Austin, Texas
                                   FISCAL NOTE
                               75th Regular Session
                                  April 16, 1997
      TO: Honorable David Counts, Chair            IN RE:  Senate Bill No. 1, As Engrossed
          Committee on Natural Resources                              By: Brown
          Austin, Texas
         FROM:  John Keel, Director    
In response to your request for a Fiscal Note on SB1 ( Relating 
to the development and management of the water resources of 
the state; providing penalties.) this office has detemined the 
         Biennial Net Impact to General Revenue Funds by SB1-As Engrossed   FN Revision 1

Implementing the provisions of the bill would result in a 
net negative impact of $(50,229,293) 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 bill would provide a framework for the management of water 
resources, including drought planning, water rights regulation, 
financial and technical assistance and data collection.

I of the bill would require the Texas Water Development Board 
(TWDB) to adopt a State Water Plan, incorporating regional water 
plans and including drought response planning.  TWDB would be 
required to designate water planning regions by September 1, 
1998.  The deadline for initial submission of regional water 
plans to TWDB would be September 1, 2000, with updated regional 
water plans required every five years.   TWDB and Texas Parks 
and Wildlife Department (TPWD) would provide financial and technical 
assistance in the development of regional water plans.

addition, Article I of the bill would designate the Governor's 
Office--Division of Emergency Management (DEM) as the lead state 
agency responsible for coordinating the drought response component 
of the State Water Plan.  DEM would be required to provide administrative 
support for drought response activities.  The Texas Natural 
Resource Conservation Commission (TNRCC) would be responsible 
for enforcement during drought conditions.  The bill would also 
create a Drought Response and Monitoring Committee, consisting 
of DEM as chair, TNRCC, TWDB, TPWD, Texas Department of Agriculture 
(TDA), Texas Agricultural Extension Service (TAES) and any other 
entity designated by the governor.

Article II of the bill 
would amend statutory provisions relating to TNRCC's responsibilities 
in water rights permitting and would provide a regulatory process 
and requirements for considering interbasin water transfers. 
 The bill also would establish the Texas Water Trust within 
the Texas Water Bank, to be administered by TWDB.  TWDB would 
be authorized to act as a clearinghouse for water marketing 
information and to prepare and publish a manual on structuring 
water transactions.

Article III of the bill would establish 
an administrative penalty for violation of a water right.  It 
would also specify conditions for granting emergency authorizations 
for the use of water.  In addition, TNRCC would be required 
to make and enforce rules to provide for the safe construction, 
maintenance, repair and removal of levees; the bill would establish 
an administrative penalty for violating levee requirements.

IV of the bill would provide a process and procedures for TNRCC 
to identify priority groundwater management areas and would 
establish procedures for TNRCC to create new groundwater districts. 
 TNRCC, TWDB and TAES would administer an education program 
to inform district residents of water issues relevant to the 
area.  The bill would require TNRCC to provide technical assistance 
to districts to develop comprehensive management plans that 
are consistent with approved regional water plans, while TWDB 
would be required to review and certify the comprehensive plans. 
 The State Auditor's Office would be responsible for conducting 
audits of a district's performance relative to its management 
plan.  This article would create a Groundwater District Loan 
Assistance Fund to provide loans to newly-created districts 
for start-up operations; TWDB would administer the fund.  The 
bill would also provide a tax exemption for capital equipment 
used for water conservation or water/wastewater recycling in 
the manufacturing process.

Article V of the bill would authorize 
TWDB to use the principal in the Agricultural Trust Fund for 
loans to agricultural water conservation districts.  The Texas 
Water Development Fund (Fund II), a special fund in the state 
treasury, would be established contingent on the passage of 
a constitutional amendment (SJR 17).  Fund II would be created 
by consolidating existing bond authorizations for water supply, 
water quality and flood control into a single financial assistance 
account within the fund; Fund II also would include a state 
participation account and an economically distressed areas program 

Article VI of the bill addresses TNRCC's regulation 
of water and wastewater services, rates, service areas and implementation 
of certain provisions of the federal Safe Drinking Water Act 
Amendments of 1996.  The bill would require entities that merge 
or purchase water utilities to demonstrate financial, managerial 
and technical capabilities to ensure a continuous and safe drinking 
water supply.  The bill also would allow TWDB to provide loans 
through the Safe Drinking Water Act State Revolving Fund (SDWASRF) 
to investor-owned utilities.  The bill would authorize loan 
subsidies to disadvantaged communities through the SDWASRF.

VII of the bill would merge the Texas Natural Resources Information 
System and the existing Texas Geographic Information Systems 
Planning Council to form a new Texas Geographic Information 
Council.  The council would provide oversight and direction 
for data collection statewide and serve as the centralized clearinghouse 
for natural resources data.  The bill also would require the 
Executive Administrator of TWDB to coordinate, conduct, and 
facilitate the development and use of statewide digital base 

Article VIII of the bill would establish the effective 
dates for the provisions in the bill.  Most provisions would 
take effect on September 1, 1997, with the following exceptions: 
 sections addressing TNRCC oversight of water rights would take 
effect immediately; the sales, excise and use tax exemption 
for water conservation equipment would take effect October 1, 
1997; and provisions relating to the consolidation of existing 
bond authorizations would take effect upon passage of a constitutional 
amendment by the voters and certification of the results by 
the Secretary of State.  Section 11.028, Texas Water Code, which 
addresses the further appropriation of non-domestic, non-municipal 
water, would be repealed effective September 1, 1997.
The fiscal impact of this bill was assessed by all the state 
agencies mentioned in the bill.  In estimating the costs of 
the bill, the agencies generally relied on historical data and 
past experience for similar programs or requirements.  The following 
agencies estimated costs to their respective agencies based 
on additional responsibilities.  The estimated fiscal impact 
and FTEs required are shown for the 1998-99 biennium.

