LEGISLATIVE BUDGET BOARD
                              Austin, Texas
                                     
                    FISCAL NOTE, 76th Regular Session
  
                              April 9, 1999
  
  
          TO:  Honorable Rene Oliveira, Chair, House Committee on Ways &
               Means
  
        FROM:  John Keel, Director, Legislative Budget Board
  
       IN RE:  HB2372 by Gutierrez (relating to exempting certain drugs
               and medicines from the sales tax), Committee Report 1st
               House, Substituted
  
**************************************************************************
*  Estimated Two-Year Net Impact to General Revenue Related Fundsfor     *
*  HB2372, Committee Report 1st House, Substituted:  a negative          *
*  impact of $(51,057,000) through the biennium ending August 31,        *
*  2001, if the effective date is July 1, 1999;  and a negative          *
*  impact of $(45,185,000) through the biennium ending August 31,        *
*  2001, if the effective date is October 1, 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.                                                             *
**************************************************************************
  

The following fiscal implications assume an effective date of July 1,
1999.
  
All Funds, Five-Year Impact:
  
***************************************************************************
*Fiscal      Probable        Probable        Probable        Probable     *
* Year       Revenue         Revenue         Revenue         Revenue      *
*         Gain/(Loss) to  Gain/(Loss) to  Gain/(Loss) to  Gain/(Loss) to  *
*        General Revenue      Cities         Transit      Counties/SPDs   *
*              Fund                        Authorities                    *
*              0001                                                       *
*  1999      $(1,894,000)              $0              $0              $0 *
*  2000      (23,872,000)     (4,164,000)     (1,635,000)       (504,000) *
*  2001      (25,291,000)     (4,411,000)     (1,732,000)       (534,000) *
*  2002      (26,859,000)     (4,685,000)     (1,840,000)       (567,000) *
*  2003      (28,500,000)     (4,971,000)     (1,952,000)       (602,000) *
*  2004      (30,193,000)     (5,266,000)     (2,068,000)       (638,000) *
***************************************************************************
  

The following fiscal implications assume an effective date of October 1,
1999.
  
***************************************************************************
*Fiscal      Probable        Probable        Probable        Probable     *
* Year       Revenue         Revenue         Revenue         Revenue      *
*         Gain/(Loss) to  Gain/(Loss) to  Gain/(Loss) to  Gain/(Loss) to  *
*        General Revenue      Cities         Transit      Counties/SPDs   *
*              Fund                        Authorities                    *
*              0001                                                       *
*  2000     $(19,894,000)    $(3,123,000)    $(1,226,000)      $(378,000) *
*  2001      (25,291,000)     (4,411,000)     (1,732,000)       (534,000) *
*  2002      (26,859,000)     (4,685,000)     (1,840,000)       (567,000) *
*  2003      (28,500,000)     (4,971,000)     (1,952,000)       (602,000) *
*  2004      (30,193,000)     (5,266,000)     (2,068,000)       (638,000) *
***************************************************************************
  
Fiscal Analysis
  
The bill would amend Chapter 151 of the Tax Code to exempt
non-prescription drugs from the sales tax, provided that they were
labeled with a national drug code issued by the Food and Drug
Administration and specifically formulated and labeled for children 12
years of age and younger.
  
  
Methodology
  
To estimate the fiscal implications of the bill, Texas-specific
non-prescription drug sales data were obtained from the U.S. Census
Bureau and adjusted to reflect only those items that would be exempted
by the bill.  The data were multiplied by the state sales tax rate and
extrapolated through fiscal 2004.  If the bill were to receive a
two-thirds vote in each house, it could take effect July 1, 1999;
otherwise, it would take effect October 1, 1999.  Fiscal impacts on
units of local government were estimated proportionally.
  
  
Local Government Impact
  
Local units of government would have a corresponding fiscal impact from
sales tax revenues, as indicated in the table above.
  
  
Source Agencies:   304   Comptroller of Public Accounts
LBB Staff:         JK, BB, SM