| TO: | Honorable Steve Ogden, Chair, Senate Committee on Finance |
| FROM: | John S. O'Brien, Deputy Director, Legislative Budget Board |
| IN RE: | SB3 by Ogden (Relating to financing public schools in this state and reducing school property taxes.), As Introduced |
| Fiscal Year | Probable Revenue Gain/(Loss) from GENERAL REVENUE FUND 1 |
Probable Revenue Gain/(Loss) from STATE HIGHWAY FUND 6 |
Probable Revenue Gain/(Loss) from FOUNDATION SCHOOL FUND 193 |
Probable Revenue Gain/(Loss) from HOTEL OCCUP TAX DEPOS ACC 5003 |
|---|---|---|---|---|
| 2005 | $173,218,000 | ($173,218,000) | $0 | $0 |
| 2006 | ($803,697,000) | $174,239,000 | $4,213,898,000 | $508,000 |
| 2007 | $632,575,000 | ($579,644,000) | $4,554,100,000 | $636,000 |
| 2008 | ($641,553,000) | $584,325,000 | $4,906,586,000 | $665,000 |
| 2009 | $569,481,000 | ($616,511,000) | $5,123,184,000 | $694,000 |
| 2010 | ($770,529,000) | $621,777,000 | $5,347,013,000 | $725,000 |
| Fiscal Year | Probable Revenue Gain/(Loss) from New General Revenue Dedicated Tobacco Accounts |
Probable Revenue Gain/(Loss) from Tobacco Endowments Funds |
Probable Revenue Gain/(Loss) from School Districts |
Probable Revenue Gain/(Loss) from Cities |
|---|---|---|---|---|
| 2005 | $0 | $0 | $0 | $0 |
| 2006 | $0 | $0 | ($2,009,609,000) | ($83,000) |
| 2007 | $1,151,040,000 | ($1,151,040,000) | ($3,886,495,000) | $4,453,000 |
| 2008 | $88,918,000 | ($88,918,000) | ($4,057,394,000) | $5,166,000 |
| 2009 | $91,586,000 | ($91,586,000) | ($4,295,308,000) | $5,545,000 |
| 2010 | $94,333,000 | ($94,333,000) | ($4,539,408,000) | $5,612,000 |
| Fiscal Year | Probable Revenue Gain/(Loss) from Counties/Special Districts |
Probable Revenue Gain/(Loss) from Transit Authorities |
|---|---|---|
| 2005 | $0 | $0 |
| 2006 | $8,750,000 | ($3,267,000) |
| 2007 | $14,104,000 | ($3,563,000) |
| 2008 | $15,221,000 | ($3,713,000) |
| 2009 | $16,028,000 | ($3,875,000) |
| 2010 | $16,651,000 | ($4,050,000) |
| Fiscal Year | Probable Revenue Gain/(Loss) from GENERAL REVENUE FUND 1 |
Probable Revenue Gain/(Loss) from STATE HIGHWAY FUND 6 |
Probable Revenue Gain/(Loss) from FOUNDATION SCHOOL FUND 193 |
Probable Revenue Gain/(Loss) from HOTEL OCCUP TAX DEPOS ACC 5003 |
|---|---|---|---|---|
| 2006 | ($848,617,000) | $835,000 | $4,213,898,000 | $356,000 |
| 2007 | $538,584,000 | ($579,838,000) | $4,554,100,000 | $636,000 |
| 2008 | ($641,553,000) | $584,325,000 | $4,906,586,000 | $665,000 |
| 2009 | $569,481,000 | ($616,511,000) | $5,123,184,000 | $694,000 |
| 2010 | ($770,529,000) | $621,777,000 | $5,347,013,000 | $725,000 |
| Fiscal Year | Probable Revenue Gain/(Loss) from New General Revenue Dedicated Tobacco Accounts |
Probable Revenue Gain/(Loss) from Tobacco Endowment Funds |
Probable Revenue Gain/(Loss) from School Districts |
Probable Revenue Gain/(Loss) from Cities |
|---|---|---|---|---|
| 2006 | $0 | $0 | ($2,009,609,000) | ($1,414,000) |
| 2007 | $1,151,040,000 | ($1,151,040,000) | ($3,886,495,000) | $4,453,000 |
| 2008 | $88,918,000 | ($88,918,000) | ($4,057,394,000) | $5,166,000 |
| 2009 | $91,586,000 | ($91,586,000) | ($4,295,308,000) | $5,545,000 |
| 2010 | $94,333,000 | ($94,333,000) | ($4,539,408,000) | $5,612,000 |
| Fiscal Year | Probable Revenue Gain/(Loss) from Counties/Special Districts |
Probable Revenue Gain/(Loss) from Transit Authorities |
|---|---|---|
| 2006 | $7,324,000 | ($3,267,000) |
| 2007 | $14,104,000 | ($3,563,000) |
| 2008 | $15,221,000 | ($3,713,000) |
| 2009 | $16,028,000 | ($3,875,000) |
| 2010 | $16,561,000 | ($4,050,000) |
The bill would amend state law relating to the financing of public schools and the reduction of school property taxes.
