by Andrew Walden
Hawaii is the only state which does not mandate “fiscal notes” be attached to legislation introduced in the House or Senate. It is not easy to find fiscal notes advocacy material because all other states have required fiscal notes for years. For instance Texas enacted Fiscal Notes in 1985. Fiscal notes provide a non-partisan estimate of a bill’s cost or benefit to the state budget. Without Fiscal Notes, Legislators are just guessing.
Along with Fiscal Notes, the Texas legislature authorizes “Economic Impact Statements” be drawn up to determine the economic cost or benefit of any given bill. In Hawaii, one must get an Environmental Impact Statement to tie a barge to a dock, but no Economic Impact Statement is even conceived of, much less required. The results are around for all to see.
For your reading pleasure, here is how Fiscal Notes work, excerpted from the text of the Texas Legislative Budget Board’s Guide to Fiscal Notes.
* * * * *
Fiscal note definition
A fiscal note is a written estimate of the costs, savings, revenue gain, or revenue loss that may result from implementation of a bill or joint resolution. It serves as a tool to help legislators better understand how a bill might impact the state budget as a whole, individual agencies, and in some instances, local governments. The Legislative Budget Board (LBB) does not prepare fiscal notes for simple or concurrent resolutions.
Basic steps in the Fiscal notes process
step 1: Bill is referred to committee by the house speaker or the lieutenant governor.
step 2: Soon after a bill is referred to committee, the committee clerk, acting on behalf of the committee chair, electronically requests a fiscal note from the LBB via the web-based fiscal note system. It is the committee’s responsibility to request fiscal notes on any bill that meets the criteria specified in the House and Senate rules. Requests should be made as soon as possible after referral to ensure that LBB staff have sufficient time to produce an estimate.
Once a fiscal note request is made, the web-based fiscal note system routes the request to the LBB fiscal note coordinator assigned as liaison to the committee.
step 3: When a fiscal note request is received by the LBB, the fiscal note coordinator determines, with assistance from affected analysts, whether a bill would have fiscal implications.
If the bill is likely to have fiscal implications, the coordinator assigns the request to affected agencies and the appropriate LBB analyst(s). An electronic copy of the bill, along with a request for assistance in making the cost estimate, is sent to each affected agency and LBB analyst via the LBB’s web-based fiscal note system.
Note: Immediately prior to the start of the legislative session, the director of each state agency is asked to name an agency contact who will be responsible for receiving fiscal note requests from the LBB and providing timely responses. Each agency is also provided written guidelines for responding to a request.
If it appears that the bill would have no fiscal implication (NFI), the process skips to Step 6.
step 4: Agencies respond to the LBB with a brief fiscal analysis of the bill, focusing on the anticipated changes in agency programs and/or operations that would be necessary if the bill were implemented. The agency reports to the LBB detailed explanation of both the bill’s fiscal impact and the method of finance. Agency estimates exclude costs caused by inflation so that the fiscal implications resulting from proposed legislation can be more accurately identified.
Agency estimates include only direct impacts; secondary impacts are excluded from fiscal note estimates. For example, a provision that requires all young children to be immunized at a state cost of $1 per child (the direct cost/fiscal implication) may possibly reduce future state expenditures on treatment for disease (a secondary fiscal implication). In this example, only the $1 cost per immunization is included in the estimate.
step 5: The LBB analyst considers all information submitted by the affected agencies and other sources in producing an accurate estimate. A worksheet is completed and the analyst creates a draft fiscal note.
step 6: The draft fiscal note is reviewed by the analyst’s manager for approval.
step 7: Once the draft fiscal note is approved it is sent to the coordinator to finalize, and then sent to the LBB director to approve; the rules provide that the LBB director is responsible for all fiscal note estimates. LBB estimates may agree or differ with information provided by state agencies.
step 8: Once a fiscal note is completed and approved by the Director, the fiscal note coordinator sends it electronically to the clerk of the committee that made the request, the author/sponsor of the bill, and source agencies.
In most instances, Steps 2 through 8 are repeated each time the bill is changed by a committee or on the floor of either chamber. If the bill is amended or substituted in the committee to which it was initially referred, the committee clerk, acting on behalf of the committee chair, needs to request an updated fiscal note for the amended/substituted bill.
In addition to the preparation of fiscal notes, House and Senate Rules direct the LBB to prepare several types of impact statements. Each statement provides specific information (described below) not contained in the corresponding fiscal note. Under Senate rules, the director of the LBB determines whether an impact statement is required. Under House rules, the committee chair makes that determination. Other differences between the Senate and House rules are noted below.
Updates to Fiscal Notes and Impact Statements.
Any time a bill is changed (amended, substituted, etc.), there is a requirement that the fiscal note be updated. If an impact statement was prepared for the introduced version of the bill, there is also a requirement that the impact statement be updated each time the bill is changed.
House and Senate impact statements
Actuarial impact statement
Provides estimates of proposed legislative changes in public pension funds. Prior to the Seventy-fourth Legislative Session, 1995, similar impact statements were prepared by the Pension Review Board. Subsequently, the LBB assumed ultimate responsibility for the production of these impact statements, although the Pension Review Board remains an important source of information. Requested by the House only if legislation would affect the financing, membership, or benefits of a pension plan. Prepared for Senate bills if the LBB determines the legislation would affect the financing, membership, or benefits of a pension plan.
