LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE, 77th Regular Session
May 1, 2001
TO: Honorable Teel Bivins, Chair, Senate Committee on
Education
FROM: John Keel, Director, Legislative Budget Board
IN RE: HB3343 by Sadler (Relating to the operation and funding
of certain group coverage programs for certain school and
educational employees and their dependents.), As
Engrossed
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* Estimated Two-year Net Impact to General Revenue Related Funds for *
* HB3343, As Engrossed: negative impact of $(1,242,471,000) 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 $0 *
* 2003 (1,242,471,000) *
* 2004 (1,221,177,000) *
* 2005 (1,227,331,000) *
* 2006 (1,240,827,000) *
****************************************************
All Funds, Five-Year Impact:
*****************************************************
* Fiscal Year Probable Savings/(Cost) from *
* General Revenue Fund *
* 0001 *
* 2002 $0 *
* 2003 (1,242,471,000) *
* 2004 (1,221,177,000) *
* 2005 (1,227,331,000) *
* 2006 (1,240,827,000) *
*****************************************************
Fiscal Analysis
The bill, as engrossed, creates a statewide health insurance pool, with
several levels of coverage, that would be mandatory for school districts,
regional education service centers, and charter schools with 500 or
fewer employees. Districts with more than 500 but not more than 1,000
employees could opt to join immediately. Districts with more than 1,000
employees would have the option of joining beginning in fiscal year 2006.
The pool would offer several tiers of coverage with at least one level
comparable to the benefits provided to state employees by the Employees
Retirement System. The Teacher Retirement System (TRS) would administer
the plan, with participation beginning in fiscal year 2003. The proposed
plan does not include retirees.
Under the provisions of the bill, the state would contribute a fixed
amount per employee per month, regardless of whether the district is in
the pool, to be used for providing health care coverage. In addition,
the state would provide a fixed dollar amount to every school district
employee in the state, to be used for additional coverage levels,
dependent coverage, health care expenses, or taken as cash.
The bill would require continued maintenance of effort by all districts,
with a minimum required effort of $150 per employee per month. For
districts spending less than $150 per employee per month, the state would
provide hold harmless funding that would be phased out over 6 years so
that all districts are contributing at least $150 per employee per month
by 2008.
As amended, the bill would require the state to offset the cost that
school districts participating in Social Security would experience
because some of their employees choose to take the $1,000 pass-through as
compensation.
Since the children of employees working in the districts participating in
the statewide pool would no longer be eligible for federal financing of
enrollment in the Children s Health Insurance Program (CHIP), the bill
would provide additional state funds to replace federal funds for CHIP
enrollees made ineligible for the federal match.
Since some property-poor districts might have to increase tax rates to
fund the $150/employee/month required contribution in the out years, the
bill would amend Chapter 42 so that Tier 2 districts can access state
aid based on current year tax rates rather than tax rates from the last
year of the prior biennium. Also, school districts at the $1.50
maintenance and operations tax rate limit (nominal basis) would not be
subject to the minimum effort hold harmless phase-out (i.e., they would
continue to receive a state subsidy in order to provide the $150 per
employee minimum contribution).
Methodology
The cost of the employee health coverage/compensation supplement is
estimated to be $589 million in fiscal year 2003, $606 million in fiscal
year 2004, $625 million in fiscal year 2005, and $643 million in fiscal
year 2006. The amount of the supplement is assumed to be $1,000 per
year, and is provided to all employees, whether or not they are
participating in a health insurance plan. This estimate is based on a
projected 588,746 employees in fiscal year 2003, with an annual growth
rate of 3% each year.
The total cost of the state insurance allotment is estimated to be $515
million in fiscal year 2003, $531 million in fiscal year 2004, $547
million in fiscal year 2005, and $563 million in fiscal year 2006. This
cost is based on a $75 per employee monthly allotment. It is projected
that the allotment will be paid on behalf of 572,755 covered employees in
fiscal year 2003, with an annual growth rate of three percent each year.
The cost of providing the various hold harmless provisions to districts
spending less than $150 per employee per month, and to districts that
participate in Social Security, is estimated to be $131 million in fiscal
year 2003, $79 million in fiscal year 2004, $50 million in fiscal year
2005, and $20 million in fiscal year 2006.
Currently there are 15,500 children of school district employees enrolled
in the CHIP program. An estimated 4,263 will become ineligible for
federal financing in fiscal year 2003. The projected cost for providing
state funding to replace the federal funding is estimated to be
$4,200,000 in fiscal year 2003, $4,800,000 in fiscal year 2004,
$5,600,000 in fiscal year 2005, and $14,100,000 in fiscal year 2006.
This estimate assumes that the number of children increases by five
percent each year, and that the cost for the CHIP program increases ten
percent each year. All districts in the mandatory pool (less than 500
employees) would be affected, and this analysis assumes that 50 percent
of the employees in the optional districts would join the statewide pool,
their children would lose federal funding eligibility, and be covered by
full state funding.
TRS will require funding in fiscal year 2002 for the design and
implementation of the program. TRS estimates the first year start-up
costs will be $25,000,000, and will require 25 new employees. Most of
this cost could be financed using the remaining balances from the $10
annual fee charged to active employees from 1993-1996, estimated to be
$22,000,000. Administrative costs in subsequent years will be part of
the program costs, and will be paid from by the state, district, and
employee contributions to the plan.
Overall, the combined cost of all these factors would result in annual
costs of $1,242.5 million in fiscal year 2003, $1,221.2 million in fiscal
year 2004, $1,227.3 million in fiscal year 2005, and $1,240.8 million in
fiscal year 2006.
Local Government Impact
School districts and their employees will benefit from the provisions of
the $1,000 per year pass-through funding, the $900 per year ($75 per
month) insurance funding, and the various hold harmless provisions in the
same amounts that are indicated as state funding elements in the
methodology section above.
To the extent that employees choose to take a portion of their supplement
as income, the districts will be required to pay employer matching costs
for Medicare for employees hired after September 1, 1986, at a rate of
1.45 percent of the amount chosen as income. Districts would not be
required to make any TRS retirement contributions on that income.
Districts may also incur costs in setting up and administering health
care reimbursement accounts if those accounts do not currently exist.
Source Agencies:
LBB Staff: JK, CT, PF, RN, SC