LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE, 76th Regular Session March 30, 1999 TO: Honorable Sherri Greenberg, Chair, House Committee on Pensions & Investments FROM: John Keel, Director, Legislative Budget Board IN RE: HB3755 by Clark (Relating to benefits payable by the Judicial Retirement System of Texas Plan Two.), As Introduced ************************************************************************** * Estimated Two-year Net Impact to General Revenue Related Funds for * * HB3755, As Introduced: negative impact of $(12,157,000) through * * the biennium ending August 31, 2001. * * * * The bill would make no appropriation but could provide the legal * * basis for an appropriation of funds to implement the provisions of * * the bill. * ************************************************************************** General Revenue-Related Funds, Five-Year Impact: **************************************************** * Fiscal Year Probable Net Positive/(Negative) * * Impact to General Revenue Related * * Funds * * 2000 $(5,942,000) * * 2001 (6,215,000) * * 2002 (6,307,000) * * 2003 (6,490,000) * * 2004 (6,596,000) * **************************************************** All Funds, Five-Year Impact: *************************************************************************** *Fiscal Probable Savings/(Cost) from Probable Savings/(Cost) from * * Year General Revenue Fund Judicial Fund * * 0001 0573 * * 2000 $(5,942,000) $(967,000) * * 2001 (6,215,000) (1,012,000) * * 2002 (6,307,000) (1,027,000) * * 2003 (6,490,000) (1,056,000) * * 2004 (6,596,000) (1,074,000) * *************************************************************************** Fiscal Analysis The bill would change the retirement annuities for Judicial Retirement Plan Two (JRS 2) members to be based on the state salary, as adjusted from time to time, of a judge of the court on which the retiring member last served. Currently, retirement annuities are based on the state salary being paid at the time of retirement without any later adjustments. The change applies to current and future JRS 2 annuitants. Methodology The increase in retirement annuities would increase the normal cost to 35.67% of payroll, well above the current combined state and member contribution rates of 22.83%. In addition, it would increase the unfunded actuarial liability of JRS 2 by $39.8 million, to $43.0 million. As a result, the funding would be inadequate and the liability would never be amortized. In order to meet the statutory requirement that the unfunded liability be amortized within 30 years, the state contribution rate would have to increase from the current 16.83% to 34.89% of payroll. Local Government Impact No fiscal implication to units of local government is anticipated. Source Agencies: LBB Staff: JK, PE, WM