LEGISLATIVE BUDGET BOARD
                                   Austin, Texas
         
                                   FISCAL NOTE
                               75th Regular Session
         
                                  March 19, 1997
         
         
      TO: Honorable Kim Brimer, Chair            IN RE:  House Bill No. 2133
          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-As Introduced
         
Implementing the provisions of the bill would result in a net 
negative impact of ($24,736,120) 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 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% 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% from their budgets.  The 
bill states that the legislature shall appropriate the total 
amount designated for the payment of state workers' compensation 
claims costs to the SORM.  The bill does not address whether 
or not the current funding structure would be replaced.  This 
analysis interprets the bill language to mean that the state's 
appropriation for workers' compensation payments would be 100% 
of expected claims costs.  Furthermore, it is assumed that agencies' 
budgets would not be reduced based on previous reimbursements 
for workers' compensation claims.  For the 1998/1999 biennium, 
it is estimated that workers' compensation claims costs for 
the state will be $94.6 million.  The additional 25% cost to 
General Revenue is estimated to be $23.7 million at the beginning 
of each biennium.

SORM would establish an allocation program 
for claim costs incurred by state agencies that account for 
90% 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 412.042 requires the Director to report to the Legislature 
at the beginning of each session on administrative expenses, 
all workers' compensation claims, and a listing of all state 
agencies that fail to meet their obligation regarding the prevention 
of accidents and injuries to state employees.

Section 412.051 
would require that all state agencies manage agency risks by 
developing, implementing, and maintaining programs designed 
to assist employees who sustain compensable injuries to return 
to work.  Section 412.052 would exempt from Section 412.051 
agencies that had medical malpractice insurance coverage, workers' 
compensation insurance coverage, or other self-insurance coverage 
with associated risk management programs before January 1, 1989.

Section 
412.053 would require each state agency to file an annual report 
with the Director of SORM each fiscal year.

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 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.  However, an increase in health care costs may offset 
these savings.
 
Methodolgy
 
Costs were based on the following assumptions:

(1) Per Section 
1 of the bill, the state's appropriation for workers' compensation 
payments would be 100% of expected claims costs.  

(2) State 
agencies' budgets would not be reduced based on previous reimbursements 
for workers' compensation claims.

(3) 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.

(4) Any administrative 
support that SORM's indirect staff could not handle would be 
absorbed by TWCC.

(5) 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.


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)     ($23,700,000)                                                      
       1998         (405,960)                                                                        
       2000         (405,960)      (23,700,000)                                                      
       2001         (405,960)                                                                        
       2002         (405,960)      (23,700,000)                                                      
 
 
         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        ($24,330,160)
               1999            (405,960)
               2000         (24,105,960)
               2001            (405,960)
               2002         (24,105,960)
 
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:   453   Workers' Compensation Commission
                                         302   Office of the Attorney General
                                         
                      LBB Staff:   JK ,TH ,BK