LEGISLATIVE BUDGET BOARD

Austin, Texas

FISCAL NOTE, 84TH LEGISLATIVE REGULAR SESSION

April 6, 2015

TO:	Honorable René Oliveira, Chair, House Committee on Business & Industry
FROM:	Ursula Parks, Director, Legislative Budget Board
IN RE:	HB1590 by Thompson, Senfronia (Relating to the minimum wage.), As Introduced

The fiscal implications of the bill are indeterminate but costs associated with the bill could be significant. The impact would largely be related to increased costs associated with employees who work for contracted entities. Several state agencies were surveyed about the impact of this legislation and examples are discussed below. Assuming current contracts and practices remain in place, costs associated with the bill could range from $105 million to $115 million in General Revenue Funds through the biennium ending August 31, 2017.

The bill would require employers in the state to pay employees the greater of the federal minimum wage (currently $7.25 per hour for non-exempt employees) or $8.25 per hour. The bill would take effect January 1, 2016.

According to analysis by the Legislative Budget Board (LBB) staff and the Texas Comptroller of Public Accounts (CPA), a small number of state employees make less than $8.25 per hour. The cost of paying these employees $8.25 per hour would not be fiscally significant.

CPA and LBB did not have access to complete wage and salary information for agencies of higher education. Assuming a distribution of employee wages that is similar to the distribution among state agencies, the cost for higher education agencies could also not be significant. However, the cost to institutions could be higher if their proportion of workers earning less that $8.25 per hour was greater than the proportion earning less than that rate at state agencies.

Some state and higher education agencies have contracted with entities that employ staff who currently are paid below $8.25 per hour. In some cases, the cost of raising these workers' wages to the rate required by the bill would be substantial. For example, according to the Health and Human Services Commission (HHSC), provider reimbursement rates for services to program clients would be impacted by wage increases. HHSC estimates that the cost of the bill to HHSC, The Department of Aging and Disability Services, and the Department of State Health Services would be approximately $51 million in General Revenue Funds and $68 million in Federal Funds in fiscal year 2016.

As another example, the Texas Department of Transportation (TXDOT) contracts with entities as part of its routine maintenance contract. Currently, routine maintenance workers are paid the federal minimum wage of $7.25 per hour. By raising costs associated with these employees, TXDOT estimates that the bill would result in a cost of $38 million in Other Funds in fiscal year 2016. This estimate assumed an effective date of September 1, 2015. Based on an effective date of January 1, 2016, the cost in fiscal year 2016 would be $12.7 million in All Funds.

Local Government Impact

For local government entities, costs to implement the bill would depend on the current minimum wage of the local government and the number of employees of the local government currently earning a wage below the greater of the federal minimum wage or $8.25 per hour.

Source Agencies:

303 Facilities Commission, 304 Comptroller of Public Accounts, 320 Texas Workforce Commission, 323 Teacher Retirement System, 405 Department of Public Safety, 529 Health and Human Services Commission, 601 Department of Transportation, 696 Department of Criminal Justice, 710 Texas A&M University System Administrative and General Offices, 720 The University of Texas System Administration, 758 Texas State University System, 768 Texas Tech University System Administration, 783 University of Houston System Administration, 802 Parks and Wildlife Department

LBB Staff:

UP, CL, JJ, THo, KVe