SB 0617 - Fiscal Note

Fiscal Note - SB 0617 - Creates a pharmaceutical tax credit for senior citizens and certain disabled veterans

COMMITTEE ON LEGISLATIVE RESEARCH

OVERSIGHT DIVISION

FISCAL NOTE

L.R. NO. 2663-01

BILL NO. SB 617

SUBJECT: Elderly; Taxation and Revenue-Income; Veterans

TYPE: Updated

DATE: February 17, 1998

#Updated to reflect additional information obtained from the Department of Social Services.

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#FISCAL SUMMARY

ESTIMATED NET EFFECT ON STATE FUNDS
FUND AFFECTED	FY 1999	FY 2000	FY 2001
General Revenue	$0	#($8,958,435)	#($8,955,470)
#Total Estimated Net Effect on All State Funds	$0	#($8,958,435)	#($8,955,470)

ESTIMATED NET EFFECT ON FEDERAL FUNDS
FUND AFFECTED	FY 1999	FY 2000	FY 2001
None
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
Local Government	$0	$0	$0

Numbers within parentheses: ( ) indicate costs or losses

This fiscal note contains 5 pages.

#FISCAL ANALYSIS

ASSUMPTION

Officials of the Department of Revenue (DOR) state the Division of Taxation could experience about 7500 new PTC claims annually and a certain portion of present claimants would also be eligible for the pharmaceutical tax credit. To pre-edit these claims, answer correspondence, and telephone calls and properly process them within present time frames the Division of Taxation would request one Tax Processing Technician I. Key entry would also experience a minor work increase, however this would be completed by existing staff.

Oversight has allowed the Department of Revenue one Tax Processing Technician I for six months of each tax year to maintain the current time frame for processing Property Tax Credits in the pre-edit and error correction areas.

Officials of the Office of Administration (OA) assume this proposal would provide a refundable tax credit for the cost of prescription drugs of up to $750 to people who qualify for the property tax circuit breaker.

According to the Office of Administration 71,000 households (5,396 joint returns and 65,604 single returns) qualified for the property tax circuit breaker. The Statistical Abstract of the United States 1997, Table no. 170, shows that in 1995 the average cost per consumer for Drugs and Medical Supplies (Includes prescription and non-prescription drugs) was $618. If each single return who qualifies for the property tax circuit breaker receives a refundable tax credit of $618, and each joint return who qualifies for the property tax circuit breaker receives a refundable tax credit of $1,236 (2 x the average cost per consumer) the fiscal impact is ($47,212,728). No growth factor was assumed.

# Oversight assumes this proposal would provide a refundable tax credit for the cost of prescription drugs of up to $750 to people who qualify for the property tax circuit breaker.

According to the Department of Social Services the Division of Family Services, Medicaid covers the expense of prescription drugs. The Department of Social Services Research and Evaluation Unit stated for fiscal year 1996 there were 93,120 individuals age 65 and over that were Medicaid eligible.

According to the State Demographer and the Office of Administration, Division of Budget and Planning, there are 164,427 Missouri Residents 65 and over with household incomes of less than $15,000. Therefore, 57% of the population "age 65 and over" are assumed to be covered by Medicaid.

ASSUMPTION (continued)

Based on data from the Office of Administration regarding projected FY2000 Circuit Breaker Claims, only about 46% of individuals who would be in the age and income ranges to qualify for the credit actually file it. Oversight assumes the same (46%) utilization rate for this credit.

Oversight referred to the 1997 Statistical Abstract table No. 171 Health Insurance Coverage Status, by Selected Characteristics: 1987 to 1995 for individuals 65 years old and over. This table shows that approximately 99% of all individuals 65 years of age and over are covered by private or Government health insurance. Therefore, Oversight, for purposes of this fiscal note has reflected 1% of the 164,427 (1,644 individuals) Missouri residents 65 and over with household incomes of less than $15,000 as not having insurance coverage.

Oversight assumes that the individuals that are covered by private or Government health insurance would average $350 annually in copays and deductibles.

Oversight assumes the average income for this population is $10,230. The 1% deduction prior to taking the credit would be an average of $102.

Oversight's calculation of the revenue impact is as follows:

Total Population 164,427

less: Medicaid (164,427 x 57%) (93,723)

70,704

Uninsured (1,644)

Balance x Utilization rate 69,060 x 46% = 31,768 @ $350 (copays and deductibles) less 1% ($102)

Subtotal $7,878,464

Plus uninsured @ $750 less 1%($102) $1,065,312

Total estimated loss from credits $8,943,776

Oversight assumes because this legislation would become effective for tax years beginning after December 31, 1998 that costs would not be accrued until claims were filed in FY 2000.

This proposal would result in a decrease in Total State Revenues.

#

FISCAL IMPACT - State Government	FY 1999	FY 2000	FY 2001
	(10 Mo.)
Cost to General Revenue Fund
Department of Revenue (DOR)
Personal Service (.5 FTE)	$0	($8,911)	($9,134)
Fringe Benefits	$0	($2,498)	($2,560)
Expense and Equipment	$0	($3,250)	$0
Administrative costs to (DOR)	$0	($14,659)	($11,694)
# Loss to General Revenue Fund
Pharmaceutical Tax Credit	$0	($8,943,776)	($8,943,776)
#ESTIMATED NET EFFECT TO
GENERAL REVENUE FUND	$0	($8,958,435)	($8,955,470)
FISCAL IMPACT - Local Government	FY 1999	FY 2000	FY 2001
	(10 Mo.)
	0	0	0

FISCAL IMPACT - Small Business

No direct fiscal impact to small businesses would be expected as a result of this proposal.

DESCRIPTION

This act authorizes a state income tax credit for pharmaceutical costs paid by specified senior citizens and certain disabled veterans. The pharmaceutical tax credit for each taxpayer is to

be equal to the total amount spent on purchasing prescription drugs in any calendar year less any

reimbursement from other sources and less 1% of income. The pharmaceutical credit cannot

exceed $750 per tax year. The act will become effective January 1, 1999 and applies to all tax years beginning after December 31, 1998.

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 Revenue

Office of Administration

Jeanne Jarrett, CPA

Director

February 17, 1998