Austin, Texas
                    FISCAL NOTE, 77th Regular Session
                                Revision 1
                              March 5, 2001
          TO:  Honorable Teel Bivins, Chair, Senate Committee on
        FROM:  John Keel, Director, Legislative Budget Board
       IN RE:  SB135  by Carona (Relating to a statewide group insurance
               program for employees and retirees of school districts.),
               As Introduced
*  Estimated Two-year Net Impact to General Revenue Related Funds for    *
*  SB135, As Introduced:  negative impact of $(2,840,300,000) 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.                                                             *
This fiscal note differs from the note provided on the House companion
(HB 12) in that it includes $22 million in Other Funds as a financing
source in fiscal year 2002 that was not included in the HB 12 fiscal

General Revenue-Related Funds, Five-Year Impact:
          *  Fiscal Year  Probable Net Positive/(Negative)   *
          *               Impact to General Revenue Related  *
          *                             Funds                *
          *       2002                        $(53,000,000)  *
          *       2003                      (2,787,300,000)  *
          *       2004                      (3,386,800,000)  *
          *       2005                      (3,860,790,000)  *
          *       2006                      (4,333,960,000)  *
All Funds, Five-Year Impact:
*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        (2,787,300,000)                    0                100.0 *
*  2004        (3,386,800,000)                    0                100.0 *
*  2005        (3,860,790,000)                    0                100.0 *
*  2006        (4,333,960,000)                    0                100.0 *
Fiscal Analysis
The bill establishes a statewide group insurance program for employees
and retirees of independent school districts.  The program would be
administered by the Teacher Retirement System (TRS) and would provide
the same level of benefits as the Uniform Group Insurance Program
provides state employees.  The state would be required to contribute a
per employee/retiree amount equal to the amount the state contributes
for state employees.  Currently, state policy is to pay for 100% of the
cost of employee-only and retiree-only coverage and 50% of the cost of
dependent coverage.
This analysis assumes that program participation would 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 start-up costs would total $75,000,000.  Based
on a similar program in another state, TRS estimates it would need
approximately 100 full-time equivalent employees to administer this
statewide program.

TRS estimates that the total cost for fiscal year 2003 will be $3.6
billion, with the state funding $3.055 billion.  TRS estimates that the
contribution per employee/retiree to be paid by the state's General
Revenue Fund would be $4,290 for fiscal year 2003.  These projections
assume that 712,410 employees/retirees would be covered in 2003.  This
contribution would increase to $5,676 by fiscal year 2006, based on
projected increases in health care costs ranging from six to eight
percent for medical claims, and 13 to 20 percent for prescription drug
claims.  Program participation is projected to grow to 784,870 by fiscal
year 2006.  TRS estimates that the number of active employees will
increase by 3% annually, and the number of retirees will increase by 4.4%

Total cost for fiscal year 2002 is in addition to the $181,035,657
currently in the General Appropriations Act, as introduced, for
TRS-Care, the existing program for retirees.  Part of the cost can be
funded with the remaining balances from the $10 annual fee collected
from active employees in 1993-1996.  For fiscal year 2003, the total
projected cost of $3.055 billion is partially offset by the $268 million
currently in the General Appropriations Act, as introduced, for TRS-Care
since that program would cease operation in fiscal year 2003 under the
provisions of this bill.
Local Government Impact
Currently, local school districts pay for some of the cost of providing
health insurance to their employees.  TRS estimates districts currently
spend approximately $850 million a year on health insurance.  Under the
provisions of this bill, districts no longer incur those costs.
Source Agencies:   323   Teacher Retirement System, 701   Texas
                   Education Agency
LBB Staff:         JK, CT, SC