Honorable Dennis Bonnen, Chair, House Committee on Ways & Means
FROM:
Ursula Parks, Director, Legislative Budget Board
IN RE:
HB1003 by Davis, Yvonne (Relating to the periodic evaluation of certain exemptions from property taxes and state taxes and the application of the sunset review process to those exemptions.), As Introduced
Estimated Two-year Net Impact to General Revenue Related Funds for HB1003, As Introduced: a negative impact of ($271,500) through the biennium ending August 31, 2017.
The bill would make no appropriation but could provide the legal basis for an appropriation of funds to implement the provisions of the bill.
Fiscal Year
Probable Net Positive/(Negative) Impact to General Revenue Related Funds
2016
($271,500)
2017
$0
2018
($271,500)
2019
$0
2020
($271,500)
Fiscal Year
Probable Savings/(Cost) from General Revenue Fund 1
2016
($271,500)
2017
$0
2018
($271,500)
2019
$0
2020
($271,500)
Fiscal Analysis
The bill would amend the Government and Tax Codes to require the Sunset Advisory Commission (SAC) to review certain exemptions from property taxes and state taxes. The SAC would be required to periodically evaluate each exemption required under the provisions of the bill. The bill would require the reviews to be conducted according to a schedule adopted by the SAC on or before January 1, 2016, and that each tax exemption be evaluated at an interval not to exceed six years. The bill would also require SAC to evaluate each exemption's effect on revenue received from taxes; the entities that receive the exemption; sales of property, goods, and services; and economic investment and growth. The SAC would be required to make recommendations for retaining or repealing each of the exemptions, issue a report, and provide drafts of legislation to implement each recommendation.
The bill would amend the Tax Code to require that any Tax Code exemptions evaluated by the SAC under the provisions of this bill be repealed on December 31st of the year the SAC presents its evaluation, unless the Legislature retains the exemption.
The bill would take effect immediately upon receiving a two-thirds majority vote in both houses; otherwise, the bill would take effect September 1, 2015.
Methodology
This analysis is based on costs realized by the SAC for the 2012-13 special purpose review of the Port of Houston Authority. Based on that information, it is assumed that costs of $11,075 would be realized per analyst assigned to a review team for each month required to conduct a review. This amount includes the costs for salaries, benefits, and other operating costs necessary for staff to conduct these reviews.
Costs to contract for economic expertise not currently available from SAC staff were determined based on Bureau of Labor Statistics data. For the purposes of this analysis, it is assumed that an average of 25 hours per month at a cost of $194 per hour would be necessary to pay for professional services for each tax exemption review conducted each biennium.
The SAC assumes that reviews would be completed during the first year of each biennium and that there would be no costs realized related to the requirements of the bill during the second year of each biennium. The SAC estimates costs of $221,500 for two full-time staff to perform a ten-month review and $50,000 in funds to contract for economic expertise would be incurred during fiscal year 2016 to review and make recommendations related to tax exemptions. It is assumed these costs would continue each biennium as long as the provisions of the bill remain in effect.
Local Government Impact
No fiscal implication to units of local government is anticipated.
Source Agencies:
116 Sunset Advisory Commission, 304 Comptroller of Public Accounts