| TO: | Honorable Teel Bivins, Chair, Senate Committee on Finance |
| FROM: | John Keel, Director, Legislative Budget Board |
| IN RE: | SB1370 by Duncan (Relating to certain group benefit plans provided to certain governmental officers, employees, and retirees and their dependents.), Committee Report 1st House, Substituted |
Estimated savings should be compared to funding levels sufficient to conform to current policies and law. Estimated savings should not be compared to agency "building block" funding requests.
| Fiscal Year | Probable Net Positive/(Negative) Impact to General Revenue Related Funds |
|---|---|
| 2004 | $403,129,399 |
| 2005 | $444,096,466 |
| 2006 | $447,682,051 |
| 2007 | $461,262,019 |
| 2008 | $475,262,019 |
| Fiscal Year | Probable Savings/(Cost) from GENERAL REVENUE FUND 1 |
Probable Savings/(Cost) from GR DEDICATED ACCOUNTS 994 |
Probable Savings/(Cost) from FEDERAL FUNDS 555 |
Probable Savings/(Cost) from OTHER SPECIAL STATE FUNDS 998 |
|---|---|---|---|---|
| 2004 | $403,129,399 | $1,628,451 | $7,073,376 | $126,001 |
| 2005 | $444,096,466 | $1,628,451 | $7,073,376 | $126,001 |
| 2006 | $447,682,051 | $1,628,451 | $7,073,376 | $126,001 |
| 2007 | $461,262,019 | $1,628,451 | $7,073,376 | $126,001 |
| 2008 | $475,262,019 | $1,628,451 | $7,073,376 | $126,001 |
| Fiscal Year | Probable Savings/(Cost) from OTHER FUNDS 997 |
Probable Revenue Gain/(Loss) from OTHER FUNDS 997 |
Probable Savings/(Cost) from STATE HIGHWAY FUND 6 |
|---|---|---|---|
| 2004 | $7,800,000 | $152,133,072 | $6,351,557 |
| 2005 | $7,800,000 | $161,869,589 | $6,351,557 |
| 2006 | $7,800,000 | $172,229,242 | $6,357,557 |
| 2007 | $7,800,000 | $183,251,914 | $6,351,557 |
| 2008 | $7,800,000 | $194,980,036 | $6,351,557 |
The bill would establish a 90 day waiting period insurance coverage for active and certain retired employees of state and higher education institutions under the ERS group insurance program. In addition, an employee working less than 40 hours a week would have to contribute at least 50 percent of the cost of member-only coverage and at least 75 percent of the cost of dependent coverage. This would apply to graduate teaching assistants as well. Future retirees would have to be at least 65 or satisfy the rule of 80 to be eligible for ERS insurance coverage. The bill also excludes members of boards and commissions from receiving the state insurance contribution.
With respect to insurance coverage for employees of the University of Texas and Texas A&M University systems, the bill would require an employee working less than 40 hours a week to contribute at least 50 percent of the cost of member-only coverage and at least 75 percent of the cost of dependent coverage. This would apply to graduate teaching assistants as well.
The bill would establish a new school district contribution to the Teacher Retirement System's retired public education employees' group insurance program of between 0.25 and 0.75 percent of payroll. The bill would increase the active public education employees' contribution rate to the retiree insurance program from 0.25 percent to 0.50 percent of salary.
The bill would reduce the compensation supplement for active school district employees from the current $1,000 annual supplement per employee to a $500 annual supplement per employee. Professional staff would not receive any supplement. The bill would also require new employees to wait 90 days before receiving the supplement. The last month of the FY 2005 supplement payment would be deferred until FY 2006.
The bill would also transfer $42 million from the TRS insurance fund for active school district employees to the TRS retiree insurance program. Because this would be an inter-fund transfer, it has no fiscal impact to the state.
The changes affecting the Employees Retirement System's group insurance program for higher education and general state employees would have the following results. Instituting a 90 day waiting period would result in biennial General Revenue savings of $36 million. Reducing the state insurance contribution for employees that work less than 40 hours per week, including graduate students, would result in biennial General Revenue savings of $24 million. Changing retiree eligibility for ERS insurance coverage results in biennial General Revenue savings of $9.2 million. Excluding board and commission members from receiving state insurance contributions would result in biennial General Revenue savings of $3.1 million.
Reducing the state insurance contribution for employees of the University of Texas and Texas A&M system that work less than 40 hours per week would result in biennial General Revenue savings of $47.3 million.
Increasing the active public education employees' contribution to 0.50 percent from 0.25 percent would generate $110.6 million to the Teacher Retirement System' trust fund, shown as "Other Funds" above, for the retired public education employees' insurance program over the 2004-2005 biennium. Establishing a school district contribution of 0.46 percent of payroll, the contribution assumed in the Senate version of the proposed General Appropriations Act, would generate approximately $203.4 million to the TRS retiree insurance fund over the 2004-2005 biennium.
With regard to active school district employees, reducing the supplement to $500, excluding professional staff from receiving any supplement, instituting a 90 day waiting period for the supplement, and deferring the last month of the biennium's supplement payment would result in approximately $727.5 million in General Revenue savings for the 2004-2005 biennium.
| Source Agencies: | 323 Teacher Retirement System, 327 Employees Retirement System, 720 The University of Texas System Administration
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| LBB Staff: | JK, WP, JO, SD, UP, RN
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