SB 0592 - Fiscal Note

Fiscal Note - SB 0592 - Increases enforcement provisions for motor vehicle financial responsibility

COMMITTEE ON LEGISLATIVE RESEARCH

OVERSIGHT DIVISION

FISCAL NOTE

L.R. NO. 2246-01

BILL NO. SB 592

SUBJECT: Motor Vehicle Financial Responsibility Law

TYPE: Original

DATE: January 23, 1998

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FISCAL SUMMARY

ESTIMATED NET EFFECT ON STATE FUNDS
FUND AFFECTED	FY 1999	FY 2000	FY 2001
Insurance Dedicated Fund	($654,472)	($856,620)	($879,713)
Highway Fund	$1,637,400	$2,456,100	$2,456,100
Total Estimated Net Effect on All State Funds	$982,928	$1,599,480	$1,576,387

ESTIMATED NET EFFECT ON FEDERAL FUNDS
FUND AFFECTED	FY 1999	FY 2000	FY 2001
Total Estimated Net Effect on All Federal Funds	$0	$0	$0

ESTIMATED NET EFFECT ON LOCAL FUNDS
FUND AFFECTED	FY 1999	FY 2000	FY 2001
Cities	$245,610	$491,220	$491,200
County Aid Road Trust Fund	$163,740	$327,480	$327,480
Total Estimated Net Effect on Local Funds	$409,350	$818,700	$818,700

Numbers within parentheses: ( ) indicate costs or losses

This fiscal note contains 5 pages.

FISCAL ANALYSIS

ASSUMPTION

The Department of Transportation (DHT), Department of Public Safety (DPS), Division of Highway Safety, Missouri Highway Patrol (MHP), Office of Prosecution Services (OPS) and the State Public Defender (SPD)do not expect to be fiscally impacted.

The Department of Insurance (INS) expects to be fiscally impacted by this proposal. The proposal would require that every insurer in the state issuing motor vehicle insurance liability policies notify the INS when any policy is terminated, cancelled or otherwise made ineffective prior to the end of the policy term. The INS would be required to notify the registered owner and advise that evidence of financial responsibility be filed with the Department of Revenue (DOR) or risk suspension. In conjunction with the insurance industry and the DOR, the INS estimates approximately 720,000 annual cancellation notices. Based on an average of 230 work days, 3,130 cancellation notices could be processed daily. Processing includes entering information into a data base system; filing evidence of financial responsibility notifications generated; and mailing the notifications to the registered owners. The INS assumes that a total of 22 FTE (i.e., 1 section supervisor, 3 clerk typist III's and 18 clerk typist II's) would be needed for this function. Each clerk typist would be able to process 150 notifications per day. The Clerk Typist III's would also be responsible for training lower level typists and assisting the supervisor. In addition to required FTE, the INS would incur costs of $225,600 for printing (i.e., including letterhead and envelopes) and postage for mailing out the notices and $50,000 for contract programming services to write computer programs to establish the cancellation notice data base and generate evidence.

Expenditures resulting from this proposal would be paid from the Insurance Dedicated Fund. The fund is financed by license fees and are not indexed for inflation. Such proposals would effectively reduce the fund balance, and over time, if no corresponding revenues are generated license fees would need to be increased. Oversight adjusted the costs for FY99 to reflect an effective date of January 1, 1999.

The Office of State Courts Administrator (CTS) does not anticipate a significant impact as this proposal would only reinforce what is currently required of the CTS.

ASSUMPTION (continued)

The Department of Revenue (DOR) assumes that this proposal would have an administrative fiscal impact. The DOR completed its fiscal note based on the assumption that the reference to the Department of Insurance in section 303.028 should have been the DOR since only the DOR is empowered to suspend driving and registration privileges under the authority of the Mandatory Insurance Law.

The DOR assumes that it must expect to receive and be prepared to process an additional 749,043 documents (i.e., cancellation notices) per year. Based on annual time and motion studies on every processing function in order to establish employee expectations and production standards, the DOR assumes that it would need an additional 160 FTE to implement this proposal. Additionally, the DOR assumes it would need one Assistant Counsel to handle the DOR legal issues and challenges.

