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F I S C A L I M P A C T R E P O R T

SPONSOR Larranaga

ORIGINAL DATE

LAST UPDATED

1/30/07

HB 548

SHORT TITLE Severance Tax Permanent Fund Transfer

SB

ANALYST Francis

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY07

FY08

200,000.0

Nonrecurring

General Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

REVENUE (dollars in thousands)

Estimated Revenue

Recurring

or Non-Rec

Fund

Affected

FY07

FY08

FY09

$200,000.0

Nonrecurring Severance Tax

Permanent Fund

$1,673.0 Recurring General Fund

$17,000.0

$18,445.0 Recurring Severance Tax

Permanent Fund

(Parenthesis ( ) Indicate Revenue Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

State Investment Council (SIC)

SUMMARY

Synopsis of Bill

House Bill 548 makes a nonrecurring general fund appropriation to the severance tax permanent

fund (STPF) of $200 million by the end of fiscal year 2007.

House Bill 548 – Page

2

FISCAL IMPLICATIONS

The appropriation of $200 million contained in this bill is a NON-RECURRING expense to the

GENERAL FUND. Assuming a rate of 8.5 percent, the historic average for STPF investments,

the $200 million will earn $17 million in FY08 and $18.4 million in FY09. In FY09, the $200

million will begin to impact the five year average of the fund balance which is used to determine

general fund distributions. Each year, 4.7 percent of the five year average balance is distributed

to the general fund to provide funds for common schools. That impact is estimated by the State

Investment Council (SIC), who manages the STPF, to be $1.7 million in FY09 and $3.5 million

in FY10.

Table 1: Fiscal Impact of HB548

General Fund

STPF

FY07 (200,000,000) 200,000,000

FY08

17,000,000

FY09 1,673,000

18,445,000

FY10 3,477,000

19,870,620

Table 2: SIC analysis of STPF distribution to General Fund

STPF Dist inclusive

+$200M

Current Estimates

Estimated Annual

Impact ($1000s)

FY 2009

$192,657

$190,984

$1,673

FY 2010

$205,706

$202,229

$3,477

FY 2011

$219,039

$213,637

$5,402

FY 2012

$233,605

$226,161

$7,444

FY 2030

$537,787

$516,913

$20,874

SIGNIFICANT ISSUES

SIC reports that since the STPF is a constitutionally protected fund, appropriations cannot be

made from the fund without a constitutional amendment.

This appropriation would lower the revenue available for capital outlay and other nonrecurring

uses in FY07 by $200 million.

NF/csd