SB 0258 - Fiscal Note

Fiscal Note - SB 0258 - Establishes the Missouri Transition Scholarship Program

COMMITTEE ON LEGISLATIVE RESEARCH

OVERSIGHT DIVISION

FISCAL NOTE

L.R. NO.: 730-01

BILL NO.: SB 258

SUBJECT: Education, Higher: Transition Scholarship Program

TYPE: Original

DATE: February 9, 1999

---

FISCAL SUMMARY

ESTIMATED NET EFFECT ON STATE FUNDS
FUND AFFECTED	FY 2000	FY 2001	FY 2002
Missouri Transition Program*	$0	$0	$0
General Revenue	($227,226)	($110,348)	($99,408)
Total Estimated Net Effect on All State Funds	($227,226)	($110,348)	($99,408)

*Includes revenues and costs of approximately $8 million annually.

ESTIMATED NET EFFECT ON FEDERAL FUNDS
FUND AFFECTED	FY 2000	FY 2001	FY 2002
None	$0	$0	$0
Total Estimated Net Effect on All Federal Funds	$0	$0	$0

ESTIMATED NET EFFECT ON LOCAL FUNDS
FUND AFFECTED	FY 2000	FY 2001	FY 2002
Local Government	$0	$0	$0

Numbers within parentheses: ( ) indicate costs or losses

This fiscal note contains 7 pages.

FISCAL ANALYSIS

ASSUMPTION

Officials from the Office of Prosecution Services, Office of Administration, Department of Public Safety (Director's Office), Office of State Courts Administrator, Truman State University, Missouri Western State College, Harris-Stowe State College, Office of the State Public Defender and Coordinating Board For Higher Education assume the proposal would result in no fiscal impact to the agencies.

Officials from the Department of Elementary and Secondary Education (DESE) assume the proposal would result in no fiscal impact to DESE or local public school districts. They assume CBHE and DOR could have some impact, and colleges and universities would have an administrative impact.

Officials from the State Treasurer's Office assume a new accounting fund would be created in the state treasury for the Blind Skills Specialist Fund. The proposed legislation would slightly increase the number of accounting transactions processed through their accounting system and increase the available funds for investment. The STO would absorb the costs associated with increased accounting transactions and investments through their current appropriations.

Officials from the University of Missouri (MU) assume the proposal would result in the following costs:

Year 1 $ 369,440

Year 2 705,500

Year 3 933,600

Year 4 1,138,603

Year 5 1,348,723

Therefore, the cumulative cost over the next five years for the Missouri Transition Scholarship Program would amount to over $4 million. To arrive at these estimates, MU increased by 60 percent the estimated Columbia campus costs. The factor of 60% was determined by comparing the number of first-time degree seeking freshmen enrolling at the Columbia campus and the other three campuses in the Fall of 1997.

Estimates for the Columbia campus assume that enrollment in the transition program would be limited to 35 students per year. The academic year costs are based on the $3,500 amount of scholarship aid and do not represent the total financial aid package. They did not attempt to estimate the effects of two factors: 1) the attrition from the program, which they would expect to be low and 2) inflation of college costs over the five-year period.

ASSUMPTION (continued)

The Oversight Division assumes the Missouri Transition Program Fund would reimburse the colleges and universities for student financial assistance from moneys generated from the five percent tax on the wholesale price of compact discs sold. Therefore, there would be no net fiscal impact for student financial assistance for colleges and universities . It is assumed by Oversight the extent of student financial assistance awarded under this program would depend on the amount of revenue from the tax and the amount of this revenue distributed to each institution by the transition program administrative board.

Oversight also assumes the administrative costs required by institutions could be absorbed by existing personnel unless the program grew substantially in size.

Officials from the Department of Corrections (DOC) state they cannot predict the number of new commitments which could result from the creation of the offense(s) outlined in this

proposal. An increase in commitments would depend on the utilization by prosecutors and the actual sentences imposed by the court. If additional persons would be sentenced to the custody of the DOC due to the provisions of this legislation, the DOC would incur a corresponding increase in operational costs either through incarceration (average of $35 per inmate, per day) or through supervision provided by the Board of Probation and Parole (average of $3.50 per offender, per day). Supervision by the DOC through probation or incarceration would result in some additional costs but DOC officials assume that the impact would be minimal. Therefore, the Oversight Division has included no fiscal impact for the DOC.

Officials from the Department of Revenue (DOR) assume the Division of Taxation would require additional personnel to administer and enforce the wholesale tax. The Division would be required to register those persons that are liable to pay the tax (wholesalers, manufacturers and importers), handle correspondence and telephone calls, process payments, pre-edit returns, issue refunds and perform file maintenance. According to the Bureau of the Census statistics, it is estimated that approximately 1,750 wholesalers would be affected by this proposal. The number of manufacturers and solicitors that would be affected is unknown. If the actual number of affected accounts is greater or less than 1,750, administrative costs would increase or decrease proportionately. Altogether, the Division of Taxation would require 4 FTE Tax Processing Technicians and .5 FTE Clerk I and associated equipment and expenses the first year. The Division would retain 3 FTE Tax Processing Technicians and .5 FTE Clerk I to administer the proposal in succeeding years. They would also require 2 FTE Computer Information Technologists II to maintain the systems after they are established (approximately 18 months after inception of the system). A significant amount of contract programming would also be necessary. Contract programming hours are projected by DOR to be 8,320 @ $107 per hour in FY 2000 and 6,240 @ $111 per hour in FY 2001.

