LEGISLATIVE BUDGET BOARD
                                   Austin, Texas
         
                                   FISCAL NOTE
                               75th Regular Session
         
                                  May 5, 1997
         
         
      TO: Honorable David Counts, Chair            IN RE:  Senate Bill No. 1, Committee Report 2nd House, Substituted
          Committee on Natural Resources                              By: Brown
          House
          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 
following:
         
         Biennial Net Impact to General Revenue Funds by SB1-Committee Report 2nd House, Substituted
         

Implementing the provisions of the bill would result in a 
net negative impact of $(49,838,026) 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 development and management 
of water resources, including drought planning, water utility 
regulation, interbasin transfers of water, financial and technical 
assistance, assistance to small and disadvantaged communities 
and data collection. 

The Texas Water Development Board (TWDB) 
would designate regional water planning areas, which would prepare 
water plans to develop, manage and conserve water resources 
and provide  a drought contingency response.  The TWDB, Texas 
Natural Resource Conservation Commission (TNRCC) and the Texas 
Parks and Wildlife Department (TPWD) would provide technical 
and financial assistance for this planning.  The Governor s 
Office - Division of Emergency Management would coordinate the 
 drought response portion of the state water plan. 

The bill 
would establish procedures for the TNRCC to create new groundwater 
districts.  TNRCC and TWDB would provide technical assistance 
to districts in priority groundwater management areas to develop 
management plans that are consistent with regional plans.  Financial 
assistance would be available for district activities.  The 
bill would create the Texas Groundwater Management Council to 
determine whether districts are operational.  The Texas Agricultural 
Extension Service would implement an educational program to 
inform residents of the status of the area's water resources 
and management options.  The bill would provide a tax exemption 
for capital equipment used for water conservation or water/wastewater 
recycling in the manufacturing process.

Contingent upon passage 
of a constitutional amendment (SJR 17), the bill would establish 
the Texas Water Development Fund II (Fund II), a special fund 
in the state treasury.  Existing bond authorizations for water 
supply, water quality and flood control would be combined into 
a single financial assistance account.  The Fund would include 
a state participation and an economically distressed areas program 
account.

The bill would establish a water resource management 
fee to be collected by TNRCC from water systems, based on meter 
size and usage. In addition, the Texas Department of Health 
(TDH) would assess and collect fees on the gross receipts of 
bottled water plants.  The bill also would establish an annual 
water rights fee to be assessed on rights held for certain uses. 
 All fee revenue would be deposited to the Water Facilities 
Fund, a special account in the General Revenue Fund which would 
be administered by TWDB.  Two and one-half percent of deposits 
to the fund would be available to pay for TNRCC operating expenses 
relating to water resource management and protection.  The remainder 
would be used for TNRCC water programs, TWDB financial assistance 
programs and fund administration, and other specific uses, including 
weather modification and brush control.

The bill would create 
two programs, the pilot weather modification and the conservation 
and restoration programs each with corresponding GR-Dedicated 
accounts.  The Brush Control Fund also would be recreated under 
the Soil and Water Conservation Board. 

TNRCC would be required 
to determine appropriate compensation to be paid by the recipient 
of an interbasin water transfer to the basin of origin which 
would be deposited to the Water Facilities Fund.  The funds 
would be used for loans on eligible projects, project acquisition, 
and debt service payments.

The bill also addresses the financial 
needs of small and disadvantaged communities, water and wastewater 
service regulation and data collection.
 
Methodolgy
 
Estimates of the bill s cost are based on historical data and 
past experience for similar programs or requirements.  The estimated 
fiscal impact to the General Revenue Fund and total FTEs (All 
Funds) required for each agency are shown for the 1998-99 biennium.

TEXAS 
WATER DEVELOPMENT BOARD: Drought planning and monitoring; water 
conservation; financial and technical assistance for regional 
water planning and ground water management plans; administration 
of Water Facilities Fund; and financial assistance programs; 
coordinate and manage data collection and dissemination, including 
developing digital base maps.  The estimate includes over $18 
million in general revenue for grants to develop 16 regional 
management plans.
ESTIMATED COST to General Revenue, 1998-99 
biennium:   $(40,478,960).
ESTIMATED FTEs (All Funds), FY1998: 
 13.5; FY1999:  23.5.

TEXAS NATURAL RESOURCE CONSERVATION 
COMMISSION: Drought planning and monitoring; water conservation; 
enforcement; administration of water resource management fee; 
water rights management; water service regulation; interbasin 
water transfers; data collection.
ESTIMATED NET COST to General 
Revenue, 1998-99 biennium: $(5,662,066).
ESTIMATED FTEs (All 
Funds) 1998-99 biennium:   24.

TEXAS PARKS AND WILDLIFE DEPARTMENT: 
Drought planning and monitoring; assess impact of plans on fish 
and wildlife; administer of conservation and restoration fund; 
technical assistance; data collection.
ESTIMATED NET COST to 
General Revenue, 1998-99 biennium: $(700,000).
ESTIMATED FTEs 
(All Funds) 1998-99 biennium:   4.

