Honorable Jane Nelson, Chair, Senate Committee on Finance
FROM:
John McGeady, Assistant Director Sarah Keyton, Assistant Director Legislative Budget Board
IN RE:
SJR21 by Seliger (Proposing a constitutional amendment to provide for foregoing the transfer of oil and gas production tax revenue to the economic stabilization fund if the ending fund balance for the preceding fiscal year is greater than 10 percent of the prior fiscal year's total net general revenue related collections and for reducing the rates of oil and gas production taxes by amounts sufficient to equal the foregone transfer.), As Introduced
Estimated Two-year Net Impact to General Revenue Related Funds for SJR21, As Introduced: an impact of $0 through the biennium ending August 31, 2021.
However, there would be a negative impact of ($428,498,000) to General Revenue Related Funds through the biennium ending August 31, 2023. In addition there would be a negative impact to the Economic Stabilization Fund of ($6,006,000) through the biennium ending August 31, 2021 and ($3,895,741,000) through the biennium ending August 31, 2023.
Fiscal Year
Probable Net Positive/(Negative) Impact to General Revenue Related Funds
2020
$0
2021
$0
2022
$0
2023
($428,498,000)
2024
($516,230,000)
Fiscal Year
Probable Savings from General Revenue Fund 1
Probable Revenue (Loss) from General Revenue Fund 1
Probable Revenue (Loss) from Foundation School Fund 193
Probable Revenue (Loss) from Economic Stabilization Fund 599
2020
$0
$0
$0
($2,277,000)
2021
$0
$0
$0
($3,729,000)
2022
$0
$0
$0
($1,748,478,000)
2023
$1,285,494,000
($1,285,494,000)
($428,498,000)
($2,147,263,000)
2024
$1,548,690,000
($1,548,690,000)
($516,230,000)
($2,366,974,000)
Fiscal Year
Probable Revenue (Loss) from State Highway Fund 6
2020
$0
2021
$0
2022
$0
2023
$0
2024
($642,747,000)
Fiscal Analysis
The joint resolution would amend Section 49-g, Article III, of the Texas Constitution, regarding the transfer of oil and natural gas production tax revenues to the Economic Stabilization Fund (ESF) and the reduction of the rates of oil and natural gas production taxes.
The resolution would require that beginning in fiscal 2022, if the ending balance in the ESF is less than 10 percent of the prior fiscal year's total net general revenue related collections, oil and gas production tax rates and the transfer to the ESF would remain the same as provided by the Legislature under general law during the current fiscal year.
If the ending balance in the ESF is greater than 10 percent of the prior fiscal year's total net general revenue related collections, the amount that would have been transferred to the ESF would be set aside and the oil and natural gas production tax rates for the current fiscal year would be adjusted downward to reduce the estimated tax revenues by amounts equal to the foregone transfer amounts in the preceding fiscal year.
The Comptroller would publish the tax rates by the 90th day of the current fiscal year.
This proposed constitutional amendment would be submitted to voters at an election to be held on November 5, 2019. If approved, it would take effect January 1, 2020 and apply to oil and gas production taxes imposed beginning fiscal 2021.
Methodology
The fiscal impact analysis is based on the Comptroller's 2020-21 Biennial Revenue Estimate. Assuming no further appropriations beyond current law, transfers to the ESF would cease in fiscal 2022. The new tax rates would affect the General Revenue Fund and GR Account - Foundation School in 2023, and the State Highway Fund (SHF) in 2024. Set asides would begin in fiscal 2022. In addition to the foregone transfers, there would be net losses to the ESF from interest and investment earnings. Losses to the ESF in fiscal 2020 result from reduced amounts in the invested portion of the fund in preparation for elimination of the investment portfolio in fiscal 2021.
The proposed amendment stipulates that beginning in fiscal 2022 the Comptroller "shall not transfer any amount collected from oil production tax or gas production tax to the economic stabilization fund" in years in which the ending balance of the ESF in the preceding fiscal year exceeded 10 percent of the prior fiscal year's total net general revenue related collections. Section 49-g (c), Article III of the Texas Constitution, however, directs the Comptroller to transfer from the General Revenue Fund to the ESF amounts equal to certain collections of oil and natural gas production taxes. For purposes of this fiscal note, it is assumed that the proposed amendment will have the effect of eliminating transfers to the ESF in years in which the ESF ending balance in the preceding fiscal year exceeded 10 percent of the prior fiscal year's total net general revenue related collections.
The enabling legislation, SB 214, would remove the ESF sufficient balance requirement and the investment requirement of a portion of the ESF. Losses of investment earnings from SB 214 are included in the fiscal impact analysis.
Note: "General revenue related" is not a term defined in law, but a usage of the Legislative Budget Board and the Comptroller of Public Accounts. General revenue related (GR-R) funds include the General Revenue (GR) Fund, the Available School Fund, the State Technology and Instructional Materials Fund, the Foundation School Account and the Tobacco Settlement Account.
Local Government Impact
No fiscal implication to units of local government is anticipated.