LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE, 76th Regular Session April 26, 1999 TO: Honorable Bill Ratliff, Chair, Senate Committee on Finance FROM: John Keel, Director, Legislative Budget Board IN RE: HB844 by Wilson (relating to the total amount of state lottery prizes that may be awarded in a fiscal year), Committee Report 2nd House, Substituted ************************************************************************** * Estimated Two-Year Net Impact to General Revenue Related Fundsfor * * HB844, Committee Report 2nd House, Substituted: positive impact * * of $38,008,000 through the biennium ending August 31, 2001. * * * * The bill would make no appropriation but could provide the legal * * basis for an appropriation of funds to implement the provisions of * * the bill. * ************************************************************************** General Revenue-Related Funds, Five-Year Impact: **************************************************** * Fiscal Year Probable Net Positive/(Negative) * * Impact to General Revenue Related * * Funds * * 2000 $(5,169,000) * * 2001 43,177,000 * * 2002 43,749,000 * * 2003 44,331,000 * * 2004 44,922,000 * **************************************************** All Funds, Five-Year Impact: *************************************************************************** *Fiscal Probable Revenue Gain/(Loss) Probable Savings/(Cost) from * * Year from Foundation School Fund Foundation School Fund * * 0193 0193 * * 2000 $(10,169,000) $5,000,000 * * 2001 38,177,000 5,000,000 * * 2002 38,749,000 5,000,000 * * 2003 39,331,000 5,000,000 * * 2004 39,922,000 5,000,000 * *************************************************************************** Fiscal Analysis The bill would repeal Section 466.015(d) of the Government Code, which limits the amount paid out in prizes each fiscal year to the gross sales for that year times the percent paid in fiscal 1997, less 5 percent of the gross sales in that fiscal year. Further, the bill would require the Texas Lottery Commission (commission) to reduce its advertising budget by $1 million for each one percent increase in the average prize payout over fiscal 1999 levels. The bill would take effect Sepetmber 1, 1999. Methodology This estimate assumes that the commission would return to the prize percentages paid in fiscal 1997. This estimate also assumes that there would be an increase in sales as a behavioral response by players. The estimate assumes that there would be a modest loss to the state in fiscal 2000 because the state's share of lottery sales would be reduced. This would be offset in later years by the projected increase in total sales. The commission's advertising budget is estimated to decrease by $5 million per year as a result of an expected increase in the average prize payout, from a commission estimate of 52.45 percent in fiscal 1999 to 57.45 percent in 2000 and each year thereafter. The reduction in expenditures would represent an unexpended balance to be transferred to the Foundation School Fund. Local Government Impact No fiscal implication to units of local government is anticipated. Source Agencies: 362 Texas Lottery Commission LBB Staff: JK, BB, WP