The fiscal implications of SB 1737 are significant, particularly in the early years of implementation. According to the Legislative Budget Board (LBB), the bill is projected to result in a negative impact of $40.2 million to General Revenue-related funds over the 2026–2027 biennium. The majority of this cost—about $38.4 million—is incurred in fiscal year 2026 due to one-time payments needed to fund retroactive service credit for certain state employees.

The bill would expand eligibility for the Law Enforcement and Custodial Officer Supplemental Retirement Fund (LECOS) to include specific employees of the Texas Juvenile Justice Department (TJJD), Comptroller of Public Accounts (CPA), and Office of the Attorney General (OAG). For those hired before September 1, 2022 (Groups 1–3) and still employed as of December 1, 2024, the bill allows for the establishment of previous service credit in LECOS, contingent upon appropriation to the Employees Retirement System of Texas (ERS). The one-time costs to fund these credits are estimated at $26.4 million for ERS and $10.1 million for LECOS.

Ongoing annual costs to the state are expected to include an additional $1.9 million per year in General Revenue contributions to LECOS, with smaller costs to General Revenue–Dedicated funds ($38,360 annually) and federal funds ($11,508 annually). These represent the state's portion of employer contributions at 1.75% of payroll for newly covered employees.

Importantly, the fiscal note states that there is no anticipated fiscal impact on local governments and that the bill itself does not appropriate funds—it merely establishes the legal basis for a future appropriation. Thus, while the policy may enhance fairness and benefits for affected employees, it requires a substantial initial investment by the state to implement.

SB 1737 is a targeted effort to extend retirement benefit equity to certain law enforcement and custodial officers employed by the Texas Juvenile Justice Department, the Comptroller of Public Accounts, and the Office of the Attorney General. These employees perform duties similar in risk and responsibility to those already eligible under the Law Enforcement and Custodial Officer Supplemental Retirement Fund (LECOS), and this bill rightly seeks to reduce turnover and improve recruitment by correcting a longstanding disparity. In doing so, SB 1737 supports individual liberty and fairness within the public workforce.

However, the expansion of defined-benefit eligibility does increase the state’s long-term fiscal obligations—an outcome that raises concerns for advocates of limited government and fiscal restraint. To address this, we recommend amendments to the bill that would provide an alternative path forward. Specifically, the legislature should explore allowing new employees to opt into a defined-contribution or hybrid retirement plan in lieu of LECOS participation. Additionally, including a sunset clause for expanded eligibility and commissioning a study to explore a broader transition toward private-sector or portable retirement models would help realign the retirement system with principles of personal responsibility and sustainability.

With these amendments, SB 1737 represents a reasonable and fair policy correction that can also serve as a starting point for a much-needed rethinking of Texas’ public retirement systems. Therefore, Texas Policy Research recommends that lawmakers vote YES on SB 1737 and strongly consider the aforementioned amendments as a commitment to responsible reform that limits future liabilities while preserving equitable treatment for public safety personnel.

• HB 4537 (Same As)