The proposal increases the tax on fire insurance premiums from 1.6% to 2.0% of gross premiums from fire insurance. TSESPRF is to be credited with .4% of the tax. The proposal is effective January 1.2006.

Under the current structure, expected contributions to TSESPRF are not sufficient to finance the normal cost plus a 30 year amortization of the unfunded actuarial accrued liability (UAAL) amount of $13.4 million. The actuary for TSESPRF prepared an analysis assuming contributions of over $3 million annually, increasing by 3% per year, beginning in 2007. The additional income expected under the proposal combined with existing expected contributions will adequately finance normal cost, and completely amortize the unfunded actuarial accrued liability by August 31, 2012.

The Legislative Budget Board estimates that given the fund's discount rate of 8%, the actuarial impact of dedicating a  revenue stream which increased by 3% annually would be a one time decrease in unfunded liabilities of about 10 to 13 times the annual amount of revenue. Since the revenue stream would not be a contribution source defined in the statute for TSESPRF, the actuary might not account for it in this way at the next valuation.

HB 1655 would make no changes to the benefits paid by the Texas Statewide Emergency Services Retirement Act Fund.  The bill would not change the normal cost, or actuarial accrued liability.

The analysis relies on the assumptions regarding the timing, amount, and future growth of the additional funding from the fire insurance premium taxes. Actual results will be different from the results contained in the analysis to the extent actual future experience varies from the experience implied by the assumptions.