Austin, Texas
                    FISCAL NOTE, 77th Regular Session
                              March 3, 2001
          TO:  Honorable Teel Bivins, Chair, Senate Committee on
        FROM:  John Keel, Director, Legislative Budget Board
       IN RE:  SB178  by Armbrister (Relating to a statewide group
               insurance program for employees and retirees of certain
               public schools.), As Introduced
*  Estimated Two-year Net Impact to General Revenue Related Funds for    *
*  SB178, As Introduced:  negative impact of $(53,000,000) 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                         $(3,000,000)  *
          *       2003                         (50,000,000)  *
          *       2004                      (2,565,000,000)  *
          *       2005                      (2,926,300,000)  *
          *       2006                      (3,286,700,000)  *
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           $(3,000,000)        $(22,000,000)                 50.0 *
*  2003           (50,000,000)                    0                100.0 *
*  2004        (2,565,000,000)                    0                100.0 *
*  2005        (2,926,300,000)                    0                100.0 *
*  2006        (3,286,700,000)                    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 pay for 100%
of the cost for employee-only coverage, and retiree-only coverage for
retirees with 20 or more years of service.  The state would contribute
50% of the cost of coverage for retirees with more than 10 years but
less than 20 years of service.  The state would not be required to pay
for dependent coverage.  Participation by the districts would be
mandatory, and program participation would begin with the 2003-2004
school year.  The current TRS-Care health care program for retirees
would cease operation at the end of fiscal year 2003.
This analysis assumes that program participation would begin, effective
September 1, 2003, with the 2003-2004 school year (state fiscal year
2004), following program start-up in fiscal years 2002-03.  TRS estimates
that start-up costs would total $76,000,000 during the two year
phase-in.  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 2004 will be $3.6
billion, with the state funding $2.6 billion.  TRS estimates that the
average contribution for each employee/retiree would be $3,735 for fiscal
year 2004.    These projections assume that 715,000 employees/retirees
would be covered in 2004.  The contributions would increase to an average
of $4,468 per employee/retiree by fiscal year 2006, based on projected
increases in health care costs ranging from six to seven percent for
medical claims, and 12 to 19 percent for prescription drug claims.
Program participation is projected to grow to 762,600 by fiscal year
2006.  TRS estimates that the number of active employees will increase by
three percent annually, and the number of retirees will increase by 4.4
percent annually.

Total cost for the program for fiscal years 2002 and 2003 is in addition
to the $449 million currently in the General Appropriations Act, as
introduced, for TRS-Care, the program for retirees.  A portion of the
fiscal year 2002 cost can be funded using the balance of the $10 annual
fee charged to active employees from 1993-1996, while the remaining
costs would be funded with General Revenue.  Costs for 2004-06 are
offset somewhat by the approximately $113,000,000 that the state will be
required to contribute each year for retiree coverage under current law.
Local Government Impact
Currently, local school districts pay for some of the cost of providing
health insurance to their employees.  TRS estimates districts spent
approximately $850 million on health insurance in fiscal year 2000.
Under the provisions of this bill, districts would no longer incur these
costs after fiscal year 2003.
Source Agencies:   781   Texas Higher Education Coordinating Board, 323
                   Teacher Retirement System, 304   Comptroller of
                   Public Accounts
LBB Staff:         JK, CT, SC