TITLE: CONCERNING AUTHORIZATION FOR THE ACCEPTANCE BY GOVERNMENTAL ENTITIES OF ADDITIONAL FORMS OF PAYMENT.

Fiscal Impact Summary	FY 1999/2000	FY 2000/2001
State Revenues General Fund Cash Fund	Possible increase or decrease in General Fund and Cash Fund revenues
State Expenditures General Fund Cash Fund
FTE Position Change	0.0 FTE	0.0 FTE
Other State Impact: None
Effective Date: 90 days after adjournment.
Appropriation Summary for FY 1999-2000: None required
Local Government Impact: Local governmental entities could accept one or more alternative forms of payment on their own, join with one or more local governments to enter into a contract, join one or more master agreements entered into by the State Treasurer, or choose not to accept payments by alternative forms of payment.

This bill, as amended in the House Local Government Committee, authorizes any state governmental entity that is responsible for the collection of moneys payable to the state (taxes, fees, payment for services provided, etc.) to accept one or more alternative forms of payment, including credit or debit cards.

The bill forbids any governmental entity that accepts payments by alternative forms of payment to impose a surcharge or convenience fee for the privilege of using the alternative form of payment. However, any state governmental entity that was accepting one or more alternative forms of payment on or before January 1, 1999, and was imposing a surcharge or convenience fee at that time, may continue to impose the surcharge or convenience fee. The amount of the current surcharge or convenience fee could not be increased.

The bill authorizes the State Treasurer to negotiate and enter into master agreements with providers of alternative forms of payment. Any provider of alternative forms of payment that wishes to have one or more state governmental entities accept the alternative forms of payment that it provides would be required to be a party to the master agreement negotiated by the State Treasurer covering the alternative forms of payment. The provider would be subject to the same terms and conditions as all other providers of alternative forms of payment that are parties to the agreements. Any state governmental entity may join any master agreement entered into by the State Treasurer. This includes judicial and legislative state governmental entities.

The provider of an alternative form of payment, including any credit or debit card issuer, shall pay the state governmental entity the full amount of the approved transaction, less any fee charged by the provider for the use of the alternative form of payment. The fees charged to any state governmental entity by a provider would not be counted as fiscal year spending for the purposes of Section 20 of Article X of the State Constitution (the TABOR Amendment).

The bill, as amended, is permissive in allowing, but not requiring state and local governmental entities to process payments by credit or debit card, or to join a master agreement entered into by the State Treasurer. The amended bill states that the State Treasurer shall enter into no more than one master agreement covering any particular alternative form of payment.

When determining state revenues for purposes of the state constitutional revenue limitation, as required by Section 20 of Article X of the State Constitution, state revenues would be counted net of any charges or fees imposed by the provider of an alternative form of payment. This will result in a reduction of state revenues when compared to revenues that would have otherwise been received if the only forms of payment accepted were cash or checks. On the other hand, it is probable that the state will experience enhanced cash flow due to customers having the ability to pay for certain government services by credit or debit card. In addition, the availability of a credit or debit card option is expected to reduce the number of bad checks submitted to the state, and will also reduce the number of bad debts and uncollectable accounts in the future. This, in turn, will reduce the state collection costs associated with bad debts and non-payment of taxes and fees. On balance, even with a reduction in net revenue on payments that are made by credit or debit card, the state may realize the same amount of cash, or possibly, even a greater amount of cash as a result of the availability of credit or debit cards as a method of payment.

Certain costs may be incurred by state agencies when offering the credit card option to their customers. For example, additional dedicated telephone lines may need to be installed in certain state offices to handle credit card processing. It is assumed that any personnel costs necessary for handling the processing of credit cards would be no greater than the costs of processing the same number and value of cash and checks. It is uncertain at this time whether the cost of the credit card processing machines would be a charge to the state, or whether they would be provided to the state as part of the negotiated agreement with the credit card provider.

It is anticipated that the ability to pay certain state fees, such as drivers licenses, motor vehicle registration, hunting licenses, or state parks passes by credit card may actually reduce the number of man-hours (counter help, for example) needed for these functions.

It should be noted that certain cash funds may receive less net revenue as a result of payments being accepted by credit card. The impact on the operations of individual cash funds as a result of this potential revenue reduction has not been estimated.

The bill is assessed as having a conditional state and local fiscal impact. The bill is permissive in the sense that it allows state governmental entities and local governments to offer credit cards as a method of payment for government services. It is not mandatory, and does not affect the ability of governmental entities currently collecting a surcharge to continue the use of that surcharge. The State Treasurer's office has indicated that the time and resources necessary to enter into master agreements would be done within the existing staff resources of the State Treasurer's office. Therefore, no fiscal impact is identified for the State Treasurer to enter into the agreements.

Any costs required by state departments that are necessary to implement the acceptance of credit or debit cards as a method of payment in the future has not been determined at this time. Nor has the reduction in current workloads that may occur as a result of the added customer convenience.

Estimates of changes in state revenue due to charges or fees imposed by the provider of an alternative form of payment or third party provider cannot be estimated at this time.

The bill allows local governmental entities to accept one or more alternative forms of payment on their own, join with one or more local governments to enter into a contract, or local governmental entities may join one or more master agreements entered into by the State Treasurer. The bill is permissive for local governments, and provides four options, including not accepting alternative forms of payment.

The fiscal note implies that no new state appropriations or spending authority are required to implement the provisions of the bill in FY 1999-00.