LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE, 77th Regular Session May 9, 2001 TO: Honorable David Sibley, Chair, Senate Committee on Business & Commerce FROM: John Keel, Director, Legislative Budget Board IN RE: HB2613 by Hochberg (Relating to the payment and funding of workers' compensation benefits for certain claimants who work part-time or have multiple employment.), As Engrossed ************************************************************************** * Estimated Two-year Net Impact to General Revenue Related Funds for * * HB2613, As Engrossed: positive impact of $0 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 $0 * * 2003 0 * * 2004 0 * * 2005 0 * * 2006 0 * **************************************************** All Funds, Five-Year Impact: *************************************************************************** *Fiscal Probable Savings/(Cost) from Probable Revenue Gain/(Loss) * * Year Subsequent Injury Trust Fund from Subsequent Injury Trust * * 0918 Fund * * 0918 * * 2002 $(11,400,000) $8,000,000 * * 2003 (11,700,000) 8,000,000 * * 2004 (12,100,000) 8,000,000 * * 2005 (12,600,000) 8,000,000 * * 2006 (13,000,000) 8,000,000 * *************************************************************************** Fiscal Analysis The bill would amend the Labor Code to clarify the calculation of Average Weekly Wage (AWW) for injured employees who are employed part-time or by multiple employers. In the case of injured workers with multiple employers, the AWW would be calculated based on the total earned wages from both subscribing and non-subscribing employers rather than only the earned wages from the employer where the injury occurred. The insurance carrier covering the employer where the injury occurred would be responsible for all income benefits awarded by TWCC. The bill would also allow insurance carriers to apply for and receive reimbursement annually from the Subsequent Injury Trust Fund (SIF) for the amount of income benefits paid to injured workers that were based on other employment. The bill would authorize TWCC to assess a maintenance tax to insurance carriers, other than governmental entities, in an amount to generate 120 percent of any projected unfunded liabilities of SIF. The bill would allow for only partial payment to insurance carriers should the statutory cap on the maintenance tax be reached prior to all liabilities of SIF being met. SIF's current funding comes from deposits of insurance carriers for death benefits awarded when no legal beneficiary exists. Under the bill, this funding stream would not change. The bill would require a TWCC actuary or financial advisor to submit a report biannually to the Research and Oversight Council on Workers' Compensation (ROC) on the financial condition and project assets and liabilities of the SIF. The bill authorize TWCC to purchase annuities for the payment of lifetime income benefits from SIF should the agency determine that to be financially prudent in the management of SIF. The bill would take effect on September 1, 2001 and apply only to injuries occurring on or after that date. Methodology The Research and Oversight Council on Workers' Compensation (ROC) estimates a $60.8 million cost over five years to the Subsequent Injury Fund (SIF) in benefits reimbursed to insurance carriers. The costs are based on a total of 4,387 claims eligible for such reimbursement each year, an average of 11.3 weeks of temporary income benefits (TIBs), $540 per week cap on TIBs benefits, and an average weekly wage (AWW) of $473 projected for fiscal year 2002. The TIBs benefit cap is assumed to increase by two percent each year and the AWW is assumed to increase by four percent each year. Four groups of claimants would be effected by the bill: 1. two full-time jobs (175 annual claims); 2. two part-time jobs (1,184 annual claims); 3. a full-time and a part-time job with the injury occurring on the part-time job (1,029 annual claims); and 4. a full-time and a part-time job with the injury occurring on the full-time job (1,998 annual claims). Depending upon the appropriation level of the Texas Workers' Compensation Commission (TWCC) and current gross premiums remaining constant, the maintenance tax at its statutory cap of two percent of gross premiums would generate from $5-8 million in revenue each year for the SIF. As of April 1, 2001, the SIF has a balance of $24 million. The average income from death benefits from 1998-2000 has been $3.5 million per year, with the average benefits being paid out of $2.6 million. With the increased revenue of $8 million from the increased maintenance tax and the current SIF revenue and balance, the full projected liabilities could be paid beyond fiscal year 2006 without insufficient funds. Local Government Impact No fiscal implication to units of local government is anticipated. Source Agencies: 453 Texas Workers' Compensation Commission, 478 Research and Oversight Council on Workers' Compensation LBB Staff: JK, DB, JO, RT, KM