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