FISCAL NOTE

Date Requested: February 07, 2018
Time Requested: 02:11 PM
Agency: Public Employees Insurance Agency (PEIA)
CBD Number: Version: Bill Number: Resolution Number:
2450 Introduced HB4468
CBD Subject: Insurance, State Personnel


FUND(S):

RHBT

Sources of Revenue:

Special Fund

Legislation creates:

Increases Existing Expenses



Fiscal Note Summary


Effect this measure will have on costs and revenues of state government.


The purpose of this bill is to provide that state retirees’ insurance benefits be restored to the benefit levels that existed in 2015. Since 2015, there have been premium increases and benefit reductions of approximately $35 million to retiree benefits. By removal of these premium and benefit changes, the costs for retiree coverage, with trend, will increase approximately $38 million in one year. These costs will require additional funding from the active employee premiums as approximately 65% of retiree costs are subsidized by active premium. Passage of this bill will also expose the State to an increase in the State’s current Unfunded OPEB (other post-employment benefits) Liability balance of $2.5 Billion by increasing the retiree benefit costs. Further concern regarding this bill is any expansion of the OPEB costs will undermine the recent benefit changes that have been passed. The current $2.5 billion unfunded liability referenced above represents reductions to the WV OPEB liability of approximately $7 billion. These reductions are the result of the significant work and sacrifices by many West Virginians over the past decade to achieve an affordable OPEB for the State of West Virginia. If passed, future audits of the OPEB valuation will expose the States perceived lack of dedication to these previously enacted OPEB cost control policies. This will result in a lack of confidence in the State’s resolve regarding its unfunded OPEB liability, causing the unfunded OPEB liability to increase dramatically. A higher unfunded OPEB liability could result in lower scoring from credit rating agencies, increasing financing costs for the State.



Fiscal Note Detail


Effect of Proposal Fiscal Year
2018
Increase/Decrease
(use"-")
2019
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 0 38,000,000 0
Personal Services 0 0 0
Current Expenses 0 38,000,000 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 0 0 0
2. Estimated Total Revenues 0 0 0


Explanation of above estimates (including long-range effect):


Since 2015, there have been premium increases and benefit reductions of approximately $35 million to retiree benefits. By removal of these premium and benefit changes, the costs for retiree coverage, with trend, will increase approximately $38 million in one year. These costs will require additional funding from the active employee premiums as approximately 65% of retiree costs are subsidized by active premium.



Memorandum


Please identify any areas of vagueness, technical defects, reasons a bill would not have a fiscal impact, and/or any special issues not captured elsewhere on this form.



    Person submitting Fiscal Note: Jason Haught
    Email Address: jason.a.haught@wv.gov