Legislature(2017 - 2018)BUTROVICH 205
04/05/2018 03:30 PM Senate STATE AFFAIRS
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| Audio | Topic |
|---|---|
| Start | |
| SB159 | |
| HB47 | |
| HB152 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 47 | TELECONFERENCED | |
| += | SB 159 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | HB 152 | TELECONFERENCED | |
HB 47-MUNICIPAL PERS CONTRIBUTIONS/INTEREST
3:40:15 PM
CHAIR MEYER called the committee back to order and announced the
consideration of House Bill 47 (HB 47).
3:41:00 PM
REPRESENTATIVE NEAL FOSTER, Alaska State Legislature, Juneau,
Alaska, sponsor of HB 47, provided an overview as follows:
HB 47 provides relief for communities who have lost 25
percent or more of their population in the last
census, it does this by reducing the required payments
to the [Alaska Public Employees' Retirement System
(PERS)]. Galena, for example, lost 30 percent of its
population in the last census and this was largely due
to the closure of the U.S. Airforce base in Galena.
Municipalities must pay into PERS based on their
current salary level and at a minimum they must pay
based on what their salary level was back in 2008. The
rational is that local governments usually either grow
or they stay the same, but they don't typically
shrink. The problem is Galena's salary level did
shrink and it shrank in half from $1.5 million in 2008
to $770000 in 2012; but, according to PERS, Galena has
to make payments to PERS as if it still had a $1.5
million workforce.
Galena simply does not have the resources to pay into
the retirement system for workers that they do not
have, so they are faced with two options; they can
either let the amount that they owe grow and currently
that bill is $1 million, or they can simply shut the
doors and turnout the lights and close-up shop. So, we
are hopeful that we can find a compromise with this
bill, Galena would still owe for the bill that has
been accumulated, but they would be provided some
relief as they go forward.
SENATOR GIESSEL asked if the bill has been previously presented
to the Legislature.
REPRESENTATIVE FOSTER answered that the legislation has gone
through the Legislature several times but has not "crossed the
finish line." He noted that HB 47 is the first time the
legislation has made it to the Senate.
3:43:34 PM
PAUL LABOLLE, Staff, Representative Foster, Alaska State
Legislature, Juneau, Alaska, provided an overview of HB 47 as
follows:
In 2007-2008, we had SB 125 that pooled the PERS
systems in the individual municipalities which used to
be siloed systems and in that pooling we required a
22-percent payment of their gross salaries; there was
concern during discussion on that bill that what you
might have with that system is municipalities laying
off employees so they can put them out on contract
thereby reduce their contribution and yet their
liability remains the same, and it would distribute
that to the rest of the PERS employers. A couple of
different options were looked at for addressing that,
what was settled upon was the 2008 floor, which is you
have to pay it at the 2008 floor or gross salaries,
which ever is greater. Existing statute also had the
penalty payment for delinquent payments, if you didn't
make the full payment then it's one-and-a-half times
the actuarial amount or in our case is 12-percent
interest on delinquent payments.
3:45:02 PM
He provided a sectional analysis as follows:
Section 1
Clean up language that is needed for implementation of
section 4 that the administrator is authorized to
determine the rate of interest assessed under the
statute referenced in section 4.
Section 2
Portion of the bill that addresses the 2008 floor
problem. What it does is put a new subsection under
subsection (a)(2) that allows for the floor to be
reestablished for FY2012 if the community has lost
more than 25 percent of its population between the
2000 and 2010 census.
Section 3
Conforming language.
Section 4
Addresses the delinquent interest payment that is at
12 percent. The current version of the bill allows the
administrator to negotiate the interest rate for
delinquent payments. In several iterations of the bill
we had gone through different ideas of setting
different rates, deliberation led us to the conclusion
that setting the rate in statute was problematic to
begin with. The administration would have liked to
have helped them with their burden, but they are
directed to charge 12-percent interest and there's
nothing they can do about it, so we give them the
ability in these situations to negotiate that interest
rate.
