LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE, 85TH LEGISLATIVE REGULAR SESSION April 14, 2017 TO: Honorable John Zerwas, Chair, House Committee on Appropriations FROM: Ursula Parks, Director, Legislative Budget Board IN RE:HB855 by Capriglione (Relating to the investment of a portion of the economic stabilization fund balance.), As Introduced Estimated Two-year Net Impact to General Revenue Related Funds for HB855, As Introduced: an impact of $0 through the biennium ending August 31, 2019. However there will be a net revenue gain of $82,175,000 to the Economic Stabilization Fund through the biennium ending August 31, 2019.
LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE, 85TH LEGISLATIVE REGULAR SESSION
April 14, 2017
TO: Honorable John Zerwas, Chair, House Committee on Appropriations FROM: Ursula Parks, Director, Legislative Budget Board IN RE:HB855 by Capriglione (Relating to the investment of a portion of the economic stabilization fund balance.), As Introduced
TO: Honorable John Zerwas, Chair, House Committee on Appropriations
FROM: Ursula Parks, Director, Legislative Budget Board
IN RE: HB855 by Capriglione (Relating to the investment of a portion of the economic stabilization fund balance.), As Introduced
Honorable John Zerwas, Chair, House Committee on Appropriations
Honorable John Zerwas, Chair, House Committee on Appropriations
Ursula Parks, Director, Legislative Budget Board
Ursula Parks, Director, Legislative Budget Board
HB855 by Capriglione (Relating to the investment of a portion of the economic stabilization fund balance.), As Introduced
HB855 by Capriglione (Relating to the investment of a portion of the economic stabilization fund balance.), As Introduced
Estimated Two-year Net Impact to General Revenue Related Funds for HB855, As Introduced: an impact of $0 through the biennium ending August 31, 2019. However there will be a net revenue gain of $82,175,000 to the Economic Stabilization Fund through the biennium ending August 31, 2019.
Estimated Two-year Net Impact to General Revenue Related Funds for HB855, As Introduced: an impact of $0 through the biennium ending August 31, 2019. However there will be a net revenue gain of $82,175,000 to the Economic Stabilization Fund through the biennium ending August 31, 2019.
General Revenue-Related Funds, Five-Year Impact: Fiscal Year Probable Net Positive/(Negative) Impact to General Revenue Related Funds 2018 $0 2019 $0 2020 $0 2021 $0 2022 $0
2018 $0
2019 $0
2020 $0
2021 $0
2022 $0
All Funds, Five-Year Impact: Fiscal Year Probable Revenue (Loss) fromEconomic Stabilization Fund - Cash Balance599 Probable Revenue Gain fromEconomic Stabilization Fund - TESTIF599 2018 ($20,188,000) $60,144,000 2019 ($39,750,000) $81,969,000 2020 ($57,380,000) $114,522,000 2021 ($63,292,000) $129,346,000 2022 ($69,813,128) $146,088,854
Fiscal Year Probable Revenue (Loss) fromEconomic Stabilization Fund - Cash Balance599 Probable Revenue Gain fromEconomic Stabilization Fund - TESTIF599 2018 ($20,188,000) $60,144,000 2019 ($39,750,000) $81,969,000 2020 ($57,380,000) $114,522,000 2021 ($63,292,000) $129,346,000 2022 ($69,813,128) $146,088,854
2018 ($20,188,000) $60,144,000
2019 ($39,750,000) $81,969,000
2020 ($57,380,000) $114,522,000
2021 ($63,292,000) $129,346,000
2022 ($69,813,128) $146,088,854
Fiscal Analysis
The bill would amend Subchapter C, Chapter 404, of the Government Code, regarding state treasury operations, state depositories and investment of state funds, to amend Section 404.0241, regarding investment of certain Economic Stabilization Fund (ESF) balances. The bill would determine the ESF balance that may be invested under the prudent investor standard as the share of the ESF balance that exceeds 30 percent of the maximum authorized balance of the fund for the applicable state fiscal biennium as prescribed by Section 49-g(g), Article III, of the Texas Constitution. The investment of the excess balance would not be subject to any other limitation or requirement in Section 404.0241 of the Government Code. The Comptroller would adjust the ESF investment portfolio periodically to ensure that the only the balance of the fund that exceeds the threshold established by the bill is invested in accordance with prudent investor standard. The bill would repeal Government Code Subsections 404.0241(c), regarding including fair market value of the ESF investment portfolio in calculating the fund's total value, and (d), regarding the expiration of Section 404.0241 of the Government Code.The bill would take effect September 1, 2017.
Methodology
The Comptroller is currently authorized, through the Texas Treasury Safekeeping Trust Company, to invest ESF funds in accordance with the prudent investor standard. The fiscal impact analysis was based on the 2018-19 Biennial Revenue Estimate. Additional amounts that would be invested in accordance with the prudent investor standard were based on the estimated maximum authorized balance of the ESF of $16.9 billion in the 2018-19 biennium and $16.7 billion in the 2020-21 biennium.Placing balances from the fund into higher returning instruments would entail increased investment risk, assuming circumstances could occur such that these investments would be sold at a loss if immediate access were required to meet temporary cash flow or emergency needs at a time when the market value was below book value (the value of the initial investment). Thus, they should not be considered to be as liquid as assets held in the Treasury Pool. Potential realized losses or gains would depend on the level of risk taken to achieve higher returns. The bill would have some negative impact on the state's cash flow. The available ESF cash balance in the state Treasury available for interfund borrowing for cash flow needs would be decreased.
Local Government Impact
No fiscal implication to units of local government is anticipated.
Source Agencies: 304 Comptroller of Public Accounts
304 Comptroller of Public Accounts
LBB Staff: UP, KK, SD
UP, KK, SD