LEGISLATIVE BUDGET BOARD
                              Austin, Texas
                                     
                    FISCAL NOTE, 77th Regular Session
  
                              April 3, 2001
  
  
          TO:  Honorable Warren Chisum, Chair, House Committee on
               Environmental Regulation
  
        FROM:  John Keel, Director, Legislative Budget Board
  
       IN RE:  HB2912  by Bosse (Relating to the continuation and
               functions of the Texas Natural Resource Conservation
               Commission.), Committee Report 1st House, Substituted
  
**************************************************************************
*  Estimated Two-year Net Impact to General Revenue Related Funds for    *
*  HB2912, Committee Report 1st House, Substituted:  negative impact     *
*  of $(1,139,032) 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                           $(531,525)  *
          *       2003                            (607,507)  *
          *       2004                            (233,549)  *
          *       2005                            (233,549)  *
          *       2006                            (233,549)  *
          ****************************************************
  
All Funds, Five-Year Impact:
  
***********************************************************************
*Fiscal    Probable    Probable    Probable    Probable   Change in    *
* Year     Revenue     Savings/    Revenue     Savings/   Number of    *
*        Gain/(Loss) (Cost) from Gain/(Loss) (Cost) from    State      *
*            from      General    from Waste    Waste     Employees    *
*          General     Revenue    Management  Management from FY 2001  *
*          Revenue       Fund      Account/    Account/                *
*            Fund        0001        GR-         GR-                   *
*            0001                 Dedicated   Dedicated                *
*                                    0549        0549                  *
*  2002      $307,919  $(839,444)    $405,021  $(101,677)        10.0  *
*  2003             0   (607,507)           0    (90,042)        11.0  *
*  2004             0   (233,549)           0    (58,962)        11.0  *
*  2005             0   (233,549)           0    (58,962)        11.0  *
*  2006             0   (233,549)           0    (58,962)        11.0  *
***********************************************************************
  
***************************************************************************
*Fiscal      Probable        Probable        Probable        Probable     *
* Year    Savings/(Cost)  Savings/(Cost)     Revenue      Savings/(Cost)  *
*         from Hazardous  from Clean Air   Gain/(Loss)       from New     *
*        and Solid Waste     Account/        from New    General Revenue  *
*        Remediation Fee   GR-Dedicated  General Revenue   Dedicated -    *
*            Account/          0151         Dedicated-    Environmental   *
*          GR-Dedicated                   Environmental      Testing      *
*              0550                          Testing        Laboratory    *
*                                           Laboratory    Accreditation   *
*                                         Accreditation      Account      *
*                                            Account                      *
*  2002         $(90,575)      $(210,011)        $149,105      $(149,105) *
*  2003          (85,917)       (191,655)         383,953       (383,953) *
*  2004          (56,260)       (125,501)         634,801       (634,801) *
*  2005          (56,260)       (125,501)         634,801       (634,801) *
*  2006          (56,260)       (125,501)         634,801       (634,801) *
***************************************************************************
  
Technology Impact
  
The acquisition of personal computers and printers for eleven additional
positions and the two positions transferred from the Texas Department of
Health.
  
  
Fiscal Analysis
  
The bill amends the Government Code to continue the Commission for 12
years, until September 1, 2013, and makes several statutory modifications
as recommended by the Sunset Advisory Commission:

- Create an incentive and performance based regulatory system to be
phased in over a period of three years.  This system would distinguish
regulatory tiers based upon levels of compliance with environmental
regulations.
- Improve the use of compliance history for the purposes of a performance
based system by developing a common definition for compliance history
and tracking compliance.
- Develop a performance assessment for regulated entities to determine
eligibility for innovative programs and to establish permit and
enforcement guidelines.
- Change inspection policy by requiring regulated entities to demonstrate
a good compliance history before receiving announced inspections.
- Improve tracking and reporting of upset emissions.
- Implement an environmental laboratory accreditation program, and
transfer the Safe Drinking Water Laboratory Assessment Program from the
Texas Department of Health (TDH) to consolidate it with the new
accreditation program at Texas Natural Resource Conservation Commission
(TNRCC).
- Adopt rules and polices to clarify on a case-by-case basis the level of
the Executive Director s role in contested permit hearings.
- Develop policies to guide potential responses to complaints after
normal business hours.
- Authorize a ratio of funding transferability, the dedicated fee
structure does not support, to be set biennially through the
appropriations process
- Improve revenue management and fee collection practices by requiring
all fees to be paid on the date due, and limit adjustments to
self-reported fee data, and fee amounts.
- Authorize fee audit staff to issue a notice of violation to fee payers
for violation of reporting requirements, and authorize the charging of
interest and penalties on delinquent unpaid fees.
- Clarify and strengthen TNRCC s authority for regulating water treatment
specialists.
- Require TNRCC to create indexes and cross references for its final
orders, policies, and interpretations.
-     Require the agency to change its name from the TNRCC to the
Department of Environmental Quality.
Those sections with fiscal implications are as follows.

SECTION 3.03
This section improves cash flow in fees due to the agency, resulting in a
one-time revenue gain of $712,940 because fewer fees would remain
outstanding, and more fees would be paid on time. In addition, this
section authorizes a percentage of funding allocation transferability
between dedicated fees to be set biennially through the appropriations
process, which is expected to result in no significant fiscal
implications to TNRCC.

SECTION 4.01
Requires TNRCC to collect and track compliance history data on regulated
entities, to prepare a comparative analysis of data evaluating
performance, and to report the information in an annual report.
Implementation of this responsibility would require one database
administrator. The database administrator would oversee the development
or restructuring of a current database with the data the agency will use
to differentiate compliance levels of regulated entities.

