TO:	Honorable Dan Patrick, Lieutenant Governor, Senate Honorable Joe Straus, Speaker of the House, House of Representatives
FROM:	Ursula Parks, Director, Legislative Budget Board
IN RE:	SB202 by Nelson (Relating to the transfer of certain occupational regulatory programs and the deregulation of certain activities and occupations.), Conference Committee Report

General Revenue-Related Funds, Five-Year Impact:

Fiscal Year	Probable Net Positive/(Negative) Impact to General Revenue Related Funds
2016	($4,168,917)
2017	($4,168,917)
2018	($5,433,305)
2019	($5,433,305)
2020	($5,433,305)

All Funds, Five-Year Impact:

Fiscal Analysis

The bill would partially implement the Sunset Advisory Commission recommendations concerning the Department of State Health Services (DSHS).

The bill would transfer 13 regulatory programs, in two phases, from DSHS to the Department of Licensing and Regulation (TDLR), reconstitute current independent boards existing for each program at DSHS as advisory committees at TDLR, and conform basic administrative processes to TDLR's current operational model (Article 1). 

The bill would transfer four regulatory programs from DSHS to the Texas Medical Board (TMB), create associated advisory committees and boards, and require fingerprint-based background checks. The bill requires TMB and DSHS to adopt a transition plan which must provide for the transfer of functions to be completed as soon as practicable after September 1, 2015 (Article 2).

The bill would discontinue from regulatory oversight eight programs currently under DSHS purview (Article 3).

The bill would take effect September 1, 2015, except for the transfer of six regulatory programs to TDLR, which would be effective September 1, 2017.

Methodology

There would be a net revenue loss to the state for two reasons: (1) the programs at DSHS currently raise more revenue than what is required at TDLR and TMB, and (2) there would be a reduction in fee revenue from programs whose oversight is discontinued. The details of the fiscal implication are as follows:

Article 1.  The analysis assumes a reduction of $873,289 and 13.8 FTEs per fiscal year at DSHS, beginning in fiscal year 2016, for phase 1 of the program transfers.  The analysis assumes a reduction of $2,017,233 and 31.1 FTEs per fiscal year at DSHS, beginning in fiscal year 2018, for phase 2 of the program transfers. The reduction in fee collections from these programs would result in a general revenue loss of $2,347,768 per fiscal year for the 2016-17 biennium, and $5,635,369 each year thereafter.  According to TDLR, the transfer of programs will increase the agency's total license population by 67,757. To respond to the increased workload, TDLR anticipates the need for an additional 31.5 FTEs with salaries totaling $1,738,214 in 2016 and 2017 for phase 1 and an additional 25.0 FTEs (56.5 total FTEs) in 2018 for phase 2 of the transfer with salaries totaling $2,917,822 each year.  The resulting net change in FTEs is 17.8 per fiscal year for the 2016-17 biennium, and 11.7 per fiscal year each year thereafter. The net increase in benefits and payroll contributions costs are estimated to be $370,383 per fiscal year for the 2016-17 biennium, and $354,402 each year thereafter. TDLR estimates one-time start-up costs of $230,445 for FTEs in fiscal year 2016 and $184,950 for FTEs in fiscal year 2018.  Additionally, TDLR's analysis assumes total rent, travel, and other operating expenses of $152,260 in fiscal years 2016 and 2017, and $285,873 in subsequent years. This analysis assumes that any increased cost to TDLR, which is statutorily required to generate sufficient revenue to cover its costs of operation, would be offset by an increase in fee generated revenue. 
 
Article 2.  The analysis assumes a reduction of $687,304 and 12.2 FTEs per fiscal year at DSHS.  The reduction in fee collections from these programs would result in a general revenue loss of $2,024,837 per fiscal year. The transfer of programs to TMB will increase the agency's total licensee population by 44,000.  The agency also anticipates an additional 450 investigations and an additional 75 enforcement cases per year. To respond to the increased workload, TMB anticipates the need for an additional 29.0 full-time equivalents (FTEs), with salaries totaling $1,520,642 each fiscal year. The resulting net change in FTEs is 16.8 per fiscal year.  The net increase in benefits and payroll contributions costs are estimated to be $353,291 per fiscal year. TMB estimates one-time start-up costs of $71,630 for FTEs in fiscal year 2016 only.  TMB's analysis assumes $16,875 each year in increased costs for expert witness testimony in standard of care reviews involving radiologic technicians and respiratory care practitioners and $31,800 each fiscal year for per diem and travel reimbursement for advisory board and advisory committee members. TMB's analysis includes $430,000 in fiscal year 2016 only for additional workspace for 29.0 FTEs, in line with estimates from the Texas Facilities Commission. This analysis assumes that any increased costs to the Texas Medical Board, which is statutorily required to generate sufficient revenue to cover its costs of operation, would be offset by an increase in fee generated revenue.

Article 3.  The discontinuation of regulatory oversight over 8 programs assumes a savings of $1,013,789 in general revenue and a reduction of 12.5 FTEs per fiscal year.  The reduction in fee collections from these programs would result in a general revenue loss of $1,647,020 per fiscal year.

Technology

TDLR anticipates $993,000 in one time start-up costs for the purchase of information technology related to data centers and server costs for database transfers in fiscal year 2016. These information technology purchases will also require $526,000 in yearly maintenance and support starting in fiscal year 2016. Additionally, TDLRs analysis assumes FTE start-up costs of $63,180 in fiscal year 2016 (31.5 FTEs @ $2,005 per FTE) and $52,200 in fiscal year 2018 (25 FTEs @ $2,088 per FTE) for computer purchases. 

TMB anticipates $71,630 in one-time start-up costs including the purchase of information technology in fiscal year 2016 only (29.0 FTEs @ $2,470 per FTE).

Local Government Impact

No fiscal implication to units of local government is anticipated.