LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE 75th Regular Session May 27, 1997 TO: Honorable James E. "Pete" Laney IN RE: House Joint Resolution No. 31, As Passed 2nd House Speaker of the House Patterson L.P. "Pete" House of Representatives 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 Passed 2nd House Implementing the provisions of the bill would result in a net positive impact of $21,400 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. The bill would also require the Finance Commission to appoint a director to conduct research and produce annual reports on the availability of financial services and on the practices of businesses that provide financial services in Texas. Methodolgy The Office of the Consumer Credit Commissioner's projected revenues of $1.5 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 28 additional full time equivalents (FTEs), including 7 examiners, 4 assistant examiners, 1 attorneys, 1 legal assistant, 4 consumer education specialist, 1 personnel manager, and 10 administrative technicians. Salaries are projected at $800,000 per year. With additional travel and related operating costs, the total costs of operation and staffing is estimated at slightly over $1.4 million dollars per year. The Finance Commission would need one additional FTE to conduct research and produce the annual report. Salary, operating, and other expenses and associated costs would total $83,300 in FY 1998 and $78,300 every year thereafter. 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 ($1,579,300) $1,540,000 29.0 1998 (1,503,300) 1,564,000 29.0 2000 (1,503,300) 1,545,000 29.0 2001 (1,503,300) 1,530,000 29.0 2002 (1,503,300) 1,661,000 29.0 Net Impact on General Revenue Related Funds: Fiscal Year Probable Net Postive/(Negative) General Revenue Related Funds Funds 1998 ($39,300) 1999 60,700 2000 41,700 2001 26,700 2002 157,700 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 449 Finance Commission of Texas 466 Office of the Consumer Credit Commissioner LBB Staff: JK ,JD ,TH ,JA