This Fiscal Note is not an official copy and should not be quoted or cited.
Fiscal Note - SB 0688 - Revises Preneed Funeral Contract Requirements
L.R. NO.  2690-01
BILL NO.  SB 688
SUBJECT:  Contracts: Preneed Funeral
TYPE:     Original
DATE:     January 22, 1996



                              FISCAL SUMMARY


                    ESTIMATED NET EFFECT ON STATE FUNDS

FUND AFFECTED                 FY 1997         FY 1998        FY 1999

PR Fees                            $0              $0             $0

Missouri Preneed                   $0              $0             $0

Embalmers and
Funeral Directors           ($26,250)       ($26,250)      ($26,250)

Endowed Care
Cemetery and
Preneed Audit              ($177,857)         $39,642        $35,113

Total Estimated
Net Effect on All
State Funds                ($204,107)         $13,392         $8,863


                   ESTIMATED NET EFFECT ON FEDERAL FUNDS

FUND AFFECTED                 FY 1997         FY 1998        FY 1999

None                               $0              $0             $0


Total Estimated
Net Effect on All
Federal Funds                      $0              $0             $0


                    ESTIMATED NET EFFECT ON LOCAL FUNDS

FUND AFFECTED                 FY 1997         FY 1998        FY 1999

Local Government                   $0              $0             $0


                              FISCAL ANALYSIS

ASSUMPTION

Officials from the Department of Economic Development-Professional
Registration (DPR) assume the Endowed Care Cemetery and Preneed Audit Fund
would fund the start-up costs for this proposal.  Since appropriations are
run through the Professional Registration (PR) Fees Fund, this fiscal note
reflects a transfer of start-up costs to the PR Fees Fund.  All revenue
generated by the Missouri Preneed Fund would be used to support its
operations and the remainder would go to pay back the Endowed Care Cemetery
and Preneed Audit Fund for start-up costs through the PR Fees Fund.

DPR asserts this proposal would result in the need for one Clerk IV (1 FTE at
$19,212 per year) to provide complex, technical assistance to the licensees
and the public and to process applications, organize, schedule and track
reviews/audits, as well as process reports.  Also, DPR would need an
additional 2.5 Auditor III's (2.5 FTE at $33,180 per year) to travel to the
registered preneed sellers annually to conduct reviews and/or audits and to
prepare reports of their findings.  This proposal would require that
reviews/audits be conducted by a Certified Public Accountant.  There are
approximately 390 registered preneed sellers in Missouri and it is assumed
DPR would complete an estimated 98 reviews and at least three audits each
year to meet the required four year cycle of completion.  It is assumed the
Auditors would work out of their homes and would travel 40 weeks per year
with three overnights per week.  Accordingly, travel expenses are based on
three motel rooms per week at $50 and four days meals at $30 multiplied by 40
weeks for an annual cost of $10,800 per Auditor.  Additionally, DPR has
requested the purchase of two vehicles at $16,400 each, as well as gasoline
and vehicle maintenance expense.

There is an existing appropriation within the State Board of Embalmers and
Funeral Directors of $50,000 for examination/audit costs.  The Missouri
Preneed Fund would reimburse that annual expense.  The Missouri Preneed Fund
would collect fees of approximately $76,250 annually.  However, in the second
year of implementation, it is assumed the Board of Embalmers and Funeral
Directors would need to increase the seller annual reporting fee from $2.00
per contract to $10.00 per contract to help support the costs for mandatory
reviews/audits.  Based on an estimated 25,000 contracts at an additional
$8.00 per contract, additional annual revenues would be $200,000.  All
Missouri Preneed Fund appropriations are run through the Professional
Registration (PR) Fees Fund.  Therefore, all Missouri Preneed Fund revenues
(after the $50,000 payback to the Embalmers and Funeral Directors Fund) would
be transferred to the PR Fees Fund.  Any balance not needed for operations
would pay back, through the PR Fees fund, the Endowed Care Cemetery and
Preneed Audit Fund for start-up costs.

Due to the increased volume of preneed reviews/audits under this proposal, it
is assumed additional litigation costs would be incurred for disciplinary
action taken based on review/audit report violations.  Currently, the Board
estimates twenty preneed sellers are examined/audited each year, with two
cases going into litigation.  Based on that percentage and approximately 98
reviews/audits conducted per year, it is expected eight additional cases
would be litigated for a cost of $12,200 ($61 per hour x 10 cases x 20 hours
per case).  This $12,200 would be part of the annual Missouri Preneed Fund
expenditures transferred to the PR Fees Fund.

Based on a similar proposal, officials from the Office of Attorney General
(AGO)  assumed they would need an Assistant Attorney General I (1 FTE) at an
annual salary of $30,000 to review legal matters pending before the division,
to provide interpretations/opinions on such matters and to review the
increased number of investigations forwarded pursuant to Section 436.055.2.
Additionally, the AGO has requested associated equipment and expense for the
new FTE position.  However, these costs have already been calculated by DPR
and are included in the Other Costs category as a GR transfer in the fiscal
impact specifications below, thereby eliminating the need to state these
costs from the AGO.