Article 1. Part A would lower school district maintenance and operations (M&O) property tax rate limits. The bill also would reduce the tax rate limits recognized in the school finance entitlement formulas by $0.20 in tax year 2005 (school year 2005-06) and $0.35 in tax year 2006 (school year 2006-07). The bill would reduce the school district M&O rate limit in from the current $1.50 limit to $1.30 in tax year 2005. For tax year 2006, the limit would drop to $1.20. In tax years 2007 and 2008, the Chapter 45 limit would be $1.25, contingent upon local voter approval. In tax year 2009, the limit would rise to $1.30, contingent upon local voter approval. The $0.86 school district Local Fund Assignment (LFA) would drop to $0.76. The $0.64 district tax rate (DTR) equalized in Tier Two of the school finance formulas would drop to $0.54. (The sum of the lowered LFA and DTR would then be $1.30 for the 2005-06 school year—the first year of the next biennium). Part A would take effect September 1, 2005 and apply beginning with the 2005-06 school year.
Part C would, on September 1, 2005, repeal the 78th Legislature's repeal of certain school finance provisions of the Education Code.
Article 2 would amend Section 11.431 of the Tax Code to reduce the time for a homeowner to file a late homestead exemption. Homeowners can qualify for a homestead exemption by filing an application as late as one year after the delinquency date for taxes on the homestead. The proposed change would limit the late filing to "not later than the delinquency date for the taxes on the homestead." The bill would amend Section 25.25 of the Tax Code to limit the correction of clerical errors by an appraisal review board to only those clerical errors relating to homestead exemption qualification matters for the previous five years and clerical errors relating to a homestead owner's property tax liability for the preceding year. Current law allows any taxpayer the right to request the correction of clerical errors that affect the owner's tax liability. The bill would amend Sections 42.253, 42.257 and 42.259 of the Education Code to require a modification of the Foundation School Program (FSP) state aid payment schedule to school districts when the district's property values were reduced after the last day of the state fiscal year. The Commissioner of Education would have to increase a district's September FSP payment by one-fifth of the difference in each of the five years following the determination of reduced value. The bill would amend Section 403.302 of the Government Code to limit the amount of time a school district had to file a request to the Comptroller for an audit of and changes to the district's appraisal roll relative to the Comptroller's annual School Property Value Study. A school district would have one year from the Comptroller's final certification to the Commissioner of Education to correct values through an audit with the Comptroller's Property Tax Division. Current law allows a school three years from the final certification date to file an audit request. This article would take effect September 1, 2005, if the bill received a two-thirds vote of each chamber. If the bill did not receive the necessary vote, this article would take effect November 1, 2005.
Article 4 would amend Chapter 171 of the Tax Code, relating to the franchise tax. The article would expand the type of business entities subject to the franchise tax to include all business types except sole proprietorships and passive entities. A passive entity would be defined as a limited partnership or a trust, other than a business trust, that makes no wage payments and that receives at least 90 percent of its income from interest, dividends, gains from sales of securities and properties, or mineral royalties and other nonoperating mineral interests on assets acquired and held for investment. The reference to the Internal Revenue Code would be changed from the one in effect after January 1, 1996 and before January 1, 1997 to January 1, 2005.
The bill would change the method for calculation of liability under the franchise tax. All taxable entities would be subject to a minimum tax equal to 0.25 percent of their gross receipts in Texas. In addition, a taxable entity could elect to pay either a tax based upon the greater of its taxable earned surplus and taxable capital, or a tax based on its taxable wages. A taxable entity's tax liability would equal the minimum tax plus the excess over the minimum tax, if any, of the tax that the taxable entity elected. A taxable entity in the business of leasing employees could not elect to pay the tax on earned surplus and capital; it would have to calculate the tax based on its taxable wages. A noncorporate entity made subject to the tax could qualify for an exemption if its activities would qualify for an exemption if the entity were a corporation.