The proposal would also result in increased revenue to the Highway Fund, Cities and County Aid Road Trust Fund since there would be a reinstatement fee required after the suspension. Missouri law authorizes a $200 reinstatement fee for the first mandatory insurance suspension; $400 for the second; and $800 for the third and any subsequent suspensions. The current number of $400 and $800 reinstatements are not tracked, but it is believed that the number is low. Therefore, for purpose of this fiscal note, the DOR has based the estimated revenue on the $200 reinstatement fee. The DOR assumes that this proposal would result in 16,374 reinstatements at $200 each for a total of $3,274,800. Only six months of revenue was estimated for FY99 given an effective date of January 1, 1999.

Oversight assumes, based on the language of the proposal, that the DOR would not be the responsible party for processing the cancellation notices. Since the DOR is the department vested with the authority to suspend licenses, it is further assumed that once the INS has processed the cancellation notice that some type of notification would be provided to the DOR.

FISCAL IMPACT - State Government	FY 1999	FY 2000	FY 2001
	(6 Mo.)
INSURANCE DEDICATED FUND
Costs-Department of Insurance (INS)
Personal Service (22 FTE)	($198,534)	($406,996)	($417,171)
Fringe Benefits	($55,649)	($114,081)	($116,933)
Expense and Equipment	($400,289)	($335,543)	($345,609)
Total Costs-INS	($654,472)	($856,620)	($879,713)
FISCAL IMPACT - State Government	FY 1999	FY 2000	FY 2001
(continued)	(6 Mo.)
ESTIMATED NET EFFECT ON
INSURANCE DEDICATED FUND	($654,472)	($856,620)	($879,713)
HIGHWAY FUND
Income
Reinstatement Fees	$1,637,400	$2,456,100	$2,456,100
ESTIMATED NET EFFECT ON
HIGHWAY FUND	$1,637,400	$2,456,100	$2,456,100
FISCAL IMPACT - Local Government	FY 1999	FY 2000	FY 2001
	(6 Mo.)
LOCAL
Income-Cities
Reinstatement Fees	$245,610	$491,220	$491,220
Income-County Aid Road Trust Fund
Reinstatement Fees	$163,740	$327,480	$327,480
ESTIMATED NET EFFECT ON
LOCAL FUNDS	$409,350	$818,700	$818,700
FISCAL IMPACT - Small Business

This proposal could have a direct fiscal impact on small businesses as insurance companies would be required to notify the Department of Insurance when terminations, cancellations or other reasons for an ineffective policy have occurred.

DESCRIPTION

The proposal would require the court to notify the director of the Department of Revenue (DOR) when a person has been found guilty of failing to meet the financial responsibility requirement in section 303.025. The DOR would be responsible for informing each owner who registers a vehicle of the requirement to file new evidence of financial responsibility upon termination of a motor vehicle liability policy prior to the end of the policy term and verifying the existence of

DESCRIPTION (continued)

financial responsibility upon receiving notice from any law enforcement officer pursuant to section 303.024.

Procedures would be established whereby every insurer would provide notification to the Department of Insurance (INS) when any liability policy has been terminated, canceled or otherwise made ineffective prior to the end of the policy period. The INS would notify the registered owner and request evidence of financial responsibility within 30 days or forfeit the registration and operator's license. If the vehicle owner terminates, cancels or otherwise makes ineffective any liability policy prior to the end of the policy period, the owner would be required to file evidence with the DOR. Failure to file the evidence could result in suspension under section 303.041.

Every motor vehicle liability policy issued pursuant to this chapter would be written for a minimum of six months. The proposal would become effective on January 1, 1999.

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

SOURCES OF INFORMATION

Department of Revenue

Office of State Courts Administration

Department of Insurance

Department of Public Safety

Missouri Highway Patrol

Office of Prosecution Services

State Public Defender

Department of Transportation

Jeanne Jarrett, CPA

Director

January 23, 1998