LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE
75th Regular Session
May 29, 1997
TO: Honorable James E. "Pete" Laney IN RE: House Bill No. 2133, As Passed 2nd House
Speaker of the House Jackson
House of Representatives
Austin, Texas
FROM: John Keel, Director
In response to your request for a Fiscal Note on HB2133 ( Relating
to the creation, powers, and duties of the State Office of Risk
Management and to provisions of workers' compensation insurance
coverage for state employees.) this office has detemined the
following:
Biennial Net Impact to General Revenue Funds by HB2133-As Passed 2nd House
Implementing the provisions of the bill would result in a net
positive impact of $744,815 to General Revenue Related Funds
through the biennium ending August 31, 1999.
The bill would make no appropriation but could provide the legal
basis for an appropriation of funds to implement the provisions
of the bill.
Fiscal Analysis
This bill would amend the Labor Code by deleting the existing
Chapter 412 and adding a new one which would create a new state
agency, the State Office of Risk Management (SORM). Section
412.011 would establish SORM to administer the state employee
workers' compensation claim payments and the state risk management
program. Floor amendment 2 would require the Office of the
Attorney General (OAG) to provide the facilities and administrative
support for SORM, which would be independent of OAG.
Section
412.012 would establish the funding mechanism for SORM. The
agency would be funded by a state appropriation, interagency
contracts with state agencies for the risk management program,
and a new allocation program for the financing of workers' compensation
benefits. Currently, the legislature appropriates 75 percent
of expected claims costs to the OAG Division of Workers' Compensation
and agencies reimburse OAG for the other 25 percent from their
budgets. The bill states that the legislature shall appropriate
the amount designated by the appropriations structure for the
payment of state workers' compensation claims costs to SORM.
Section 10 of the bill would abolish the OAG Division of
Workers' Compensation and the Division of Risk Management at
the Texas Workers' Compensation Commission (TWCC) and transfer
all employees, records, equipment, and supplies to SORM, as
those divisions existed on August 31, 1997, not later than December
31, 1997. Floor amendment 2 would state that indirect FTEs
and indirect funding from OAG and TWCC shall not be transferred
to SORM. Total costs to consolidate TWCC's Risk Management
Division and the Attorney General's Division of Workers' Compensation
would be $371,800 in FY 1998 and $9,600 every year thereafter.
FY 1998 costs include costs for moving, office renovation,
and information systems. Continuing costs include a data communications
link to provide SORM with access to TWCC's mainframe.
After
the FY 1998 start-up period, TWCC projects that the creation
of SORM would result in a savings of $1,126,215 in total workers'
compensation claims due to better focused risk management efforts,
better coordination between loss control specialists and claims
adjusters in the return to work programs and the implementation
of the cost allocation program. This savings takes into account
a three percent increase in medical costs due to revised TWCC
medical cost guidelines.
Methodolgy
Costs were based on the following assumptions:
(1) Per Section
1 of the bill, 75 percent of expected claim costs would be appropriated
to SORM and agencies would reimburse SORM for the other 25 percent
of claim costs from their operating budgets.
(2) Per the
General Services Commission (GSC), there is adequate room on
the 6th floor of the state-owned William Clements Building to
house SORM. This would require moving the 22 direct FTEs from
TWCC's Risk Management Division into the Clements building and
would require some renovation of the existing space. Per GSC,
the total cost for moving and renovation would be $99,000.
(3)
Per OAG, the information systems start-up costs for SORM would
be $263,200 in FY 1998. This figure includes: (1) replacement
of PC's to ensure compatibility; (2) standardization of software;
and (3) linking of all PCs to create a local area network that
can access needed mainframes and databases.
(4) Per Section
10 of the bill, all equipment, including office furniture and
supplies would be transferred from TWCC's Risk Management Division
and OAG's Division of Workers' Compensation to SORM.
(5)
After the FY 98 start-up period, there would be a 9 percent
reduction in indemnity costs offset by a 3 percent increase
in medical costs which would net a total savings in General
Revenue claim costs of $1,126,215 per year. These savings were
based on FY 96 incurred workers' compensation claim payments.
(6)
Texas Department of Criminal Justice workers' compensation claim
costs, which accounted for approximately 23 percent of total
FY 96 claim costs and which increased 30 percent between FY
95 and 96 due to an increase in FTEs, would stabilize in the
1998/1999 biennium.
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 Revenue
Savings/(Cost) Gain/(Loss) from
from General General Revenue
Revenue Fund Fund
0001 0001
1998 ($371,800) $0
1998 (9,600) 1,126,215
2000 (9,600) 1,126,215
2001 (9,600) 1,126,215
2002 (9,600) 1,126,215
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 ($371,800)
1999 1,116,615
2000 1,116,615
2001 1,116,615
2002 1,116,615
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:
LBB Staff: JK ,TH ,BK