Honorable Brooks Landgraf, Chair, House Committee on Environmental Regulation
FROM:
Jerry McGinty, Director, Legislative Budget Board
IN RE:
HB3913 by Morales Shaw (relating to the disposition and use of the state's portion of civil penalties recovered in suits brought by local governments for violations of certain laws under the jurisdiction of, or rules adopted or orders or permits issued by, the Texas Commission on Environmental Quality.), Committee Report 1st House, Substituted
Estimated Two-year Net Impact to General Revenue Related Funds for HB3913, Committee Report 1st House, Substituted : a negative impact of ($1,652,000) 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
($826,000)
2025
($826,000)
2026
($826,000)
2027
($826,000)
2028
($826,000)
All Funds, Five-Year Impact:
Fiscal Year
Probable Revenue Gain/(Loss) from General Revenue Fund 1
Probable Revenue Gain/(Loss) from New Other Fund - Special Environmental Remediation Fund
2024
($826,000)
$826,000
2025
($826,000)
$826,000
2026
($826,000)
$826,000
2027
($826,000)
$826,000
2028
($826,000)
$826,000
Fiscal Analysis
The bill would amend the Water Code to create the new Special Environmental Remediation Fund to be administered by the Texas Commission on Environmental Quality (TCEQ). The Environmental Remediation Fund is a fund within the treasury outside the General Revenue Fund. The bill would create a new program to expend the funds deposited to the account and would require that fund may only be used for environmental remediation projects.
The bill would require that TCEQ adopt specific rules to implement the program including eligibility criteria, grant application procedures, guidelines for grant amounts, and procedures for monitoring the use of grant funding.
The bill would require the state's portion of certain civil penalties under Section 7.107 of the Water Code, collected for wastewater violations, to be deposited into this account.
Methodology
The bill would transfer the deposit of revenue collected from certain civil penalties recovered from specific lawsuits brought by local governments that are currently deposited to the General Revenue Fund to the Environmental Remediation Fund. Based on information provided by the Comptroller of Public Accounts (CPA) and TCEQ, this analysis assumes that the amount of revenue collected would not be affected by the provisions of the bill.
Under the provisions of the bill, the Environmental Remediation Fund would receive half all funds recovered from the lawsuits brought by local governments. Based on information provided by TCEQ and the CPA, in fiscal year 2022 the civil judgments issued from applicable cases totaled $3,304,318 resulting in the state collecting $1,652,159 in revenue. The table above reflects an increase in funding that would be allocated to the Environmental Remediation Fund with a resulting equivalent decrease in General Revenue.
This analysis assumes that costs to the Environmental Remediation Fund for qualifying environmental projects cannot be determined because the definition of a qualifying environmental project has not been set by TCEQ and thus the number of eligible projects and the timing and funding for any eligible projects is unknown.
Based on information provided by TCEQ, it is assumed that any costs associated with implementing the provisions of this bill could be absorbed using existing resources.
There would be effects on the Economic Stabilization Fund (ESF) balance limit and consequent effects for General Revenue reserves and transfers to ESF. Because pertinent tax revenue is initially deposited to the General Revenue Fund, the reduction in tax revenue in the 2024-25 biennium would reduce the 2026-27 ESF balance limit by 10 percent of the reduction in tax, reducing 2025 severance tax reserves for transfer to the ESF by the amount of the balance limit reduction and increasing available General Revenue in 2025 by the amount of reduction of the reserves; however, that amount is not expected to be significant.
This legislation would do one or more of the following: create or recreate a dedicated account in the General Revenue Fund, create or recreate a special or trust fund either with or outside of the Treasury, or create a dedicated revenue source. The fund, account, or revenue dedication included in this bill would be subject to funds consolidation review by the current Legislature.
Local Government Impact
No significant fiscal implication to units of local government is anticipated.
Source Agencies:
302 Office of the Attorney General, 304 Comptroller of Public Accounts, 582 Commission on Environmental Quality