ASSUMPTION (continued)

The Oversight Division assumes the Department of Revenue could accomplish the provisions of the proposal with 3 FTE Tax Processing Technicians ($20,184) for the Division of Taxation. Oversight excluded the Computer Information Technologists ($38,148) from the fiscal impact for the Information Systems Division but has included $100,000 in contracted programming in FY 2000.

DOR officials estimated the revenue impact based on 1992 wholesale trade data for Missouri compiled by the U.S. Bureau of the Census. According to this source, growth rates for compact disc sales were as follows:

1991-1992: 22%

1992-1993: 22%

1993-1994: 34%

1994-1995: 10%

DOR officials assume compact disc sales for 1999 would be $123,790,013. Using a 10% growth rate for the next three years, such sales are estimated to be $136,169,014 for FY 2000; $149,785,915 for FY 2001; and $164,764,507 for FY 2002. Five percent of these estimated sales figures would result in the following collection projections: FY 2000 = $6,808,450 (if this legislation could be implemented by FY 2000, only a portion, 10 months, collections are projected); FY 2001 = $7,489,295; and FY 2002 = $8,238,225.

The proposal would result in an increase in Total State Revenues since the five percent tax on compact discs would be included in the calculation of Total State Revenues.

FISCAL IMPACT - State Government	FY 2000	FY 2001	FY 2002
	(10 Mo.)
MISSOURI TRANSITION PROGRAM FUND
Income-Tax on Compact Discs	$5,673,709	$7,489,295	$8,238,225
Cost-Distribution of Funds to Colleges
and Universities for Transition Program	($5,673,709)	($7,489,295)	($8,238,225)
ESTIMATED NET EFFECT ON TRANSITION
PROGRAM FUND	$0	$0	$0
GENERAL REVENUE FUND
Cost-Department of Revenue
Personal Service (3 FTE)	($50,460)	($62,066)	($63,618)
Fringe Benefits	(15,082)	(18,552)	(19,015)
Expense and Equipment	(61,684)	(29,730)	(16,775)
Contract Programming	(100,000)	0	0
Total Cost-DOR	($227,226)	($110,348)	($99,408)
Long-Range Fiscal Impact-State Government
Colleges and universities could have a need for FTEs to administer the program, which would come from appropriations, depending on the size of the program.
FISCAL IMPACT - Local Government	FY 2000	FY 2001	FY 2002
	(10 Mo.)
	0	0	0
FISCAL IMPACT - Small Business
Small businesses who are wholesalers of compact discs could be fiscally impacted from complying with the five percent tax on compact discs.

DESCRIPTION

The proposal would create the "Missouri Transition Program", which would be administered by the Missouri transition program administrative board. The board would be comprised of one representative of each publicly funded four-year institution of higher education. The board would distribute funds to colleges and universities to establish a Missouri Transition Program. The board would meet at least once per annum to promulgate rules and regulations pertaining to

distribution of funds designated for the Missouri Transition Program.

The program would be a four-year undergraduate program designed to significantly increase enrollment and retention to graduation of motivated and talented underprivileged students.

The colleges and universities could require the applicant to consent to authorizing the Director of Revenue to compare financial information submitted by the applicant with the Missouri individual income tax returns of the applicant.

The proposal would create the Missouri Transition Program Fund. Moneys in the fund would

not be transferred to the credit of the General Revenue Fund at the end of the biennium.

The proposal would require five percent of the wholesale price of each compact disc sold to be paid to the Director of Revenue and credited to the Missouri Transition Program Fund. Failure to pay would be a class D felony. Payment would be made by the manufacturer, solicitor or wholesale dealer on or before the fifteenth day of each month on forms prescribed by the Department of Revenue. Failure to pay the required fee on or before the due date would result in an additional charge of one percent per business day of the deficiency, not to exceed twenty-five percent of the deficiency, and in addition, interest on the deficient charge and penalty at the rate of one percent a month or fraction of a month from the date the deficient charge became due until paid.

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 Elementary and Secondary Education

Coordinating Board For Higher Education

Department of Revenue

Office of State Courts Administrator

State Treasurer's Office

Office of Administration

Department of Corrections

Department of Public Safety

State Public Defender

Office of Prosecution Services

University of Missouri

Missouri Western State College

Harris-Stowe State College

Truman State University

NOT RESPONDING: Central Missouri State University, Southeast Missouri State University, Southwest Missouri State University, Northwest Missouri State University, Missouri Southern State College, Lincoln University

Jeanne Jarrett, CPA

Director

February 9, 1999