Requires the agency to develop a performance assessment to use in
determining eligibility for incentive-based and innovative regulatory
programs, permitting and enforcement decisions, and determining whether
an entity receives an announced inspection.  Implementation would require
three enforcement coordinators.  One additional attorney and one legal
assistant would be required for complex rulemaking, legal support and
permit review. The coordinators would provide cross-agency support in the
development of performance-based regulation.

The total cost for the bill's provisions relating to compliance history
data, performance assessments and incentive-based and innovative
regulatory programs is estimated at: $782,773 in fiscal year 2002;
$724,273 in fiscal year 2003; and $474,273 in each fiscal year from 2004
through 2006.

SECTION 4.06
Directs TNRCC to establish criteria to determine when emissions events
are excessive, triggering either a correction action plan or a permit.
This section does not require TNRCC to evaluate all statewide emissions
events nor does it require enforcement actions based on an allowable
number of emission events. TNRCC currently has allocated staff and other
resources for additional oversight of emission events in three regional
offices and in the central office.

SECTION 5.01
Requires TNRCC to implement a voluntary laboratory accreditation program
consistent with national standards.  Implementation of this provision
would require five new positions, including support staff (an Accountant)
and four inspectors.  TNRCC could phase in this program, adding four
positions in fiscal year 2002 and one more in fiscal year 2003. Program
costs (including benefits) are estimated at $458,935 in fiscal year 2002
and $501,696 in fiscal year 2003 and thereafter.  Although these costs
are expected to be offset by fees, all costs for the first 18 months of
the program would require General Revenue appropriations, until  revenue
collections are sufficient to fund operating costs.  TNRCC is expected to
obtain approval from the National Environmental Laboratory Accreditation
Conference (NELAC) to administer a NELAC program within 18 months of the
effective date of the bill.  After which, TNRCC may begin to assess lab
fees associated with accreditation.

SECTION 9.01
Transfers the drinking water certification program, staff, equipment, and
funding from the Department of Health (TDH) to TNRCC effective September
1, 2001.  This provision also authorizes TNRCC to administer fees for
the program.  The transfer would move two positions from TDH to TNRCC.
The estimated cost of the drinking water certification program for the
2002-03 biennium is $282,210.  This transfer would result in an
offsetting reduction in TDH spending and FTE levels.
  
  
Methodology
  
Total costs of implementing this bill are an estimated at $2.6 million
during the 2002-03 biennium. The bill also would require an additional
ten FTEs in fiscal year 2002 and eleven additional positions in 2003 and
in each fiscal year thereafter.

Two additional revenue sources are anticipated to result from this
legislation. A one-time revenue gain of $712,940 in fiscal year 2002 is
expected due to proposed changes in due dates and assessments for fees.
It is expected that $307,919 of these additional revenues would be
deposited to the credit of the General Revenue Fund and that $405,021
would be deposited to the Waste Management Account No. 549. New fees to
cover the cost of the laboratory accreditation program are expected to
total $250,848 in fiscal year 2003, increasing to $501,696. The drinking
water certification program is expected to transfer $149,105 in revenues
in fiscal year 2002 and $133,105 in revenues in each year thereafter from
the Department of Health to TNRCC.  It is assumed that both the
laboratory accreditation fees and the drinking water certification
program fees would be deposited to a newly created account in the General
Revenue Fund, the Environmental Testing Laboratory Accreditation
Account.

There are at least two provisions of the bill which have the potential
for generating cost savings: the provision requiring TNRCC to encourage
electronic reporting through the Internet and reduce duplication in
reporting requirements; and, the removal of the Executive Director as a
party to larger, more complicated and time-consuming contested permit
cases.  Any savings realized from these provisions could be reallocated
for additional costs related to changing the name of the TNRCC to the
Texas Department of Environmental Quality, which the bill requires be
phased in by January 1, 2004.

Since the laboratory accreditation fees are not anticipated to be
collected until 18 months after the bill's enactment, this estimate
assumes that program costs in the initial period would be paid out of the
General Revenue Fund. Future costs for the laboratory accreditation
program would be covered by fees deposited to the newly created
Environmental Testing Laboratory Accreditation Account. This estimate
assumes that all costs for the drinking water certification program would
be paid out of the Environmental Testing Laboratory Accreditation
Account.  Although this is not a new requirement of the committee
substitute, a revision has been made to the fiscal note to account for
the anticipated cost of the program out of general revenue funds.

It is assumed that all costs associated with the bill's requirements
relating to  compliance history data and performance assessments for
incentive-based and innovative programs would be funded by TNRCC's
multiple funding sources.  Costs were allocated to TNRCC's multiple
funding sources as follows:  costs were distributed among the four
largest dedicated accounts based on the percentage each account
represented of the biennial budget recommended for the TNRCC in House
Bill 1. The four accounts are the Clean Air Account No. 151, Water
Resource Management Account No. 153, Waste Management Account No. 549,
and the Hazardous and Solid Waste Remediation Account No. 550.  One
additional adjustment was made: funding that otherwise would have come
from the Water Resource Management Account No. 153 was provided by the
General Revenue Fund.

The bill's provisions relating to after hours complaint response by the
TNRCC are not expected to result in significant fiscal implications to
the agency.
  
  
Local Government Impact
  
No significant fiscal implication to units of local government is
anticipated.
  
  
Source Agencies:   582   Texas Natural Resource Conservation Commission,
                   116   Sunset Advisory Commission
LBB Staff:         JK, CL, MF, ZS, TL