LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE
75th Regular Session
April 8, 1997
TO: Honorable Jerry Patterson, Chair IN RE: Senate Bill No. 1060, Committee Report 1st House, as amended
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-Committee Report 1st House, as amended
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.
In managing assets of the Veteran's Land Fund and the Veteran's
Housing Assistance Fund, and pending the completion of an investment
transaction, the bill would authorize the VLB, with the comptroller's
approval, 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 homes.
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 homes.
The bill would allow the board to enter into agreements for
the management or operation of all or part of a veteran's home.
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 two Veteran's Homes in 1998 and two 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 Homes 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
homes and debt service on the bonds.
The Department of Human
Services (DHS) has indicated that they are prepared to enter
into a memorandum of agreement with the VLB to transfer $2.5
million in both 1998 and 1999 in medical assistance funds from
their Nursing Facility and Hospice payments program for the
development of homes. However, this would still constitute general
revenue. Also according to DHS, if the four proposed homes
are operational in the year 2000 and all clients in the homes
are Medicaid eligible, and the Federal government approves the
homes, savings to the state's share of Medicaid costs would
total an estimated $5,143,801. The savings would continue every
year.
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 Probable
Gain/(Loss) from Savings/(Cost)
Other - Various from General
VLB Bond Funds Revenue Fund
OTHER-OTH 0001
1998 $2,200,000 $0
1999 2,200,000 0
2000 2,200,000 5,143,801
2001 2,200,000 5,143,801
2002 2,200,000 5,143,801
Net Impact on General Revenue Related Funds:
Fiscal Year Probable Net Postive/(Negative)
General Revenue Related Funds
Funds
1998 ($2,650,000)
1999 (2,650,000)
2000 4,993,801
2001 4,993,801
2002 4,993,801
Similar annual fiscal implications would continue as long as
the provisions of the bill are in effect.
No fiscal implication to units of local government is anticipated.
Source: Agencies: 304 Comptroller of Public Accounts
501 Department of Health
324 Department of Human Services
LBB Staff: JK ,JD ,JH