Criminal justice policy impact statement
Provides estimates of proposed legislative changes in prison capacity. These impact statements are necessary if a bill changes sanctions applicable to adults convicted of felony crimes. Under Senate rules, these impact statements would also apply to juvenile justice bills. Requested by the House only if a provision of the bill would change sanctions applicable to adults convicted of a felony crime. Prepared for Senate bills if the LBB determines that the bill would change sanctions applicable to adults convicted of a felony crime or would apply to juveniles who have been adjudicated for misdemeanor or felony conduct.
Equalized Education Funding impact statement
Provides an analysis of the equity implications associated with a proposed legislative change in state aid to school districts under the Foundation School Program. Requested by the House only if a bill proposes to change the school funding formulas. Prepared for Senate bills if the LBB determines the bill would change the school funding formulas.
Higher education impact statement
Provides an estimate of the implications resulting from creating or changing the classification, mission, or governance of an institution of higher education. The director of the LBB will request this only if a bill proposes to establish a new institution of higher education, open graduate programs at institutions that heretofore have been only undergraduate institutions, convert two-year colleges into four-year colleges, or move one institution from one university system to another. (Only required by Senate Rules.)
Open Government impact statement
Estimates the impact of proposed policy changes on public access to government information or to the transaction of public business. The director of the LBB will request this only if provisions of the bill would reduce public access to government records and meetings. (Only required by Senate Rules.)
Tax/Fee equity notes
Provides an analysis of how a proposed increase/decrease in taxes/fees affects taxpayers in the state. It calculates both the initial impact and the final impact. Requested only if a statewide tax or fee is affected. For House and Senate bills, the committee chair determines whether to request this. Supplemental Information Regarding Economic Effects of Tax Changes is provided by the LBB upon request. These statements are prepared by the Comptroller of Public Accounts.
Water development policy impact statement
Provides estimates of changes resulting from the creation of water districts under provisions of Article XVI, Section 59 of the Texas Constitution. The Water Development Board and the Texas Commission on Environmental Quality are an important source of information in preparing these documents. Requested only if a bill is affected by Article XVI, Section 59 of the Texas Constitution. (Only required by House Rules; however, if a House bill is changed in the Senate and an impact statement had been created when the bill was in the House, the LBB should request an updated impact statement.)
* * * * *
§ 314.001. SYSTEM OF FISCAL NOTES. The Legislative Budget Board shall establish a system of fiscal notes identifying the probable costs of each bill or resolution that authorizes or requires the expenditure or diversion of state funds for a purpose other than one provided for in the general appropriations bill.
§ 314.002. COST ESTIMATES. In preparing a fiscal note, the board shall project cost estimates for a five-year period that begins on the effective date of the bill or resolution and shall state whether or not costs or diversions will be involved after that period.
§ 314.003. ATTACHMENT TO BILL OR RESOLUTION.
(a) If a fiscal note is required on a bill or resolution, it must be attached to the bill or resolution before a committee hearing on the bill or resolution may be conducted.
(b) The fiscal note must be printed on the first page of the committee report of the bill or resolution and on the first page of all subsequent printings.
(c) The fiscal note must remain with the bill or resolution throughout the legislative process, including submission to the governor.
§ 314.004. EQUALIZED EDUCATION FUNDING IMPACT STATEMENT.
(a) The board shall prepare for each bill or resolution that affects public education an equalized education funding impact statement.
(b) The impact statement must evaluate the effect of the bill or resolution on all state equalized funding requirements and policies.
(c) The impact statement must be attached to the bill or resolution immediately following the fiscal note attached under Section 314.003.
* * * * *
§ 315.001. SHORT TITLE. This chapter may be cited as the Economic Impact Statement Act.
§ 315.003. STATE POLICY. Recognizing the impact of the laws and rules of this state on the economy, employment, and enterprise of its people, the legislature declares that the continuing policy of this state is to maintain and create conditions that will sustain and promote the economy, employment, and economic opportunities of the people of Texas.
§ 315.004. ECONOMIC IMPACT STATEMENT.
(a) At the request of the lieutenant governor or speaker of the house of representatives, a state agency shall prepare an economic impact statement for any pending bill or joint resolution that directly affects that agency. Preparation of the statement shall be coordinated through the Legislative Budget Board director.
(b) The economic impact statement must include:
(1) a brief description of the nature and effect of the proposal; and
(2) a statement of the manner and extent to which the proposal, if implemented, will directly or indirectly during each of the two years following its effective date:
- (A) affect employment in the state, including the number of people affected, the geographic area or areas affected, and the existing level of employment and unemployment in those areas;
- (B) affect the construction, modification, alteration, or utilization of any structure, equipment, facility, process, or other asset in the state, including the estimated dollar measure of the action and the geographic area or areas affected;
- (C) result in changes in costs of goods and services in the state;
- (D) result in changes in revenue and expenditures of state and local governments; and
- (E) have economic impacts within the state other than those specifically described by this subsection.
(c) An economic impact statement that omits any information required by this chapter must specifically note the omission, state the reason for the omission, and estimate the additional time and effort required to obtain the information.
Acts 1985, 69th Leg., ch. 479, § 1, eff. Sept. 1, 1985.
LINK>>>Texas Legislative Budget Board’s Guide to Fiscal Notes
Website: Texas Legislative Budget Board