LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE
74th Regular Session
April 26, 1995
TO: Honorable Ken Armbrister IN RE: Committee Substitute
Committee on State Affairs for Senate
Senate Bill No. 1231
Austin, Texas
FROM: John Keel, Director
In response to your request for a Fiscal Note on Senate Bill No.
1231 (relating to the powers and duties of and systems and
programs under the Employees Retirement System of Texas) this
office has determined the following:
The bill would make no appropriation but could provide the legal
basis for an appropriation of funds to implement the provisions
of the bill.
The bill would affect the transfer of service credits and benefit
transfers between the Teacher Retirement System (TRS) and the
Employees Retirement System (ERS), provide benefit increases to
the Law Enforcement and Custodial Officer Supplemental Retirement
Fund (LECOS) and ERS members, and make some changes in the Texas
Employees Uniform Group Insurance Benefits Act. If enacted, major
provisions (and their fiscal impacts, if any) would include:
1) A supplemental benefit payment (13th check) to ERS retirees in
1997, and a provision allowing the ERS board of trustees to
continue this type of payment in any year which this payment
would not immediately cause ERS to exceed the 31 year funding
limit. At some point in the future this could affect the ability
of the legislature to make adjustments in the state contribution
rate or to adjust benefits or service credit allowances.
2) A benefit increase of 12.5 % for all current retirees who did
not retire under the recent early retirement provisions which
granted a 2.25% benefit multiplier.
3) Allowing ERS members to use sick leave credit for retirement
eligibility and service. Current law allows sick leave to be used
only for service credits. This new provision would increase the
normal cost by .026%, from 12.224 to 12.25%. If the legislature
appropriated the normal costs of ERS in fiscal year (FY) 1998,
the probable cost to the General Revenue Fund would be $644,989,
and the cost to all other funds would be $459,444. In FY 1999 the
probable costs would be $664,339 to General Revenue and $473,227
to all other funds. In FY 2000, the probable costs would be
$684,269 to General Revenue and $487,424 to all other funds.
Similar annual costs would continue as long as the provisions of
the bill are in effect.
4) Adjusting the LECOS benefit formula to a constant 2.5
multiplier, increasing the limit on annuity payments from 80% to
100% of current compensation, and increasing the benefit for
total occupational disability to automatically equal 100% of
current compensation. Additionally, current LECOS retirees who
retired under the recent early retirement provisions will get an
adjustment for whole months of credit. These benefits would
significantly increase the normal cost, raising it by 1.036%,
from 1.457% to 2.493%. If the legislature appropriated the normal
costs of LECOS in FY 1998, the probable cost to the General
Revenue Fund would be $12,549,080. In FY 1999 the probable costs
would be $12,925,552 to General Revenue. In FY 2000, the probable
costs would be $13,313,319 to General Revenue. Similar annual
costs would continue as long as the provisions of the bill are in
effect.
5) Repealing the requirement that the LECOS appropriation be
completely from the General Revenue Fund. This change would
result in proportionality being applied to the appropriation.
Assuming the new normal cost mentioned in 4), if the legislature
appropriated the normal costs of LECOS in FY 1998, the probable
savings to the General Revenue Fund would be $3,385,166, and the
cost to all other funds would be $3,385,166. In FY 1999 the
probable savings would be $3,486,721 in General Revenue and costs
would be $3,486,721 to all other funds. In FY 2000, the probable
savings would be $3,591,323 to General Revenue and costs would be
$3,591,323 to all other funds. Similar annual fiscal implications
would continue as long as the provisions of the bill are in
effect.
6) Allowing beneficiaries of a deceased member to purchase
service if the credit would allow for a death benefit annuity.
7) Changing the guidelines for exchanging service credits between
ERS and TRS. This would codify current practice.
8) Allowing payments for service transfers between ERS and TRS to
be paid in monthly installments corresponding to actual benefits
paid, rather than being actuarially predetermined.
9) Restricting the definition of custodial officer for future
members. This would result in significant future savings to
General Revenue and other funds. If LECOS payments were
appropriated in FY 1996, the savings to General Revenue would be
$980,000.
10) Exempting any self insured program of ERS from all insurance
code except that which specifically targets the Texas Employees
Uniform Group Insurance Benefits Act. The fiscal implications of
this cannot be determined.
11) Allowing trustees to claim all incurred expenses, not just
those which are necessary.
12) Giving the executive director investment authority; currently
this authority is only given to the trustees.
No fiscal implication to units of local government is
anticipated.
Source: Employees Retirement System
LBB Staff: JK, RN, WM, DF