The tax rate on earned surplus would drop from 4.5 percent to 2.5 percent. The earned surplus tax base would include all compensation as reported on a specified line on the federal Internal Revenue Service Form 940, Employers' Annual Federal Unemployment (FUTA) Tax Return. A taxpayer could deduct the lesser of 50 percent of its compensation or $30,000 per full-time employee. Taxable compensation would include guaranteed payments to partners. A taxable entity could subtract from its apportioned earned surplus the amount paid to provide health benefits to employees in this state, up to the lesser of $150,000 or 10 percent of the entity's apportioned taxable earned surplus. Taxpayers served by a staff leasing company would add to their earned surplus the payments made by the staff leasing company to employees assigned to the taxpayer's business. The staff leasing company would subtract such payments from its own earned surplus. The reportable federal taxable income for a partnership and other noncorporate taxable entities would be determined under rules adopted by the Comptroller, using principles similar to the standard applied to corporations.
Taxable entities would have to add-back to reportable federal taxable income certain payments made to related entities. The bill would specify safe harbors for the add-back of royalty and interest payments. The bill would grant the Comptroller authority to adjust items of income and deductions among related parties if such adjustment were necessary to reflect an arm's length standard.
A taxable entity that elected to pay on taxable wages would calculate the tax on taxable wages at the lesser of 1.75 percent of taxable wages or $1,500 per employee for the reporting period. The tax liability for a taxable entity that elected to pay on taxable wages would equal the minimum tax plus the excess, if any, of the tax on taxable wages above the minimum tax.
The bill would allow a parent or investor taxable entity to exclude from its taxable capital the investment in the capital of other taxable entities if the parent or investor had a controlling interest in the other entities.
The bill would establish a franchise tax credit for physicians, dentists, optometrists, and podiatrists participating in the Medicaid or Children's Health Insurance Program (CHIP) as providers of health care services. The credit would be equal to 20 percent of the payments received from the programs. The credit would be nontransferrable and limited to the amount of tax due. The Comptroller, with the assistance of the Health and Human Services Commission, would adopt rules to implement the credit.
The bill would add provisions on the forfeiture of the right of a partnership to transact business in the state; permit noncorporate taxable entities to qualify for refunds and credits on the same basis as currently exist for corporations; specify that the revenue from the franchise tax be deposited in GR Account 0193—Foundation School; and repeal various provisions in Chapter 171 concerning officer and director compensation.
The article would take effect November 1, 2005 and apply to reports originally due on or after that date. For entities that would become subject to the tax because of this article, income or losses occurring before January 1, 2005 could not be considered for the earned surplus component. An entity that would become subject to the tax because of this article and that would be subject to the tax on January 1, 2006, and for which January 1, 2006 is not the beginning date, would file an annual report due May 15, 2006. If a franchise tax credit were found to be unconstitutional in a final judgment no longer subject to appeal, the credit would be disallowed for any entity that received the credit from the date the final judgment was entered by the court. The article would specify the initial and appellate jurisdiction for a constitutional challenge to the provisions applying the franchise tax to the income of partnerships.
Article 5. This article would amend the Tax Code relating to sales and use taxes, motor fuels taxes, and hotel occupancy taxes.
Part A would amend Chapter 151 to raise the state sales and use tax rate to 6.5 percent from 6.25 percent. The rate would be raised to 6.75 percent from 6.5 percent on the first anniversary of the date of the increase to 6.5 percent. An additional three day sales tax holiday for clothing and footwear would be created to start on the first Friday each December and end the following Sunday. School supplies, including backpacks, with a sales price of less than $100 per item, purchased for use by a student in an elementary or secondary school during either three-day sales tax holiday would be exempt from the sales tax.
