LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE 75th Regular Session May 15, 1997 TO: Honorable Kenneth Armbrister, Chair IN RE: House Joint Resolution No. 31, As Engrossed Committee on State Affairs By: Patterson,L.P. "Pete" Senate Austin, Texas FROM: John Keel, Director In response to your request for a Fiscal Note on HJR31 ( Proposing a constitutional amendment permitting an encumbrance against homestead property for certain extensions of equity credit.) this office has detemined the following: Biennial Net Impact to General Revenue Funds by HJR31-As Engrossed Implementing the provisions of the bill would result in a net positive impact of $324,500 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 The proposed constitutional amendment would permit home equity lending. The Office of the Consumer Credit Commissioner projects that additional examiners will be required to examine an increased number of licensed lenders at an increased cost per examination as a result of the added complexity of the type of examinations conducted. Collected revenues would increase due to the licensure of more regulated lenders, and from fees collected as a result of charges assessed to lenders for examinations. Methodolgy The Office of the Consumer Credit Commissioner's projected revenues of $1.3 million during the first year of implementation include increased licensing fees resulting from a projected increase in the number of lenders, as well as revenues generated from examinations. The agency will charge a $150 surcharge per visit, plus $32 per hour of examination. The agency projects that the cost of the new division would include 20 additional full time equivalents (FTEs), including 5 examiners, 2 assistant examiners, 1 financial analyst, 2 attorneys, 1 consumer education specialist, and 9 administrative technicians. Salaries are projected at $670,000 per year. With additional travel and related operating costs, the total costs of operation and staffing is estimated at slightly under $1 million dollars per year. In fiscal year 1998, there would also be the cost of publication for the constitutional amendment to be set before the voters. The probable fiscal implications of Implementing the provisions of the bill during each of the first five years following passage is estimated as follows: Five Year Impact: Fiscal Year Probable Probable Revenue Change in Number Savings/(Cost) Gain/(Loss) from of State from General General Revenue Employees from Revenue Fund Fund FY 1997 0001 0001 1998 ($1,068,000) $1,176,000 20.0 1998 (942,000) 1,158,500 20.0 2000 (953,000) 1,151,000 20.0 2001 (973,000) 1,146,000 20.0 2002 (1,020,000) 1,196,000 20.0 Net Impact on General Revenue Related Funds: Fiscal Year Probable Net Postive/(Negative) General Revenue Related Funds Funds 1998 $108,000 1999 216,500 2000 198,000 2001 173,000 2002 176,000 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: 304 Comptroller of Public Accounts LBB Staff: JK ,JD ,TH ,JA