LEGISLATIVE BUDGET BOARD
                                   Austin, Texas
         
                                   FISCAL NOTE
                               75th Regular Session
         
                                  April 23, 1997
         
         
      TO: Honorable Kenneth Armbrister, Chair            IN RE:  House Bill No. 2644, As Engrossed
          Committee on State Affairs                              By: Telford
          Senate
          Austin, Texas
         
         
         
         
         FROM:  John Keel, Director    
         
In response to your request for a Fiscal Note on HB2644 ( relating 
to systems and programs administered by the Teacher Retirement 
System of Texas. ) this office has detemined the following:
         
         Biennial Net Impact to General Revenue Funds by HB2644-As Engrossed
         
No fiscal implication to the State is anticipated.
         

         
 
The bill would make numerous changes to the Teacher Retirement 
System (TRS) governing statutes, change the normal retirement 
age plus service eligibility to a rule of 80, and provide a 
75% CPI catch-up ad hoc annuity increase for current retirees. 
Insurance related provisions include some of the major recommendations 
of the Value Health Management study, affecting both the active 
and retiree health insurance plans. The bill would require no 
increase in state retirement contributions since the current 
state plus member contribution is sufficient to pay for the 
increased normal costs and amortize the resulting unfunded actuarial 
liability within 30 years. However the funding period would 
increase by 18.3 years, from 5.8 years to 24.1 years.

The 
75% CPI catch-up is the third installment out of a 4 biennia 
schedule intended to increase retirement annuity payments so 
that they are greater than or equal to the retiree s original 
annuity, when adjusted by the CPI. Retirees who retired prior 
to 1971 have already  caught up , and will receive an additional 
5% increase from this provision.  The increase in unfunded  
actuarial liabilities from this provision is approximately $1.3 
billion.

Currently, an active TRS member can retire at age 
50 with 30 years of service, age 60 with 20 years of service, 
or age 65 with 5 years of service. Section 12 of the bill would 
allow unreduced retirement benefits for any combination of age 
and service adding up to 80. The increase in unfunded actuarial 
liabilities from this provision is approximately $460 million. 
This provision also increases the actuarial normal cost of the 
plan by 0.07%; at current payroll rates this is an additional 
$11 million per year.

Adding salary supplements for drivers 
education courses to the base member compensation upon which 
benefits are based will add approximately $100 million in unfunded 
actuarial liabilities and increase the normal cost of the plan 
by 0.03%; at current payroll rates this is an additional $5 
million per year. 

The active insurance program would lower 
the minimum health insurance premiums paid by the employer/district 
to 75 percent of the employee only health premium. The bill 
would also allow participating districts to have a separate 
health insurance plan. These provisions should enhance participation 
in the plan. The active and retiree health insurance plans would 
be authorized to contract directly with health maintenance organizations 
and provider organizations as well as administrators. 

TRS 
would be authorized to self-fund the retiree health insurance 
program. Long-term care could be included as a component of 
the current plan, or as a separate insurance plan. To the extent 
the cost was not borne by the retirees, this could have a large 
cost to the fund. The state would be specifically authorized 
to raise its contribution above the current 0.5 percent of payroll 
without increasing the active member contribution.

Section 
21 of the bill would require TRS to allow retirees to have membership 
dues for a nonprofit association of retired school employees 
withheld from their monthly annuity payments. TRS would then 
be responsible for sending these dues to the nonprofit association 
every month.
          
Adding teacher salary supplements for driver's education courses 
to the salary base would require increased contributions. This 
salary would be above the state minimum salaries for teachers, 
so the increased contributions would be borne by local school 
districts. The total cost across the state would be approximately 
$360,000 per year. This would be allocated by district in proportion 
to the number of driver's education courses taught in that district.
          
   Source:            Agencies:   
                                         
                      LBB Staff:   JK ,JD ,PE ,WM