LEGISLATIVE BUDGET BOARD

Austin, Texas

FISCAL NOTE, 78TH LEGISLATIVE REGULAR SESSION

March 16, 2003

TO:	Honorable Allan Ritter, Chair, House Committee on Pensions & Investments
FROM:	John Keel, Director, Legislative Budget Board
IN RE:	HB1664 by Thompson (Relating to credit in the Teacher Retirement System of Texas for service performed as a United States Peace Corps volunteer.), As Introduced

Estimated Two-year Net Impact to General Revenue Related Funds for HB1664, As Introduced: a negative impact of ($4,601,000) 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.

General Revenue-Related Funds, Five-Year Impact:

Fiscal Year	Probable Net Positive/(Negative) Impact to General Revenue Related Funds
2004	($2,241,000)
2005	($2,360,000)
2006	($2,478,000)
2007	($2,601,000)
2008	($2,732,000)

All Funds, Five-Year Impact:

Fiscal Year	Probable Savings/(Cost) from GENERAL REVENUE FUND 1	Probable Savings/(Cost) from EST OTH EDUC & GEN INCO 770
2004	($2,241,000)	($90,000)
2005	($2,360,000)	($94,000)
2006	($2,478,000)	($100,000)
2007	($2,601,000)	($105,000)
2008	($2,732,000)	($110,000)

Fiscal Analysis

The bill would allow a member of the Teacher Retirement System  (TRS) who has at least two years of Peace Corps service to purchase TRS membership service credit for equivalent time served as a Peace Corps volunteer.  The bill would limit to 5 years the credit that could be purchased as a result of Peace Corps service.  The purchase would be based on TRS contributions immediately before or after Peace Corps service plus interest of 8 percent per year, compounded annually after first eligibility.  The bill provides that the purchase cannot be made until a member has at least five years of service in public schools.

Methodology

State law requires that a new monetary benefit payable by the Teacher Retirement System may not be established if the result is a period to amortize the unfunded liability of the retirement system by more than 31 years. According to a Teacher Retirement System actuarial analysis, the state contribution rate required to achieve a 30-year funding period would increase from 7.15 percent of payroll, as determined by the August 31, 2002 actuarial valuation, to 7.16 percent of payroll as a result of passage of this legislation.

 

The current TRS state contribution rate is 6 percent. The biennial General Revenue cost (excluding General Revenue-Dedicated) to increase the state contribution rate from 6 percent to 7.17 percent is estimated to be $534 million; the cost to all funds is estimated to be $555 million. The portion of the biennial General Revenue cost attributable to the benefit that would be provided by the bill, associated with a contribution rate increase from 7.15 percent to 7.16 percent, is estimated to be $4.6 million (as reflected in the Fiscal Impact table). 

 

Please note that the actuarial impact of the benefit increase required under the bill could change as a result of the retirement system's February, 2003, updated actuarial valuation.

Local Government Impact

No fiscal implication to units of local government is anticipated.

Source Agencies:	323 Teacher Retirement System
LBB Staff:	JK, JO, RR, UP, RN