Legislature(2021 - 2022)BUTROVICH 205
03/15/2021 09:00 AM Senate EDUCATION
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| Audio | Topic |
|---|---|
| Start | |
| SB20 | |
| SB6 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 20 | TELECONFERENCED | |
| *+ | SB 6 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
SB 6-RIP FOR PUBLIC EMPLOYEES/TEACHERS
9:46:58 AM
CHAIR HOLLAND reconvened the meeting and announced the
consideration of SENATE BILL NO. 6 "An Act relating to
retirement incentives for members of the defined benefit
retirement plan of the teachers' retirement system and the
defined benefit retirement plan of the Public Employees'
Retirement System of Alaska; and providing for an effective
date."
He invited Joe Hayes to present the bill.
9:47:18 AM
JOE HAYES, Staff, Senator Scott Kawasaki, Alaska State
Legislature, Juneau, Alaska, read the sponsor statement for SB
6:
Senate Bill 6 would implement a temporary, voluntary
Retirement Incentive Program to increase state savings by
allowing public employees to retire up to three years
early. Long-serving public employees are among the highest
paid in the state. In many cases, pensions paid to retiring
employees would cost the state less money than their
current salaries. Providing high-salaried employees the
option to retire early would save Alaska money through
lower personnel costs.
SB 6 could also help prevent layoffs. The bill presents a
method of cost-cutting and payroll reduction without
forcing anyone out of the workforce before they are ready
to retire. This gives the State of Alaska the opportunity
to reduce operating costs by opening vacancies that enable
the placement of more junior employees. Retirement
incentive programs are regularly used in the private sector
to efficiently control personnel costs through market
incentives rather than heavy-handed layoffs.
Retirement Incentive Programs have been used on a temporary
basis three times in Alaska's history and was last proposed
in 2004. In 1986, Senator Jim Duncan estimated savings at
approximately $25 million. A Legislative Audit of the 1989
Retirement Incentive Program demonstrated a savings of
$22.9 million with nearly 1,764 individual participants. In
1996, Rep. McGuire calculated the state gained $41 million
in savings through identical legislation.
Senate Bill 6 is an innovative policy option for state
agencies, municipalities and school districts to consider
as a means to reduce payroll costs without layoff
9:49:13 AM
MR. HAYES presented the sectional analysis for SB 6:
Section 1:
Defines the purpose and intent of the bill to make
Retirement Incentive Programs (RIP) temporarily
available to state agencies, municipalities and school
districts. Includes intent for state agencies that
adopt authorized RIPs to adopt an accompanying policy
to prohibit hiring of new employees.
Section 2:
Allows public employers, including the University of
Alaska, to elect to adopt a RIP under the bill. The
employer may limit the program to specific components,
job classifications, geographic locations or a
combination of the three.
Specifies the commissioner of administration or the
commissioner's designee ("administrator") has the sole
authority to approve or deny an employee's RIP
application.
An employer adopting a RIP shall propose the program
to the administrator to approve if it meets the
requirements set forth under sec. 9 of this bill.
Establishes the requirements for any RIP proposed by a
public employer:
(1) Designate job classifications and specific
budget and administrative components of employees
eligible to participate; and
(2) For each participating employee, the employer
must reimburse the defined benefit retirement
plan within three years after the end of the
fiscal year in which the employee retires. This
reimbursement must be equal to an amount that is
the difference between the benefits the RIP
participant receives after the credit and the
benefits the participant would have received
without the credit, less the amount the
participant has paid on the indebtedness provided
later in this section. The reimbursement
agreement requires the employer's contributions
must be given priority over other financial
obligations.
9:51:01 AM
An employer adopting a RIP may request the
administrator to establish one or more application
periods open to at least one eligible employee. The
RIP application period must be at least 30 days and at
most 60 days in duration. RIP application periods may
only be established between 30 days after the program
is established and no later than June 30, 2024.
An administrator may allow an employee to retire early
under a RIP no later than six months after the last
day of the application period, or a date set by the
RIP as the date employees are eligible to retire
earlywhichever is earlier.
Establishes RIP eligibility requirements for an
employee:
(1) The employee is vested in a defined benefit
retirement plan in PERS or TRS;
(2) The employee has credit for service under
Tiers 1, 2 or 3;
(3) The employee is at least 50 years old and has
at least 17 years of credited service as a peace
officer or firefighter, or at least 20 years of
credited service in any other public agency;
(4) The employee is qualified to retire under
their defined benefit plan after receipt of the
approved early retirement credit;
(5) An employee of a state agency satisfies the
requirements under sec. 3; and
(6) The savings in personal services costs for
the participating employee's position will exceed
the cost to the employer for that vacating
position within three years after the employee is
appointed to retirement.
