COMMITTEE ON LEGISLATIVE RESEARCH
OVERSIGHT DIVISION
FISCAL NOTE
L.R. No.: 0919-01
Bill No.: SB 243
Subject: Administration, Office of; Insurance - Property; Property - Real and Personal; Public Buildings
Type: Original
Date: January 30, 2003
FISCAL SUMMARY
| FUND AFFECTED | FY 2004 | FY 2005 | FY 2006 |
| General Revenue | $634,695 | $698,164 | $767,981 |
| Total Estimated
Net Effect on General Revenue Fund |
$634,695* | $698,164* | $767,981* |
* Does not include unknown appropriation to State Property Preservation Fund.
| FUND AFFECTED | FY 2004 | FY 2005 | FY 2006 |
| State Property Preservation Fund | (Unknown) to Unknown | (Unknown) to Unknown | (Unknown) to Unknown |
| Various | $168,716 | $185,588 | $204,147 |
| Total Estimated
Net Effect on Other State Funds |
(Unknown) to Unknown | (Unknown) to Unknown | (Unknown) to Unknown |
Numbers within parentheses: ( ) indicate costs or losses.
This fiscal note contains 5 pages.
| FUND AFFECTED | FY 2004 | FY 2005 | FY 2006 |
| Total Estimated
Net Effect on All Federal Funds |
$0 | $0 | $0 |
| FUND AFFECTED | FY 2004 | FY 2005 | FY 2006 |
| Local Government | $0 | $0 | $0 |
ASSUMPTION
Officials from the State Treasurer's Office and the Office of Administration - Division of Design and Construction assume the proposal would have no fiscal impact on their offices.
Officials from the Office of Administration - Division of General Services (DGS) state they expect the proposal to save the state significantly in insurance costs. However, in any given year there is the risk that a bonded building may be damaged and the state would be liable for the cost to repair or replace the damaged building. DGS notes over the past 15 years the state has recovered on two claims totaling $281,000 on losses to covered buildings. This translates to approximately $18,733 per year average claims costs. Current premium costs for insurance to cover bonded buildings is approximately $730,795. DGS brokers are projecting next year's renewal to increase approximately 12.5%. DGS assumes a 10% increase may be likely the following year. DGS assumes a positive net effect on state funds of $803,411 in FY 2004; $883,752 in FY 2005; and $972,128 in FY 2006. DGS assumes the split between General Revenue and Other Funds to be 79 to 21 percent, respectively.
Oversight assumes the State Property Preservation Fund will operate similarly to the Legal Expense Fund - there would be no money in the fund unless it's needed whereby money would be transferred to the fund from General Revenue. Oversight cannot estimate the amount ASSUMPTION (continued)
needed by the fund each year and therefore has assigned positive and negative unknown amounts.
| FISCAL IMPACT - State Government | FY 2004
(10 Mo.) |
FY 2005 | FY 2006 |
| GENERAL REVENUE FUND | |||
| Savings - DGS | |||
| Avoidance of Premium Costs | $649,494 | $714,443 | $785,888 |
| Costs - DGS | |||
| Average Annual Claims Cost | ($14,799) | ($16,279) | ($17,907) |
| Costs - Appropriation to State Property Preservation Fund | |||
| To Pay for Property Loss | (Unknown) | (Unknown) | (Unknown) |
| ESTIMATED NET EFFECT ON GENERAL REVENUE FUND |
$634,695* |
$698,164* |
$767,981* |
| * Does not include Unknown transfer to State Property Preservation Fund | |||
| OTHER FUNDS | |||
| Savings - DGS | |||
| Avoidance of Premium Costs | $172,650 | $189,915 | $208,907 |
| Costs - DGS | |||
| Average Annual Claims Cost | ($3,934) | ($4,327) | ($4,760) |
| ESTIMATED NET EFFECT ON OTHER FUNDS |
$168,716 |
$185,588 |
$204,147 |
| FISCAL IMPACT - State Government | FY 2004
(10 Mo.) |
FY 2005 | FY 2006 |
| STATE PROPERTY PRESERVATION FUND | |||
| Transfer-In - General Revenue | |||
| Appropriation from General Revenue | Unknown | Unknown | Unknown |
| Costs - State Property Preservation Fund | |||
| Payments for Property Losses | (Unknown) | (Unknown) | (Unknown) |
| ESTIMATED NET EFFECT ON STATE PROPERTY PRESERVATION FUND |
(Unknown) to Unknown |
(Unknown) to Unknown |
(Unknown) to Unknown |
| FISCAL IMPACT - Local Government | FY 2004
(10 Mo.) |
FY 2005 | FY 2006 |
| $0 | $0 | $0 |
FISCAL IMPACT - Small Business
No direct fiscal impact to small businesses would be expected as a result of this proposal.
DESCRIPTION
This proposal creates the "State Property Preservation Fund." Moneys in the fund would be used for the purpose of repairing or replacing state-owned or leased property damaged from natural or man-made events.
Subject to appropriations, the fund would pay claims for property loss for state-owned or leased buildings. In order for the fund to make payment for property loss, a notice of coverage must be issued by the Office of Administration for the property and the state must be contractually DESCRIPTION (continued)
obligated to provide insurance for such property.
The proposal limits the aggregate amount of money to be paid out of the fund to not exceed the cost of repairing or restoring the building or the defeasance of outstanding debt secured by the property. Payments from the fund come only after other insurance policies have been exhausted.
Moneys remaining in the fund at the end of an appropriation period shall not be transferred to General Revenue. The fund shall satisfy all covenants requiring the state to provide property insurance for state-owned or leased buildings and their contents.
This proposal is not federally mandated, would not duplicate any other program and would not require additional capital improvements or rental space.
SOURCES OF INFORMATION
Office of Administration
- Division of Design and Construction
- Division of General Services/Risk Management
State Treasurer's Office
Mickey Wilson, CPA
Director
January 30, 2003