LEGISLATIVE FISCAL ESTIMATE

[First Reprint]

SENATE, No. 3838

STATE OF NEW JERSEY

221st LEGISLATURE

 

DATED: OCTOBER 31, 2024

 

 

SUMMARY

 

Synopsis:

Permits Director of Division of Pensions and Benefits to initiate temporary transfer of funds in certain circumstances.

Type of Impact:

Potential expenditure increase to State Health Benefits Program Fund – State part; potential revenue loss to State Health Benefits Program Fund – State part; potential expenditure reduction to State Health Benefits Program Fund – local part.

Agencies Affected:

Department of the Treasury; Local government employers that participate in State Health Benefits Program.

 

 

Office of Legislative Services Estimate

Fiscal Impact

Annual 

 

Potential State Expenditure Increase

Indeterminate

 

Potential State Revenue Loss

Indeterminate

 

Potential Local Expenditure Reduction

Indeterminate

 

 

 

 

·         The Office of Legislative Services (OLS) lacks the informational basis to quantify the fiscal impacts of this bill.  The bill, however, newly creates a limited exposure of the State to the financial condition of the State Health Benefits Program Fund – local part.  The bill provides a temporary cash flow mechanism to cover unexpected, mid-year shortfalls in the fund that might otherwise require precipitous corrective actions on the fund’s revenue or expenditure side.  The mechanism would transfer reserves from the State Health Benefits Program Fund – State part and loan the reserves without interest to the State Health Benefits Program Fund – local part.

 

·         Assuming any short-term loan would be repaid, the fiscal impacts of the loan would be a State revenue loss from interest earnings on the cash balances in the State Health Benefits Program Fund – State part that instead of being invested would be loaned interest-free to the State Health Benefits Program Fund – local part.  To local governments participating in the State Health Benefits Program, the loan would potentially delay the fiscal impact on employer contributions to the fund to mitigate the fund’s financial imbalance without necessarily causing a net change in local governmental expenditures over time.

 

 

BILL DESCRIPTION

 

      This bill permits the Division of Pensions and Benefits to transfer funds from the State Health Benefits Program Fund – State part to the State Health Benefits Program Fund – local part when the balance of the latter fund falls to a level that is insufficient to cover 10 days of anticipated payments for costs including, but not limited to, any portion of premiums, claims, or other periodic charges.

      The bill limits the amount of the transfer to a sum of up to 30 days of anticipated payments from the State Health Benefits Program – local part.  The bill requires the State Health Benefits Program – local part to repay borrowed monies within 120 days.  The division may extend the loan repayment by up to an additional year to ensure sufficient funds are available to pay claims incurred by employees enrolled in the State Health Benefits Program Fund – local part.  

      Additionally, the bill requires the division to notify the Department of the Treasury of transfers within 30 days.  The division is also required to provide the department with a monthly accounting of the outstanding balance of all transfers initiated under the bill, any repayment of monies, and the current balance of the State Health Benefits Program Fund – local part.

 

 

FISCAL ANALYSIS

 

EXECUTIVE BRANCH

 

        None received.

 

OFFICE OF LEGISLATIVE SERVICES

 

      The OLS lacks the informational basis to quantify the fiscal impacts of this bill.  The bill, however, newly creates a limited exposure of the State to the financial condition of the State Health Benefits Program Fund –  local part.  The bill provides a temporary cash flow mechanism to cover unexpected, mid-year shortfalls in the fund that might otherwise require precipitous corrective actions on the fund’s revenue or expenditure side.  The mechanism would transfer reserves from the State Health Benefits Program Fund – State part and loan the reserves without interest to the State Health Benefits Program Fund – local part.

      Assuming any short-term loan would be repaid, the fiscal impacts of the loan would be a State revenue loss from interest earnings on the cash balances in the State Health Benefits Program Fund – State part that instead of being invested would be loaned interest-free to the State Health Benefits Program Fund – local part.  To local governments participating in the State Health Benefits Program, the loan would potentially delay the fiscal impact on employer contributions to the fund to mitigate the fund’s financial imbalance without necessarily causing a net change in local governmental expenditures over time.  

      However, if the local fund were not to repay the loan to the State Health Benefits Program Fund – State part, the State in effect would support local governments participating in the State Health Benefits Program – local part.  Any such support could result in increased State employer contributions to the fund and an expenditure reduction to local governments. 

      According to the most recent Rate Renewal Report, in Plan Year 2024 expenditures of the State Health Benefits Program Fund – local part are projected to exceed premium payments received from local governments and their employees by $49.6 million.  This is on top of the $50 million deficit of the fund at the beginning of Plan Year 2024, bringing the projected deficit at the end of Plan Year 2024 to about $100 million.

      According to the Department of the Treasury, 10 days of claims at current Plan Year 2024 cost levels is $68 million.  Under the bill, if available funds in the State Health Benefits Program Fund – local part fall to a level that is insufficient to cover 10 days of claims, the Division of Pensions and Benefits can initiate transfers from the State Health Benefits Program Fund – State part to the State Health Benefits Program Fund – local part. 

 

 

Section:

State Government

Analyst:

Anna Harris

Associate Fiscal Analyst

Approved:

Thomas Koenig

Legislative Budget and Finance Officer

 

 

This legislative fiscal estimate has been produced by the Office of Legislative Services due to the failure of the Executive Branch to respond to our request for a fiscal note.

 

This fiscal estimate has been prepared pursuant to P.L.1980, c.67 (C.52:13B-6 et seq.).