LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE, 77th Regular Session
Revision 1
March 5, 2001
TO: Honorable Teel Bivins, Chair, Senate Committee on
Education
FROM: John Keel, Director, Legislative Budget Board
IN RE: SB127 by Staples (Relating to a statewide group
insurance program for employees and retirees of school
districts.), As Introduced
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* Estimated Two-year Net Impact to General Revenue Related Funds for *
* SB127, As Introduced: negative impact of $(277,730,000) 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. *
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This fiscal note differs from the note provided on the House companion
(HB 326) in that it includes $22 million in Other Funds as a financing
source in fiscal year 2002 that was not included in the HB 326 fiscal
note.
General Revenue-Related Funds, Five-Year Impact:
****************************************************
* Fiscal Year Probable Net Positive/(Negative) *
* Impact to General Revenue Related *
* Funds *
* 2002 $(53,000,000) *
* 2003 (224,730,000) *
* 2004 (444,680,000) *
* 2005 (503,720,000) *
* 2006 (562,020,000) *
****************************************************
All Funds, Five-Year Impact:
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*Fiscal Probable Probable Change in Number of *
* Year Savings/(Cost) from Savings/(Cost) from State Employees from *
* General Revenue Fund Other Funds FY 2001 *
* 0001 0997 *
* 2002 $(53,000,000) $(22,000,000) 100.0 *
* 2003 (224,730,000) 0 100.0 *
* 2004 (444,680,000) 0 100.0 *
* 2005 (503,720,000) 0 100.0 *
* 2006 (562,020,000) 0 100.0 *
**************************************************************************
Fiscal Analysis
The bill amends current statutes relating to the statewide group
insurance program for employees and retirees of the independent school
districts. The program would be administered by the Teacher Retirement
System (TRS) and provide the same level of benefits as the Uniform Group
Insurance Program provides to state employees. The state would be
required to fund 35% of the cost of coverage for active employees, with
the school districts paying the other 65%. The current statutory
provisions requiring the state to contribute 0.5% of active employee
payroll in order to help fund coverage for retirees are continued.
Neither the state nor the school districts would be required to pay for
dependent coverage. Participation by the school districts in the
statewide plan would be optional. Program coverage would begin with the
2002-2003 school year (state fiscal year 2003).
Methodology
The bill assumes program participation to begin, effective September 1,
2002, with the 2002-2003 school year (state fiscal year 2003), following
program start-up in fiscal year 2002. For fiscal year 2002, TRS
estimates that the start-up costs will be $75,000,000. Based on a
similar program in another state, TRS estimates that it would need
approximately 100 full-time equivalent employees. Total costs for fiscal
year 2002 are in addition to the $181,035,657 currently in the General
Appropriations Act, as introduced, for TRS-Care, the existing program for
retirees. Fiscal year 2002 costs can be partly funded with balances
remaining from the $10 annual fee on active employees collected from
1993-1996.
TRS estimates that the total cost for fiscal year 2003 will be $1.980
billion, with the state funding $493 million from general revenue funds.
Because of the funding requirements and optional school district
participation, TRS assumes that 426,654 employees/retirees, or 57
percent, would be covered in fiscal year 2003. TRS estimates that the
average per employee/retiree cost to the state for fiscal year 2003 would
be $1,155. The $493 million cost is partially offset by the
$267,912,922 already in the General Appropriations Act, as introduced,
for TRS-Care.
The per employee/retiree cost to the state is projected to increase to
$1,450 by fiscal year 2006. Cost increases for health care costs are
estimated to range from 6%-8% for medical claims, and 12%-20% for
prescription drug claims. Program participation is projected to grow to
470,360 by fiscal year 2006. TRS estimates that the number of active
employees will increase by 3% percent annually, and the number of
retirees will increase by 4.4% percent annually.
Local Government Impact
TRS estimates that school districts are currently paying $850 million a
year for health insurance coverage. The bill would allow school
districts to choose whether to join the plan. Districts that do
participate would be required to pay for 65% of the costs of active
employee coverage. The estimated cost for participating districts under
this bill is projected to be $591 million in fiscal year 2003,
increasing to $851 million in fiscal year 2006.
Source Agencies: 701 Texas Education Agency, 323 Teacher
Retirement System
LBB Staff: JK, CT, SC