LEGISLATIVE BUDGET BOARD
                              Austin, Texas
                                     
                    FISCAL NOTE, 77th Regular Session
  
                               May 10, 2001
  
  
          TO:  Honorable Dale B. Tillery, Chair, House Committee on
               Pensions & Investments
  
        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.), Committee Report 2nd House, Substituted
  
**************************************************************************
*  Estimated Two-year Net Impact to General Revenue Related Funds for    *
*  SB292, Committee Report 2nd House, Substituted:  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
(fiscal year 2005).

The additional state contributions required for the final six months of
fiscal year 2004 total an estimated $13,335,745.  For fiscal year 2005,
the additional cost is $5,354,435, which reflects the need to make
contributions for a full year, instead of 10 months.  For fiscal year
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