LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE, 77th Regular Session
February 12, 2001
TO: Honorable John T. Smithee, Chair, House Committee on
Insurance
FROM: John Keel, Director, Legislative Budget Board
IN RE: HB765 by Chavez (Relating to motor vehicle insurance
coverage requirements for operation of certain motor
vehicles; providing a penalty.), As Introduced
**************************************************************************
* Estimated Two-year Net Impact to General Revenue Related Funds for *
* HB765, As Introduced: negative impact of $(26,014,593) through *
* the biennium ending August 31, 2003. *
* *
* 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 *
* 2002 $(16,092,604) *
* 2003 (9,921,989) *
* 2004 (9,667,935) *
* 2005 (9,957,534) *
* 2006 (9,945,213) *
****************************************************
All Funds, Five-Year Impact:
***********************************************************************
*Fiscal Probable Probable Probable Probable Change in *
* Year Revenue Savings/ Savings/ Revenue Number of *
* Gain/(Loss) (Cost) from (Cost) from Gain/(Loss) State *
* from General Texas from Texas Employees *
* General Revenue Department Department from FY 2001 *
* Revenue Fund of of *
* Fund 0001 Insurance Insurance *
* 0001 Operating Operating *
* Fund Fund *
* Account/ Account/ *
* GR- GR- *
* Dedicated Dedicated *
* 0036 0036 *
* 2002 $(267,852) $267,852 83.0 *
* $(6,200,030)$(9,892,574) *
* 2003 (6,200,030) (3,721,959) (245,677) 245,677 83.0 *
* 2004 (6,200,030) (3,467,905) (245,677) 245,677 83.0 *
* 2005 (6,200,030) (3,757,504) (245,677) 245,677 83.0 *
* 2006 (6,200,030) (3,745,183) (245,677) 245,677 83.0 *
***********************************************************************
Technology Impact
It is estimated that the technology impact would be $1,871,375 for fiscal
year 2002 and $332,369 for each year thereafter.
Fiscal Analysis
The bill amends Chapter 5 of the Insurance Code and adds Chapter 28. The
bill adopts a new regulatory process for mandatory auto liability
insurance including adoption by the Texas Department of Insurance of a
passenger vehicle liability insurance policy with fixed rates and
guaranteed issue.
According to the Department of Public Safety (DPS), the bill would
require the creation of a database for passenger vehicle liability
insurance policies by having all companies that write such policies in
Texas provide information to DPS regarding the issuance of policies, the
termination of policies, and the claims made under those policies. The
bill prescribes conditions, time limits, and procedures for the
suspension (including hearing and appeal) of drivers' licenses for
persons failing to comply with the new statutes.
The bill would take effect September 1, 2001.
Methodology
The Texas Department of Insurance (TDI) estimates that it would require
four additional Full-time Equivalent (FTE) positions to implement the
provisions of the bill. Passage of the bill would result in one rate
hearing by TDI per year to set benchmark rates for passenger vehicle
liability. It is anticipated that TDI would be involved in four more
contested case hearings involving individual rate filing, form filings,
market conduct, solvency or other regulatory matters relating to rates.
This would require TDI to hire expert witnesses for the rate hearing and
for consultation during the hearing process.
It is assumed that TDI would adjust its fees and/or rate on assessments
to cover the agency's costs from Fund 36.
Department of Public Safety (DPS) accident records indicate that
approximately 18.65 percent of the 14 million licensed drivers in Texas
are uninsured. Therefore, it is estimated that the DPS would be required
to take action against 2.6 million licensees. Those drivers would come
to the attention of DPS when required to purchase liability insurance in
order to renew a driver's license. Texas drivers' licenses are issued
for 6 years. Thus it is estimated that one-sixth of the estimated 2.6
million uninsured drivers would renew a license each year, resulting in
437,000 suspension notices annually that the DPS Driver Improvement
Bureau (DIB) would have to process. DPS would also need additional FTEs
in its (1) Safety Responsibility Bureau to receive and evaluate 437,000
policies annually as part of the license suspension clearance procedure;
(2) Driver Records Bureau to provide data entry and microfilming for the
437,000 actions; and (3) Customer Service Bureau to receive 36,440
additional telephone calls each year from affected licensees.
DPS estimates the bill would result in 44,000 additional administrative
hearings per year. Including case preparation, review of files to return
to DIB, and actual time for hearings, the DPS would need additional
Examiners. DPS would need additional personnel for processing paperwork
setting cases for hearings. It is estimated that the total number of
additional FTEs that DPS would need to implement the bill is 79.
New programming would be needed to create a database to store information
and DPS would incur contract programming costs at an estimated $950,400.
An additional $920,975 would be needed for equipment and computer
hardware and software. These costs would occur in fiscal year 2002 only.
In addition, in FY 2000 DPS collected approximately $6.2 million in
reinstatement fees in compliance with the Safety Responsibility Act.
DPS expects that with the exclusion of "passenger vehicles" from Safety
Responsibility sanctions, there would no longer be an incentive for
operators of "passenger vehicles" to comply and pay associated fees,
resulting in an estimated loss of $6.2 million per year.
Local Government Impact
Reclassifying the offense of Failure to Maintain Liability Insurance from
a Class C misdemeanor to a Class A, and subsequent violations of the
same offense to a State Jail Felony would result in shifting the cases
from municipal and justice of the peace (JP) courts to county courts at
law and district courts. Additionally, instead of writing a citation, a
Class A misdemeanor and a State Jail Felony offense require an arrest.
Municipal and JP courts would experience a revenue loss because of the
loss of fines, fees, and court costs that are generated by cases. Some of
the revenue loss would be offset by a savings created by reduced
workload. It is anticipated that the cost of arresting and detaining
defendants would reduce the savings.
Conversely, county courts at law and district courts would gain revenue
from fines, fees, and court costs received that would offset the increase
in cases heard. The counties could also incur some additional costs from
confining offenders.
Amounts of gains, losses, costs, and savings would vary and be largely
dependent on the number of cases as well as the level of fines levied
and successfully collected.
Source Agencies: 302 Office of the Attorney General, 405 Texas
Department of Public Safety, 454 Texas Department
of Insurance
LBB Staff: JK, JO, DB, DE, DG