LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE
75th Regular Session
March 17, 1997
TO: Honorable Barry Telford, Chair IN RE: House Bill No. 1780
Committee on Pensions and Investments By: Greenberg
House
Austin, Texas
FROM: John Keel, Director
In response to your request for a Fiscal Note on HB1780 ( Relating
to the purchase of service credit in the Employees Retirement
System of Texas and the Teacher Retirement System of Texas.)
this office has detemined the following:
Biennial Net Impact to General Revenue Funds by HB1780-As Introduced
Implementing the provisions of the bill would result in a net
negative impact of $(278,000) to General Revenue Related Funds
through the biennium ending August 31, 1999.
Fiscal Analysis
House Bill 1780 would expand the purchase of service credit
options for Employee Retirement System (ERS) employees and allow
for a payroll deduction for purchase of credit with the Teachers
Retirement System (TRS). Active members of both systems would
gain more flexibility in their purchase of credit options. ERS
employees would be allowed a simple monthly payment option over
a period not to exceed five years. The bill would require ERS
to provide additional information to members regarding the costs
of purchasing service.
The bill would allow ERS to base
the interest rate used to calculate the cost of purchasing service
on actuarial recommendations. ERS anticipates additional service
credits would be purchased and would cost the system an additional
$8 million per year. This cost assumes the interest rate was
left at the current 5%. Current costs to ERS for the purchase
of service credit are $17 million per year. If instead the interest
rate was raised to the actuarial interest rate (currently at
8%,) there would be some additional revenue for ERS which would
partially offset the additional costs.
TRS expects no significant
fiscal impact from passage of the bill.
Methodolgy
The ERS actuary anticipates additional service credit purchases
would be made. When these are made for service which has not
been previously established (such as military service), the
state must make an additional contribution. The cost to the
state to make these additional contributions is estimated to
be $229,000 per year. The method of finance is provided by using
estimated 1998 ERS retirement state contributions.
The probable fiscal implications of implementing the provisions
of the bill during each of the first five years following passage
is estimated as follows:
Five Year Impact:
Fiscal Year Probable Probable Probable Probable Change in Number
Savings/(Cost) Savings/(Cost) Savings/(Cost) Savings/(Cost) of State
from General from State from all GR from Federal Funds Employees from
Revenue Fund Highway Fund Dedicated Funds FY 1997
0001 0006 NEW-DED 0555
1998 ($139,000) ($33,000) ($12,000) ($44,000) 0.0
1998 (139,000) (33,000) (12,000) (44,000) 0.0
2000 (139,000) (33,000) (12,000) (44,000) 0.0
2001 (139,000) (33,000) (12,000) (44,000) 0.0
2002 (139,000) (33,000) (12,000) (44,000) 0.0
Fiscal Year Probable
Savings/(Cost)
from Other State
Funds
OTHER-OTH
1998
1999 (1,000)
2000 (1,000)
2001 (1,000)
2002 (1,000)
Net Impact on General Revenue Related Funds:
The probable fiscal implication to General Revenue related funds
during each of the first five years is estimated as follows:
Fiscal Year Probable Net Postive/(Negative)
General Revenue Related Funds
Funds
1998 ($139,000)
1999 (139,000)
2000 (139,000)
2001 (139,000)
2002 (139,000)
Similar annual fiscal implications would continue as long as
the provisions of the bill are in effect.
No fiscal implication to units of local government is anticipated.
Source: Agencies: 304 Comptroller of Public Accounts
323 Teacher Retirement System and Optional Retirement Program
327 Employees Retirement System
LBB Staff: JK ,PE ,WM