Part A also would add Section 151.433 to the Tax Code to provide sales tax relief to persons receiving financial assistance under Chapter 31 of the Human Resources Code or nutritional relief under Chapter 33 of the Human Resources Code through an electronic benefits transfer system. In addition, an individual otherwise eligible for financial assistance under Chapter 31, but for whom such assistance is not paid because of sanctions applied against the individual under Section 31.0032 would be eligible for reimbursement. The article would require the Comptroller and the executive commissioner of the Health and Human Services Commission (HHSC) by joint rule to devise a program to reimburse eligible persons for 20 percent of their estimated state sales taxes paid during each state fiscal year. The Health and Human Services Commission could not consider these reimbursements in determining a household's eligibility for state financial assistance and food stamps. No later than August 15 of each year, the Comptroller, by rule, would estimate the amount of state sales taxes an eligible person was expected to pay during the next state fiscal year, considering the persons' federal adjusted gross income (FAGI), the number of dependents for federal tax purposes, and any other information the Comptroller considered appropriate. Using this information, the Comptroller would devise a table specifying, by income bracket and number of dependents, the estimated amount of state sales taxes an eligible person would be expected to pay and the amount of reimbursement the individuals would be entitled to receive under this bill. The Comptroller would provide the table to the HHSC executive commissioner, who would use the table to provide either additional monthly financial assistance under Chapter 31, or additional monthly nutritional assistance to those receiving such under Chapter 33, if they were not receiving financial assistance under Chapter 31. HHSC would make these reimbursements available to eligible persons using the state's electronic benefits system. Notwithstanding any other law, however, the total amount of reimbursements under this bill could not exceed $100 million each state fiscal year. The bill would authorize the Comptroller and the HHSC executive commissioner to take any action necessary to ensure that the $100 million limit would not be exceeded, to include: decreasing the percentage of tax reimbursements paid, decreasing the amounts of monthly payments or assistance on a pro rata basis, or suspending the reimbursements.
Part A would take effect September 1, 2005, assuming the bill received the requisite two-thirds majority votes in both houses of the Legislature. Otherwise, it would take effect November 1, 2005.
Part B would amend Chapter 152 to raise the rates for the state motor vehicle sales tax and the motor vehicle rental tax (on rentals of more than 30 days) to 6.5 percent from 6.25 percent. The rates would increase to 6.75 percent on the first anniversary of the effective date of this bill. The rate increase would apply to motor vehicles purchased outside Texas and brought into the state by a Texas resident; to motor vehicles purchased in Texas without payment of the tax, transferred out of the state immediately, and then later returned to Texas; but it would not apply to even-exchanges or gifts of motor vehicles. The bill would establish a standard presumptive value for determining the proper amount of motor vehicle sales tax due on certain motor vehicle sales transactions. The Texas Department of Transportation (TxDOT) would determine the presumptive value based on a nationally recognized motor vehicle industry reporting service. TxDOT would maintain information on presumptive values as part of its registration and title system, update the values quarterly, and make the values available to county tax assessor-collectors no later than November 1, 2005. The standard presumptive value provisions would not apply to even-exchange or gift transactions. If the amount paid in a sales transaction were greater than or equal to the presumptive value, the tax assessor-collector would compute and collect the tax due on the amount paid. If the amount paid in a sales transaction were less than the presumptive value, the tax assessor-collector would compute and collect the motor vehicle sales tax due on the presumptive value, unless the purchaser could establish a retail value by obtaining an appraisal. Appraisals would have to be on a form prescribed by the Comptroller, and they would have to be obtained no later than the 20th day after purchase. Automobile dealers could charge a fee, set by the Comptroller, for providing a certified appraisal.
Part B would take effect September 1, 2005, assuming the bill received the requisite two-thirds majority votes in both houses of the Legislature. Otherwise, it would take effect September 1, 2005. The standard presumptive value provisions would take effect November 1, 2005.
Part C would amend Chapter 160 to raise the boat and boat motor sales and use tax rate to 6.5 percent from 6.25 percent. The rate would be raised to 6.75 percent from 6.5 percent on the first anniversary of the date of the increase to 6.5 percent. Part C would take effect September 1, 2005, assuming the bill received the requisite two-thirds majority votes in both houses of the Legislature. Otherwise, it would take effect November 1, 2005.
Part D would amend Chapter 162, relating to the allocation of motor fuels taxes. For the gasoline, diesel, and liquified gas taxes, during the months of June, July, and August of each odd-numbered year, the Comptroller would not make allocations to the State Highway Fund 0006. Rather, the Comptroller would allocate the revenue that would otherwise have been allocated during the previous three months between September 5 and September 11 of each odd numbered year. This provision would take effect August 1, 2005, assuming that the bill received the requisite two-thirds majority votes in both houses of the Legislature. Otherwise, it would take effect November 1, 2005.