Sets the level of indebtedness for RIP participants.
For TRS members, participants pay 25.95 percent of the
year's annual compensation for the school year, or the
calculated school year compensation if they work a
partial year, plus a share of the administrative
costs. The indebtedness for peace officers and
firefighters is 22.5 percent and 20.25 percent for all
other PERS members.
For any RIP participants, annual or personal leave may
be applied toward indebtedness. Pension benefits shall
be reduced by an actuarial adjustment if the
participant has not paid the indebtedness at the time
of retirement.
9:53:18 AM
Provides a credit of three years of service to be
given to an employee participating in the program. The
three years credit must be applied in an order of
priority until the credit is met: to meet the age or
service required for normal retirement eligibility; to
meet the age required for early retirement; to reduce
the actuarial adjustment required for early
retirement; as years of credited service for
calculating benefits.
Section 3:
Requires interested eligible state employees must be
employed for at least 12 months prior to application
to an approved RIP.
Prohibits the governor, lieutenant governor,
commissioners, deputy commissioners or assistant
commissioners from participating in a RIP.
Section 4: Authorizes University of Alaska employees
who are members of PERS or TRS may participate in a
RIP under the appropriate requirements for their
defined benefit retirement program established under
this bill.
Section 5: Allows PERS or TRS members to receive a
credit for service while employed in a political or
public organization prior to that organization's
participation in PERS or TRS. The credit may not be
applied to determine the amount of retirement benefits
that employee receives.
Section 6: Allows the commissioner of administration
to recover a delinquency owed to the state by an
employer. Provides a delinquency may be recovered by
withholding money owed to the employer equal to or
less than the amount of the delinquency, and by
bringing action against the employer.
Section 7: Allows an administrator to close an adopted
RIP to new applicants if it has been determined that
an increase in the number of participants will have a
significant negative effect on the actuarial soundness
of PERS or TRS.
9:55:08 AM
Section 8: Requires an employee who participated in a
RIP that is reemployed under PERS or TRS or the
judicial retirement system to forfeit the incentive
credits received or due as established under sec. 2.
That employee must also incur an indebtedness to the
reemploying defined benefit plan at 110 percent of the
amount received solely as a result in participating in
a RIP, including health insurance premium costs.
The administrator shall apply the amount the employee
paid in indebtedness under sec. 2 as a credit toward
the member's reemployment indebtedness. Interest on
the reemployment indebtedness accrues from the date of
reemployment until the date the individual is
appointed to retirement and accepts an actuarial
adjustment to future benefits, or until the employee
repays the indebtedness in full. The rate of interest
is established by the Alaska Retirement Management
Board.
Prohibits a state agency or the University of Alaska
from employing or contracting an individual who
retired under a RIP for a period of three years.
Establishes several exceptions for the University of
Alaska, school districts and the legislative branch.
9:56:19 AM
Section 9: Requires the director of the Office of
Management and Budget (OMB) to determine if each RIP
adopted will reduce net operating costs for the state
agency for a five-year period beginning July 1, 2021
and report the outcome of the review to the
administrator.
Prohibits the administrator from approving a RIP
unless the OMB determines the program is expected to
reduce the agency's net operation costs. The state
agency adopting a RIP shall cooperate with and provide
information to the OMB to aid with the preparation of
the review and the annual report submitted to the
legislature.
9:56:58 AM
Requires the OMB to submit to both legislative
chambers an annual report of established RIPs
beginning January 15, 2022, through January 15, 2025.
Sets the requirements for those annual reports so that
the legislature can evaluate the RIPs, their impacts
on PERS and TRS, and their economic impact to
employing agencies.
9:57:19 AM
Section 10: Provides that an employee does not have a
vested or contractual right to a benefit under this
bill until an agreement is executed with the
administrator that authorizes the employee to
participate in the RIP. Allows the legislature to
change a RIP as it relates to employees for whom an
agreement has not been executed.
Section 11: Allows the commissioner to adopt
regulations to implement and interpret the Act.
Section 12: Provides definitions of administrator,
employer, OMB, PERS, TRS, public organization and
state agency for purposes of the Act established under
this bill.
