LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE, 77th Regular Session
May 26, 2001
TO: Honorable Bill Ratliff, Lieutenant Governor
Honorable James E. "Pete" Laney, Speaker of the House
FROM: John Keel, Director, Legislative Budget Board
IN RE: HB1203 by Brimer (relating to the purchase of certain
insurance coverage by state agencies and to workers'
compensation insurance benefits provided by certain
state agencies.), Conference Committee Report
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* Estimated Two-year Net Impact to General Revenue Related Funds for *
* HB1203, Conference Committee Report: positive impact of *
* $1,100,000 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. *
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General Revenue-Related Funds, Five-Year Impact:
****************************************************
* Fiscal Year Probable Net Positive/(Negative) *
* Impact to General Revenue Related *
* Funds *
* 2002 $0 *
* 2003 1,100,000 *
* 2004 2,200,000 *
* 2005 2,750,000 *
* 2006 3,190,000 *
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All Funds, Five-Year Impact:
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*Fiscal Probable Probable Change in Number of *
* Year Savings/(Cost) from Savings/(Cost) from State Employees from *
* General Revenue Fund Interagency FY 2001 *
* 0001 Contracts *
* 0777 *
* 2002 $0 $(42,000) 1.0 *
* 2003 1,100,000 (42,000) 1.0 *
* 2004 2,200,000 (42,000) 1.0 *
* 2005 2,750,000 (42,000) 1.0 *
* 2006 3,190,000 (42,000) 1.0 *
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Fiscal Analysis
As amended, HB1203 would expand the State Office of Risk Management's
(SORM) risk management activities by allowing the agency to offer
insurance brokerage services to state agencies. In acting as a
full-service insurance manager for state agencies, SORM would purchase
insurance coverage for state agencies under any line of insurance other
than health or life insurance for all state agencies subject to Chapter
501 of the Labor Code.
Methodology
SORM estimates it would need an additional FTE to implement the
full-service insurance management responsibility which the legislation
creates.
According to SORM, an overall expected savings of 10% can be achieved in
year one and an additional 10% in year two by centralizing the purchase
of insurance by state agencies. This savings, according to the agency,
would be achieved through a bulk premium discount, where the industry
standard ranges from 9%-14%, and a minimal 5% savings through elimination
of unnecessary policies. SORM assumes additional savings would continue
because savings would still be achieved through discounts for multi-year
policies, by matching appropriate coverage to agencies to eliminate
unnecessary coverage, finding the most cost effective policies, and
combining policies to achieve premium discounts.
SORM calculated the estimated savings to the state by taking the proposed
client agencies insurance premium amount from FY 2000 ($11,000,000) and
applying a 10% savings in FY 2003 and an additional 10% in FY 2004. An
additional 5% and 4% in savings are estimated for FY 2005 and FY 2006,
respectively.
Source Agencies: 479 State Office of Risk Management
LBB Staff: JK, RB, JC