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