LEGISLATIVE BUDGET BOARD
                              Austin, Texas
                                     
                    FISCAL NOTE, 77th Regular Session
  
                            February 12, 2001
  
  
          TO:  Honorable Paul Sadler, Chair, House Committee on Teacher
               Health Insurance, Select
  
        FROM:  John Keel, Director, Legislative Budget Board
  
       IN RE:  HB1248  by Tillery (Relating to a public school
               prescription drug benefit plan.), As Introduced
  
**************************************************************************
*  Estimated Two-year Net Impact to General Revenue Related Funds for    *
*  HB1248, As Introduced:  negative impact of $(1,070,700,000)           *
*  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                        $(23,800,000)  *
          *       2003                      (1,046,900,000)  *
          *       2004                      (1,271,900,000)  *
          *       2005                      (1,515,500,000)  *
          *       2006                      (1,759,100,000)  *
          ****************************************************
  
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                     $(23,800,000)                            20.0 *
*  2003                   (1,046,900,000)                            20.0 *
*  2004                   (1,271,900,000)                            20.0 *
*  2005                   (1,515,500,000)                            20.0 *
*  2006                   (1,759,100,000)                            20.0 *
***************************************************************************
  
Fiscal Analysis
  
The bill creates a statewide prescription drug program for public school
employee, retirees, and their dependents.  The coverage would be
comparable to the prescription drug benefits offered through the Uniform
Group Insurance Program administered by the Employees Retirement System
(ERS.)  The drug program would be jointly administered by ERS and the
Teacher Retirement System (TRS).  The state would be required to pay for
100% of the cost of coverage for employees and retirees, and 50% of the
cost of coverage for dependents and for part-time employees.  The school
districts could choose to make contributions towards the costs of
coverage above the state's share.  Employees and retirees would be
required to pay for any costs not covered by the state and the districts.

The bill takes effect September 1, 2001, allowing one year for program
implementation, with program coverage beginning no later than September
1, 2002.  Once the program is operational, prescription drug coverage
could no longer be provided through TRS-Care, the current program for
retirees, or through the health insurance programs provided by the
school districts to their employees.
  
  
Methodology
  
Start-up costs for fiscal year 2002 are estimated to be $23,800,000, and
that 20 full-time equivalent employees will be required each year for
program administration.  The total cost to the state for fiscal year 2003
would be $1.047 billion.  The contribution per employee/retiree to be
paid by the state's General Revenue Fund is projected to be $1,470 for
fiscal year 2003.  These projections assume that 712,410
employees/retirees would be covered in 2003.  This contribution would
increase to $2,241 by fiscal year 2006, based on projected increases in
prescription drug costs ranging from 12%-20%.  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 state  cost of $1.047 billion is in addition to the $268
million currently in the General Appropriations Act.  While the TRS-Care
program would no longer provide coverage for prescription drugs, the
amounts in the bill as introduced will be required to cover the medical
and hospital costs incurred by TRS-Care.
  
  
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.  It is not
known how much of this cost is related to prescription drug coverage.
Under the provisions of this bill, the districts would no longer bear
that cost, although the districts could choose to make contributions
towards the costs of dependent prescription drug coverage.
  
  
Source Agencies:   304   Comptroller of Public Accounts, 323   Teacher
                   Retirement System, 454   Texas Department of Insurance
LBB Staff:         JK, CT, SC