| TO: | Honorable Dennis Bonnen, Chair, House Committee on Environmental Regulation |
| FROM: | John Keel, Director, Legislative Budget Board |
| IN RE: | HB1365 by Bonnen (Relating to the Texas emissions reduction plan.), Committee Report 1st House, Substituted |
| Fiscal Year | Probable Net Positive/(Negative) Impact to General Revenue Related Funds |
|---|---|
| 2004 | $1,862,000 |
| 2005 | $622,000 |
| 2006 | ($358,000) |
| 2007 | ($2,962,000) |
| 2008 | ($4,988,000) |
| Fiscal Year | Probable Revenue (Loss) fromGENERAL REVENUE FUND 1 |
Probable Savings fromCLEAN AIR ACCOUNT 151 |
Probable Revenue Gain fromTEXAS EMISSIONS REDUCTION PLAN 5071 |
Probable Savings fromTEXAS EMISSIONS REDUCTION PLAN 5071 |
|---|---|---|---|---|
| 2004 | $1,862,000 | $1,500,000 | $109,391,000 | $160,515 |
| 2005 | $622,000 | $0 | $134,832,000 | $163,710 |
| 2006 | ($358,000) | $0 | $139,242,000 | $163,710 |
| 2007 | ($2,962,000) | $0 | $144,902,000 | $163,710 |
| 2008 | ($4,988,000) | $0 | $150,467,000 | $163,710 |
| Fiscal Year | Probable (Cost) fromTEXAS EMISSIONS REDUCTION PLAN 5071 |
Probable (Cost) fromSTATE HIGHWAY FUND 6 |
Change in Number of State Employees from FY 2003 |
|---|---|---|---|
| 2004 | ($106,109,270) | ($10,353,000) | 19.0 |
| 2005 | ($130,787,040) | ($9,781,000) | 19.0 |
| 2006 | ($135,064,740) | ($9,781,000) | 19.0 |
| 2007 | ($140,554,940) | ($9,781,000) | 19.0 |
| 2008 | ($145,952,990) | ($9,781,000) | 19.0 |
The bill would create a temporary fee on the delivery of diesel fuel ranging from $75 per cargo tank less than 2,500 gallons up to $300 per cargo tank with a capacity between 8,000 and 10,000 gallons. Ninety-eight percent of such fees would be deposited to the credit of the Texas Emissions Reduction Plan (TERP) Account No. 5071, while the remaining 2 percent would be credited to the General Revenue Fund to cover the collection expenses of the Comptroller.
The bill would change the surcharge on heavy-duty diesel equipment from 1 percent under current law to 2 percent. In addition, the bill would extend the surcharge to include leased and rental equipment on which the Comptroller currently does not assess the surcharge.
The bill would change the percentage allocations regarding the use of TERP funds. The Comptroller of Public Accounts and the Public Utility Commission, which currently receive 10 percent and 7.5 percent, respectively, of TERP Account No. 5071 funds for grant and incentive programs, would no longer receive financial assistance payments. These two agencies would, however, still be eligible for a portion of the 3 percent of TERP funds for administrative costs. The Texas Council on Environmental Technology (TCET) would receive 11.5 percent of TERP funds, as compared to the 7.5 percent under current law. Although the percentage allocation for the Texas Commission on Environmental Quality (TCEQ), 72 percent under current law, is stricken in the bill, there is no percentage amount subsituted for the TCEQ.
The bill would prohibit the TCEQ from setting speed limits for environmental purposes.
The Comptroller of Public Accounts estimates that the temporary fee on the delivery of diesel fuel would generate and the increase in the surcharge on the sale of heavy-duty diesel equipment and the extension of the tax to include uses such as leases and rentals would generate an additional $109.4 million to the TERP Account No. 5071 in 2004, increasing to $150.5 million by 2008, as shown in the table above.
Two percent of the fees would be deposited to the General Revenue Fund. The fees are expected to generate $1.9 million in revenues in 2004. However, the Comptroller estimates that, beginning in 2006, the net effect on General Revenue Funds resulting from the bill's passage would be negative, and the revenue loss would increase through 2008 as shown in the table above. This is based on an estimated dynamic tax feedback effects created by the increase in industry and/or individual tax burdens.
