LEGISLATIVE BUDGET BOARD
                                   Austin, Texas
         
                                   FISCAL NOTE
                               75th Regular Session
         
                                  February 13, 1997
         
         
      TO: Honorable J.E. "Buster" Brown, Chair            IN RE:  Senate Bill No. 1
          Committee on Natural Resources                              By: Brown
          Senate
          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-As Introduced
         
Implementing the provisions of the bill would result in a net 
negative impact of $(37,770,990) 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 assistance and data collection.

Article I of the 
bill would designate the Texas Water Development Board as the 
lead state agency responsible for preparation, coordination 
and oversight of a comprehensive state drought plan; the Texas 
Natural Resource Conservation Commission would be responsible 
for enforcement during drought conditions.  The bill would also 
create a Drought Planning and Monitoring Committee, which would 
consist of:  Texas Natural Resource Conservation Commission, 
Texas Parks and Wildlife Department, Governor's Office--Division 
of Emergency Management, Texas Department of Agriculture and 
any other entity designated by the governor.

Article II of 
the bill would amend statutory provisions relating to the Texas 
Natural Resource Conservation Commission's responsibilities 
in water rights permitting.  In addition, the bill would provide 
a regulatory process and requirements for considering interbasin 
water transfers.  The Texas Parks and Wildlife Department and 
Texas Water Development Board  would assist the Texas Natural 
Resource Conservation Commission by providing habitat analyses 
and water planning data, respectively.

Article III of the 
bill would provide the infrastructure and financial assistance 
to encourage political subdivisions to develop regional water 
management plans.  The article would also provide a process 
and procedures for the Texas Natural Resource Conservation Commission 
 to identify priority groundwater management areas.  The article 
would establish procedures for the Texas Natural Resource Conservation 
Commission to create new groundwater districts and would provide 
districts with specific enforcement powers.  The article would 
create a Groundwater District Loan Assistance Fund to provide 
loans to newly-created districts for start-up operations.  The 
Texas Water Development Board would administer the fund.  Article 
III of the bill also would require the Railroad Commission to 
adhere to the groundwater management plan when issuing permits 
for enhanced recovery.  This article also would provide groundwater 
districts with the authority to assess administrative penalties. 
 Section 3.54 provides a tax exemption for capital equipment 
used for water conservation or water/wastewater recycling in 
the manufacturing process.

Article IV of the bill also would 
authorize the Water Development Board to use the principal in 
the Agricultural Trust Fund for loans to agricultural water 
conservation districts.  The bill would establish the Texas 
Water Development Fund II (Fund II), a special fund in the state 
treasury, contingent on 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 account.  

Article 
V of the bill addresses the Texas Natural Resource Conservation 
Commission'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 article 
would require entities that merge or purchase water utilities 
to develop business plans and includes other requirements to 
ensure a continuous and safe drinking water supply.  The article 
also would allow the Texas Water Development Board to provide 
loans through the Safe Drinking Water Act State Revolving Fund 
(SDWA SRF) to investor-owned utilities, which are for-profit 
entities.  The article would authorize loan subsidies to disadvantaged 
communities through the SDWA SRF; the Texas Water Development 
Board estimated a cost to general revenue based on a twenty 
percent match requirement for providing these loan subsidies.

Article 
VI of the bill would merge TNRIS and the existing Texas Geographic 
Information Systems Planning Council to form a new Texas Geographic 
Information Council.  The Geographic Information Council would 
provide oversight and direction to data collection statewide, 
and would serve as the centralized clearinghouse for natural 
resources data.  The article also would require the Executive 
Administrator of the Texas Water Development Board to coordinate, 
conduct, and facilitate the development and use of statewide 
digital base maps.  The Texas Water Development Board cost estimate 
indicates that the digital base map effort will be completed 
within four years.  In addition, the Texas Natural Resource 
Conservation Commission provided estimates for enhanced data 
collection activities to support the provisions of Article VI.

Article 
VII of the bill establishes the effective dates for provisions 
in the bill.  A majority of the provisions would take effect 
on September 1, 1997, with the following exceptions:  sections 
addressing TNRCC oversight of water rights would take effect 
immediately; Section 3.54, which would provide for a sales, 
excise and use tax exemption for water conservation equipment 
would take effect October 1, 1997; and several sections in Article 
IV 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.
 
Methodolgy
 
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 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.  

TEXAS WATER DEVELOPMENT 
BOARD:  

-- Lead agency for drought planning and monitoring; 
water conservation
    ESTIMATED NET COST to General Revenue, 
1998-99 biennium: ($2,227,829) and 3 FTEs

-- Financial assistance 
for regional water planning and groundwater management plans 
 
    ESTIMATED NET COST to General Revenue, 1998-99 biennium: 
 ($7,856,010) and 7 FTEs

 -- Administer Agricultural Trust 
Fund and the Texas Water Development Fund II
    No additional 
costs associated with this responsibility.  

