Austin, Texas
                                   FISCAL NOTE
                               75th Regular Session
                                  May 26, 1997
      TO: Honorable Bob Bullock            IN RE:  Senate Bill No. 55, As Passed 2nd House
          Lieutenant Governor                Zaffirini et al.
          Austin, Texas
         FROM:  John Keel, Director    
In response to your request for a Fiscal Note on SB55 ( Relating 
to the regulation of the sale, distribution, and use of tobacco 
products; providing penalties.) this office has detemined the 
         Biennial Net Impact to General Revenue Funds by SB55-As Passed 2nd House
Implementing the provisions of the bill would result in a net 
positive impact of $20,874 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 affect the regulation of the sale of tobacco 
products, particularly with regard to limiting access to and 
consumption of tobacco products by minors.

The bill would 
assign responsibility for enforcement to the Comptroller, in 
cooperation with county sheriffs and municipal chiefs of police. 
 The Comptroller would be authorized to make grants to counties 
and municipalities to enforce the provisions of the bill, including 
conducting random unannounced inspections to ensure compliance. 
Comptroller staff and peace officers would be empowered to seize, 
seal, or disable tobacco vending machines in violation of the 

The bill would require the Department of Health to 
develop and implement a public awareness campaign to reduce 
tobacco use by minors, and to prepare a report each biennium 
on the status of smoking and the use of tobacco products in 
Texas. The Department would also establish a grant program to 
support youth groups that encourage the reduction of tobacco 
use by minors.

The bill would levy a fee on advertisers, 
equal to 10 percent of the gross purchase price of any outdoor 
advertising of cigarettes and tobacco products in Texas.  Fee 
revenue would be deposited into an un-named dedicated account 
in the General Revenue Fund.  Revenues deposited into this fund 
may only be appropriated for enforcement and an education advertising 

The bill would modify provisions in the Tax Code, 
raising fees for businesses in the tobacco industry, and require 
a fee would for retailer permits.  Revenue from the sale of 
retailer's permits would be deposited into the General Revenue 
Fund.  Revenue collected from the sale of retailer's permits 
may only be appropriated to the Comptroller, first for administration 
of licensing of retailers, then for administration and enforcement, 
and finally to the Department of Health for the development 
of a tobacco use public awareness campaign.

of the various programs would be contingent on the Comptroller 
determining that sufficient funds would be available from the 
retail permit fee and the 10 percent fee on outdoor advertising 
of tobacco products.

The bill could also generate additional 
revenue through criminal and civil fines and administrative 
The bill would require a fee of $125 in the 1998-99 biennium 
and $180 for the 2000-01 biennium for the Retailer's permit. 
There are approximately 44,000 Retailer's permits currently 
active, including one for each of the approximately 12,000 cigarette 
vending machines in the state.  

The Comptroller estimated 
the tobacco advertising fee based on an estimated $150.8 million 
in national outdoor advertising expenditures for tobacco products 
in 1995, adjusted for Texas' share of the expenditures.

Comptroller would incur administrative costs for increased staff 
and equipment for the Criminal Investigations Division and the 
Legal Division's Hearings sections. It is assumed that these 
costs would first be paid from the new Tobacco Education and 
Enforcement Fund, with the remainder being paid from the General 
Revenue 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 Revenue   Probable Revenue   Probable           Change in Number   
            Gain/(Loss) from   Gain/(Loss) from   Savings/(Cost)     of State                             
            General Revenue    New - GR           from New - GR      Employees from                       
            Fund               Dedicated          Dedicated          FY 1997                              
                               Tobacco            Tobacco                                                 
                               Education and      Education and                                           
                               Enforcement Fund   Enforcement Fund                                        
            0001               NEW-DED            NEW-DED                                                  
       1998        $3,594,000          $900,000        ($900,000)              32.0                  
       1998       (1,806,000)         1,103,000       (1,103,000)              32.0                  
       2000         3,500,000         1,144,000       (1,144,000)              32.0                  
       2001       (2,676,000)         1,185,000       (1,185,000)              32.0                  
       2002         2,251,000         1,232,000       (1,232,000)              32.0                  
Fiscal Year Probable           
            from General                                                                                  
            Revenue Fund                                                                                  
       1999         (431,254)                                                                        
       2000         (410,225)                                                                        
       2001         (349,254)                                                                        
       2002         (322,225)                                                                        
         Net Impact on General Revenue Related Funds:

              Fiscal Year      Probable Net Postive/(Negative)
                               General Revenue Related Funds
               1998           $2,258,128
               1999          (2,237,254)
               2000            3,089,775
               2001          (3,025,254)
               2002            1,928,775
Similar annual fiscal implications would continue as long as 
the provisions of the bill are in effect.
No significant fiscal implication to units of local government 
is anticipated.
   Source:            Agencies:   304   Comptroller of Public Accounts
                                         501   Department of Health
                      LBB Staff:   JK ,JD ,BB ,KF