LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE, 76th Regular Session
April 15, 1999
TO: Honorable Florence Shapiro, Chair, Senate Committee on
State Affairs
FROM: John Keel, Director, Legislative Budget Board
IN RE: SB292 by Nixon, Drew (Relating to a self-directed
investment option for participants in the Teacher
Retirement System of Texas.), As Introduced
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* Estimated Two-year Net Impact to General Revenue Related Funds for *
* SB292, As Introduced: negative impact of $(2,600,000) 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. *
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General Revenue-Related Funds, Five-Year Impact:
****************************************************
* Fiscal Year Probable Net Positive/(Negative) *
* Impact to General Revenue Related *
* Funds *
* 2000 $(1,600,000) *
* 2001 (1,000,000) *
* 2002 (1,000,000) *
* 2003 (1,000,000) *
* 2004 (1,000,000) *
****************************************************
All Funds, Five-Year Impact:
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*Fiscal Probable Savings/(Cost) from Change in Number of State *
* Year General Revenue Fund Employees from FY 1999 *
* 0001 *
* 2000 $(1,600,000) 20.0 *
* 2001 (1,000,000) 20.0 *
* 2002 (1,000,000) 20.0 *
* 2003 (1,000,000) 20.0 *
* 2004 (1,000,000) 20.0 *
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Fiscal Analysis
The bill provides for an optional defined contribution plan, effective
September 1, 2000. Members of the Teacher Retirement System (TRS) would
be allowed to reallocate up to one-half (3.2% of payroll) of their
current contributions to the retirement system into a new defined
contribution plan that would provide investment choices through outside
vendors. The Board of Trustees of TRS would reduce a participating
member's annuity in proportion to the amount of member contributions that
were diverted from the pension plan into the defined contribution plan.
The TRS actuary projects that there would be no direct actuarial impact
on TRS pension plan, but the system estimates that there would be a
fiscal impact to agency operations. While outside vendors would provide
the investment management services and could be paid from the account
balances of the participants, there would still be administrative duties
for TRS to perform. These duties would include developing communication
and administration documentation, selecting investment organizations,
and interacting with higher education institutions, local school
districts, and their employees in processing plan participation
decisions and changes.
Methodology
The TRS actuary assumed that the system could implement the legislation
in a way that prevents any actuarial losses to the system. If this
assumption is correct, there would not be any change to the state's
contributions to the system.
TRS estimate that first year start-up costs will be $1.6 million, with
ongoing annual costs of $1 million. The agency also projects the need
for an additional 20 FTEs.
Local Government Impact
No significant fiscal implication to units of local government is
anticipated.
Source Agencies: 323 Teacher Retirement System
LBB Staff: JK, SD, SC