LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE, 77th Regular Session May 17, 2001 TO: Honorable Warren Chisum, Chair, House Committee on Environmental Regulation FROM: John Keel, Director, Legislative Budget Board IN RE: SB5 by Brown, J. E. "Buster" (Relating to the Texas emissions reduction plan; providing a penalty.), Committee Report 2nd House, Substituted ************************************************************************** * Estimated Two-year Net Impact to General Revenue Related Funds for * * SB5, Committee Report 2nd House, Substituted: negative impact of * * $(5,011,000) 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. * ************************************************************************** General Revenue-Related Funds, Five-Year Impact: **************************************************** * Fiscal Year Probable Net Positive/(Negative) * * Impact to General Revenue Related * * Funds * * 2002 $(2,208,000) * * 2003 (2,803,000) * * 2004 (6,127,000) * * 2005 (8,447,000) * * 2006 (10,488,000) * **************************************************** All Funds, Five-Year Impact: *********************************************************************** *Fiscal Probable Probable Probable Probable Change in * * Year Revenue Revenue Revenue Savings/ Number of * * Gain/(Loss) Gain/(Loss) Gain/(Loss) (Cost) from State * * from from State from New New General Employees * * General Highway General Revenue from FY 2001 * * Revenue Fund Revenue Dedicated * * Fund 0006 Dedicated --TERP Fund * * 0001 --TERP Fund * * 2002 $(45,000)$154,652,000 54.0 * * $(2,208,000) $(154,355, * * 653) * * 2003 (2,803,000) (99,000) 163,343,000 55.0 * * (161,985, * * 624) * * 2004 (6,127,000) (272,000) 171,389,000 55.0 * * (169,740, * * 244) * * 2005 (8,447,000) (340,000) 180,047,000 55.0 * * (178,088, * * 504) * * 2006 (401,000) 189,419,000 55.0 * * (10,488,000) (187,179, * * 344) * *********************************************************************** Technology Impact There would be a technology impact to four agencies: 1) the technology impact to TNRCC is estimated at $48,000 in fiscal year 2002; 2) the technology impact to the new agency, the Texas Council on Environmental Technology would be $9,000 in fiscal year 2002 and $3,000 in 2003; 3) the technology impact to the Comptroller's Office is estimated at $570,300 in fiscal year 2002; 4) the technology impact to the Energy Systems Laboratory (Texas Engineering Extension Service) would be $140,000 in fiscal year 2002, with reduced amounts in 2003-06. There is no significant technology impact expected for the Public Utility Commission. Fiscal Analysis The bill would create the Texas Emissions Reduction Plan to be administered by the Texas Natural Resource Conservation Commission (TNRCC), the Comptroller, and the newly created Council on Environmental Technology (TCET). The three agencies would be required to provide and manage grants and other funding for several incentive programs aimed at lowering emissions that impede air quality attainment under the federal Clean Air Act. The Public Utility Commission (PUC) would provide grants for a newly established energy program, and TCET would be responsible for establishing and administering a new technology research and development, which would include grants to support the development of emissions-reducing technologies. The Texas Emissions Reduction Plan (TERP) Fund would be a new account in the General Revenue Fund to be administered by the Comptroller consisting of new surcharges and fees including: - 10 percent of the registration fee for truck trailers and commercial vehicles statewide; - $5 for each motor vehicle inspected in a near nonattainment or nonattainment area; - $1 for each motor vehicle inspected in all other areas of the state; - 0.5 percent of the charge for each sale, lease, or rental of new or used construction equipment statewide; - 5 percent of the total charge for every retail sale or lease of year 1996 and earlier on-road diesel motor vehicles over 14,000 lbs.; - $60 fee on motor vehicles registering for the first time in Texas; and - $1 hotel occupancy fee imposed on persons staying in hotels in near nonattainment or nonattainment areas; The bill would allocate 67 percent of revenues in the Fund for the diesel reduction incentive plan to be administered by the TNRCC. Fifteen percent of revenues in the Fund would be allocated to the motor vehicle purchase or lease incentive program administered by the TNRCC and the Comptroller. The PUC would administer the energy efficiency program with 7.5 percent of funds. The TCET would administer a technology research and development program with an additional 7.5 percent of the funds. The remaining 3 percent of revenues could be used by the TNRCC, the Energy Systems Laboratory and the Comptroller of Public Accounts and the PUC for administrative costs. The bill would specify that the International Residential Code (IRC) be adopted as the energy code for single family construction and that the International Energy Conservation Code (IECC) be adopted as the energy code. The Texas Engineering Experiment Station's Energy Systems Laboratory (ESL) would be required to review and evaluate local amendments to the IRC and IECC. The ESL also would be required to develop energy savings estimates and set targets for each municipality in a near nonattainment area to develop and implement energy savings and weatherization programs to meet the targets. Additionally, the ESL