Colorado Legislative Council Staff

STATE

REVISED FISCAL NOTE

(replaces Fiscal Note dated February 11, 1998)

No State General Fund Impact

TABOR Refund Impact

State Cash Fund Revenue and Expenditure Impact

Drafting Number:

Prime Sponsor(s):

LLS 98-389

Rep. Owen

Sen. Rizzuto

Date:

Bill Status:

Fiscal Analyst:

April 21, 1998

Senate State Affairs

Steve Tammeus (866-2756)

 

TITLE:            CONCERNING THE ESTABLISHMENT OF DEFINED CONTRIBUTION PLANS FOR SPECIFIED PUBLIC EMPLOYEES, AND MAKING AN APPROPRIATION IN CONNECTION THEREWITH.


Summary of Legislation


STATE FISCAL IMPACT SUMMARY

FY 1998/99

FY 1999/2000

State Revenues

General Fund

Defined Contribution Plan Administration Fund



$20,140



$5,820

State Expenditures

General Fund

Defined Contribution Plan Administration Fund

Cash Funds Exempt - Dept of Law *



$20,140

$8,640*



$5,820

$4,320*

FTE Position Change

0.1 FTE

None

Local Government Impact — None

*These amounts for the Department of Law are included in the Administration Fund expenditures above.


            This reengrossed bill establishes the State Defined Contribution Retirement Committee consisting of five members, including the Director of OSPB, the Director of Legislative Council Staff, the Lieutenant Governor, one state Senator, and one state Representative. The committee is to perform its duties as if it were transferred to the Department of Personnel by a type 1 transfer. The bill requires the department to provide necessary administrative support to the committee.


            The bill authorizes the committee to establish at least one defined contribution plan by January 1, 1999. The bill requires the committee to provide for the administration of the defined contribution plan(s) and to designate at least five companies to provide the plan(s). The bill requires the providers to service the accounts or pay a fee to the committee to service the accounts.


            The reengrossed bill revises the eligible employees to include only the members and employees of the House and Senate, the Governor, the Lieutenant Governor, the Attorney General, the Chief Deputy Attorney General, the Solicitor General, the Secretary of State, the Deputy Secretary of State, the State Treasurer, the Deputy State Treasurer, a member of the Public Utilities Commission, and an executive director of a department of state appointed by the Governor.


            The bill creates the Defined Contribution Plan Administration Fund and requires all fees collected by the committee per the provisions of the bill to be deposited to the fund. Moneys in the fund are subject to annual appropriation by the General Assembly for the direct and indirect costs of administering the plan(s).


            The reengrossed bill will become effective on July 1, 1998. The bill will affect state cash fund revenue and expenditures. Therefore, it is assessed as having a fiscal impact.



State Revenue


            Based upon the assumptions identified in the “State Expenditure” section of this revised fiscal note, the plan providers will be required to reimburse the department for initial plan start-up costs, and on-going administrative and legal expenses. The total amount of revenue to the Defined Contribution Plan Administration Fund is estimated to be up to $20,140 for FY 1998-99 and $5,820 for FY 1999-2000.



TABOR Refund Impact


            Section 20 of Article X of the Colorado Constitution, limits the maximum annual percentage increase in state fiscal year spending. Once total state revenue from all sources that are not specifically excluded from fiscal year spending exceeds these limits for the fiscal year, the state constitution requires that the excess shall be refunded in the next fiscal year unless voters approve a revenue change as an offset. Based on the current Legislative Council economic forecast, it is projected that the state will be in a TABOR refund position during each of the next five fiscal years. Any increase or decrease in state revenue from changes in fees, fines, licenses, or other revenue sources will affect the amount of the state revenue to be refunded.



State Expenditures


            The provisions of this reengrossed bill will create state expenditures based upon the following assumptions:

 

                that the committee, with support from the Department of Personnel, will establish the defined contribution plan(s);

                that the department will provide staff support to the State Defined Contribution Retirement Committee starting in FY 1998-99, and that those personal services and operating costs will be absorbed within existing resources;

                that the costs of the members of the committee will be absorbed within existing resources;

                that, in order to provide the plan(s) by January 1, 1999, the department will contract the services of a plan consultant to prepare the RFP, conduct the interviews, and select the plan providers;

                that the Department of Law will provide legal services (staff and contracted) to determine IRS compliance, to apply to the IRS for status as a “qualified”pension plan exempt from mandatory social security, to assist with the promulgation of rules, and to provide on-going legal counsel;

                that the plan(s) will be administered by the providers, but the providers will reimburse the department for on-going administrative and legal expenses; and

                that approximately 115 of the 230 eligible employees will elect to participate in the defined contribution plan(s).


            Table 1 provides a summary of the Department of Personnel’s expenditures to support the provisions of this reengrossed bill.


Table 1 - Department of Personnel

Defined Contribution Plan Administration Fund Expenditures

 

FY 1998-99

FY 1999-2000

Contracted Services

$10,000

$0

Administrative Expenses

1,500

1,500

Legal Expenses - Department of Law

(180 hours first year, then 90 hours per year thereafter)

0.1 FTE - 8,640

4,320

Total Expenses

0.1 FTE - $20,140

$5,820



Public Employee’s Retirement Association (PERA) Impact


             The reengrossed bill will have no fiscal impact on the administrative expenses, assets, or amortization periods of the Public Employee’s Retirement Association (PERA).



Spending Authority


            This revised fiscal note would imply the Department of Personnel would require a Defined Contribution Plan Administration Fund appropriation of $20,140 for FY 1998-99. Of that amount, the Department of Law would require a cash fund exempt spending authority of 0.1 FTE and $8,640.



Departments Contacted


Personnel        Law                OSPB              PERA             Legislative Council Staff