LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE 75th Regular Session March 11, 1997 TO: Honorable Judith Zaffirini, Chair IN RE: Senate Bill No. 55 Committee on Health & Human Services By: Zaffirini Senate Austin, Texas FROM: John Keel, Director In response to your request for a Fiscal Note on SB55 ( Relating to the regulation of the sale or distribution of tobacco products, providing penalties.) this office has detemined the following: Biennial Net Impact to General Revenue Funds by SB55-As Introduced Implementing the provisions of the bill would result in a net negative impact of $(1,417,440) 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 require the Texas Department of Health to conduct unannounced inspections of locations where cigarettes or tobacco products are sold, to establish administrative systems to support the provisions of this bill, to develop tobacco use prevention programs for minors in violation of the bill, and to develop and implement a public awareness campaign. The bill would give Comptroller staff the authority to seize, seal, or disable tobacco vending machines in violation of the provisions of the bill. The bill would modify provisions in the Tax Code, raising fees for businesses in the tobacco industry. A new permit would be required for retailers. Revenue from the sale of retailer's permits would be deposited into the General Revenue Fund. The bill would require appropriations to be made first to the Comptroller for administration and licensing of retailers. Remaining revenues could be appropriated to the Department of Health. The bill could also generate additional revenue through criminal and civil fines and administrative penalties. Methodolgy The general revenue impact was calculated in four parts. First, the Comptroller estimates that there would be a decrease in revenue available from cigarette and tobacco product taxes due to a restriction of minors' access to tobacco. The Comptroller estimates this revenue loss to be $1,400,000 in fiscal year 1998, $4,470,000 in fiscal year 1999, $4,558,000 in fiscal year 2000, $5,462,000 in fiscal year 2001, and $5,384,000 in fiscal year 2002. Second, there would be an increase in revenue relating to the new retailer's permit. Since the retailer's permits expire on the last day of May of each even-numbered year, the revenue impacts from this revenue source are greater in even-numbered years. Third, there would be an increase in revenue associated with the increases in other tobacco permit fees. Fourth, as the Department of Health would be directed to establish reasonable application and renewal fees for the approval of tobacco use prevention programs in the amounts necessary to administer this subchapter, it is assumed that there would be a revenue gain equal to the cost of developing and administering this activity. The administrative costs to the Comptroller are assumed to be $503,695 in fiscal year 1998, and $38,168 in fiscal years 1999 and 2001, and $50,139 in fiscal years 2000 and 2002, with an increase of one full-time equivalent. It is estimated that functions assumed by the Department of Health would cost approximately $1.4 million in fiscal year 1998 and $1.9 million in each subsequent year. The Department of Health would increase full-time equivalent positions by 13.5 in the first year and 22 in subsequent years. 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 Change in Number Gain/(Loss) from Savings/(Cost) of State General Revenue from General Employees from Fund Revenue Fund FY 1997 0001 0001 1998 $5,982,492 ($1,894,132) 14.5 1998 (3,560,508) (1,945,292) 23.0 2000 2,306,492 (1,957,263) 23.0 2001 (4,579,508) (1,945,292) 23.0 2002 948,492 (1,957,263) 23.0 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 $4,088,360 1999 (5,505,800) 2000 349,229 2001 (6,524,800) 2002 (1,008,771) 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: 501 Department of Health 304 Comptroller of Public Accounts 302 Office of the Attorney General 517 Commission on Alcohol and Drug Abuse LBB Staff: JK ,BB ,KF