COMPTROLLER: Tax exemption 
for water conservation and wastewater recycling equipment.
ESTIMATED 
NET LOSS to General Revenue, 1998-99 biennium:  $(1,479,000)

TEXAS 
AGRICULTURAL EXTENSION SERVICE: Administration of education 
program to inform district residents of water issues.
ESTIMATED 
NET COST to General Revenue, 1998-99 biennium: $(1,500,000)

OTHER 
AGENCIES:

The Texas Department of Agriculture estimates that 
the bill's provisions for the linked deposit program, which 
provides funds to finance water conservation projects, would 
result in a loss of interest earnings of $200,000 per year. 
 The estimated annual revenue collected by the Texas Department 
of Health (TDH) from the bottled water fee is $324,000, based 
on 54 facilities at the average fee of $6,000.  TDH estimates 
that the cost to collect the fee is $9,000 per year.  All other 
agencies affected by this bill estimated no fiscal impact.

According 
to TNRCC, the estimated total revenue deposited to the Water 
Facilities Fund is $54.7 million per year, of which $3.4 million 
is retained by units of local government.  

In the following 
table, the estimated revenue gains to the Pilot Weather Modification 
Fund, Conservation and Restoration Fund and Water Resource Management 
Account are transfers from the Water Facilities Fund.
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           Change in Number   
            Savings/(Cost)     Gain/(Loss) from   Gain/(Loss) from   Savings/(Cost)     of State          
            from General       General Revenue    Federal Funds      from Federal Funds Employees from    
            Revenue Fund       Fund                                                     FY 1997           
            0001               0001               0555               0555                                  
       1998     ($35,607,990)        ($493,000)        $5,777,096      ($5,777,096)              41.5
       1998      (12,751,036)         (986,000)         5,763,597       (5,763,597)              51.5
       2000      (12,366,036)       (1,478,000)         5,834,234       (5,834,234)              51.5
       2001      (17,366,036)       (1,523,000)         5,834,234       (5,834,234)              51.5
       2002      (13,632,380)       (1,563,000)            92,012          (92,012)              51.5
 
 
Fiscal Year Probable Revenue   Probable           Probable Revenue   Probable           
            Gain/(Loss) from   Savings/(Cost)     Gain/(Loss) from   Savings/(Cost)                       
            New - GR           from New - GR      New - GR           from New - GR                        
            Dedicated -        Dedicated -        Dedicated -        Dedicated -                          
            Water Facilities   Water Facilities   Pilot Weather      Pilot Weather                        
            Fund               Fund               Modification Fund  Modification Fund                    
            NEW-DED            NEW-DED            NEW-DED            NEW-DED                               
       1998       $51,300,000     ($51,300,000)        $1,364,114      ($1,364,114)                  
       1999        51,300,000      (51,300,000)         1,364,114       (1,364,114)                  
       2000        51,300,000      (51,300,000)         1,364,114       (1,364,114)                  
       2001        51,300,000      (51,300,000)         1,364,114       (1,364,114)                  
       2002        51,300,000      (51,300,000)             1,364       (1,364,114)                  
 
Fiscal Year Probable Revenue   Probable           Probable Revenue   Probable           
            Gain/(Loss) from   Savings/(Cost)     Gain/(Loss) from   Savings/(Cost)                       
            New - GR           from New - GR      Water Resource     from Water                           
            Dedicated -        Dedicated -        Management         Resource                             
            Conservation and   Conservation and   Account - New GR   Management                           
            Restoration Fund   Restoration Fund   Dedicated          Account - New GR                     
                                                                     Dedicated                            
            NEW-DED            NEW-DED            NEW-DED            NEW-DED                               
       1998        $1,364,114      ($1,364,114)        $1,282,500      ($1,282,500)                  
       1999         1,364,114       (1,364,114)         1,282,500       (1,282,500)                  
       2000         1,364,114       (1,364,114)         1,282,500       (1,282,500)                  
       2001         1,364,114       (1,364,114)         1,282,500       (1,282,500)                  
       2002         1,364,114       (1,364,114)         1,282,500       (1,282,500)                  
 
         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
               1998        ($36,100,990)
               1999         (13,737,036)
               2000         (13,844,036)
               2001         (18,889,036)
               2002         (15,195,380)
 
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 for 
water resource planning.  Grant funding is available from TWDB 
for these purposes.  Under the bill's water fee provisions, 
public water systems retain five cents for each connection to 
its system.  TNRCC estimates that the revenue gain to local 
governments would be $3.4 million per year, which should cover 
administrative costs associated with the assessment and collection 
of the fees. 

In addition, much of the revenue generated 
under the bill's provisions for the Water Facilities Fund would 
be available to units of local government for loans and grants 
for water related projects.
          
   Source:            Agencies:   580   Water Development Board
                                         582   Natural Resources Conservation Commission
                                         802   Parks and Wildlife Department
                                         551   Department of Agriculture
                                         304   Comptroller of Public Accounts
                                         501   Department of Health
                                         592   Soil and Water Conservation Board
                                         555   Texas Agricultural Extension Service
                                         Governor's Office -- Division of Emergency Management
                      LBB Staff:   JK ,BB ,DM ,NT