LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE, 77th Regular Session
April 26, 2001
TO: Honorable Paul Sadler, Chair, House Committee on Teacher
Health Insurance, Select
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 schools
and educational employees and their dependents.),
Committee Report 1st House, Substituted
**************************************************************************
* Estimated Two-year Net Impact to General Revenue Related Funds for *
* HB3343, Committee Report 1st House, Substituted: negative impact *
* of $(1,283,974,000) 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 (1,283,974,000) *
* 2004 (1,235,202,000) *
* 2005 (1,234,000,000) *
* 2006 (1,247,000,000) *
****************************************************
All Funds, Five-Year Impact:
*****************************************************
* Fiscal Year Probable Savings/(Cost) from *
* General Revenue Fund *
* 0001 *
* 2002 $0 *
* 2003 (1,283,974,000) *
* 2004 (1,235,202,000) *
* 2005 (1,234,000,000) *
* 2006 (1,247,000,000) *
*****************************************************
Fiscal Analysis
The bill, as substituted, 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 $75 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.
Since the children of employees working in the districts with less than
1,000 employees 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 total cost of the state insurance allotment is estimated to be $516
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 3% each year.
The cost of the employee health coverage/compensation supplement is
estimated to be $589 million in fiscal year 2003, $607 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 cost of providing the various hold harmless provisions to districts
spending less than $150 per employee per month is estimated to be $172
million in fiscal year 2003, $92 million in fiscal year 2004, $56 million
in fiscal year 2005, and $ 17 million in fiscal year 2006.
Currently there are 15,500 children of school district employees enrolled
in the CHIP program. An estimated 5,115 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
$4,994,000 in fiscal year 2003, $5,768,000 in fiscal year 2004,
$6,662,000 in fiscal year 2005, and $23,317,000 in fiscal year 2006.
This estimate assumes that the number of children increases by 5% each
year, and that the cost for the CHIP program increases 10% each year. In
2006, all districts are eligible to join the statewide pool, and
therefore all children of school district employees will become
ineligible for federal 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 $1,284 million in fiscal year 2003, $1,235 million in fiscal
year 2004, $1,234 million in fiscal year 2005, and $1,247 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-thru 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 Social Security and Medicare, which total 7.65%. 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, SD, RN, SC