MR. LABOLLE addressed the cost of not implementing the bill as
follows:
Right now, they have about a $1.5 million outstanding
balance they owe the state. As that accrues, you run
into different scenarios where the state could cutoff
community assistance, bar them from participating in
certain revolving loan programs, and you could end up
at a place where the city can no longer function, and
bankruptcy is not an option for municipalities in the
State of Alaska. Cities can dissolve but they can't
dissolve unless they pay all of their debts, and if
they can pay all of their debts they would not be in
the situation. What that leaves them with is basically
they could turnoff the lights and give the keys to the
state in which case we would now be on the hook for
the entire amount rather than paying on their current
salaries and or the new established floor.
3:48:01 PM
CHAIR MEYER asked how many communities would be affected by the
bill.
MR. LABOLLE answered that there are five communities that meet
the population metric: Atka, St. George, Pelican, Galena, and
Anderson. He detailed that actuarial analysis cites only three
communities that are affected, that being: Pelican, Galena, and
St. George. He added that St. George was not an ongoing issue.
CHAIR MEYER asked why St. George was not an ongoing issue.
MR. LABOLLE replied that Kevin Worley from the Division of
Retirement and Benefits could better address Chair Meyer's
question.
CHAIR MEYER asked what Galena's economy is.
MR. LABOLLE detailed that Galena functions as a sub-regional hub
in addition to fishing. He reiterated that Galena's main economy
used to be the Air Force base which closed.
CHAIR MEYER said he knew Galena's base closing caused a
population decrease. He asked if the population will ever go
back up to the level prior to the base closing.
REPRESENTATIVE FOSTER noted that Galena also has the Galena
Interior Learning Academy and students from throughout the state
attend the academy.
SENATOR WILSON noted that the Air Force left Galena with
substantial assets that the community could leverage to pay off
some of its debts.
MR. LABOLLE concurred that assets were left. He admitted that
the question remains as to how much is an asset and how much is
a liability. He noted that one asset that has been a major help
to Galena has been the fuel that was left behind by the Air
Force, the fuel has been used to offset the community's fuel
bills.
3:50:44 PM
CHAIR MEYER asked what happened in the other communities that
caused the population decreases.
MR. LABOLLE explained that Pelican was impacted by the closing
of its processing plant. He admitted that he did not know the
reasons for Atka, Anderson, and St. George.
SENATOR WILSON asked what the cost is to the state from the
communities' population decreases and reduced PERS
contributions.
MR. LABOLLE deferred the question to Mr. Worley.
3:52:27 PM
CHAIR MEYER opened public testimony.
3:52:33 PM
SHANDRA HUNTINGTON, City Manager, City of Galena, Galena,
Alaska, testified in support of HB 47. She disclosed that she
was born and raised in Galena and served as the city clerk and
currently as city manager. She said she would explain the
importance of HB 47 for communities like Galena that have seen
significant population decline between 2000-2010.
MS. HUNTINGTON specified that the Air Force base in Galena
closed October 1, 2010, but the shutdown process started in
2006. She explained that prior to the base's closure the
population in Galena was 675 residents, after the closure there
were 470 residents. She added that a flood occurred in 2013 that
led to a disaster declaration for Galena.
She detailed Galena's PERS contribution challenges and noted
that the law was not designed to consider sharply declining
populations from events outside of decisions made by the city.
She explained the city's financial challenges in dealing with a
cashflow crisis. She set forth that HB 47 will not undermine the
underlining goals and structure of PERS while helping to ensure
municipalities facing significant population loss are able to
continue contributing to PERS.
3:59:48 PM
CHAIR MEYER asked if there were assets left by the Air Force
after the base closing.
MS. HUNTINGTON answered that the Air Force left one million
gallons of fuel. She noted that the fuel was specifically left
for the Galena Interior Learning Academy, but the fuel has
nearly run out. She disclosed that Galena had to take out a $4
million loan to upgrade the heating system and water utilities
that were left in poor condition by the Air Force for the city
to receive a grant. She added that the buildings left by the Air
Force were built in the 1960s and require maintenance.