Part E would amend Chapters 156, 351, and 352 to exempt from the hotel occupancy tax that part of an apartment or condominium building consisting of unfurnished dwelling units leased to tenants; and it would repeal the exception to the state hotel occupancy tax for permanent residents. Part E would take effect October 1, 2005, assuming that the bill received the requisite two-thirds majority votes in both houses of the Legislature. Otherwise, it would take effect January 1, 2006.
Article 6 would amend the Tax and Alcoholic Beverage Codes by raising the tax rates for cigarettes, cigars and other tobacco products, and alcoholic beverages.
Part A would amend Chapter 154 of the Tax Code to raise the cigarette tax rate by $37.50 per 1,000 cigarettes weighing three pounds or less per thousand ($0.75 per pack of 20 cigarettes), to a new rate of $58.00 per 1,000 cigarettes ($1.16 per pack). Cigarette tax revenue generated by the rate increase would be deposited to the General Revenue Fund.In addition, Part A would amend Chapter 155 of the Tax Code to raise the tax rates for all of the tobacco products in the chapter by 25 percent. The tax on small cigars (weighing three pounds or less per thousand) would increase to $0.0125 from $0.01 per 10 cigars; the tax on each of the three categories of large cigars ($7.50, $11.00, and $15.00 per thousand) would increase to $9.375, $13.75, and $18.75 per thousand, respectively; and the tax on tobacco products other than cigarettes and cigars (i.e., snuff and chewing and pipe tobacco) would increase to 44.02 percent from 35.213 percent of the manufacturer's list price. Cigar and tobacco products revenue generated by the rate increases would be deposited to Fund 1.
Part B would amend the Alcoholic Beverage Code to raise all alcoholic beverage excise taxes by 25 percent. The liquor tax would increase to $3.00 from $2.40 per gallon; the tax per gallon for each of the three categories of wine ($0.204 for table wine, $0.408 for fortified wine, and $0.516 for carbonated wine) would increase to $0.255, $0.510, and $0.645, respectively; the tax on malt liquor (or ale) would increase to $0.2475 from $0.198 per gallon; and the tax on beer would increase to $7.50 from $6.00 per barrel. Alcohol excise tax revenue generated by the rate increases would be deposited to Fund 1. In addition, Part B would amend Chapter 183 of the Tax Code to raise the mixed beverage tax by 25 percent, to 17.5 percent from 14 percent of gross receipts. The state share of the mixed beverage tax revenue generated by the rate increase would be deposited to Fund 1.
This article would take effect September 1, 2005, assuming the bill received the requisite two-thirds majority votes in both houses of the Legislature. Otherwise, it would take effect November 1, 2005.
Article 7 would affect miscellaneous fees and funds. Part A would require the transfer of certain tobacco settlement proceeds held by institutions of higher education into dedicated general revenue accounts. It would create two dedicated general revenue accounts—an earnings account and a secondary account—for each of 16 Permanent Tobacco Settlement Investment Funds held and administered by institutions of higher education. Part A would require the transfer, at the direction of the Legislature, of amounts approximating the corpus of each permanent fund to the permanent fund's related secondary account. The Comptroller would manage and invest the assets of each secondary account and would periodically transfer the earnings to the related earnings accounts. The bill would require the Comptroller to estimate the permanent funds' future earnings and distributions and provide general revenue transfers to the earnings and secondary accounts as if the accounts were still permanent endowments. The supplemental general revenue transfers could not exceed $65 million in any fiscal year. The bill would require the corpus transfers to be made November 1, 2006. Part A would take effect November 1, 2005.
Article 8 would allow charitable organizations with a bingo license on January 1, 2005 to offer electronic pull-tab bingo. The bill would allow the games to be played on electronic card-minding devices or on electronic monitoring terminals; and it would allow the use of player cards to electronically track the play and credits of players. As with traditional bingo, there would be a 5 percent prize fee on all prizes. For individual prizes exceeding $5, the fee would be collected from the player's account. The prize payout percentage for electronic pull-tabs could not be less than it is for paper pulltabs, but it could be more. Revenues received by the state from the prize fees would be used to finance public primary and secondary schools, to reduce public school property taxes, or both, as determined by the general appropriations act or other law. The Lottery Commission could conduct pre-implementation activities and expend money from its 2006-2007 appropriation to ensure a prompt start-up of electronic pull-tab operations after the effective date. The commission would have to adopt electronic pull-tab rules no later than December 1, 2005.
