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F I S C A L I M P A C T R E P O R T

SPONSOR Nunez

ORIGINAL DATE

LAST UPDATED

2/22/07

HB 1271

SHORT TITLE NMSU to Join Retiree Health Care Authority

SB

ANALYST Propst

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY07

FY08

$6,700.0

Non-Recurring

General Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

New Mexico State University (NMSU)

Retiree Health Care Authority

SUMMARY

Synopsis of Bill

House Bill 1271 appropriates $6,700.0 from the General Fund to the Board of Regents of New

Mexico State University in FY08 to pay the cost of NMSU joining the Retiree Health Care

Authority.

FISCAL IMPLICATIONS

The appropriation of $6,700.0 contained in this bill is a non-recurring expense to the General

Fund. Any unexpended or unencumbered balance remaining at the end of FY08 shall revert to

the General Fund.

SIGNIFICANT ISSUES

RHCA reports that it appears that NMSU’s request is based on an old calculation methodology

that was amended by RHCA effective January 1, 2007. Using the old calculation methodology

significantly understates the actual buy-in amount required for entities to join RHCA. Even

under the old rule, the buy-in amount for NMSU would have been amended upward to reflect the

House Bill 1271 – Page

2

value of RHCA long-term investments as of December 31, 2006. The old, expired buy-in

amount would have been $8,800.0 not the $6,700.0 appropriated in HB 1271. The old

methodology was determined by RHCA to significantly understate the true buy-in costs for

entities wishing to join RHCA and to be actuarially unsound.

Under the new calculation methodology adopted effective January 1, 2007, RHCA, using

demographic data provided two years ago by NMSU, estimates the correct buy-in amount

required for NMSU to join RHCA is $93,936.0.

Therefore, according to RHCA, the $6,700.0 contained in HB 1271 would fund only 8% of the

amount NMSU would be required to pay to join RHCA.

NMSU proposes to move 800 retirees to the Retiree Health Care Authority.

WEP/mt

Buy In Estimator for periods 7/1/06 - 6/30/07

NMSU

Actives

4007

AAL at 7.75%/Active

13,030

$

Active AAL

52,211,210

$

Retirees

898

AAL at 7.75%/Retiree

46,464

$

Retiree AAL

41,724,672

$

Grand Total

93,935,882

$

Note: Assumes average age, service, pay and election patterns match those assumed in NMRHCA GASB 43 valuation.