LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE, 77th Regular Session March 3, 2001 TO: Honorable Teel Bivins, Chair, Senate Committee on Education FROM: John Keel, Director, Legislative Budget Board IN RE: SB1021 by Armbrister (Relating to a prescription drug benefit plan for active school employees.), As Introduced ************************************************************************** * Estimated Two-year Net Impact to General Revenue Related Funds for * * SB1021, As Introduced: negative impact of $(643,700,000) 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 (640,700,000) * * 2004 (772,400,000) * * 2005 (915,200,000) * * 2006 (1,056,100,000) * **************************************************** 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) 30.0 * * 2003 (640,700,000) 0 30.0 * * 2004 (772,400,000) 0 30.0 * * 2005 (915,200,000) 0 30.0 * * 2006 (1,056,100,000) 0 30.0 * ************************************************************************** Fiscal Analysis The bill creates a statewide prescription drug program for public school employees, administered by the Teacher Retirement System (TRS). The coverage would be comparable to the prescription drug benefits offered through the Uniform Group Insurance Program administered by the Employees Retirement System. The state would be required to pay for 100 percent of the cost of coverage for active employees. The bill takes effect September 1, 2001, allowing one year for program implementation, with program coverage beginning no later than September 1, 2002. Methodology Start-up costs for fiscal year 2002 are estimated to be $25,000,000, and that 30 full-time equivalent employees will be required each year for program administration. The total cost to the state for fiscal year 2003 would be $641 million. The annual cost per employee is projected to be $1,123 for fiscal year 2003 for each of the projected 570,928 employees that would be covered. The cost would increase to $1,694 by fiscal year 2006, based on projected increases in prescription drug costs ranging from 12 to 18 percent. Total program cost for fiscal year 2006 is estimated to be $1.056 billion. Program participation is projected to grow to 623,640 by fiscal year 2006, based on an estimated annual growth rate of three percent. A portion of the implementation costs in fiscal year 2002 could be paid for using the remaining balances from the $10 annual fee paid by active employees from 1993 to 1996. The rest of the plan financing would come from the General Revenue Fund. 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 in fiscal year 2000 on health insurance. It is not known how much of this cost is related to prescription drug coverage. Source Agencies: 701 Texas Education Agency, 323 Teacher Retirement System LBB Staff: JK, CT, SC