LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE, 77th Regular Session February 6, 2001 TO: Honorable Paul Sadler, Chair, House Committee on Teacher Health Insurance, Select FROM: John Keel, Director, Legislative Budget Board IN RE: HB12 by Ehrhardt (Relating to a statewide group insurance program for employees and retirees of school districts.), As Introduced ************************************************************************** * Estimated Two-year Net Impact to General Revenue Related Funds for * * HB12, As Introduced: negative impact of $(2,863,030,000) through * * the biennium ending August 31, 2003. * * * * 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 * * 2002 $(75,730,000) * * 2003 (2,787,300,000) * * 2004 (3,386,800,000) * * 2005 (3,860,790,000) * * 2006 (4,333,960,000) * **************************************************** All Funds, Five-Year Impact: *************************************************************************** *Fiscal Probable Savings/(Cost) from Change in Number of State * * Year General Revenue Fund Employees from FY 2001 * * 0001 * * 2002 $(75,730,000) 100.0 * * 2003 (2,787,300,000) 100.0 * * 2004 (3,386,800,000) 100.0 * * 2005 (3,860,790,000) 100.0 * * 2006 (4,333,960,000) 100.0 * *************************************************************************** Fiscal Analysis The bill establishes a statewide group insurance program for employees and retirees of independent school districts. The program would be administered by the Teacher Retirement System (TRS) and would provide the same level of benefits as the Uniform Group Insurance Program provides state employees. The state would be required to contribute a per employee/retiree amount equal to the amount the state contributes for state employees. Currently, state policy is to pay for 100% of the cost of employee-only and retiree-only coverage and 50% of the cost of dependent coverage. The state would not be required to pay for dependent coverage. Methodology This analysis assumes that program participation would begin, effective September 1, 2002, with the 2002-2003 school year (state fiscal year 2003), following program start-up in fiscal year 2002. For fiscal year 2002, TRS estimates that start-up costs would total $75,730,000. Based on a similar program in another state, TRS estimates it would need approximately 100 full-time equivalent employees to administer this statewide program. TRS estimates that the total cost for fiscal year 2003 will be $3.6 billion, with the state funding $3.055 billion. TRS estimates that the contribution per employee/retiree to be paid by the state's General Revenue Fund would be $4,290 for fiscal year 2003. These projections assume that 712,410 employees/retirees would be covered in 2003. This contribution would increase to $5,676 by fiscal year 2006, based on projected increases in health care costs ranging from 6%-8% for medical claims, and 13%-20% for prescription drug claims. Program participation is projected to grow to 784,870 by fiscal year 2006. TRS estimates that the number of active employees will increase by 3% annually, and the number of retirees will increase by 4.4% annually. Total cost for fiscal year 2002 is in addition to the $181,035,657 currently in the General Appropriations Act, as introduced, for TRS-Care, the existing program for retirees. For fiscal year 2003, the total projected cost of $3.055 billion is partially offset by the $268 million currently in the General Appropriations Act, as introduced, for TRS-Care since that program would cease operation in fiscal year 2003 under the provisions of this bill. Local Government Impact Currently, local school districts pay for some of the cost of providing health insurance to their employees. TRS estimates districts currently spend approximately $850 million a year on health insurance. Under the provisions of this bill, districts no longer incur those costs. Source Agencies: 323 Teacher Retirement System, 701 Texas Education Agency LBB Staff: JK, CT, SC