BILL ANALYSIS                                                                                                                                                                                                    




                    Appropriations Committee Fiscal Summary
          
                                          SB 1435  (Johnston)
          
          Hearing Date:5/25/2000          Amended:As introduced  
          Consultant: Maureen Brooks          Policy Vote:P. E. & R.   
          3-0                      
          ____________________________________________________________ 
          ___
          BILL SUMMARY:  SB 1435 increases the monthly allowance paid  
          to retired members of the Defined Benefit Program of the  
          State Teachers' Retirement System (STRS) in an amount equal  
          to the member's premium for Medicare Part A.  The bill  
          limits eligibility to members who are at least 65 years of  
          age, enrolled in Medicare Part B, and not eligible for  
          Medicare Part A without payment of a premium.
                              Fiscal Impact (in thousands)
           
          Major Provisions            2000-01             2001-02              
           2002-03            Fund  
          Admin costs             $35                     STRF

          Increase in annual
            contributions             -------approximately $150 million  
          annually-----               STRF
          STAFF COMMENTS:   SUSPENSE FILE.  Costs result from monthly  
          premiums of $301 for approximately 17,500 retirees who are  
          now eligible for the benefit and an additional 41,000  
          members who will receive it upon turning age 65.  The  
          present value of total long-term costs is $2.1 billion.

          The Federal Balance Budget Act (BBA) of 1997 permits  
          retired CalSTRS members and their beneficiaries to  
          participate in Medicare Part A without any premiums if 1)  
          they have paid Medicare Part A premiums for seven  
          consecutive years, and 2) they have worked at least 10  
          years.  CalSTRS members hired after April 1, 1986 are  
          required to pay Medicare taxes and will be eligible for  
          free-premium Medicare Part A coverage.  Therefore, SB 1435  
          will provide a benefit to a limited number of STRS retirees  
          and that number will decline as more members will be  
          subject to mandatory Medicare payroll tax through their  
          employment.
          
          SB 1435 provides that the amount for Medicare Part A will  
          be payable directly to the federal Health Care Financing  










          Administration unless the member elects to directly receive  
          the allowance.  The bill requires that the amount be  
          adjusted annually to reflect changes imposed in the premium  
          by the federal Health Care Financing Administration.

          Staff notes that the amount of the premium is not a vested  
          benefit and will not be added to the member's allowance in  
          determining future cost of living increases and  
          supplemental purchasing power payments.