LEGISLATIVE BUDGET BOARD

Austin, Texas

FISCAL NOTE, 80TH LEGISLATIVE REGULAR SESSION

May 11, 2007

TO:	Honorable Robert Duncan, Chair, Senate Committee on State Affairs
FROM:	John S. O'Brien, Director, Legislative Budget Board
IN RE:	HB1105 by McClendon (Relating to the state contribution to the Teacher Retirement System of Texas, including a one-time supplemental annuity payment.), As Engrossed

Estimated Two-year Net Impact to General Revenue Related Funds for HB1105, As Engrossed: a negative impact of ($356,427,471) through the biennium ending August 31, 2009.

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
2008	($173,784,413)
2009	($182,643,058)
2010	($191,944,635)
2011	($201,711,290)
2012	($211,966,278)

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	Probable Savings/(Cost) from TRS TRUST ACCOUNT FUND 960	Probable Revenue Gain/(Loss) from TRS TRUST ACCOUNT FUND 960
2008	($173,784,413)	($8,631,911)	($178,428)	$182,594,752
2009	($182,643,058)	($9,063,507)	($187,349)	$191,893,914
2010	($191,944,635)	($9,516,682)	($196,717)	$201,658,034
2011	($201,711,290)	($9,992,517)	($206,553)	$211,910,360
2012	($211,966,278)	($10,492,142)	($216,880)	$222,675,300

Fiscal Analysis

The bill would increase the minimum state contribution to the Teacher Retirement System (TRS) for retirement from 6.00 percent to 6.70 percent of compensation. The bill would direct TRS to make a one-time supplemental payment of a retirement or death benefit in September 2007 to members eligible to receive benefits in August 2007 and who have an effective retirement date on or before December 31, 2006.

Methodology

The provisions of the bill related to the supplemental benefit would increase the unfunded actuarial accrued liability by $410 million and would increase the state contribution rate required to amortize the liability within the 30-year period required by statute by 0.1 to 6.7 percent.

The estimated cost of the requirement to increase the state contribution rate from a minimum of 6.00 to 6.70 percent is $183 million in All Funds in fiscal year 2008 and $192 million in All Funds in fiscal year 2009. These costs would be expected to increase at a similar rate annually and would be ongoing.

Since the minimum required state contribution rate required by the bill is equal to the contribution rate required to amortize the unfunded liability, including the supplemental benefit provided by the bill, within the 30-year funding period, the supplemental benefit does not violate TRS funding statutes.

Local Government Impact

No fiscal implication to units of local government is anticipated.

Source Agencies:

323 Teacher Retirement System

LBB Staff:

JOB, KJG, UP, JSc