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: HB523 by Tillery (Relating to a statewide group
insurance program for school district employees and
retirees.), As Introduced
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* Estimated Two-year Net Impact to General Revenue Related Funds for *
* HB523, As Introduced: negative impact of $(1,086,050,254) 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. *
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General Revenue-Related Funds, Five-Year Impact:
****************************************************
* Fiscal Year Probable Net Positive/(Negative) *
* Impact to General Revenue Related *
* Funds *
* 2002 $(75,730,254) *
* 2003 (1,010,320,000) *
* 2004 (1,363,040,000) *
* 2005 (1,567,060,000) *
* 2006 (1,771,040,000) *
****************************************************
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 2001 *
* 0001 *
* 2002 $(75,730,254) (100.0) *
* 2003 (1,010,320,000) (100.0) *
* 2004 (1,363,040,000) (100.0) *
* 2005 (1,567,060,000) (100.0) *
* 2006 (1,771,040,000) (100.0) *
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Fiscal Analysis
The bill amends current statutes regarding a statewide group insurance
program for employees and retirees of the independent school districts.
The program would be administered by the Teacher Retirement System
(TRS). The bill allows the TRS Board of Trustees to determine the level
of coverage offered, but requires that coverage be comparable to the
coverage offered by the Employees Retirement System through the Uniform
Group Insurance Program. The state would pay for 50% of the cost of
employee-only coverage and the local school districts would pay the
remaining 50% for employee-only coverage. Funding for retirees would
continue the current 0.5% state contribution and 0.25% active employee
contribution. The state would be required to pay for 100% of the cost
for retirees with 30 or more years length of service, 75% of the costs
for retirees with between 20 years and 30 years of service, and 50% of
the costs for retirees with between 10 years and 20 years of service.
Neither the state nor the school districts would be required to pay for
dependent coverage.
Methodology
The bill assumes that program participation begins, 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 the start-up costs will be $75,730,254. Based on a
similar program in another state, TRS estimates that it would need
approximately 100 full-time equivalent employees. Total costs for fiscal
year 2002 are in addition to the $181,035,657 currently in the General
Appropriations Act, as introduced, for TRS-Care, the existing program for
retirees.
TRS estimates that the total cost for fiscal year 2003 will be $3.064
billion, with the state funding $1.278 billion from general revenue
funds. These projections assume that 685,563 employees/retirees would be
covered in fiscal year 2003. TRS estimates that the average per person
cost to the state for fiscal year 2003 would be $1,864. The $1.278
billion cost is partially offset by the $267,912,922 already in the
General Appropriations Act, as introduced, for TRS-Care.
The per person cost to the state is projected to increase to $2,510 by
fiscal year 2006. Costs increases for health care costs are estimated
to range from 6%-8% for medical claims, and 12%-20% for prescription
drug claims. Program participation is projected to grow to 754,324 by
fiscal year 2006. TRS estimates that the number of active employees
will increase by 3% percent annually, and the number of retirees will
increase by 4.4% percent annually.
Local Government Impact
The bill requires school districts to pay for 50% of the costs of active
employee coverage. The estimated cost to the districts under this bill
is projected to be $922 million in fiscal year 2003, increasing to
$1.326 billion in fiscal year 2006. TRS estimates that school districts
are currently paying $850 million a year for health insurance coverage.
Source Agencies: 454 Texas Department of Insurance, 701 Texas
Education Agency, 304 Comptroller of Public
Accounts, 323 Teacher Retirement System
LBB Staff: JK, CT, SC