Article 9 would require the Comptroller to prepare a report providing a comprehensive analysis of the effects of the tax policies adopted by the 79th Legislature on the personal income of state residents and on state businesses. The report would be filed no later than October 15, 2006, with an update to be filed no later than October 15, 2008.
Unless otherwise provided for in this bill, this bill would take effect September 1, 2005, assuming that it received the requisite two-thirds majority votes in both houses of the Legislature. Otherwise, it would take effect November 1, 2005.
Article 1 would compress school district M&O tax rates to $1.30 in fiscal 2006 and $1.15 in fiscal 2007. The bill would allow a total of $0.10 enrichment from fiscal 2008-09 and an additional $0.05 enrichment in fiscal 2010. This estimate assumes no school district enrichment. School district M&O rates were set to the specified rates, applied to school district taxable values, and the result was trended through the projection period. The resulting reduced school district M&O levy was compared to the projected current-law levy to estimate the school district tax levy loss.
Article 2. The provision that would reduce a homeowner's time for filing a late homestead exemption would provide some undetermined savings to taxing units, because losses to late homestead exemptions would be reduced. There would also be an undetermined savings to taxing units, because refunds to late filing homestead owners would be reduced. The bill's provision concerning the correction of clerical errors would provide an undetermined amount of savings to taxing units by limiting non-homestead owner access to appraisal review board remedies for correcting clerical errors for any of the five years preceding the current tax year. The fiscal impact of the provisions that would modify the state payment schedule to school districts when a district's values were reduced would depend on the future behavior of school districts and the Commissioner of Education.
Relative to the bill's provision reducing a school district's deadline for requesting an audit under Section 403.302 of the Government Code, recent School District Property Value Study data indicate that approximately 60 percent of school district audits are requested in the first year following certification. A reduction in the filing period from three years to one year could result in approximately half of the remaining audits being filed within the proposed one-year period. An annual growth rate of 4 percent was applied to the amount of state savings and school district losses, as rising property values would result in larger audited values over the projected time period.
Article 4. The estimated fiscal impact was based on data from state franchise tax files and data from the Texas Workforce Commission.
Article 5. The fiscal implications of raising the sales tax rate to 6.5 percent and subsequently 6.75 percent the following year were estimated using current state sales and use tax revenue projections. The fiscal impact was adjusted for the two potential effective dates. The revenue gains for the State Highway Fund 6 reflect the increased sales tax revenue attributable to motor lubricants.
The fiscal implications of including school supplies in the sales tax holiday were estimated using data gathered from the U.S. Census Bureau. Texas sales of school supplies were adjusted for the appropriate time period and price range, multiplied by the sales tax rate, adjusted for the two potential effective dates, and extrapolated through fiscal 2010. The fiscal impact on units of local government were estimated proportionally.
The fiscal implications of creating a second sales tax holiday were estimated using data gathered from the U.S. Census Bureau. Texas sales of the affected items were adjusted for the appropriate time period and price range, multiplied by the sales tax rate, adjusted for the two potential effective dates, and extrapolated through fiscal 2010. The fiscal impacts on units of local government were estimated proportionally.
The estimated fiscal impact of the sales tax reimbursements was based on Health and Human Services Commission data on the number of persons projected to receive assistance under Chapters 31 and 33 and their income and dependent characteristics. Using projections of the current IRS table showing allowable state sales tax deductions by Federal Adjusted Gross Income and number of dependents, the total amount of state sales taxes paid each year from fiscal 2006 to fiscal 2010 by persons eligible for reimbursements under this bill was estimated to be on the order of $508 million to $568 million per year.
Note: ARTICLE 5 would require the Comptroller to estimate the amounts of reimbursable taxes no later than August 15 of each year and to provide those results as soon as possible to HHSC. In the event that this bill did not become effective until after that date in 2005, it was assumed, for the purposes of this fiscal note, that the Comptroller would nevertheless provide the required information to HHSC in time to allow the full amount of reimbursements, subject to the statutory cap, to be made in fiscal 2006 and each year thereafter. In addition, the $100 million cost to Fund 1 for the sales tax reimbursement assumes an appropriation of that amount would be made each year to HHSC.
