LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE, 76th Regular Session May 10, 1999 TO: Honorable David Sibley, Chair, Senate Committee on Economic Development FROM: John Keel, Director, Legislative Budget Board IN RE: HB3657 by Oliveira (Relating to the continuation, funding, and operation of certain workforce development programs.), As Engrossed ************************************************************************** * Estimated Two-year Net Impact to General Revenue Related Funds for * * HB3657, As Engrossed: impact of $0 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 $0 * * 2001 0 * * 2002 0 * * 2003 0 * * 2004 0 * **************************************************** All Funds, Five-Year Impact: *********************************************************************** *Fiscal Probable Probable Probable Probable Change in * * Year Revenue Revenue Revenue Savings/ Number of * * Gain/(Loss) Gain/(Loss) Gain/(Loss) (Cost) from State * * from from from Smart Smart Jobs Employees * * Unemployme- Holding Jobs Trust Trust Fund from FY 1999 * * nt Trust Fund Fund 0891 * * Compensati- 0890 0891 * * on * * Clearance * * Account * * 0936 * * 2000 $54,142,000 33.0 * * $(28,841, $(15,701, $(35,944, * * 000) 180) 871) * * 2001 86,762,000 43,381,000 33.0 * * (46,218,000) (53,917,307) * * 2002 30,856,000 15,428,000 33.0 * * (16,437,000) (17,972,436) * * 2003 0 0 0 0 0.0 * * 2004 0 0 0 0 0.0 * *********************************************************************** *************************************************************************** *Fiscal Probable Revenue Gain/(Loss) Probable Revenue Gain/(Loss) * * Year from New - Other Smart Jobs from New - GR Dedicated Skills * * Rainy Day Fund Development Account * * 2000 $16,242,600 $53,600,580 * * 2001 17,352,400 26,028,600 * * 2002 6,171,200 9,256,800 * * 2003 0 0 * * 2004 0 0 * *************************************************************************** Fiscal Analysis The bill would amend the expiration date in Section 204.0065 of the Labor Code's current "temporary" maximum tax rate of 2.6 percent of wages, to December 31, 2001. Due to the reduction of the maximum employer contribution rate from 2.7 to 2.6 percent, the Comptroller estimates a loss in revenue to the Unemployment Compensation Clearance Account 0936 of $28.8 million in fiscal year 2000 and $46.2 million in fiscal year 2001. Due to the continuation of the 0.1 percent Smart Jobs contribution after December 31, 1999 by the bill, the Comptroller estimates a gain in revenue of $54.1 million in fiscal year 2000, $86.7 million in fiscal year 2001 and $30.9 million during the first four months of 2002 to the Smart Jobs Holding Trust Fund 0890. The bill would also amend Section 481.161 of the Government Code setting December 31, 2001 as the expiration date of the Smart Jobs program and amend Section 481.154 of the Government Code creating a new Smart Jobs Rainy Day Fund to be used if the unemployment rate exceeds 125 percent of the rate during the previous three years or to address severe economic dislocations. The bill would also amend Section 204.123 of the Labor Code allocating 14 percent of transferred funds to the Smart Jobs Trust Fund 0891, 20 percent to the new Smart Jobs Rainy Day Trust Fund, and 66 percent to the new General Revenue-Dedicated Skills Development Account in fiscal year 2000. Allocations in subsequent years would be 50 percent to the Smart Jobs Fund, 20 percent to the Rainy Day Fund, and 30 percent to the Skills Development Account. Based on past Legislative appropriation levels, the Texas Department of Economic Development (TDED) estimates a cost to the Smart Jobs Trust Fund 0891 of $35.9 million for the remaining eight months of fiscal year 2000, $53.9 million in fiscal year 2001 and $17.9 million for the first four months of 2002. Methodology The Comptroller estimates the gain from continuing the 0.1 percent Smart Jobs contribution by multiplying the Holding Trust Fund 0890 fiscal year 1998 revenues (which equaled $70.7 million) by the projected growth rate of statewide wage and salary disbursements based on the Comptroller's fall 1998 economic forecast. Because current Smart Jobs contributions are set to end on December 31, 1999, the projected gain for fiscal year 2000 was adjusted to reflect a partial year of "new" collections from January 1 to August 31 of that year. Revenues for the Smart Jobs Fund 0891, the new Smart Jobs Rainy Day Fund and the new Skills Development Account reflect transfers from Holding Account 0890 based on the percentages in Section 204.123 of the Labor Code as amended by the bill. Expenditure levels for the Smart Jobs Rainy Day Fund would depend on economic conditions and administration by TDED. The total amount of expenditures from the Smart Jobs Fund and Rainy Day Fund would be limited to appropriations made to the TDED for this program. The Comptroller estimates the loss to the Unemployment Compensation Clearance Account 0936 by multiplying the fund's fiscal 1998 revenues (which equaled $978.8 million) by the ratio of the 0.1 percent rate reduction. The resulting amount was then multiplied by the projected growth rate of statewide wage and salary disbursements based on the Comptroller's fall 1998 economic forecast. TDED based the estimates of continuing the Smart Jobs program on the staff and funding level for the program in the 1998-99 biennium, which is 33 FTEs and $53.9 million per year. For fiscal year 2000, the fiscal impact is determined by estimating that two-thirds of the fiscal year 1999 annual cost would be used for the program from January through August 2000. The decrease in revenue in fiscal year 2000 reflects a lower level of transfers from Holding Fund 0890. For fiscal year 2002, the fiscal impact is determined by estimating that one-third of the fiscal year 2002 annual cost would be used for the program from September through December 2001. Local Government Impact No fiscal implication to units of local government is anticipated. Source Agencies: 304 Comptroller of Public Accounts LBB Staff: JK, TH, RT, DP