LEGISLATIVE BUDGET BOARD
                              Austin, Texas
                                     
                    FISCAL NOTE, 77th Regular Session
                                Revision 1
  
                              April 8, 2001
  
  
          TO:  Honorable Dale B. Tillery, Chair, House Committee on
               Pensions & Investments
  
        FROM:  John Keel, Director, Legislative Budget Board
  
       IN RE:  HB2464  by Tillery (Relating to the Judicial Retirement
               System of Texas Plan One and the Judicial Retirement
               System of Texas Plan Two.), As Introduced
  
**************************************************************************
*  Estimated Two-year Net Impact to General Revenue Related Funds for    *
*  HB2464, As Introduced:  negative impact of $(13,965,000) 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                         $(6,783,000)  *
          *       2003                          (7,182,000)  *
          *       2004                          (7,368,000)  *
          *       2005                          (8,056,000)  *
          *       2006                          (8,237,000)  *
          ****************************************************
  
All Funds, Five-Year Impact:
  
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*Fiscal        Probable         Probable Revenue         Probable        *
* Year    Savings/(Cost) from   Gain/(Loss) from    Savings/(Cost) from  *
*        General Revenue Fund General Revenue Fund     Judicial Fund     *
*                0001                 0001                 0573          *
*  2002           $(6,553,000)           $(230,000)           $(949,000) *
*  2003            (6,974,000)            (208,000)            (982,000) *
*  2004            (7,105,000)            (263,000)          (1,002,000) *
*  2005            (7,808,000)            (248,000)          (1,092,000) *
*  2006            (7,955,000)            (282,000)          (1,114,000) *
**************************************************************************
  
Fiscal Analysis
  
The bill, to be effective September 1, 2001, makes several changes to the
Judicial Retirement System Plan 1 (JRS-1), which covers judges who
joined the bench before September 1, 1985, and the Judicial Retirement
System Plan Two (JRS-2), which covers judges who joined the bench after
that date.  Both programs are administered by the Employees Retirement
System (ERS).

JRS I and JRS II members would be able to purchase service credit for the
remaining months in any calendar year in which the member held office
for part of that calendar year.  The 6% member contribution for JRS I
members would cease when the member has at least 20 years of service
credit. The 10% increase in the benefit factor that currently applies to
JRS II members who have not been out of judicial office for more than
one year would be extended to visiting judges if the first anniversary
of their last day of that service has not occurred.   Retirement
annuities for JRS II members would be based on the state salary, as
adjusted from time to time, of a judge of the court which the retiring
member last served.  Currently, retirement annuities for JRS II members
are based on the state salary being paid at the time of retirement
without any later adjustments.
  
  
Methodology
  
The JRS-1 program is a pay-as-you-go program, with the state depositing
member contributions into the General Revenue Fund and paying benefits
out of the General Revenue Fund each year.  The provision to discontinue
the required member contributions once the member has 20 years of service
results in a revenue loss to the General Revenue Fund estimated at
$230,000 in fiscal year 2002 and increasing to $282,000 in fiscal year
2006 as more members reach 20 years of service.

The provision to allow JRS-1 members to purchase additional service
credit will result in a net increase in the amount of benefits paid
annually.  ERS estimates the additional benefit payments will total
$200,000 in fiscal year 2002, and increase to $500,000 by fiscal year
2006 as more JRS-1 judges retire.

The JRS-2 program is pre-funded, with contributions being made today to
pay for benefits that will be provided at a later date.  The bill's
provisions to increase retired judges' benefits whenever the salaries
for serving judges are increased and to increase the benefit factor for
certain visiting judges result in a higher normal cost for the plan.
The normal cost would increase from the current 16.03% to 38.55%.  The
current actuarial surplus of $5.5 million would be depleted, and there
would be an unfunded actuarial accrued liability of $61.6 million.  As a
result of these changes, the state would need to contribute 32.55%,
instead of the current 16.83%, to fund the normal cost and amortize the
liability.  Based on the current payroll levels, and assuming increases
based only an increasing number of JRS-2 judges, ERS estimates the
increase in the state's contribution will be $7.3 million in fiscal year
2002, increasing to $8.6 million by fiscal year 2006.  JRS-2
contributions are funded by a combination of General Revenue and the
Judicial Fund No. 573.
  
  
Local Government Impact
  
No fiscal implication to units of local government is anticipated.
  
  
Source Agencies:   327   Employees Retirement System
LBB Staff:         JK, RB, SC