Honorable Kelly Hancock, Chair, Senate Committee on Business & Commerce
FROM:
Ursula Parks, Director, Legislative Budget Board
IN RE:
SB1499 by Zaffirini (Relating to the regulation of for-profit legal service contract companies.), Committee Report 1st House, Substituted
Estimated Two-year Net Impact to General Revenue Related Funds for SB1499, Committee Report 1st House, Substituted: an impact of $0 through the biennium ending August 31, 2019. However, the bill would result in a net negative impact to General Revenue of ($1,166,958) in 2020 increasing in subsequent years. This legislation will not take effect unless the 85th Legislature makes an appropriation for its implementation.
Fiscal Year
Probable Net Positive/(Negative) Impact to General Revenue Related Funds
2018
$0
2019
$0
2020
($1,166,958)
2021
($1,278,937)
2022
($1,400,882)
Fiscal Year
Probable Revenue Gain/(Loss) from General Revenue Fund 1
Probable Savings/(Cost) from General Revenue Fund 1
Change in Number of State Employees from FY 2017
2018
$0
$0
0.0
2019
$0
$0
0.0
2020
($1,258,190)
$91,232
(1.5)
2021
($1,370,169)
$91,232
(1.5)
2022
($1,492,114)
$91,232
(1.5)
Fiscal Analysis
The bill would amend Chapter 953 of the Occupations Code and remove for-profit legal service contracts from regulation by the State.
The bill states that the Act will not take effect unless there is a specific appropriation provided for the implementation in the general appropriations act of the Eighty-fifth Legislature.
The bill would take effect September 1, 2019.
Methodology
The deregulation of this industry would result in a loss of revenue to the State beginning in fiscal year 2020. Companies, administrators and sales representatives pay fees for new and renewal applications, which would no longer be collected. Additionally, each company currently pays an annual fee to the Department of Licensing and Regulation (TDLR) equal to 1.7% of the amount a company collected from legal service contracts sold in Texas in the current year minus the amount the company paid to the state in franchise taxes in the same year. According to analysis by TDLR, the revenue from these fees has increased annually at an approximate rate of 8.9% and it was assumed this growth would continue.
Based on information provided by TDLR and the Comptroller of Public Accounts (CPA), the CPA estimates a loss in revenue to the General Revenue Fund of approximately $1.3 million in fiscal year 2020 and increasing to $1.5 million by fiscal year 2022. Approximately 1.5 FTEs across TDLR regulate this industry and would be reduced upon deregulation, resulting in an annual savings to General Revenue of $91,232 in salaries and associated personnel expenses in fiscal year 2020 and beyond.
According to the Texas Department of Insurance (TDI), should these entities no longer be subject to state regulation due to the provisions of this bill, TDI would no longer assess a maintenance tax for these entities as directed in Texas Insurance Code Chapter 260. Based on information provided by TDI, duties and responsibilities associated with implementing the provisions of the bill could be accomplished by utilizing existing resources and the provisions of the bill would not have a significant impact on maintenance tax revenue collections.
Based on the analysis of the Office of the Attorney General, duties and responsibilities associated with implementing the provisions of the bill could be accomplished by utilizing existing resources.
This analysis indicates an appropriation is not necessary to implement the provisions of the bill, as it would decrease the work of the agency and result in a revenue loss.
Local Government Impact
No fiscal implication to units of local government is anticipated.
Source Agencies:
304 Comptroller of Public Accounts, 452 Department of Licensing and Regulation, 454 Department of Insurance, 302 Office of the Attorney General