Honorable Charles Schwertner, Chair, Senate Committee on Business & Commerce
FROM:
Jerry McGinty, Director, Legislative Budget Board
IN RE:
SB1217 by Middleton (relating to the Texas Windstorm Insurance Association.), Committee Report 1st House, Substituted
Estimated Two-year Net Impact to General Revenue Related Funds for SB1217, Committee Report 1st House, Substituted : a negative impact of ($15,994,000) through the biennium ending August 31, 2025.
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, Five- Year Impact:
Fiscal Year
Probable Net Positive/(Negative) Impact to General Revenue Related Funds
2024
($8,015,000)
2025
($7,979,000)
2026
($8,216,000)
2027
($8,595,000)
2028
($8,971,000)
All Funds, Five-Year Impact:
Fiscal Year
Probable Revenue Gain/(Loss) from General Revenue Fund 1
Probable Revenue Gain/(Loss) from Foundation School Fund 193
2024
($6,011,000)
($2,004,000)
2025
($5,984,000)
($1,995,000)
2026
($6,162,000)
($2,054,000)
2027
($6,446,000)
($2,149,000)
2028
($6,728,000)
($2,243,000)
Fiscal Analysis
The bill would amend the Insurance Code to require the Texas Windstorm Insurance Association (TWIA) to adjust various aspects of administration and operations of the organization, including adding the Public Insurance Counsel to the nine-member board. The bill would exempt TWIA from the insurance premium tax or insurance maintenance tax or fee. 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 bill would take effect September 1, 2023.
Methodology
Certain insurance premiums in this state are subject to an insurance premium tax rate (1.6%) written in a given calendar year. According to the Comptroller of Public Accounts (CPA), based on information from the Texas Department of Insurance (TDI) and Texas Windstorm Insurance Association (TWIA), estimated TWIA premiums written in calendar year 2022 were $521,191,000. Under current law, those premiums are subject to the insurance premium tax and have an estimated premium tax liability of $8,339,000 in fiscal 2023.
Starting in calendar year 2023, this bill would remove the premium insurance tax placed upon TWIA premiums written in this state, impacting anticipated premium tax liabilities in fiscal year 2024. Additionally, insurance premium taxes are allocated 75 percent to General Revenue Fund 0001 and 25 percent to Account 0193 – Foundation School Fund. This analysis assumes that the amount of TWIA premiums written would increase at the rate of growth of the median home price. Therefore, based on this assumption, the total revenue loss is estimated to be $15,994,000; $11,995,000 in General Revenue and $3,999,000 in General Revenue Account - School Foundation Fund 0193 for the 2024-25 biennium.
Based on this analysis of the Department of Insurance (TDI) and the Office of Public Insurance Counsel, any duties and responsibilities associated with implementing the provisions of the bill could be accomplished by utilizing existing agency resources. Additionally, the provisions of the bill relating the the Insurance Maintenance Tax would have no effect on aggregate maintenance tax collections as the TDI sets the maintenance tax liability in amounts sufficient to fund operations.
Local Government Impact
No significant fiscal implication to units of local government is anticipated.
Source Agencies:
304 Comptroller of Public Accounts, 359 Office of Public Insurance Counsel, 454 Department of Insurance