LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE, 77th Regular Session February 22, 2001 TO: Honorable Dale B. Tillery, Chair, House Committee on Pensions & Investments FROM: John Keel, Director, Legislative Budget Board IN RE: HB28 by McClendon (Relating to credit in the Employees Retirement System of Texas for military service.), As Introduced ************************************************************************** * Estimated Two-year Net Impact to General Revenue Related Funds for * * HB28, As Introduced: negative impact of $(14,674,637) 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, Six-Year Impact: **************************************************** * Fiscal Year Probable Net Positive/(Negative) * * Impact to General Revenue Related * * Funds * * 2001 $(2,989,168) * * 2002 (10,313,031) * * 2003 (1,372,438) * * 2004 (1,399,887) * * 2005 (1,427,885) * * 2006 (1,456,443) * **************************************************** All Funds, Six-Year Impact: *************************************************************************** *Fiscal Probable Probable Probable Probable * * Year Savings/(Cost) Savings/(Cost) Savings/(Cost) Savings/(Cost) * * from General from General from Federal from Other * * Revenue Fund Revenue Funds - Federal Funds * * 0001 Dedicated 0555 0997 * * Accounts * * 0994 * * 2001 $(2,989,168) $(294,017) $(882,050) $(735,041) * * 2002 (10,313,031) (1,014,396) (3,043,189) (2,535,991) * * 2003 (1,372,438) (134,994) (404,982) (337,485) * * 2004 (1,399,887) (137,694) (413,081) (344,235) * * 2005 (1,427,885) (140,448) (421,343) (351,119) * * 2006 (1,456,443) (143,257) (429,770) (358,142) * *************************************************************************** Fiscal Analysis This bill would allow state employees who are eligible to receive federal retirement payments based on 20 years or more of active federal military duty to establish up to 5 years of military service credit under the employee class of the Employees Retirement System (ERS). The bill would take effect immediately upon passage. Methodology Under current statute, when a member purchases military service credit the state must also contribute for the service purchased, at a rate of 6.0% of salary. ERS estimates that there are currently 3,000 state employees who would be able to purchase service under this bill, with 300 new eligible employees hired each year. This analysis assumes that the 3,000 current employees would begin purchasing the maximum 5 years of service credit in 12 monthly installments upon the bill's passage. The resulting cost for existing employees is $4,900,275 in fiscal year 2001 and $14,700,825 in fiscal year 2002. The annual cost for newly hired employees is estimated at $2,205,783 in fiscal year 2002, increasing to $2,387,612 in fiscal year 2006 as the average starting salary increases. The method of financing for the state's contributions will be proportional to the method of financing their salaries, which is assumed to mirror that of the overall ERS membership. It is assumed that all eligible current and new employees would purchase their service during the first year of eligibility to avoid interest penalties. Local Government Impact No fiscal implication to units of local government is anticipated. Source Agencies: 327 Employees Retirement System LBB Staff: JK, RB, SC