LEGISLATIVE BUDGET BOARD
Austin, Texas
 
FISCAL NOTE, 78TH LEGISLATIVE REGULAR SESSION
 
April 13, 2003

TO:
Honorable Allan Ritter, Chair, House Committee on Pensions & Investments
 
FROM:
John Keel, Director, Legislative Budget Board
 
IN RE:
HB985 by Thompson (Relating to a temporary service retirement option for certain members of the Employees Retirement System of Texas who are employed by the legislature.), As Introduced



Estimated Two-year Net Impact to General Revenue Related Funds for HB985, As Introduced: a negative impact of ($36,294,750) through the biennium ending August 31, 2005.

The bill would make no appropriation but could provide the legal basis for an appropriation of funds to implement the provisions of the bill.



Fiscal Year Probable Net Positive/(Negative) Impact to General Revenue Related Funds
2004 ($155,361)
2005 ($36,139,389)
2006 ($67,943,770)
2007 ($96,233,955)
2008 ($121,410,336)




Fiscal Year Probable Savings/(Cost) from
GENERAL REVENUE FUND
1
2004 ($155,361)
2005 ($36,139,389)
2006 ($67,943,770)
2007 ($96,233,955)
2008 ($121,410,336)

Fiscal Analysis

This bill provides a temporary service retirement option for certain employee class members employed by the legislature or an agency in the legislative branch who have at least five years of service credit and who are eligible to retire on or before August 31, 2005 using up to 60 months of additional service credit to meet eligibility requirements for service retirement (age plus service equals at least 80).

Methodology

State law (Section 811.006 of the Texas Government Code) provides that benefit changes may not be implemented if the result is a period to amortize the unfunded liability of the retirement system by more than 31 years.  Based on an Employee Retirement System (ERS) actuarial analysis, the state contribution rate required to achieve a 30-year funding period would increase from 7.02 percent of payroll, as determined by the February 28, 2003 actuarial valuation, to 7.69 percent of payroll as a result of passage of this bill. 

The current ERS state contribution rate is 6 percent.  The biennial General Revenue cost to increase the state contribution rate from 6 percent to 7.69 percent is estimated to be $144.1 million. The portion of the biennial General Revenue cost attributable to the bill, and associated with a contribution rate increase from 7.02 percent to 7.69 percent of payroll, is estimated to be $36.5 million (as reflected in the Fiscal Impact table).


Technology

None.

Local Government Impact

No fiscal implication to units of local government is anticipated.


Source Agencies:
304 Comptroller of Public Accounts, 327 Employees Retirement System
LBB Staff:
JK, JO, RR, MS, ZS