4:01:16 PM
At ease.
4:02:00 PM
CHAIR MEYER called the committee back to order. He asked Ms.
Huntington if there was any hope for Galena's population coming
back.
MS. HUNTINGTON answered that Galena always has hope. She noted
that the city has the Galena Interior Learning Academy. She
opined that the city can grow, but maintenance will have to
occur to the buildings and infrastructure at the closed Air
Force base.
4:03:23 PM
KATHIE WASSERMAN, Executive Director, Alaska Municipal League,
Juneau, Alaska, testified in support of HB 47. She concurred
with previous testimony that the legislation related to HB 47
has been around for quite some time. She noted that Pelican's
population drop occurred when a cold storage business closed in
2002 but noted that the community had paid off its PERS debt.
She explained that St. George no longer has PERS employees, but
their PERS debt remains. She explained that the population
decreases in the five communities was due to circumstances
outside of the communities control.
4:07:00 PM
CHAIR MEYER asked if additional communities can be expected to
have population decreases in the future.
MS. WASSERMAN answered that she did not have numbers to back her
response but opined that populations will stabilize but the
debts will not go away.
CHAIR MEYER noted that Ms. Wasserman addressed SB 125 in her
overview and asked if that the bill passed in a previous
Legislature.
MS. WASSERMAN specified that SB 125 was PERS legislation passed
by Senators Hoffman and Stedman in 2006.
CHAIR MEYER asked if the state went to the defined-retirement
plan in 2006.
MS. WASSERMAN answered yes.
SENATOR GIESSEL addressed PERS employee-count data from FY2008-
FY2016. She noted in FY2016 that Galena had 18-PERS employees, 0
in Nenana and St. George, and 5 in Pelican.
MS. WASSERMAN remarked that a lot of the communities have gone
out of their way to not let go of employees because they do not
want to trigger a termination study.
CHAIR MEYER asked why the time frame of 2000 to 2010 was chosen.
MS. WASSERMAN surmised that it was when "this legislation
started."
4:11:27 PM
CHAIR MEYER closed public testimony.
CHAIR MEYER asked Mr. Worley to address the bill's fiscal notes.
He asked if there were two fiscal notes and one forthcoming.
4:12:08 PM
KEVIN WORLEY, Chief Finance Officer, Division of Retirement and
Benefits, Alaska Department of Administration, Juneau, Alaska,
stated that HB 47 has no fiscal impact on the division. He
explained that the division would provide updated actuarial
numbers and a new fiscal note soon.
CHAIR MEYER pointed out that the fiscal note that he reviewed
was dated FY2017 when the bill was introduced. He detailed that
it showed $121,000 for FY2018, and then $112,000 for FY2019. He
asked if those numbers will be adjusted.
MR. WORLEY answered correct.
CHAIR MEYER asked him to confirm that the bill modifies the 2008
salary floor and it has to do with the 25-percent decrease in
population between 2000-2010. He asked why time range was
between 2000 and 2010.
MR. WORLEY answered that the years were based on the U.S. Census
from 2000 and 2010.
CHAIR MEYER asked if the 25-percent population decrease only
applies to the five communities.
MR. WORLEY answered yes. He noted that the division confirmed
the five impacted communities participating in PERS with the
Department of Commerce, Community, and Economic Development.
4:14:31 PM
CHAIR MEYER asked if there could be other communities asking for
the same relief in the future or if the bill precludes the state
from providing relief again.
MR. WORLEY answered that the legislation was very date-specific
between 2000 to 2010 and only deals with the five communities.
He believed that new legislation would have to be enacted for
communities that suffer the same decline in the future.
CHAIR MEYER admitted that population loss in smaller communities
is concerning due to fragile economies. He asked Mr. Worley if
he believed that the fiscal note will be presented soon.
MR. WORLEY answered that he will present the fiscal note the
following day.
