LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE, 77th Regular Session
March 21, 2001
TO: Honorable Jim Solis, Chair, House Committee on Economic
Development
FROM: John Keel, Director, Legislative Budget Board
IN RE: HB1326 by Brimer (Relating to the computation of the
initial contribution rate for certain employers for
purposes of unemployment compensation.), As Introduced
**************************************************************************
* Estimated Two-year Net Impact to General Revenue Related Funds for *
* HB1326, As Introduced: positive impact of $0 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 $0 *
* 2003 0 *
* 2004 0 *
* 2005 0 *
* 2006 0 *
****************************************************
All Funds, Five-Year Impact:
*****************************************************
* Fiscal Year Probable Revenue Gain/(Loss) from *
* Unemployment Compensation *
* Clearance Account *
* 0936 *
* 2002 $(64,025,482) *
* 2003 (64,025,482) *
* 2004 (64,025,482) *
* 2005 (64,025,482) *
* 2006 (64,025,482) *
*****************************************************
Fiscal Analysis
The bill would amend Section 204.006 of the Labor Code, reducing
employers' unemployment insurance contribution rates from 2.7 percent to
1.5 percent. The bill would also repeal Sections 204.004 and 204.005. The
repeal of these sections would eliminate alternate employer insurance
contribution rates based on industry averages.
If enacted, we believe the bill would take effect on September 1, 2001
based on a reasonable interpretation of the author's intent.
Methodology
The Texas Workforce Commission (TWC) estimates a $128 million loss in
unemployment insurance tax revenue to the Unemployment Compensation
Clearance Account 0936 for the 2002-03 biennium. The calculation of the
per year tax loss is based on calendar year 2001 taxable wages of
non-rated (new) employers in the state in the amount of $5,335,456,813
multiplied by 1.2 percent, the difference between the current 2.7 percent
contribution rate and the proposed 1.5 percent rate.
According to the US Department of Labor, the loss of the tax revenue
together with potentially increasing unemployment compensation outlays
in an economic downturn could render the state's Unemployment Insurance
Trust Fund insolvent. The Department of Labor estimates that Texas has
only two and one-half months in reserves in the fund to cover claims in
the event of a recession. If the fund were to become insolvent, the
state would have to borrow money from the federal government to pay
unemployment insurance claims. In order to pay back the federal loan
with interest, the state would have to increase employers' contribution
rates.
Local Government Impact
No fiscal implication to units of local government is anticipated.
Source Agencies: 320 Texas Workforce Commission
LBB Staff: JK, JO, HL, RT