| TO: | Honorable John T. Smithee, Chair, House Committee on Insurance |
| FROM: | John Keel, Director, Legislative Budget Board |
| IN RE: | SB422 by Bivins (relating to requirements regarding motor vehicle insurance and proof of financial responsibility; providing penalties. ), Committee Report 2nd House, Substituted |
| Fiscal Year | Probable Net Positive/(Negative) Impact to General Revenue Related Funds |
|---|---|
| 2004 | $0 |
| 2005 | $7,946,819 |
| 2006 | $3,452,519 |
| 2007 | $3,003,089 |
| 2008 | $2,553,659 |
| Fiscal Year | Probable Revenue Gain/(Loss) from GENERAL REVENUE FUND 1 |
Probable Revenue Gain/(Loss) from STATE HIGHWAY FUND 6 |
Probable Savings/(Cost) from STATE HIGHWAY FUND 6 |
|---|---|---|---|
| 2004 | $0 | $0 | ($312,454) |
| 2005 | $7,946,819 | $3,537,181 | ($1,953,181) |
| 2006 | $3,452,519 | $2,591,481 | ($1,947,481) |
| 2007 | $3,003,089 | $2,398,911 | ($1,946,911) |
| 2008 | $2,553,659 | $2,216,341 | ($1,946,341) |
The bill would amend the Transportation Code and the Insurance Code relating to requirements for motor vehicle insurance and proof of financial responsibility. The bill would partially implement recommendation GG 24 from the Comptroller's e-Texas report, Limited Government, Unlimited Opportunity. The bill would establish a process in which the Department of Transportation (TxDOT), or its designated agent, would select a random sample from its records of motor vehicle registrations, send letters to the owners, and check their responses with the insurance companies allegedly issuing their policies. The bill would establish guidelines, requirements, penalties, and procedures for the suspension, termination, and reinstatement of registrations and for addressing violations, offenses, and non-compliance with the requirements of the bill. The bill would require TxDOT to collect civil penalties and deposit amounts necessary to cover its administrative costs to the credit of the State Highway Fund. The bill would also require TxDOT to deposit amounts collected above its administrative costs to the credit of the General Revenue Fund.
The bill would require TxDOT, the Department of Insurance (TDI), and the Department of Public Safety (DPS) to work together to implement the provisions of the bill and would require the Texas Transportation Commission and the Commissioner of Insurance to establish necessary rules to implement the provisions of the bill.
Based on information provided by TDI, TxDOT assumes that 22 percent of the estimated 15,500,000 motor vehicles registered for passenger use in Texas would not be in compliance with current insurance requirements. TxDOT also assumes that 22 percent (110,000) of the required sample of 500,000 would be found to be in violation during the first year and that 50 percent of this amount would provide sufficient proof of insurance to prevent suspension. Of the remaining 50 percent, TxDOT estimates 90 percent would come into compliance and resolve the suspension during the year(10 percent would provide the necessary proof of insurance and pay the $250 penalty, but would not have to pay the additional registration fee and the remaining 80 percent would provide the necessary proof of insurance, pay the $250 penalty, and the additional registration fee).
For the purposes of this analysis, TxDOT used an average registration fee of $60 and assumed that $40 of this fee would be deposited to the credit of the State Highway Fund and the remaining $20 would be credited to counties where the registration occurred. Accordingly, it is estimated that approximately $9.9 million in fiscal year 2005, $5.4 million in fiscal year 2006, $5.0 million in fiscal year 2007, and $4.5 million in fiscal year 2008 would be deposited to the General Revenue Fund; and that approximately $1.6 million in fiscal year 2005, $0.9 million in fiscal year 2006, $0.8 million in fiscal year 2007, and $0.7 million in fiscal year 2008 would be deposited to the State Highway Fund.
TxDOT assumes that revenue losses would be realized for the 10 percent of drivers initially found to be in non-compliance who would not repay the annual registration fee. TxDOT estimates that 5,500 would be identified in this category in fiscal year 2005; 3,000 in fiscal year 2006; 2,750 in fiscal year 2007; and 2,500 in fiscal year 2008. It is also assumed revenue losses from this group would not be realized during the year of discovery, but during each following year.
TxDOT assumes that costs of approximately $1.9 million each year beginning in fiscal year 2005 would be incurred for a private vendor; that programming changes in fiscal year 2004 would cost $312,454; and that additional administrative operating costs of $12,540 would be realized in fiscal year 2005, $6,840 in fiscal year 2006, $6,270 in fiscal year 2007, and $5,700 in fiscal year 2008. For the purposes of this analysis, it is assumed that equivalent amounts from penalties collected would be deposited to the credit of the State Highway Fund to offset these costs and the remainder would be deposited to the credit of the General Revenue Fund in accordance with the bill.
| Source Agencies: | 405 Department of Public Safety, 601 Department of Transportation, 454 Department of Insurance
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| LBB Staff: | JK, JO, JRO, RT, MW
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