WATER DEVELOPMENT BOARD:  Lead agency for drought planning and 
monitoring; water conservation; financial assistance for regional 
water planning  and groundwater management plans; administration 
of financial assistance to investor-owned utilities and disadvantaged 
communities through the SDWASRF (state funds satisfy match requirements 
for loan subsidy provisions of the federal Safe Drinking Water 
Act); coordinate/manage data collection and dissemination, including 
development of digital base maps (state funds would be supplemented 
by federal matching funds--at about a 2-1 federal to state ratio--and 
local and private funds; completion in four years).  TWDB estimates 
deadlines for 16 regional management plans will require expenditure 
of $18 million in grant money (General Revenue funding) in fiscal 
year 1998.  
ESTIMATED COST to General Revenue, 1998-99 biennium: 
 $(40,778,960) and 18.5 FTEs

COMMISSION:  Drought planning and monitoring; water conservation; 
enforcement; water management through water rights permitting, 
enforcement and marketing; review and approval of interbasin 
water transfers; data collection.  
Revenue, 1998-99 biennium:  $(5,771,333) and 22 FTEs

PARKS AND WILDLIFE DEPARTMENT:  Drought Planning and Monitoring 
Committee; assess impact of regional water plans and groundwater 
management plans on fish and wildlife; assist groundwater districts 
and directly fund (grants) assessments of impacts to fish and 
wildlife; data collection.
ESTIMATED COST to General Revenue, 
1998-99 biennium:  $(700,000) and 3 FTEs.

Tax exemption for water conservation and wastewater recycling 
ESTIMATED LOSS to General Revenue, 1998-99 biennium: 

an education program to inform district residents of water issues. 
ESTIMATED COST to General Revenue, 1998-99 biennium $(1,500,000) 


The Texas Department of Agriculture 
(TDA) estimated that the linked deposit program would result 
in a loss of interest earnings of $200,000 per year.  The State 
Office of Administrative Hearings and the Attorney General's 
Office would adjudicate cases referred to them by TNRCC.  These 
offices estimated no fiscal impact.  The Governor's Office Division 
of Emergency Management estimated that drought-management oversight 
duties could be absorbed at current staffing levels.  

State Auditor's Office estimated no fiscal impact for the biennium. 
 The agency expects that audits required under Article IV would 
not take effect until fiscal year 2000.  
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   Probable Revenue   Probable Revenue   Change in Number   
            Savings/(Cost)     Gain/(Loss) from   Gain/(Loss) from   Gain/(Loss) from   of State          
            from General       General Revenue    Federal Funds      Federal Funds      Employees from    
            Revenue Fund       Fund                                                     FY 1997           
            0001               0001               0555               0555                                  
       1998     ($36,898,517)        ($493,000)        $5,776,796      ($5,776,796)              43.5
       1998      (11,851,776)         (986,000)         5,763,297       (5,763,297)              43.5
       2000      (12,511,776)       (1,478,000)         5,833,934       (5,833,934)              43.5
       2001      (17,511,776)       (1,523,000)         5,833,934       (5,833,934)              43.5
       2002      (13,978,119)       (1,563,000)            91,712          (91,712)              43.5

         Net Impact on General Revenue Related Funds:

              Fiscal Year      Probable Net Postive/(Negative)
                               General Revenue Related Funds
               1998        ($37,391,517)
               1999         (12,837,776)
               2000         (13,989,776)
               2001         (19,034,776)
               2002         (15,541,119)
Similar annual fiscal implications would continue as long as 
the provisions of the bill are in effect.
Local governments would be affected by several provisions in 
this bill.  The bill would impose additional requirements on 
units of local government that function as water utilities to 
develop both drought contingency and management plans.  State 
grant funding (from General Revenue) would provide a 50 percent 
match for these costs.  Newly-created groundwater districts 
could apply for loans to pay for start-up costs.

Water planning 
regions would be required to hold at least two public hearings 
on a proposed regional water plan.  Groundwater districts would 
be authorized to assess user and standby fees to fund maintenance 
and operating expenses, as well as to repay bond debt service. 
 The Comptroller estimated no significant loss of revenue to 
local governments due to the tax exemption on capital equipment 
used for water conservation. 
   Source:            Agencies:   304   Comptroller of Public Accounts
                                         551   Department of Agriculture
                                         555   Texas Agricultural Extension Service
                                         580   Water Development Board
                                         582   Natural Resources Conservation Commission
                                         592   Soil and Water Conservation Board
                                         802   Parks and Wildlife Department
                                         308   State Auditor's Office
                                         Governor's Office Division of Emergency Management
                      LBB Staff:   JK ,BB ,DM