LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE, 77th Regular Session
May 24, 2001
TO: Honorable James E. "Pete" Laney, Speaker of the House,
House of Representatives
FROM: John Keel, Director, Legislative Budget Board
IN RE: HB2323 by Gallego (Relating to repayment assistance for
certain law school loans of persons providing legal
services to the indigent), As Passed 2nd House
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* Estimated Two-year Net Impact to General Revenue Related Funds for *
* HB2323, As Passed 2nd House: negative impact of $(1,651,608) *
* through the biennium ending August 31, 2003. *
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General Revenue-Related Funds, Five-Year Impact:
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* Fiscal Year Probable Net Positive/(Negative) *
* Impact to General Revenue Related *
* Funds *
* 2002 $(833,170) *
* 2003 (818,438) *
* 2004 (898,438) *
* 2005 (978,438) *
* 2006 (1,058,438) *
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All Funds, Five-Year Impact:
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*Fiscal Probable Savings/(Cost) from Change in Number of State *
* Year General Revenue Fund Employees from FY 2001 *
* 0001 *
* 2002 $(833,170) 4.0 *
* 2003 (818,438) 4.0 *
* 2004 (898,438) 4.0 *
* 2005 (978,438) 4.0 *
* 2006 (1,058,438) 4.0 *
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Technology Impact
The program will require systems for tracking participants and making
loan payments co-payable to both the lawyer and the holder of the
education loan notes. Programming necessary to enable efficiency in
administering the program is as follows:
(1) complex PC programming for processing applications, vouchers,
accounting data for the general ledger, and preparation of forms for each
recipient, monitoring education loan debt and holders of education loan
notes, tracking of lawyers working for non-profit organizations serving
indigents, and reports;
(2) programming of imaging system to handle documents internally and
on-line;
(3) programming of telecommunications system, PCs, large screen color
monitors for use with document imaging system, and laser printers.
The additional technological impact of amendment 2 is as follows:
This program will require systems for making loans to repay education
loans which are forgiven for completed service, tracking employment of
attorneys in specified counties of Texas, forgiving repayment loans for
appropriate service employment as attorneys in district and county
attorney offices, converting repayments to loans for those who do not
fulfill the service obligation for any part of a 12-month period,
producing a due diligence letter and collections system, and filing suit
and entering judgment against those who do not repay any remaining loan
balance.
Programming to enable efficiency in administering the program is as
follows: (1) mainframe or complex PC programming handling loan making,
all of the monitoring, tracking, and processes above; (2) programming of
an imaging system, including work flow and (3) programming of a
telecommunications system.
Fiscal Analysis
The amendments to this bill leaves the original bill intact and add a
loan forgiveness program for attorneys on top of it.
This bill, as amended, authorizes a true education loan repayment that
repays education loans for lawyers practicing law at non-profit
organizations providing legal assistance to indigents in both criminal
and civil matters.
The first amendment to the bill has no cost to the state.
A second amendment to the bill authorizes an education loan
repayment/forgiveness loan program to repay education loans of attorneys
employed in a district or county attorney's office in a county with a
population of 50,000 or less. The attorney must agree to be employed for
five years. Repayment assistance is 60 percent in the first year, 80
percent in the second year, and 100 percent of the amount due during from
the third through fifth years. The attorney must sign a promise to repay
the amount of all repayments made for years in which repayment were
received if the attorney does not serve five years as specified in the
agreement. Repayments made during these five years are forgiven if the
attorney completes five years of service.
The Coordinating Board shall adopt rules for this program not later than
December 1, 2001. This bill takes effect September 1, 2001.
Methodology
This cost estimate is based on an analysis made by the Texas Higher
Education Coordinating Board (THECB).
For the original bill, the fiscal impact is as follows:
The fiscal impact in fiscal year 2002 is $752,890, including $560,000 for
repayments on education loans, cost for two part-time staff and one
full-time staff members, $50,000 for complex PC programming, $30,000 of
PC equipment for three staff members, $30,574 for administrative costs,
$1,500 for travel to promote the program at association meetings, and
$5,000 in other operating expenses. The cost for fiscal year 2003 is
$672,890 including $560,000 for repayments on education loans and all the
same expenses as in the previous fiscal year;
The addition fiscal impact of Amendment #2 is as follows
The fiscal impact in fiscal year 2004 includes $192,000 for repayment of
education loans for 30 lawyers, $31,008 in salary for 3 part-time staff,
and $15,903 for administrative costs.
[10 lawyers x $8000 x 60% = $48,000]
[10 lawyers x $8000 x 80% = $64,000]
[10 lawyers x $8000 x 100% = $80,000]
The fiscal impact in 2005 includes $272,000 for repayment of education
loans for 40 lawyers, $31,008 in salary for 3 part-time staff, and
$15,903 for administrative costs.
[10 lawyers x $8000 x 60% = $48,000]
[10 lawyers x $8000 x 80% = $64,000]
[10 lawyers x $8000 x 100% = $80,000]
[10 lawyers x $8000 x 100% = $80,000]
The fiscal impact in 2006 includes $352,000 for repayment of education
loans for 50 lawyers, $31,008 in salary for 3 part-time staff, and
$15,903 for administrative costs.
[10 lawyers x $8000 x 60% = $48,000]
[10 lawyers x $8000 x 80% = $64,000]
[10 lawyers x $8000 x 100% = $80,000]
[10 lawyers x $8000 x 100% = $80,000]
[10 lawyers x $8000 x 100% = $80,000]
According to materials provided by the State Bar of Texas, 349 lawyers
currently work for non-profit organizations providing legal services for
the indigent, 75 percent of lawyers nationwide in 1995-96 had an
education debt. In 2000, lawyers had an average education loan debt of
$80,000.
This analysis assumes 80 percent, or 279, of the 349 lawyers working for
non-profit organizations have an average education loan debt of $80,000,
including principal and interest. This bill provides for repayment of
fifty percent of a lawyer's education loan debt or $40,000. To retain
half of the 279 lawyers or, 140 lawyers, with education loan debt of
$40,000 in each year will require a funding level of $560,000 each year
for ten years. Repayment to each of the 140 lawyers would be $4,000 each
year in order to repay half of the $80,000 in ten years.
Methodology for Amendment #2
Of the 558 attorneys serving in rural counties of 50,000 or fewer, 347
are elected attorneys and 211 attorneys are employed in rural counties.
Many of the district or county attorney offices are one-man operations.
From the five-year service period required by the bill, it is assumed
that the 211 attorneys employed in the district or county attorney
offices are those addressed by the bill.
Material from the State Bar of Texas indicates that in the 95-96 academic
year, 75 percent of graduating lawyers had education loan debt, and the
average education loan debt in 2000 for attorneys was $80,000, including
principal and interest. The methodology assumes that 80 percent of these
211 attorneys, or 169, have education loan debt and the average education
loan debt of these 169 attorneys is $80,000.
THECB assumes that the education loans are repaid over a 10 year period,
with an average of $8,000 due each year. We assume that funds will be
appropriated for adding 10 lawyers each year for five years when 50
lawyers will be in the program.
The analysis assumes that the attrition, recruitment, and retention of
lawyers to work in non-profit organizations keeps the number of lawyers
participating in the program at 140 each year.
Local Government Impact
No fiscal implication to units of local government is anticipated.
Source Agencies: 781 Texas Higher Education Coordinating Board
LBB Staff: JK, CT