-- Administer 
financial assistance to investor-owned utilities and disadvantaged 
communities through the Safe Drinking Water State Revolving 
Fund (state funds satisfy match requirements for loan subsidy 
provisions of the federal Safe Drinking Water Act)
    ESTIMATED 
NET COST to General Revenue, 1998-99 biennium:  ($12,400,000) 
and 0 FTEs

-- Coordinate and 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 funds ratio--and local and private funds)
    ESTIMATED 
NET COST to General Revenue, 1998-99 biennium:  ($5,825,462) 
and 4 FTEs; estimated gain to federal, local and private funds 
for the biennium:  $13,995,852
 
TEXAS NATURAL RESOURCE CONSERVATION 
COMMISSION:

-- Drought planning and monitoring; water conservation; 
enforcement
    ESTIMATED NET COST to General Revenue, 1998-99 
biennium:  ($1,443,012) and 3 FTEs

-- Water management through 
water rights permitting, enforcement, and marketing; review 
and approval of interbasin water transfers; public participation
 
   ESTIMATED NET COST to General Revenue, 1998-99 biennium: 
 ($2,169,035) and 9 FTEs

-- Groundwater management, planning 
and technical assistance; identification of priority groundwater 
management areas
    ESTIMATED NET COST to General Revenue, 
1998-99 biennium:  ($484,015) and 2 FTEs

-- Regulate water 
and wastewater services, rates, and service areas; capacity 
development
     ESTIMATED NET COST to General Revenue, 1998-99 
biennium:  ($1,305,697) and 9 FTEs; estimated gain in federal 
funds for the biennium:  $193,846 and 2 FTEs

-- Enhanced 
data collection and data management
    ESTIMATED NET COST 
to General Revenue, 1998-99 biennium:  ($2,031,512) and 5 FTEs

TEXAS 
PARKS AND WILDLIFE DEPARTMENT:

-- Drought Planning and Monitoring 
Committee  
    ESTIMATED NET COST to General Revenue, 1998-99 
biennium:  ($30,000) and 0 FTEs

-- Assess impact of regional 
water plans and groundwater management plans on fish and wildlife
 
   ESTIMATED NET COST to General Revenue, 1998-99 biennium: 
 ($450,000) and 2 FTEs

-- Data collection
    ESTIMATED 
NET COST to General Revenue, 1998-99 biennium:  ($20,000) and 
0 FTEs

RAILROAD COMMISSION:

-- Consider groundwater impacts 
for injection well permits (enhanced recovery)
    ESTIMATED 
NET COST to General Revenue, 1998-99 biennium:  ($49,418) and 
0.4 FTEs

COMPTROLLER:  

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

The State 
Office of Administrative Hearings and the Attorney General s 
Office would adjudicate cases referred to them by the Texas 
Natural Resource Conservation Commission.  These offices estimated 
no fiscal impact.  Representatives from the Governor's Office--Division 
of Emergency Management and the Department of Agriculture would 
sit on the Drought Planning and Monitoring Committee; both agencies 
estimated no fiscal impact.  No estimates were received from 
state agencies regarding the assessment of administrative penalties.

Local 
governments will be affected by several provisions in this bill. 
 The Comptroller estimated no significant loss of revenue to 
local governments due to the tax exemption on capital equipment 
used for water conservation.  No information was received from 
the Texas Association of Counties.  Several river authorities 
indicated that the bill would have no significant fiscal impact 
or the impact could not be estimated.  The bill would impose 
additional requirements on units of local government that function 
as water utilities to develop drought contingency plans and 
management plans.  State grant funding would provide a 50 percent 
match for these costs.  In addition, newly created groundwater 
districts would be able to apply for loans to pay for initial 
start-up costs.
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       Water Assistance   Federal Funds      General Revenue    Employees from    
            Revenue Fund       Fund                                  Fund               FY 1997           
            0001               0480               0555               0001                                  
       1998     ($21,002,532)        $1,321,842        $5,742,007        ($493,000)              46.4
       1998      (15,289,458)         1,326,842         5,763,007         (986,000)              46.4
       2000      (13,846,591)         1,125,327         5,789,139       (1,478,000)              46.4
       2001      (10,846,591)         1,125,327         5,789,139       (1,523,000)              46.4
       2002       (8,155,557)                 0            89,423       (1,563,000)              46.4
 
 
         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        ($21,495,532)
               1999         (16,275,458)
               2000         (15,324,591)
               2001         (12,369,591)
               2002          (9,718,557)
 
Similar annual fiscal implications would continue as long as 
the provisions of the bill are in effect.   

          
   Source:            Agencies:   802   Parks and Wildlife Department
                                         551   Department of Agriculture
                                         455   Railroad Commission
                                         360   State Office of Administrative Hearings
                                         582   Natural Resources Conservation Commission
                                         352   Bond Review Board
                                         580   Water Development Board
                                         302   Office of the Attorney General
                                         304   Comptroller of Public Accounts
                                         592   Soil and Water Conservation Board
                                         Governor's Office--Division of Emergency Management
                      LBB Staff:   JK ,BB ,DM ,NT