Officials from the Office of Secretary of State (SOS)  assume this proposal
would not require registration of business entities not already required to
register as a result of "doing business" in Missouri.  This proposal would
require publication of certain administrative rules.  SOS assumes that
existing staff and equipment would be adequate to absorb this workload.
However, a large number of rules or additional legislation with similar
requirements could result in a substantial fiscal impact.

Officials from Department of Insurance, Department of Revenue, Administrative
Hearing Commission and the Office of State Treasurer assume the proposal
would have no fiscal impact on their agencies.


FISCAL IMPACT - State Government     FY 1997      FY 1998      FY 1999
                                    (10 Mo.)

PR FEES FUND

Income-Division of Professional Registration (DPR)
   Transfer from Missouri Preneed
     Fund                            $26,250     $186,608     $191,137
   Transfer from Endowed Care Cemetery
      and Preneed Audit Fund         177,857            0            0
Total Income - DPR                  $204,107     $186,608     $191,137

Costs-DPR
   Personal Service (3.5 FTE)     ($87,228)    ($107,334)   ($110,017)
   Fringe Benefits                 (26,797)      (32,973)     (33,797)
   Equipment and Expense           (77,882)      (34,101)     (35,123)
   Other Costs-GR Transfers
     for AGO                       (12,200)      (12,200)     (12,200)
Total Costs - DPR                ($204,107)    ($186,608)   ($191,137)

ESTIMATED NET EFFECT TO
PR FEES FUND                             $0            $0           $0


MISSOURI PRENEED FUND

Income-Division of Professional Registration (DPR)
   Fees                              76,250        76,250       76,250
   Increase in Fees                       0       200,000      200,000
Total Income - DPR                  $76,250      $276,250     $276,250

Costs-DPR
   Transfer to PR Fees Fund       ($26,250)    ($186,608)   ($191,137)
   Transfer to Endowed Care Cemetery and
      Preneed Audit Fund                (0)      (39,642)      35,113)
   Professional Services           (50,000)      (50,000)     (50,000)
   Total Costs - DPR              ($76,250)    ($276,250)   ($276,250)

ESTIMATED NET EFFECT TO
MISSOURI PRENEED FUND                    $0            $0           $0


FISCAL IMPACT - State Government    FY 1997       FY 1998      FY 1999
(continued)                        (10 Mo.)

EMBALMERS AND FUNERAL
DIRECTORS FUND

Savings-Division of Professional Registration (DPR)
   Professional Services (Paid by Missouri
      Preneed Fund)                 $50,000       $50,000      $50,000
Total Savings - DPR                 $50,000       $50,000      $50,000

Loss-DPR
   Fees (collected by Missouri
      Preneed Fund)               ($76,250)     ($76.250)    ($76,250)
Total Loss - DPR                  ($76,250)     ($76,250)    ($76,250)

ESTIMATED NET EFFECT TO
EMBALMERS AND FUNERAL
DIRECTORS FUND                    ($26,250)     ($26,250)    ($26,250)


ENDOWED CARE CEMETERY
AND PRENEED AUDIT FUND

Income-Division of Professional Registration (DPR)
   Transfer from Missouri
      Preneed Fund                        0        39,642       35,113
Total Income - DPR                       $0       $39,642      $35,113

Costs-DPR
   Transfer to PR Fees Fund      ($177,857)          ($0)         ($0)
Total Costs - DPR                ($177,857)          ($0)         ($0)

ESTIMATED NET EFFECT TO
ENDOWED CARE CEMETERY
AND PRENEED AUDIT FUND           ($177,857)       $39,642      $35,113


FISCAL IMPACT - Local Government    FY 1997       FY 1998      FY 1999
                                   (10 Mo.)

                                          0             0            0

DESCRIPTION

The proposed legislation would expand upon the regulation of the sale of
preneed contracts.  It would establish mandatory reviews and/or audits of
preneed funeral contract sellers and providers at least once every four
years.  The name of the "Endowed Care Cemetery Audit Fund" would be changed
to "Endowed Care Cemetery and Preneed Audit Fund".  The fees collected would
be deposited in the Missouri Preneed Fund to offset the costs of
administering this proposal.

The proposed legislation would require that books and records concerning
preneed funeral contracts be kept and maintained in Missouri and held by the
seller for five years after fulfillment or cancellation of the contract.
Providers and sellers of preneed contracts would be required to notify the
Board at least sixty days prior to selling, transferring or disposing of a
majority of their business assets.  The proposal further outlines
responsibilities of the seller and of the buyer or transferee.  After a
seller has recovered the initial twenty percent to cover necessary expenses,
the seller would be required to deposit all subsequent payments into a trust
within thirty days.

The proposal would include provisions for the right to cancel preneed
contracts and waivers of the right to cancel.  The Division would be required
to investigate each written complaint that is signed by an individual who has
personal knowledge of the facts.  If a preneed seller proposes a contract to
a person who already has a preneed contract with another seller, the seller
making the proposal would be required to provide a side-by-side comparison
that describes the differences of what is contained in each contract.

This legislation is not federally mandated, would not duplicate any other
program and would not require additional capital improvements or rental
space.


SOURCES OF INFORMATION
Department of Economic Development-Professional Registration
Office of Attorney General
Office of Secretary of State
Department of Insurance
Department of Revenue
Administrative Hearing Commission
Office of State Treasurer