LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE
75th Regular Session
March 21, 1997
TO: Honorable Kim Brimer, Chair IN RE: House Bill No. 2133, Committee Report 1st House, as amended
Committee on Business & Industry By: Jackson
House
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; provisions of workers' comp insurance coverage for
state employees.) this office has detemined the following:
Biennial Net Impact to General Revenue Funds by HB2133-Committee Report 1st House, as amended
Implementing the provisions of the bill would result in a net
positive impact of $90,095 to General Revenue Related Funds
through the biennium ending August 31, 1999. Beginning in the
year 2000, savings to General Revenue Related Funds are estimated
to be $720,255 per year.
Fiscal Analysis
This bill would amend the Labor Code by deleting Chapter 412
and adding a new Chapter 412. This bill would create a new
state agency, the State Office of Risk Management (SORM). Section
412.011 would establish the office to administer the government
employee's workers compensation insurance and the state risk
management programs. This section would require the Texas Workers'
Compensation Commission (TWCC) to provide the facilities and
administrative support for the office, which would be independent
of TWCC.
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 the allocation program for the financing of workers'
compensation benefits. Currently, the legislature appropriates
75 percent of expected claims costs to the Division of Workers'
Compensation in the Attorney General's Office and agencies reimburse
the Attorney General 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 the SORM.
SORM
would establish an allocation program for claim costs incurred
by state agencies that account for 90 percent of the claim costs
for the preceding fiscal biennium. SORM would compare the allocation
to the agency's actual workers' compensation claim expenses
and if expenses were higher than the amount allocated to that
agency, the agency would reimburse SORM for the additional costs.
If claim costs are lower, the agency would retain a portion
of the savings.
Section 412.033 would allow SORM's Board
of Directors to hire a Director to serve as the state risk manager.
Section 412.041 would allow the Director to secure and provide
for services that are necessary and employ and compensate professional
consultants, technical assistants, and employees on a full-time
or part-time basis.
Section 412.051 would require certain
state agencies to manage agency risks by developing, implementing,
and maintaining programs designed to assist employees who sustain
compensable injuries to return to work.
Section 10 of the
bill would abolish the Division of Workers' Compensation in
the Attorney General's office and the Division of Risk Management
at 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. Total costs to consolidate
TWCC's Risk Management Division and the Attorney General's Division
of Workers' Compensation would be $630,160 in FY 1998 and $405,960
every year thereafter. FY 1998 costs include moving costs, procurement
of software and hardware to link SORM's office to the TWCC LAN,
upgrades to TWCC's mainframe due to anticipated increased usage
from SORM, and software to make Attorney General Macintosh computers
IBM-compatable. Continuing costs include rent, software maintenance
charges and phone line charges.
After the FY 1998 start-up
period, TWCC's assumes 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) All staff,
direct and indirect, of TWCC's Risk Management Division and
the Attorney General's Division of Workers' Compensation would
constitute SORM staff and would be located at a new site.
(3)
Any administrative support that SORM's indirect staff could
not handle would be absorbed by TWCC.
(4) Per Section 10
of the bill, all equipment, including office furniture and supplies
would be transferred from TWCC's Risk Management Division and
the Attorney General'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.
The probable fiscal implications of
implementing the provisions of the bill during each of the first
five years following passage is estimated as follows:
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
Savings/(Cost) Savings/(Cost)
from General from General
Revenue Fund Revenue Fund
0001 0001
1998 ($630,160) $0
1998 (405,960) 1,126,215
2000 (405,960) 1,126,215
2001 (405,960) 1,126,215
2002 (405,960) 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 ($630,160)
1999 720,255
2000 720,255
2001 720,255
2002 720,255
Source: Agencies:
LBB Staff: JK ,TH