would make materials available to the building industry and develop an accreditation program for energy rating services. The ESL would provide technical assistance to local jurisdictions. The bill would provide authority to the ESL to set and collect fees to offset costs for these activities. Methodology Based on estimates by the Comptroller, it is anticipated that $154.6 million in revenues from newly created and increased taxes and fees would be collected for deposit into the TERP fund in 2002, with the amount increasing to $189.4 million by 2006. Of the amount available in the TERP fund each year, 67 percent or $103.6 million in 2002 would be used for the diesel emissions reduction incentive program administered by the TNRCC. An estimated $23.2 million, or 15 percent of revenues, would be allocated to the motor vehicle purchase program administered by the TNRCC and the Comptroller. An additional 7.5 percent each year, or $11.6 million in 2002 would be used by the newly created TCET for the technology research and development program, except for $500,000 of that amount, which would be deposited to the credit of the Clean Air Account No. 151 to supplement funding for air quality planning activities in near-nonattainment areas. The energy efficiency program to be administered by the PUC would receive approximately $11.6 million, or 7.5 percent of TERP revenues, in 2002, and the remaining 3 percent, or $4.6 million could be used by the Comptroller, the ESL. the PUC and the TNRCC to cover administrative costs. This estimate assumes that the TCET would be a new agency with an administrative budget of $250,000, as provided by the bill, and that the TCET would require 3 FTEs in the first year of operation, and 4 FTEs in subsequent years. The agency would be housed at the Center for Environmental Resources at the University of Texas at Austin. It is assumed that the TCET would contract for a health effects study for $200,000 per year. The remaining $10.8 million from the 7.5 percent of TERP funds provided in the bill would be used to provide grants for environmental technology development projects. Administrative costs by the Comptroller are estimated at $1,066,565 in fiscal year 2002, and the agency would require an additional 10 FTEs to handle increased audit and accounting workload created by the bill. Ongoing costs of $496,265 per year are anticipated in fiscal years 2003 through 2006. These amounts include benefits. Administrative costs to the TNRCC are estimated to be $1,301,907 in fiscal year 2002, based on 16 FTEs and one time costs. Ongoing costs of $1,141,908 per year are anticipated in fiscal years 2003 through 2006. These amounts include benefits. This estimate assumes the TNRCC would use the $500,000 deposited to the credit of the Clean Air Account No. 151 to contract for air quality planning in near non-attainment areas. The Public Utility Commission would require 5.5 FTEs and incur costs of $314,741 in each fiscal year to administer the energy efficiency grants program. The bill's requirements relating to energy efficient building standards would result in annual costs of $1,660,000 in fiscal year 2002 and $1,590,000 in fiscal years thereafter to the Texas Engineering Experiment Station's Energy Systems Laboratory, including benefits, for an additional 20 FTEs. This estimate assumes that costs to the ESL would be paid out of the TERP Fund in fiscal years 2002 and 2003, since no significant fees could be charged while the ESL is developing materials required to administer programs created by the bill. In years 2004 through 2006 Appropriated Receipts from fees authorized from the bill would generate an estimated $50,000 in fiscal year 2004 and $100,000 in fiscal years 2005 and 2006, reducing costs to the ESL by those amounts. The table above includes estimated losses to the General Revenue Fund and State Highway Fund No. 006 provided by the Comptroller. The Comptroller derived these losses based on the estimated dynamic tax feedback effects created by the increase in industry and individual tax burdens. Local Government Impact Local governments could experience positive fiscal impacts, reducing the cost of acquiring equipment and vehicles, if they are successful in receiving grants from the TNRCC. Affected counties would administer and enforce the International Residential Code and the International Energy Conservation Code. County officials indicate that administering and enforcing building codes would require them to incur significant costs. Bexar and Travis counties estimate that initial costs to develop a code administration and enforcement program would be $1 million. Annual expenditures for Bexar County to maintain the program are estimated at $490,000. Travis estimates $600,000 annually to maintain the program. Local government officials stated that political subdivisions in affected counties could bare significant additional costs in order to implement all energy efficiency measures that meet the standards established in a contract under Section 302.004 (b), Local Government Code. However, it is assumed that initial costs would be offset by future savings in energy costs experienced by units of local government. Source Agencies: 582 Texas Natural Resource Conservation Commission, 712 Texas Engineering Experiment Station, 405 Texas Department of Public Safety, 473 Public Utility Commission of Texas, 304 Comptroller of Public Accounts, 601 Texas Department of Transportation LBB Staff: JK, CL, TL, DW