The proposed motor vehicle sales tax rates were applied to estimates of annual gross sales subject to the motor vehicle sales tax and adjusted for behavioral effects. For the motor vehicle rental tax on rentals lasting more than 30 days, these long-term rentals represent approximately 5 percent of all rental tax revenue collected. The new rates were applied to estimates of adjusted gross rental tax and adjusted for behavioral effects. The presumptive value provisions would apply primarily to sales of motor vehicles between individuals, often referred to as "casual" or "private" sales. Even-exchanges or gifts of motor vehicles would be excluded. Estimated revenues for fiscal 2006 were adjusted for implementation lags.The fiscal implications of raising the boat and boat motor sales tax rate to 6.5 percent and subsequently 6.75 percent the following year were estimated using current boat tax revenue projections. The fiscal impact was adjusted for the two potential effective dates.
The motor fuel tax revenues in the 2006-07 Biennial Revenue Estimate were subjected to the new allocation patterns, as specified in the bill, to arrive at the fiscal impact.
Regarding the repeal of the exemption for permanent residents for the state hotel occupancy tax, it was estimated that 15 percent of exemptions were due to the permanent resident exemption. Because of the timing of remittance, the fiscal impact for fiscal 2006 reflects 7 months of collections. The potential local gains could not be estimated.
Article 6. The proposed cigarette, cigar and other tobacco products tax rate increases were estimated using current revenue projections for these taxes, adjusted for declines in taxable consumption in Texas, as well as for tax avoidance effects and collection lags.
The proposed alcoholic beverage tax rate increases were estimated using current revenue projections for these taxes, adjusted for declines in taxable consumption in Texas, as well as tax avoidance effects and collection lags. Note: As written, under this bill, counties and cities in which the taxpayers were located would receive increased allocations from the tax in accordance with current law—approximately 10.7 percent of increased collections to cities and a like amount to counties.
Article 7. The fiscal impact is based on the transfer amounts specified in the bill. Part A would result in an estimated minimum annual loss of investment income of $54 million to the state due to the differing investment authority of the new secondary dedicated accounts compared to the existing investment authority of the permanent funds. Additionally, the permanent funds must be invested in such a manner as to preserve the purchasing power of the fund. In this bill, there is no requirement that the purchasing power of the secondary accounts be preserved. Estimates of account earnings were based on a 3 percent money market rate whereas the investment gains for the permanent funds were based on an 8 percent growth rate. The general revenue supplement was estimated to be in excess of $55 million, based on the estimated earnings differential but less than the $65 million fiscal cap.
Note: The values used in this analysis (indicated in the bill) differ from the transfers that would be required in this article. In addition, these funds would only be available for certification to the extent that they were maintained in the Treasury Pool and on the condition that language were included in the 2006-07 General Appropriations Act (GAA) directing the transfer of balances in these dedicated accounts to Fund 1 pursuant to the provisions in Section 403.095(d) of the Government Code. Any movement of these funds would require a liquidation of investments that could possibly result in a loss in asset value, as well as a loss in investment earnings, related to the dedicated accounts. To the extent it should be necessary to liquidate the accounts, the general revenue loss would be the full $65 million per fiscal year as allowed by the bill.
Article 8. The fiscal impact from charitable bingo is based on data from private research organizations, level of play as a function of prize percentages, inflation effects, start-up timing considerations, and statutory playing hours. The estimate for fiscal 2006 assumes that electronic play would commence in early calendar 2006 and gradually build from there. Note: This estimate assumes that no further legal changes would be necessary to implement this article.
Note: This legislation would do one or more of the following: create or recreate a dedicated account in the General Revenue Fund, create or recreate a special or trust fund either with or outside of the Treasury, or create a dedicated revenue source. Legislative policy, implemented as Government Code 403.094, consolidated special funds (except those affected by constitutional, federal, or other restrictions) into the General Revenue Fund as of August 31, 1993 and eliminated all applicable statutory revenue dedications as of August 31, 1995. Each subsequent Legislature has reviewed bills that affect funds consolidation. The fund, account, or revenue dedication included in this bill would be subject to funds consolidation review by the current Legislature.
The Comptroller of Public Accounts estimates that positive dynamic fiscal impacts would result from this tax revision. Those impacts are not included in the tables above.
Not included in the above tables are administrative costs associated with implementing the provisions of the bill.
| Source Agencies: | 701 Central Education Agency, 304 Comptroller of Public Accounts, 307 Secretary of State, 320 Texas Workforce Commission, 362 Texas Lottery Commission
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| LBB Staff: | JOB, SD, WP
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