LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE, 77th Regular Session
April 5, 2001
TO: Honorable Steven Wolens, Chair, House Committee on State
Affairs
FROM: John Keel, Director, Legislative Budget Board
IN RE: HB1217 by Pitts (Relating to requiring state agencies to
compete with the private sector in providing certain
functions and services.), As Introduced
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* Estimated Two-year Net Impact to General Revenue Related Funds for *
* HB1217, As Introduced: positive impact of $3,480,000 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. *
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General Revenue-Related Funds, Five-Year Impact:
****************************************************
* Fiscal Year Probable Net Positive/(Negative) *
* Impact to General Revenue Related *
* Funds *
* 2002 $0 *
* 2003 3,480,000 *
* 2004 6,960,000 *
* 2005 10,440,000 *
* 2006 13,920,000 *
****************************************************
All Funds, Five-Year Impact:
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*Fiscal Probable Probable Probable Change in *
* Year Savings/(Cost) Savings/(Cost) Savings/(Cost) Number of State *
* from General from Other from Federal Employees from *
* Revenue Fund Funds Funds - Federal FY 2001 *
* 0001 0997 0555 *
* 2002 $0 $0 $0 0.0 *
* 2003 3,480,000 348,000 1,972,000 (408.0) *
* 2004 6,960,000 696,000 3,944,000 (816.0) *
* 2005 10,440,000 1,044,000 5,916,000 (1,224.0) *
* 2006 13,920,000 1,392,000 7,888,000 (1,632.0) *
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Technology Impact
None.
Fiscal Analysis
This bill would add Chapter 2163 to the Government Code to define
government competition with the private sector. A state agency would
not perform a function if a private entity can perform that function
better and at a lower cost. A state agency shall identify each function
that it performs that is also commercially available in the private
sector, link each identified function with the state agency employees or
positions that perform that function, and select a reasonable percentage
of the functions identified to compete with the private sector. This
bill would also require the Texas Incentive and Productivity Commission
to treat each successful bid as a suggestion submitted by a state
employee group and consider whether the employees of the division are
eligible for a bonus. A state agency would report the percentage and
specific function identified and summarize the results of the
competition to the Council on Competitive Government and the agency's
strategic plan.
Methodology
According to the Comptroller of Public Account's office e-Texas report,
the federal government has implemented a similar program and has averaged
cost reductions of at least 20 percent due to competition. Texas spent
$3.9 billion in wages and salaries in fiscal 1999 (excluding benefits and
jobs in higher education) and had the equivalent of 272,346 full-time
state employees. The federal government has determined that about 75
percent of its full time equivalent employees (FTEs) work in
commercially-available activities. Using the federal experience as a
model, Texas has approximately $2.9 billion of its wages and salaries
devoted to commercially-available services.
Assuming that it takes 12 months for Texas state agencies to identify
commercially available activities and to subject these selected functions
to competition with the private sector, fiscal year 2003 is the earliest
savings could be generated. Also, assuming Texas' state agencies open
to competition commercially-available functions accounting for $29
million per year, which is 1 percent of the State's
commercially-available services, and if an average savings of 20 percent
would result, based on the federal model, the ongoing savings would grow
by $5.8 million annually. Approximately 60 percent of the State's wages
and salaries are financed out of General Revenue Funds, 6 percent from
Other Funds, and 34 percent from Federal Funds. Therefore, approximately
$3,480,000 in General Revenue Funds would be saved in the first year and
an additional $3,480,000 each year thereafter. Similarly, approximately
$348,000 in Other Funds and $1,972,000 in Federal Funds would be saved
in the first year and an additional $348,000 in Other Funds and
$1,972,000 in Federal Funds each year thereafter. Using the same model,
the number of FTEs that would be reduced in the first year would be
approximately 408 and an additional 408 each year thereafter.
According to the Texas Incentive and Productivity Commission, the agency
has estimated there would be no significant additional expenses if this
legislation is passed.
Local Government Impact
No fiscal implication to units of local government is anticipated.
Source Agencies: 353 Texas Incentive and Productivity Commission,
304 Comptroller of Public Accounts, 303 General
Services Commission
LBB Staff: JK, RB, GS