The Texas Department of Transportation (TxDOT) is expected to experience increased costs for projects involving vehicles and equipment powered by diesel fuel. Based on an estimated $8.7 million gallons of diesel fuel used by TxDOT and an average increase of $.03 per gallon, increased fuel cost are expected to total $261,000 per year at the agency. TxDOT also estimates that an additional 140 million gallons of diesel are used by contractors for the agency, resulting in an increase of $4.2 million. The increase of one percent in the surcharge on heavy-duty equipment is estimated to add an additional $5.3 million in costs to TxDOT, based on increases contractors would pass along to the agency.
In 2004, TxDOT also would require and estiamted $572,000 to change speed limit signs currently set for environmental purposes. This estimate assumes all costs to TxDOT would be paid out of the State Highway Fund No. 006.
This estimate assumes that the TCEQ would receive 85.5 percent of TERP Account No. 5071 funds, or an additional $93.5 million in fiscal year 2004, rising to $128.6 million by fiscal year 2005, to make grants for diesel emissions reductions projects. The TCET would receive between $12.6 million and $17.3 million in additional TERP funds. This would result in approximately $3.0 million to $3.5 million to be used each year for air quality research. This estimate assumes that there would be a savings of $1.5 million in savings to the Clean Air Account for the Texas Commission on Environmental Quality, since this amount is proposed for 2004 for air quality modeling studies. This amount would not expected to be needed if TCET were conducting air quality research.
Of the three percent allocated for administrative costs, it is estimated that the TCEQ would require an additional $549,590 in fiscal year 2004 and $491,090 in future years and require an additional 9 FTEs to handle the significant increase in the amount of grant funds available.
The Comptroller of Public Accounts would be expected to experience a savings in TERP expenditures. Based the current TERP Account No. 5071 revenue stream and anticipated costs for 2004-08, this is estimated to result in a savings of $160,515 in fiscal year 2004 and $163,710 in future years.
Although the Public Utility Commission would no longer be making grants using TERP Account No. 5071 funds, the agency still would continue to administer other TERP responsibilities. No significant impact to the agency's administrative costs or FTEs is expected.
This estimate assumes the the Texas Engineering Experiment Station's (TEES) Energy System's Laboratory does not receive sufficient TERP funds from the current revenue stream to carry out its statutory requirements in Health and Safety Code, Chapter 388. Accordingly, it is estimated that the TEES would receive an additional $820,432 each fiscal year, or one-fourth of the allocation for administration designated at 3 percent of TERP funds in Health and Safety Code, Section 386.252(a)(5). This would also provide for an increase of 10 FTEs at the TEES.
Since the TCEQ and the TEES are the only agencies expected to require addititional administrative costs upon passage of the bill, only $1.3 million out of $3.3 million to $4.5 million in additional TERP funds for administration (3 percent of total collections) would be expected to be appropriated by the Legislature.
Local governmental entities would benefit from new fees charged to help increase the amount in the TERP Fund. Since TERP funding would increase from a current level of approximately $21 million per year to an estimated $130 million in 2004, rising to $170 million by 2008, the share designated for political subdivisions is estimated to be $5.6 million in fiscal year 2004 rising to $7.3 million by fiscal year 2005 (five percent of 85.5 percent of total TERP funds).
Some of the changes required by the bill would allow easier cooperation between the Texas Emissions Reduction Program and incentives provided at the local government level. Local governments could also benefit from a more effective program as preferential recipients of grant funds.
Local governments could experience increased fuel costs resulting from the diesel fuel delivery fee created by the bill. Additional costs would depend on the number of gallons of fuel a political subdivision uses each year and the number of contract costs that would be increased as a result of the new diesel fee.
| Source Agencies: | 304 Comptroller of Public Accounts, 369 Council on Environmental Technology, 473 Public Utility Commission of Texas, 582 Commission on Environmental Quality, 601 Department of Transportation, 712 Texas Engineering Experiment Station
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| LBB Staff: | JK, JO, CL, MS, KG, TL
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