LEGISLATIVE BUDGET BOARD
                                   Austin, Texas
         
                                   FISCAL NOTE
                               75th Regular Session
         
                                  May 12, 1997
         
         
      TO: Honorable Barry Telford, Chair            IN RE:  Senate Bill No. 1102, Committee Report 2nd House, Substituted
          Committee on Pensions and Investments                              By: Armbrister
          House
          Austin, Texas
         
         
         
         
         FROM:  John Keel, Director    
         
In response to your request for a Fiscal Note on SB1102 ( Relating 
to systems and programs administered by the Employees Retirement 
System of Texas) this office has detemined the following:
         
         Biennial Net Impact to General Revenue Funds by SB1102-Committee Report 2nd House, Substituted
         
No significant fiscal implication to the State is anticipated.
         

         
 
This bill makes numerous changes to the statutes governing the 
Employees Retirement System (ERS), the Law Enforcement and Custodial 
Officers Supplemental Retirement Fund (LECOSRF), the Judicial 
Retirement System Plan One (JRS-1), and the Judicial Retirement 
System Plan Two (JRS-2), as well as the administration of the 
Uniform Group Insurance Program.   Some of these changes affect 
the administration of ERS' programs and have no fiscal or actuarial 
impact.  Among the changes that will have an actuarial impact 
are the increase in the benefits multiplier from 2.0% to 2.25% 
for ERS members, changes in retirement eligibility requirements, 
earlier retirement eligibility for certain employees of the 
Texas Workforce Commission, the Texas Department of Mental Health 
and Mental Retardation and the Texas Department of Human Services, 
rules regarding purchase of service credit for military service, 
and rules for receiving service credit for unused sick leave. 
 The bill also directs the Board to authorize a supplemental 
payment to annuitants during the 1998 fiscal year if the actuary 
certifies that the amortization period would remain below 31 
years.

ERS projects that implementing the provisions of this 
bill would increase the actuarial liabilities of the ERS by 
$983.5 million, reducing the current actuarial surplus from 
$1.4 billion to $424 million.  The normal cost for ERS would 
increase from 12.294% to 13.791%, or approximately $64 million 
a year. 

The combined state and employee contribution rate 
to the ERS is currently 12.0%, which is below the normal cost 
rate under current statute.  At this contribution rate, if this 
bill were enacted the actuarial surplus would be eliminated 
in approximately 6 years and an unfunded liability would emerge 
that could not be amortized within the 31 years required by 
statute.  To maintain the actuarial soundness of the fund once 
the surplus is depleted, the state's contributions for retirement 
would have to increase from 6.0% to at least 7.791%, an increase 
of approximately $77 million each year over the current contributions. 
 This analysis assumes that the plan's experience matches the 
current assumptions, and that no actuarial gains or losses occur.

Eligibility 
provisions for the Judicial Retirement System, Plans One and 
Two are changed to eliminate requirements relating to continuous 
service.  There would be no change in the normal cost of JRS-2 
and no change in the state's contribution rate.  The changes 
related to JRS-1 are not expected to have a significant impact 
on the level of benefit payments under that program from the 
General Revenue Fund.
          
No fiscal implication to units of local government is anticipated.
          
   Source:            Agencies:   327   Employees Retirement System
                                         
                      LBB Staff:   JK ,PE ,SC