LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE, 77th Regular Session May 24, 2001 TO: Honorable Bill Ratliff, Lieutenant Governor, Senate FROM: John Keel, Director, Legislative Budget Board IN RE: SB292 by Armbrister (relating to programs and systems administered by the Employees Retirement System of Texas.), As Passed 2nd House ************************************************************************** * Estimated Two-year Net Impact to General Revenue Related Funds for * * SB292, As Passed 2nd House: positive impact of $0 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 0 * * 2004 (11,868,813) * * 2005 (4,765,447) * * 2006 37,311 * **************************************************** All Funds, Five-Year Impact: *************************************************************************** *Fiscal Probable Probable Probable Probable * * Year Savings/(Cost) Savings/(Cost) Savings/(Cost) Savings/(Cost) * * from General from General from Federal from State * * Revenue Fund Revenue Funds - Federal Highway Fund * * 0001 Dedicated 0555 0006 * * Accounts * * 0994 * * 2002 $0 $0 $0 $0 * * 2003 0 0 0 0 * * 2004 (11,868,813) (266,715) (133,357) (1,066,860) * * 2005 (4,765,447) (107,089) (53,544) (428,355) * * 2006 37,311 838 419 3,354 * *************************************************************************** Fiscal Analysis The bill would make various changes to the retirement programs administered by the Employees Retirement System (ERS). The provision that would have a direct fiscal impact is the cost-of-living adjustment provided to retirees in the Law Enforcement and Custodial Officers Supplemental (LECOS) retirement program. LECOS retirees would receive a cost-of-living adjustment based on increases in the Consumer Price Index. Methodology The bill would result in a small decrease in the normal cost of the LECOS program from the current 1.950% to 1.947%. However, the bill would also deplete the fund's current actuarial surplus, resulting in a resumption of state contributions to the fund in March 2004. Currently, the state is not making contributions to the plan. Based on the existing plan provisions and the February 29, 2001 actuarial valuation of the fund, the state would not need to resume making contributions until November 2004 (FY 2005). The additional state contributions required for the final six months of FY 2004 total an estimated $13,335,745. For FY 2005, the additional cost is $5,354,435, which reflects the need to make contributions for a full year, instead of 10 months. For FY 2006, there would actually be a small savings to the state of $41,922 due to the lower normal cost. Local Government Impact No fiscal implication to units of local government is anticipated. Source Agencies: 327 Employees Retirement System LBB Staff: JK, RB, SC