LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE, 77th Regular Session
April 4, 2001
TO: Honorable David Sibley, Chair, Senate Committee on
Business & Commerce
FROM: John Keel, Director, Legislative Budget Board
IN RE: SB1783 by Sibley (Relating to the regulation of
telecommunications services, fees, and programs.), As
Introduced
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* Estimated Two-year Net Impact to General Revenue Related Funds for *
* SB1783, As Introduced: negative impact of $(13,667,000) 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. *
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General Revenue-Related Funds, Five-Year Impact:
****************************************************
* Fiscal Year Probable Net Positive/(Negative) *
* Impact to General Revenue Related *
* Funds *
* 2002 $(5,595,000) *
* 2003 (8,072,000) *
* 2004 3,397,000 *
* 2005 9,732,000 *
* 2006 10,666,000 *
****************************************************
All Funds, Five-Year Impact:
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*Fiscal Probable Revenue Probable Revenue Probable Revenue *
* Year Gain/(Loss) from Gain/(Loss) from Gain/(Loss) from All *
* General Revenue Fund Telecommunications Local Units of *
* 0001 Infrastructure Fund Government - Sales *
* 0345 Tax *
* 2002 $(5,595,000) $(97,665,000) $(971,000) *
* 2003 (8,072,000) (129,153,000) (1,681,000) *
* 2004 3,397,000 54,344,000 707,000 *
* 2005 9,732,000 155,707,000 2,025,000 *
* 2006 10,666,000 170,655,000 2,221,000 *
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Fiscal Analysis
The bill would modify the Utilities Code and other statutes to ensure
that all Texans in urban and rural areas have access to advanced services
that are appropriate to their needs at reasonably comparable prices,
terms and quality.
The bill would require all applicable companies to provide advanced
services, reasonably comparable to those offered in the companies' larger
exchanges, within nine months to communities that have failed to attract
a provider of advanced services within 120 days after 50 bona fide
requests have been posted by the Public Utility Commission (PUC). The
bill would not require a company to provide new services or to provision
services in any new areas.
The bill would allow municipalities to buy, own, construct, maintain, and
operate a facility to provide advanced services for its residents.
The bill would authorize rural communities to seek funds for the
deployment of advanced services through the following means: 1) projects
identified in the Development Corporation Act of 1979 (4A /4B projects),
2) Telecommunications Infrastructure Fund (TIF) 0345 grants for
community technology centers, 3) community development block grants, 4)
Texas Agricultural Finance Authority financing, or 5) other business
incentives available. The bill would allow the TIF board to use funds in
the qualifying entities account for infrastructure and related costs for
the provision of community technology centers or advanced services to
rural areas. It would further require that the TIF board give priority
to a project that will establish or enhance the provision of advanced
services to rural areas. The TIF board would also be required to
coordinate with the PUC and any other entity to encourage universal
access to advanced services in rural areas and to develop rules for
implementation and coordination of requests for access.
The bill would require the General Services Commission (GSC), subject to
PUC approval, to allow access to and contract the use of the state
telecommunications system to any public or governmental entity or
political subdivision of the state. The bill would also require the PUC
and TIF telecommunications planning group to coordinate and permit access
pursuant to PUC approval and adopted rules.
The bill would decrease the TIF assessment rate from 1.25 percent to
0.625 percent of the taxable telecommunications receipts of
telecommunications utilities and commercial mobile service providers
beginning September 1, 2001. The bill would extend the life of the TIF
Board and Subchapter C, Chapter 57 of the Utilities Code by five years,
to September 1, 2010, from September 1, 2005. The bill would delete the
provision in current law that requires the assessment to end when total
collections deposited to the credit of Fund 0345, excluding interest,
reached $1.49 billion.
The bill would take effect on September 1, 2001.
Methodology
Telecommunications services are subject to state and local sales taxes.
Telecommunications services also are subject to the TIF assessment under
Section 57.043 of the Utilities Code. The TIF assessment is currently a
portion of the services subject to state and local sales tax.
The bill would cut the TIF assessment rate in half beginning in fiscal
year 2002, and extend the life of the assessment until September 1, 2010,
resulting in a gain to Fund 0345 after fiscal 2003. Under current law,
the Comptroller of Public Accounts estimates the TIF revenues to reach
the statutory cap of $1.49 billion in fiscal 2004, at which time the
assessment will end. The Comptroller estimated the assessment rate under
current law would be reduced for fiscal year 2004 to not exceed the
statutory deposit cap. The fiscal implications reflect the revenue lost
to the TIF due to the reduction in the assessment rate earlier than
current law and the Biennial Revenue Estimate anticipated. The revenues
shown in fiscal year 2004 are those over and above the Comptroller's
estimate of final revenues of $87 million expected to be collected at a
reduced assessment rate under current law. Fiscal year 2005 and beyond
reflect total assessment collections that would be generated by the
bill's implementation.
The fiscal implications of reducing the TIF rate from 1.25 percent to
0.625 percent in fiscal year 2002 were estimated using current TIF
revenue projections. By reducing the TIF assessment rate to .625%, the
bill would reduce revenue flowing into the TIF by approximately $230
million for the 2002-03 biennium. However, by deleting the provision in
current law that ends assessment collection once the fund has reached
$1.5 billion, this bill would increase TIF revenue from fiscal year 2004
through 2006 by approximately $380 million.
The bill also would affect state and local sales tax collections because
the TIF assessment is included in the sales price of telecommunications
services and therefore subject to state and local sales tax. The
Comptroller estimated the effect on state sales taxes deposited to the
General Revenue Fund by applying the state sales tax rate of 6.25 percent
to the estimated fiscal impact on the TIF, and adjusting for an
effective date of September 1, 2001.
The Texas Education Agency estimates the bill would have no fiscal impact
on the foundation school program. The PUC estimates the bill would not
result in significant fiscal impact on agency operations or personnel
and could be absorbed into current resources.
Local Government Impact
As shown in the above table, local government sales tax revenues would be
negatively effected in fiscal years 2002 and 2003 due to the immediate
reduction in the TIF assessment rate. However, the bill would extend TIF
for five additional years, which would give local governments a positive
revenue generation through 2010.
The bill would reduce TIF revenue available for grants, loans and other
statutorily authorized purposes by $230 million in the 2002-03 biennium.
As a result, the entities currently eligible for TIF grants - public
schools, institutions of higher learning, public libraries, and
not-for-profit health centers - would see a reduction in either the
number of grants made available to them by the TIF Board, or the amount
of those grants. Also, section 57.0475 of the bill would introduce
additional entities eligible for TIF funds, likely spreading the reduced
amount of TIF money available over a larger number of grantees. However,
in 2004 the TIF revenues would begin to exceed what they would have been
under current law. Therefore, beginning with 2004 there would be more
grant money available to these entities than otherwise would have been
available; by the end of 2006, TIF grantees would see a net increase in
grant funds of an estimated $150 million.
The fiscal impact to local economic development corporation (4A and 4B
corporations) sales tax cannot be estimated due to the inability to know
how many rural cities and counties would adopt or increase such a tax
for rural advanced services projects.
Source Agencies: 313 Department of Information Resources, 477
Commission on State Emergency Communications, 116
Sunset Advisory Commission, 473 Public Utility
Commission of Texas, 720 The University of Texas
System, 475 Office of Public Utility Counsel, 306
Texas State Library and Archives Commission, 701
Texas Education Agency, 480 Department of Economic
Development, 304 Comptroller of Public Accounts,
367 Telecommunications Infrastructure Fund Board,
303 General Services Commission
LBB Staff: JK, JO, KM, JM, WP