FISCAL NOTE

Date Requested: January 09, 2019
Time Requested: 03:06 PM
Agency: Public Employees Insurance Agency (PEIA)
CBD Number: Version: Bill Number: Resolution Number:
1475 Introduced HB2053
CBD Subject: Insurance, State Personnel


FUND(S):

PEIA Basic Insurance

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 $34 million to retiree benefits. By removal of these premium and benefit changes, the costs for retiree coverage, with trend, will increase approximately $39 million. 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. Current estimates indicate this bill would increase the Unfunded OPEB Liability by $350 million. Further concern regarding this bill is any expansion of the OPEB costs will undermine the recent benefit changes that have been passed to reduce the Unfunded OPEB Liability. 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 State’s 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
2019
Increase/Decrease
(use"-")
2020
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 0 39,000,000 0
Personal Services 0 0 0
Current Expenses 0 39,000,000 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):


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 $34 million to retiree benefits. By removal of these premium and benefit changes, the costs for retiree coverage, with trend, will increase approximately $39 million. 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. Current estimates indicate this bill would increase the Unfunded OPEB Liability by $350 million.



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