Honorable Morgan Meyer, Chair, House Committee on Ways & Means
FROM:
Jerry McGinty, Director, Legislative Budget Board
IN RE:
HB1502 by Deshotel (Relating to the extension of the expiration of certain parts of the Texas Economic Development Act.), As Introduced
Estimated Two-year Net Impact to General Revenue Related Funds for HB1502, As Introduced : a negative impact of ($222,208) through the biennium ending August 31, 2023.
However, the estimated cost to the Foundation School Program increases to ($190.7 million) in fiscal year 2031.
The bill would make no appropriation but could provide the legal basis for an appropriation of funds to implement the provisions of the bill.
General Revenue-Related Funds, Ten- Year Impact:
Fiscal Year
Probable Net Positive/(Negative) Impact to General Revenue Related Funds
2022
$0
2023
($222,208)
2024
($222,208)
2025
($695,869)
2026
($6,998,785)
2027
($27,953,082)
2028
($72,111,429)
2029
($109,446,174)
2030
($148,705,742)
2031
($190,949,734)
All Funds, Ten-Year Impact:
Fiscal Year
Probable Savings/(Cost) from General Revenue Fund 1
Probable Savings/(Cost) from Foundation School Fund 193
Probable Revenue Gain/(Loss) from School Districts LOCAL-SCHOOL
Change in Number of State Employees from FY 2021
2022
$0
$0
$0
0.0
2023
($222,208)
$0
$0
3.0
2024
($222,208)
$0
$0
3.0
2025
($222,208)
($473,661)
($2,600,000)
3.0
2026
($222,208)
($6,776,577)
($36,200,000)
3.0
2027
($222,208)
($27,730,874)
($155,900,000)
3.0
2028
($222,208)
($71,889,221)
($320,400,000)
3.0
2029
($222,208)
($109,223,966)
($507,600,000)
3.0
2030
($222,208)
($148,483,534)
($707,300,000)
3.0
2031
($222,208)
($190,727,526)
($938,200,000)
3.0
Fiscal Analysis
The bill would amend section 313.007 of the Tax Code to extend the expiration date of Subchapters B and C of Chapter 313 (Texas Economic Development Act) from December 31, 2022 to December 31, 2032.
The bill would take effect immediately upon enactment, assuming it received the requisite two-thirds majority votes in both houses of the Legislature. Otherwise the effective date of the bill is September 1, 2021.
Methodology
Subchapters B and C of Chapter 313 expire December 31, 2022. Extending the expiration of Subchapters B and C would allow ten additional years of Chapter 313 projects.
Annual "model classes" of future applicants to the Chapter 313 program were created from an analysis of project data, and application submitted between 2013 and 2020. Data collected from 509 Chapter 313 participants in 2020 indicates that the estimated lifetime gross tax benefit for the projects applying in 2015, 2016, 2017, 2018, and 2019 is as follows, respectively: $780 million, $948 million, $1 billion, $1.4 billion, and $1.9 billion. The class of 2023 represents the first year of applications under the bill. In an attempt to take into account the impact of the coronavirus pandemic on program participation on the estimated size of the first class of Chapter 313 applicants applying in 2023, the size of the estimated 2020, 2021, and 2022 model classes were reduced by about a third below what trendlines based on actual data would have indicated, and then trended according to historical growth rate.
The table estimates school district levy loss by year. Estimates of the lifetime gross tax benefit for each of the nine additional annual "model classes" after 2023 increase eight percent annually.
The estimated cost to the Foundation School Program is $0.5 million in fiscal year 2025, $6.8 million in fiscal year 2026, increasing to $190.7 million in fiscal year 2031.
To the extent that some projects would not locate in Texas "but for" the Chapter 313 program, the estimated local revenue reductions shown in the table may be lower and may not create a state cost through the Foundation School Program.
The Comptroller's office reports that the administrative costs to implement provisions of the bill would total $222,208 per year starting in fiscal year 2023. The administrative cost estimate reflects the funds that would be necessary to hire one Accounts Examiner III and two Program Specialist IVs beginning in fiscal year 2023 to handle the forecasted expansion of the program. Each application statutorily requires staff to perform an economic impact analysis, collect data, provide reports, certify the applicant, and audit job requirements.
Local Government Impact
The estimated fiscal implication to units of local government is reflected in the table above.
Estimated school levy losses in the years 2032 through 2049 due to the 10-year Chapter 313 program extension are approximately $27.1 billion.