Austin, Texas
                                   FISCAL NOTE
                               75th Regular Session
                                  April 17, 1997
      TO: Honorable Judith Zaffirini, Chair            IN RE:  Senate Bill No. 55, Committee Report 1st House, Substituted
          Committee on Health & Human Services                              By: Harris
          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-Committee Report 1st House, Substituted
Implementing the provisions of the bill would result in a net 
positive impact of $1,684,874 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 bill.  The Comptroller would develop and implement a 
public awareness campaign to reduce tobacco use by minors.  
The Comptroller would prepare an annual report on minors' access 
to tobacco for submission to the U.S. Department of Health and 
Human Services.

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 a new fund, the Tobacco Education 
and Enforcement 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.  A new 
permit would be required for retailers.  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 for the development of a tobacco use public awareness 

The bill could also generate additional revenue 
through criminal and civil fines and administrative penalties. 
The bill would require a fee of $260 every two years 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 

The potential fiscal impact of the bill was 
estimated by the Comptroller by first projecting the potential 
reduction in teen tobacco use and calculating the resulting 
loss in tax revenues.  Expected new revenue was added to result 
in the net revenue figures noted below.

The costs shown in 
the tables below would reflect increased staff and equipment 
for the Criminal Investigations Division and the Legal Division's 
Hearings section at the Comptroller.
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  Tobacco       from General       Employees from                       
            Fund               Education and      Revenue Fund       FY 1997                              
                               Enforcement Fund                                                           
            0001               NEW-OTH            0001                                                     
       1998        $7,887,000          $900,000      ($2,435,872)              36.0                  
       1998       (2,032,000)         1,103,000       (1,734,254)              36.0                  
       2000         5,415,000         1,144,000       (1,754,225)              36.0                  
       2001       (3,153,000)         1,185,000       (1,734,254)              36.0                  
       2002         3,805,000         1,232,000       (1,754,225)              36.0                  
         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           $5,451,128
               1999          (3,766,254)
               2000            3,660,775
               2001          (4,887,254)
               2002            2,050,775
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
                      LBB Staff:   JK ,BB ,KF