LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE, 77th Regular Session
March 24, 2001
TO: Honorable Florence Shapiro, Chair, Senate Committee on
State Affairs
FROM: John Keel, Director, Legislative Budget Board
IN RE: SB1132 by Ogden (Relating to the retirement benefits of
certain law enforcement and custodial officers in the
Employees Retirement System of Texas.), As Introduced
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* Estimated Two-year Net Impact to General Revenue Related Funds for *
* SB1132, As Introduced: negative impact of $(62,866,287) 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. *
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General Revenue-Related Funds, Five-Year Impact:
****************************************************
* Fiscal Year Probable Net Positive/(Negative) *
* Impact to General Revenue Related *
* Funds *
* 2002 $(31,280,445) *
* 2003 (31,585,842) *
* 2004 (12,203,211) *
* 2005 (7,658,403) *
* 2006 (7,734,987) *
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All Funds, Five-Year Impact:
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*Fiscal Probable Probable Probable Probable *
* Year Savings/(Cost) Savings/(Cost) Savings/(Cost) Savings/(Cost) *
* from General from General from State from Federal *
* Revenue Fund Revenue Highway Fund Funds - Federal *
* 0001 Dedicated 0006 0555 *
* Accounts *
* 0994 *
* 2002 $(31,280,445) $(702,932) $(2,811,726) $(351,466) *
* 2003 (31,585,842) (709,794) (2,839,177) (354,897) *
* 2004 (12,203,211) (274,229) (1,096,918) (137,115) *
* 2005 (7,658,403) (172,099) (688,396) (86,049) *
* 2006 (7,734,987) (173,820) (695,280) (86,910) *
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Fiscal Analysis
The bill would increase the benefit formula for the Law Enforcement and
Custodial Officers Supplemental retirement program (LECOS) for members
who retire with at least 30 years of law enforcement or custodial
officer service credit. The current benefit factor for law enforcement
and custodial officer service is 2.75% (the 2.25% benefit factor for all
ERS membership service plus 0.5%). The bill increases this factor to
3.00% (the 2.25% benefit factor plus 0.75%) if the member retires with
at least 30 years of law enforcement or custodial officer service
credit. The increased factor will apply to all years of law enforcement
or custodial officer service credit.
Methodology
The provisions of this bill would result in an increase in the normal
cost of the LECOS program and the emergence of an unfunded actuarial
accrued liability. The state contribution rate needed to fund the normal
cost and amortize the liability over 30 years would be 2.558%. The
LECOS fund currently has an actuarial surplus and state contributions are
not required until October 2003 (fiscal year 2004). The current version
of the appropriations bill, as drafted by the Senate Finance Committee,
does not contain any funding for state contributions for fiscal years
2002-03. The impact of this legislation is to require state
contributions to start in September 2001, rather than in October 2003
(fiscal year 2004). Additionally, the necessary state contribution rate
will be higher, at 2.558% instead of 1.95%.
Based on projected payroll levels for LECOS members, the cost to the
state will be $35.1 million in fiscal year 2002 and $35.5 million in
fiscal year 2003, representing the state's contributions on the entire
payroll base. For fiscal year 2004, the projected cost is $13.7
million, representing a combination of the higher contribution rate and
the need to make contributions beginning in September 2003 rather than
October 2003. The cost for fiscal year 2005, $8.6 million, and for
fiscal year 2006, $8.7 million, only represents the higher contribution
rate.
Local Government Impact
No fiscal implication to units of local government is anticipated.
Source Agencies: 327 Employees Retirement System
LBB Staff: JK, RB, SC