LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE
75th Regular Session
April 1, 1997
TO: Honorable David Sibley, Chair IN RE: Senate Bill No. 1894
Committee on Economic Development By: Sibley
Senate
Austin, Texas
FROM: John Keel, Director
In response to your request for a Fiscal Note on SB1894 ( Relating
to the authority of the commissioner of insurance to adopt rules
for general application.) this office has detemined the following:
Biennial Net Impact to General Revenue Funds by SB1894-As Introduced
Implementing the provisions of the bill would result in a net
positive impact of $455,322 to General Revenue Related Funds
through the biennium ending August 31, 1999.
Fiscal Analysis
This bill would amend Article 1.03A of the Insurance Code to
require that Texas Department of Insurance (TDI) rules be written
in "clear and concise" language and that each rule state the
subject matter to be regulated and the specific statutory authority
for the rule. The bill state's that neither Article 1.03A nor
any other provision of the Insurance Code may be used as general
authority for rule-making.
According to TDI, under current
law if a statute needs clarification, TDI adopts a rule to strengthen
the statute's intent. This bill would prohibit the agency from
adopting a rule when the statute does not allow for general
rulemaking. Therefore, the agency would have to increase the
number of enforcement actions to enforce statutory provisions.
Two additional attorneys, one legal assistant, and one legal
secretary would be needed to prosecute new enforcement cases.
Total costs to TDI General Revenue-Dedicated Fund 036 for these
four FTEs would be $194,597 in FY 1998 and $172,018 in FYs 1999
through 2002.
These increased enforcement actions would
increase the amount of penalties and restitution assessed for
unfair and illegal practices. Total gain to General Revenue
is estimated to be $227,661 per year.
According to TDI,
the bill would also impact the rule adoption process by requiring
TDI to respond to challenges on whether it had sufficient rule
making authority to adopt certain pro-solvency standards which
have been in use for many years. Also, the bill may jeopardize
the ability of TDI to continue to use a number of pro-solvency
standards which TDI currently adopts by rule.
While it is
believed that TDI would be largely able to continue to use the
majority of these pro-solvency standards, it is also believed
that TDI may be precluded from using certain portions of or
sub-sets of these standards. As a result, TDI may need to perform
a slightly higher number of target examinations, which are performed
on insurers whose financial condition cause regulatory concerns.
A target examination may be done on an insurer if it has been
determined that the insurer should be examined every 2 years
instead of the mandated 3 year interval. Since this workload
increase is uncertain, no additional costs are associated with
these examinations.
Methodolgy
Fiscal impact and estimates were based on the anticipated increase
in workload required to implement this bill. In FY 96, there
were 42 enforcement actions and seven attorneys handling these
cases. Based on approximately 15 new enforcement actions due
to the provisions of the bill, two additional attorneys would
be needed to prosecute these new cases with one legal assistant
and one legal secretary needed for research, document organization
and support.
Total gain to General Revenue of $227,661
per year is based on penalties and restitution from the 42 Market
Activity enforcement actions in FY 96:
(1) Penalties: $13,464.29
per action in FY 96 OR $201,964.35 for 15 actions; and,
(2)
Restitution: $1,713.12 per action in FY 96 OR $25,696.80 for
15 actions.
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 Change in Number
Savings/(Cost) Gain/(Loss) from of State
from Texas General Revenue Employees from
Department of Fund FY 1997
Insurance
Operating
Account/
GR-Dedicated
0036 0001
1998 ($194,597) $227,661 4.0
1998 (172,018) 227,661 4.0
2000 (172,018) 227,661 4.0
2001 (172,018) 227,661 4.0
2002 (172,018) 227,661 4.0
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 $227,661
1999 227,661
2000 227,661
2001 227,661
2002 227,661
Source: Agencies: 454 Department of Insurance
LBB Staff: JK ,TH ,BK