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
          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.  

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.
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.

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
               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