SB 0699 - Fiscal Note

Fiscal Note - SB 0699 - Establishes the Family Development Account Program

COMMITTEE ON LEGISLATIVE RESEARCH

OVERSIGHT DIVISION

FISCAL NOTE

L.R. NO. 2947-01

BILL NO. SB 699

SUBJECT: Family Development Accounts

TYPE: Original

DATE: February 4, 1998

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FISCAL SUMMARY

ESTIMATED NET EFFECT ON STATE FUNDS
FUND AFFECTED	FY 1999	FY 2000	FY 2001
General Revenue Fund	($131,531) to ($231,531)	($125,366) to ($4,225,366)	($128,599) to ($4,288,599)
Total Estimated Net Effect on All State Funds	($131,531) to ($231,531)	($125,366) to ($4,225,366)	($128,599) to ($4,288,599)

ESTIMATED NET EFFECT ON FEDERAL FUNDS
FUND AFFECTED	FY 1999	FY 2000	FY 2001
None	$0	$0	$0
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	(Unknown)

Numbers within parentheses: ( ) indicate costs or losses

This fiscal note contains 5 pages.

FISCAL ANALYSIS

ASSUMPTION

The Department of Social Services (DSS) assumes this proposal will have no impact on their agency as there is no provision for excluding this type of resource in public assistance eligibility determinations.

The Office of the State Treasurer does not anticipate any fiscal impact as a result of this proposal.

The Department of Revenue does not anticipate any fiscal impact in the first several years. However, if the number of credits received is over 1,600, a Tax Processing Technician will be needed for six months.

The Department of Insurance (INS) assumes this proposal provides a tax credit for insurance companies against premium tax payments for contributions to a Family Development Account. The INS assumes there are approximately 300 domiciled insurance companies in Missouri which pay premium tax. The INS assumes any tax credits taken would reduce revenue to the County Insurance Fund. The funds in the County Insurance Fund are allocated annually to local school districts. The INS assumes the credits claimed would range from $0 to $4,000,000 depending upon how many insurers participate in the program and to what degree.

The Department of Economic Development (DED) assumes the proposal requires the DED to implement the Family Development Accounts Program (FDAP). DED assumes this would include, soliciting and reviewing proposals from community development groups; overseeing community development groups to assure compliance of contributors, account holders and financial institutions; promulgating rules and regulations; approving financial institutions to establish FDA's; and certifying tax credits to Department of Revenue.

The DED assumes they would request three FTE to implement this proposal. DED assumes they would request a Community Development Program Coordinator, an Accountant and a Clerk Typist along with related expenses and equipment including costs for rent expense and a vehicle.

The Community Development Program Coordinator would administer the program, by developing rules, regulations, policies, and processes; soliciting, reviewing and approving proposals from community development organization; reviewing and approving proposals from financial institutions to establish FDA's. They would also promote the program to community development groups and individual contributors; educate prospective clients about the availability and use of the FDAP.

ASSUMPTION (continued)

The Accountant would be responsible for establishing program accountability through the establishment and maintenance of regularly scheduled reports and audits of all program participants such as the community development groups, contributors, financial institutions, and account holders. This person would ensure proper documentation is forwarded to the Department of Revenue. DED assumes the certification of tax credits will be similar to the process used by the Neighborhood Assistance Program Tax Credit.

DED assumes one Clerk Typist would be required to provide support in implementing and administering all functions of the program.

DED assumes taxpayers are allowed credits for contributing money to the FDA's on behalf of account holders. The maximum tax credit allowed in this proposal is $4,000,000.

DED assumes the proposal provides for up to $100,000 annually, subject to appropriation, for an outside evaluation of the program.

Oversight assumes this proposal will reduce corporate and individual income tax revenue, thereby reducing Total State Revenues. There is no data available to estimate the number of people who will take advantage of the Family Development Account Program (FDAP). Therefore, the impact is assumed to be between $0 and $4,000,000, since the maximum amount of credits that can be issued in one year is $4,000,000.

Oversight assumes the three FTE requested by the DED would be housed in existing facilities. Accordingly, Oversight has not included costs for rent expenses. Oversight also assumes the initial implementation of this proposal would not necessitate the purchase of an automobile. As the program expands, and routine travel becomes necessary, the DED may request funds for an automobile in the normal budget process. Oversight has also reduced DED's other expense and equipment costs to conform to OA guidelines.

The effective date of this proposal is for tax years beginning after January 1, 1999. Oversight assumes the entire credit could be claimed in fiscal year 2000. Allocations to school districts from the County Insurance Fund would be affected the subsequent fiscal year.

FISCAL IMPACT - State Government	FY 1999	FY 2000	FY 2001
	(10 Mo.)
GENERAL REVENUE FUND
Loss - reduced tax revenue due to	$0	$0	$0
new tax credits		to	to
		($4,000,000)	($4,000,000)
Costs - DED
Personal Service	($66,270)	($81,546)	($83,580)
Fringe Benefits	(18,575)	(22,857)	(23,427)
Expense and Equipment	(46,685)	(20,963)	(21,591)
	($131,531)	($125,366)	($128,599)
Other Costs - DED	$0	$0	$0
(Subject to Appropriation)	to	to	to
Outside program evaluation	($100,000)	($100,000)	($100,000)
Estimated Net Effect on -	($131,531)	($125,366)	($128,599)
GENERAL REVENUE FUND	to	to	to
	($231,531)	($4,225,366)	($4,228,599)
FISCAL IMPACT - Local Government	FY 1999	FY 2000	FY 2001
	(10 Mo.)
Loss - Local School Districts			$0
reduced distributions from the			to
County Insurance Fund	$0	$0	(Unknown)
FISCAL IMPACT - Small Business

This proposal would have an effect on small businesses as it provides tax credits to small businesses who elect to make contributions to the Family Development Account Program.

DESCRIPTION

This act establishes the Family Development Account Program. The program is intended to allow low-income families to set up special accounts with community groups, and to encourage charitable organizations to assist families with certain expenses.

DESCRIPTION (continued)

The act allows certain low-income individuals to set up subaccounts within savings accounts held by Community Based Organizations in financial institutions. Withdrawals from these subaccounts may be made to cover educational costs, job training costs, the purchase of a home, major home repairs and improvements, and start-up capitalization projects.

The Community Based Organizations will manage the accounts, solicit contributions, and make matching deposits. No more than 15% of all funds in the account may be used for administrative costs. Money deposited or withdrawn from an account are exempt from taxes. Tax credits to contributors are also available for the tax years beginning on and after January 1, 1999.

Independent evaluations and audits of the program will be made annually.

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

Department of Revenue

Department of Insurance

Department of Social Services

AGENCIES NOT RESPONDING

Office of Administration

Jeanne Jarrett, CPA

Director

February 4, 1998