LEGISLATIVE BUDGET BOARD

Austin, Texas

FISCAL NOTE, 78TH LEGISLATIVE REGULAR SESSION

April 8, 2003

TO:	Honorable Jim Keffer, Chair, House Committee on Economic Development
FROM:	John Keel, Director, Legislative Budget Board
IN RE:	HB3324 by Keffer, Jim (Relating to the issuance of financial obligations for the unemployment compensation fund and revenue to support such obligations.), As Introduced

Estimated Two-year Net Impact to General Revenue Related Funds for HB3324, As Introduced: an impact of $0 through the biennium ending August 31, 2005.

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
2004	$0
2005	$0
2006	$0
2007	$0
2008	$0

All Funds, Five-Year Impact:

Fiscal Year	Probable Revenue Gain from Borrowing Proceeds - UC Obligation Trust Fund	Probable (Cost) from Borrowing Proceeds - UC Obligation Trust Fund	Probable (Cost) from Administrative Costs - UC Obligation Trust Fund	Probable Revenue Gain from Administrative Costs - UC Obligation Trust Fund
2004	$800,000,000	($800,000,000)	($7,333,333)	$7,333,333
2005	$0	$0	$0	$0
2006	$0	$0	$0	$0
2007	$0	$0	$0	$0
2008	$0	$0	$0	$0

Fiscal Analysis

The bill would amend Chapter 203 of the Labor Code to provide the Texas Workforce Commission (TWC) with authority to issue up to $2 billion in bonds or other obligations for the unemployment insurance program.  TWC would have the discretion to ask the Texas Public Finance Authority (TPFA) to issue the obligations.  The obligations would not constitute a debt of the state and would not be backed by the full faith and credit or taxing power of the state.  The obligations would be free from taxation by the state and its political subdivisions.

Proceeds from the obligations would be held in a dedicated trust fund outside the state treasury but in the custody of the Comptroller.  The proceeds could be used for repayment of principal and interest on advances from the federal trust fund, payment of unemployment benefits, payment of costs associated with issuance of the obligations, for provision of a bond reserve, or for payment of capitalized interest for up to two years.

TWC would be required to make an assessment on employers in the state at a rate sufficient to cover bond obligations and the estimated amount of bond administrative expenses each year.  These assessments would be calculated with the same wage base used to calculate the unemployment tax.

If enacted by a vote of two-thirds of all the members of each house, the bill would become effective immediately. Otherwise, the bill would take effect September 1, 2003.

Methodology

Based on current unemployment rate projections from the Comptroller of Public Accounts, TWC estimates it would seek $800 million in obligations from TPFA in 2004.  The obligation assessment on employers would generate sufficient funds to repay the principal and interest on the obligation during 2004, assuming a 2.75% interest rate for commercial paper issuances.  TWC further assumes there would be no additional need to borrow in the credit markets through fiscal year 2008.

Local Government Impact

No fiscal implication to units of local government is anticipated.

Source Agencies:	304 Comptroller of Public Accounts, 320 Texas Workforce Commission, 347 Public Finance Authority
LBB Staff:	JK, JO, JRO, RT, WP, JC