LEGISLATIVE BUDGET BOARD
                                   Austin, Texas
         
                                   FISCAL NOTE
                               75th Regular Session
         
                                  March 26, 1997
         
         
      TO: Honorable Jerry Patterson, Chair            IN RE:  Senate Bill No. 1060
          Committee on Veteran Affairs & Military Installations-Spec                              By: Patterson, Jerry
          Senate
          Austin, Texas
         
         
         
         
         FROM:  John Keel, Director    
         
In response to your request for a Fiscal Note on SB1060 ( Relating 
to the management of certain funds by the Veterans Land Board, 
to the creation of veterans assistance centers, and to the Veterans 
Land Board's entering into  bond enhancement agreements for 
certain bonds.) this office has detemined the following:
         
         Biennial Net Impact to General Revenue Funds by SB1060-As Introduced
         
Implementing the provisions of the bill would result in a net 
negative impact of $(5,300,000) 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 amend provisions related to the Veterans' Land 
Board (VLB) authority for the management of funds and securities. 
 Pending the completion of an investment transaction, the bill 
would authorize the VLB, in managing assets of the Veterans' 
Land Fund and the Veterans' Housing Assistance Fund, to select 
commercial banks or other financial entities to serve as custodians 
of the cash or securities in the fund, and authorize the custodian 
to make cash investments as directed by the board.  The bill 
would allow the custodian under the direction of the board, 
to lend securities under certain conditions.  

The bill would 
allow one or more designated officers or employees of the board 
to act on behalf of the board in entering into and delivering 
bond enhancement agreements, and in setting terms of the bond 
enhancement agreements.  

The bill would allow the VLB to 
select the Comptroller or one or more commercial banks, depository 
trust companies, or other entities to serve as custodian of 
cash or securities for the Veterans' Financial Assistance Program. 
 The bill would also allow the custodian to make investments 
at the direction of the board, and lend securities.
 
The 
bill would allow the VLB, under its Veterans' Financial Assistance 
Program, to establish veterans assistance centers.  The bill 
would direct the board to adopt rules for the construction, 
acquisition, ownership, operation, maintenance, enlargement, 
improvement, or furnishing or equipping of veteran's assistance 
centers.  The bill would allow the board to enter into agreements 
for the management or operation of all or part of a veteran's 
assistance center.  

The bill would take effect September 
1, 1997
 
Methodolgy
 
The VLB has constitutional authority to issue bonds.  According 
to the VLB funds management staff, provisions which allow the 
use of an outside custodian for management of the funds will 
result in cost savings to the bond funds of approximately $150,000 
annually in custodial services paid to the Office of the Comptroller. 
 

In addition, the VLB estimates that the ability to use 
an outside custodian will enable staff to conduct same day transactions 
which will produce $1 million annually in additional investment 
income.  Provisions which allow the VLB to delegate authority 
for bond enhancement agreements is projected to produce $1.2 
million in earnings to the funds each year.  These estimated 
earnings will only impact the Constitutionally dedicated bond 
funds and will not impact any of the VLB's administration funds.

Under 
the bill,  the VLB staff projects there will be construction 
of 2 Veteran's Assistance Centers in 1998 and 2 constructed 
in 1999.  The VLB projects using tax exempt revenue bonds and 
federal funds to fund the centers.  Thirty five percent of the 
funds used will be from the issuance of tax exempt bonds and 
the other sixty five percent of the funds is projected to come 
from federal funding from the U.S. Veterans Administration. 
 If the facilities are constructed, each one will require a 
one time appropriation of general revenue in the amount of $1.25 
million for debt service and to establish a reserve fund.  

The 
VLB expects to use all the beds in the Veterans Assistance Centers 
for Medicaid eligible veterans only.  The state could realize 
savings in Medicaid costs since these beds would be funded with 
U.S. Veterans Administration funds and not Medicaid funds.  
The VLB estimates receiving approximately $100 a day per patient 
from the U.S. Veterans Administration, Social Security payments, 
and Veterans Disability payments.  These funds would be used 
to pay operational costs for the centers and debt service on 
the bonds.
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           Probable           
            Savings/(Cost)     Gain/(Loss) from   Savings/(Cost)     Savings/(Cost)                       
            from General       Federal Funds      from Federal Funds from Veterans                        
            Revenue Fund                                             Land Program                         
                                                                     Administration                       
                                                                     Fund                                 
            0001               0555               0555               0522                                  
       1998      ($2,650,000)       $14,300,000     ($14,300,000)          $150,000                  
       1998       (2,650,000)        14,300,000      (14,300,000)           150,000                  
       2000         (150,000)                                               150,000                  
       2001         (150,000)                                               150,000                  
       2002         (150,000)                                               150,000                  
 
 
Fiscal Year Probable Revenue   
            Gain/(Loss) from                                                                              
             Various VLB                                                                                  
            Bond Funds                                                                                    
            OTHER-OTH                                                                                      
       1998                                                                                          
       1999         2,200,000                                                                        
       2000         2,200,000                                                                        
       2001         2,200,000                                                                        
       2002         2,200,000                                                                        
 
         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         ($2,650,000)
               1999          (2,650,000)
               2000            (150,000)
               2001            (150,000)
               2002            (150,000)
 
          
No fiscal implication to units of local government is anticipated.
          
   Source:            Agencies:   304   Comptroller of Public Accounts
                                         
                      LBB Staff:   JK ,JD ,JH