. The bill would also create a new, dedicated unnamed fund for the use of the board in the administration of the bill. The Comptroller would be required to credit the new fund with money derived from fees, assessments, or charges paid to the board under this bill. The bill would repeal Article 6573a, Revised Civil Statutes, relating to the Real Estate Inspection Recovery Trust Fund 0988, and would create, in its stead, the Inspection Recovery Fund. To receive a license, a person would be required to pay a fee, in addition to other licensing fees, of no more than $200 into the Inspector Recovery Fund. The bill also would establish the Inspector Regulation Account as a dedicated account in the General Revenue Fund 0001. The account would be funded by transfers of money in excess of $600,000 from the Inspection Recovery Fund. Money in this account could only be used for the payment of costs incurred by the board in regulation of inspectors. The bill would take effective July 1, 1997. Methodolgy It is estimated that a staff of approximately 5 full-time equivalent positions (FTEs) plus associated operating cost would be required to administer the bill. This estimate is based on the assumption that approximately 1,400 of the currently licensed inspectors would apply for certification with the new board. It is estimated that the costs to administer the bill would be approximately $400,000 in the first year and $320,000 every year thereafter. The bill would require that all fees, assessments, and charges collected under these provisions be placed in the new un-named fund for the board's use in the administration of the bill's provisions. This analysis assumes that fees would be raised in amounts necessary to implement the bill's provisions. In fiscal 1996, real estate inspectors paid $34,000 in fees to the commission for deposit in the General Revenue Fund. As redefined by the bill, the Inspection Recovery Fund would be used to reimburse a person who suffers actual damages from an act committed by an inspector. If on December 31 of any year, the Inspection Recovery Fund balance fell below $300,000, each inspector would be required to pay an additional $75 at their next license renewal, or a pro rata share to bring the fund to $450,000. If on December 31 of any year, the Inspection Recovery Fund balance exceeded $600,000, the excess would be transferred into a separate account in the General Revenue Fund, known as the Inspector Regulation Account, which could only be used by the board in the regulation of inspectors. Based on historical information, transfers of $42,000 have been made from Real Estate Inspection Recovery Trust Fund 0988 to the General Revenue Fund. The unobligated and unexpended balance of the fiscal 1997 appropriation to the Texas Real Estate Commission for the regulation of real estate inspectors would be transferred to the board for the implementation of the bill's provisions. The bill would create a new special fund, a new dedicated account in the General Revenue Fund, and new dedicated revenue sources in the State Treasury. The creation and/or continuation of special funds and dedicated revenue sources outside the General Revenue Fund could further restrict the Legislature's ability to appropriate revenues for general operating purposes. The probable fiscal implications of implementing the provisions of the bill during each of the first five years following passage is estimated as follows: Six Year Impact: Fiscal Year Probable Revenue Probable Revenue Probable Change in Number Gain/(Loss) from Gain/(Loss) from Savings/(Cost) of State General Revenue New - Unnamed Fund from New - Employees from Fund Unnamed Fund FY 1997 0001 NEW-OTH NEW-OTH 1997 ($5,600) $5,600 ($5,600) 1997 (76,000) 400,000 (400,000) 5.0 1999 (76,000) 320,000 (320,000) 5.0 2000 (76,000) 320,000 (320,000) 5.0 2001 (76,000) 320,000 (320,000) 5.0 2002 (76,000) 320,000 (320,000) 5.0 Net Impact on General Revenue Related Funds: The probable fiscal implication to General Revenue related funds during each of the first five years is estimated as follows: Fiscal Year Probable Net Postive/(Negative) General Revenue Related Funds Funds 1997 ($5,600) 1998 (76,000) 1999 (76,000) 2000 (76,000) 2001 (76,000) 2002 (76,000) Similar annual fiscal implications would continue as long as the provisions of the bill are in effect. No fiscal implication to units of local government is anticipated. Source: Agencies: 329 Real Estate Commission 304 Comptroller of Public Accounts LBB Staff: JK ,JD ,CG