4:16:05 PM
CHAIR MEYER held HB 47 in committee.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 47 Version A.PDF |
SSTA 4/5/2018 3:30:00 PM |
HB 47 |
| HB 47 Sponsor Statement.pdf |
SSTA 4/5/2018 3:30:00 PM |
HB 47 |
| HB 47 Actuarial Letter.pdf |
SSTA 4/5/2018 3:30:00 PM |
HB 47 |
| HB 47 Supporting Documents amended statutes.pdf |
SSTA 4/5/2018 3:30:00 PM |
HB 47 |
| HB 47 Supporting Documents cities impacted by the floor.pdf |
SSTA 4/5/2018 3:30:00 PM |
HB 47 |
| HB 47 Supporting Documents DOA-RAB letter.pdf |
SSTA 4/5/2018 3:30:00 PM |
HB 47 |
| HB 47 Supporting Documents effected employers.pdf |
SSTA 4/5/2018 3:30:00 PM |
HB 47 |
| HB 47 Supporting Documents Gross Salaries.pdf |
SSTA 4/5/2018 3:30:00 PM |
HB 47 |
| HB 47 Supporting Documents Huntington PERS.pdf |
SSTA 4/5/2018 3:30:00 PM |
HB 47 |
| HB 47 Supporting Documents PERS cities by 2010 population.pdf |
SSTA 4/5/2018 3:30:00 PM |
HB 47 |
| HB 47 Supporting Documents PERS Employer Salaries for FY08 - FY12.pdf |
SSTA 4/5/2018 3:30:00 PM |
HB 47 |
| HB 47 Supporting Documents testimony Korta PERS.pdf |
SSTA 4/5/2018 3:30:00 PM |
HB 47 |
| HB 47 Supporting Documents Total PERS employers.pdf |
SSTA 4/5/2018 3:30:00 PM |
HB 47 |
| HB 47 Fiscal Note DOA OMB 64.pdf |
SSTA 4/5/2018 3:30:00 PM |
HB 47 |
| HB 152 Version N.PDF |
SSTA 4/3/2018 3:30:00 PM SSTA 4/5/2018 3:30:00 PM |
HB 152 |
| HB152 ver N Sponsor Statement.pdf |
SSTA 4/3/2018 3:30:00 PM SSTA 4/5/2018 3:30:00 PM |
HB 152 |
| HB152 Memo of Changes 3.20.18.pdf |
SSTA 4/3/2018 3:30:00 PM SSTA 4/5/2018 3:30:00 PM |
HB 152 |
| HB152 Additional Documents-DMVA Letter and bill info 3.19.18.pdf |
SSTA 4/3/2018 3:30:00 PM SSTA 4/5/2018 3:30:00 PM |
HB 152 |
| HB152 Supporting Document-DMVA Letter and Sectional 3.19.18.pdf |
SSTA 4/3/2018 3:30:00 PM SSTA 4/5/2018 3:30:00 PM |
HB 152 |
| HB152 Opposing Document-Letter Lawrence Wood 3.19.18.pdf |
SSTA 4/3/2018 3:30:00 PM SSTA 4/5/2018 3:30:00 PM |
HB 152 |
| HB 152 Fiscal Note.pdf |
SSTA 4/3/2018 3:30:00 PM SSTA 4/5/2018 3:30:00 PM |
HB 152 |
| SB 159 Version A.PDF |
SSTA 3/20/2018 3:30:00 PM SSTA 4/5/2018 3:30:00 PM |
SB 159 |
| SB 159 Hearing Request.pdf |
SSTA 3/20/2018 3:30:00 PM SSTA 4/5/2018 3:30:00 PM |
SB 159 |
| SB 159 DOA Presentation in SSTA 3.20.18.pdf |
SSTA 3/20/2018 3:30:00 PM SSTA 4/5/2018 3:30:00 PM |
SB 159 |
| SB 159 Tranmsittal Letter PERS and TRS.pdf |
SSTA 3/20/2018 3:30:00 PM SSTA 4/5/2018 3:30:00 PM |
SB 159 |
| SB 159 Fiscal Note.pdf |
SSTA 3/20/2018 3:30:00 PM SSTA 4/5/2018 3:30:00 PM |
SB 159 |