Honorable Joan Huffman, Chair, Senate Committee on State Affairs
John McGeady, Assistant Director Sarah Keyton, Assistant Director Legislative Budget Board
SB21 by Huffman (Relating to the distribution, possession, purchase, consumption, and receipt of cigarettes, e-cigarettes, and tobacco products.), As Introduced
Estimated Two-year Net Impact to General Revenue Related Funds for SB21, As Introduced: a negative impact of ($5,116,109) through the biennium ending August 31, 2021.
Additionally, the bill will have a direct impact of a revenue loss to the Property Tax Relief Fund of ($3,370,000) for the 2020-21 biennium. Any loss to the Property Tax Relief Fund must be made up with an equal amount of General Revenue to fund the Foundation School Program.
Probable Net Positive/(Negative) Impact to General Revenue Related Funds
Probable Revenue Gain/(Loss) from General Revenue Fund 1
Probable Savings/(Cost) from GR Match For Medicaid 758
Probable Savings/(Cost) from Federal Funds 555
Probable Revenue Gain/(Loss) from Property Tax Relief Fund 304
Probable Revenue Gain/(Loss) from Cities
Probable Revenue Gain/(Loss) from Transit Authorities
Probable Revenue Gain/(Loss) from Counties & Special Districts
The bill would amend Subchapter H of Chapter 161 of the Health and Safety Code, regarding public health provisions, to increase the legal age for the sale, distribution, possession, purchase, consumption, or receipt of cigarettes, e-cigarettes, or tobacco products from age 18 to age 21. Individuals aged 18 and over on the effective date of the bill would be exempt from the new age requirement. The bill would remove the provision allowing minors to have tobacco products in the presence of parents, guardians, or a spouse. The bill would require valid proof of identification for persons younger than 30 years of age, rather than 27 years of age as under current law. The bill would exclude certain products approved by the U.S. Food and Drug Administration for the treatment of nicotine or smoking addiction from the provisions of Subchapter H.
The bill would make conforming changes elsewhere in Chapter 161.
The bill would repeal Health and Safety Code Sections 161.083(a-1), regarding the providing of e-cigarettes to a person younger than 27 years of age, and 161.455, regarding cigarette and e-cigarette shipping requirements.
The bill would take effect September 1, 2019.
The fiscal impact on Texas tobacco tax revenue was based on the 2020-21 Biennial Revenue Estimate. The reduction in the use of cigarettes, snuff, cigars, and other tobacco products by some Texans under the age of 21 would lead to reduced revenue deposits to the General Revenue Fund 0001 and the Property Tax Relief Fund 0304. Revenue to the General Revenue Fund would decrease by $2,054,000 in fiscal year 2020, $3,379,000 in fiscal year 2021, $4,190,000 in fiscal year 2022, $4,985,000 in fiscal year 2023, and $4,735,000 in fiscal year 2024. Revenue to the Property Tax Relief Fund would decrease by $1,220,000 in fiscal year 2020, $2,150,000 in fiscal year 2021, $2,530,000 in fiscal year 2022, $3,150,000 in fiscal year 2023, and $2,800,000 in fiscal year 2024.
The reduction in the use of all products for which the age requirement is raised would lead to reduced sales tax revenue to Fund 0001, cities, transit authorities, counties, and special districts. Revenue for cities would decrease by $100,000 in fiscal year 2020, $180,000 in fiscal year 2021, $220,000 in fiscal year 2022, $280,000 in fiscal year 2023, and $260,000 in fiscal year 2024. Revenue to transit authorities would decrease by $40,000 in fiscal year 2020, $60,000 in fiscal year 2021, $80,000 in fiscal year 2022, and $90,000 in fiscal years 2023 and 2024. Revenue for counties and special districts would decrease by $20,000 in fiscal year 2020, $40,000 in fiscal years 2021 and 2022, $60,000 in fiscal year 2023, and $50,000 in fiscal year 2024.
With a reduction in the use of tobacco products, there would be a savings to the state resulting from reduced health care costs. The estimates on savings were based on the Medicaid Cost Savings Due to Raising the Minimum Legal Age for Purchasing Tobacco Products in Texas report produced by the Health and Human Services Commission (HHSC), as required by Rider 54 of HHSC's bill pattern, 2018-19 General Appropriations Act. The report showed an increase in the minimum legal age of tobacco purchases may lead to a decrease in adverse birth outcomes (primarily preterm and/or low birthweight births) for persons served by the Medicaid program, which may result in cost savings. The estimated savings to General Revenue Match for Medicaid No. 758 would be $96,362 in fiscal year 2020, $220,529 in fiscal year 2021, $418,809 in fiscal year 2022, $630,177 in fiscal year 2023, and $906,044 in fiscal year 2024. The savings to Federal Funds would be $148,648 in fiscal year 2020, $343,339 in fiscal year 2021, $652,041 in fiscal year 2022, $981,117 in fiscal year 2023, and $1,410,612 in fiscal year 2024. Savings may be overstated because the report did not consider the impact of exempting individuals aged 18 and over on the effective date of the bill from the new minimum legal age; however, the reduction to savings would be expected to be minimal. Additional significant long-term savings to Medicaid would be anticipated beyond fiscal year 2024 due to reductions in chronic diseases attributable to smoking.
Local Government Impact
There would be a corresponding amount of sales tax revenue loss from local taxing jurisdictions. Those revenue losses are displayed in the above tables.
Selling, giving, or causing to be sold or given a cigarette, e-cigarette, or tobacco product to someone under the minimum legal age is a Class C misdemeanor. A Class C misdemeanor is punishable by a fine of not more than $500. In addition to the fine, punishment can include up to 180 days of deferred disposition. Costs associated with enforcement and prosecution could likely be absorbed within existing resources. Revenue gain from fines imposed and collected is not anticipated to have a significant fiscal impact.
304 Comptroller of Public Accounts, 529 Health and Human Services Commission, 537 State Health Services, Department of