Section 13: Prohibits sections 1-12 from impairing the
benefits of a person appointed to retirement under
PERS or TRS before the effective date of this bill.
Section 14: Sections 1-12 apply to contracts made on
or after the effective date.
Section 15: Repeals sections 1-12 on July 1, 2024.
Section 16: Enacts the bill immediately under AS
01.10.070(c)
9:58:29 AM
SENATOR BEGICH noted that in Section 10, Mr. Hayes said, "for
whom an agreement has been executed." He suggested Mr. Hayes
meant to say "for whom an agreement has not been executed
MR. HAYES agreed.
SENATOR BEGICH said that Section 8 is to keep people from taking
advantage of the system and coming back immediately after
executing an RIP. He asked if that was correct, and Mr. Hayes
affirmed it was correct.
9:59:45 AM
SENATOR HUGHES referenced a bill allowing retired teachers to
come back. She understands what Senator Begich is saying but
wonders if that would make sense if there is a shortage. In
Section 2, an employee could be 50 years old. If this is truly
something where there could be a net cost savings, she
questioned the reason for an age limit. Someone could meet the
minimum years of credited service at a younger age.
MR. HAYES responded that he is not sure how many state employees
would be hired at 18 without a degree, but he will review that.
SENATOR HUGHES said someone could start at age 25 and still meet
that requirement before age 50.
SENATOR BEGICH said Senator Micciche's bill that became law
excluded teachers from coming back into the retirement system.
There are exceptions in Section 8 for things like substitute
teaching. The retirement incentive bill would not be affected by
this.
10:02:41 AM
SENATOR MICCICHE said the financial benefits to the state have
been questionable with the RIPs passed in the past. The state is
in a perfect storm of not being able to fill teacher positions,
which is why the legislature passed the retiree rehire bill. He
is struggling. The economic benefits are questionable. The
Legislative Research Services report had mixed reviews. With
some calculations there actually was a cost to the state. He
understands the economic value of giving an economic incentive
to replace a highly compensated 30-year teacher with another
teacher at a lower cost, but right now, the state is in dire
straits in keeping teaching positions filled. That worries him.
He appreciates the idea. Maybe at some point it will be more
beneficial, but right now he is worried about it.
MR. HAYES responded that Senator Kawasaki views this bill as
win-win. It is an opt-in rather an opt-out bill. Each
governmental agency decides if it works for them. The state is
not saying that anyone has to do an RIP, but if there are cost
savings, agencies could proceed. It is a morale booster because
of the amounts of layoffs coming from the state with reduced
budgets. This is a better way for folks to walk away and retain
morale in certain segments of the state.
CHAIR HOLLAND called on invited testimony.
10:05:26 AM
DOUG WOOLIVER, Deputy Administrative Director, Alaska Court
System, Anchorage, Alaska, said the court has no position on SB
6, but he was asked to testify about a RIP program the court
developed in 2016. The court was looking to reduce personnel
costs. It had long-time employees who cost more than newer
employees. The court had no authority to have an early
retirement program such as this. It could only incentivize those
who were already eligible for retirement to retire. With the
court program, employees must have been eligible to retire for
at least three years, must have been an employee of the court
system for at least 10 years, and agree to retire by August 31
of 2016. Only 28 people were eligible and 16 of them opted to
retire. The incentive was three months salary. The net savings
was $680,000 a year, which is not big relative to PERS (Public
Employee Retirement System) or TRS (Teacher Retirement System),
but for the court system budget, $680,000 was a real help at the
time. It was a morale booster. The court was able to say goodbye
to people on good terms and saved a lot of money by the court's
standards. It is a different kind of program, but it worked for
the court system.
10:07:54 AM
SENATOR MICCICHE said he is only looking at the bill from an
education standpoint because it is in the Education Committee.
He feels differently about the bill as far as TRS vs. PERS. With
PERS he sees some practical benefit. The ageism aspect of this
has been challenged in the past. The court system was based on
years of service or something not related to age. This bill
seems more age directed. He asked if Mr. Wooliver had any
concerns about that or would he rather not speak to the legal
aspects of the bill.
MR. WOOLIVER replied that it would be best to turn to
Legislative Legal for that, but retirement incentives are common
across the country. He would guess that whatever the law is, it
is well established.
SENATOR HUGHES said that to veer off education a bit, from
reading the Legislative Research information, the 1989 program
was to mitigate the social hardships of layoffs. Those positions
were not replaced. As lawmakers they need to think about that.
They have seen that per capita the number of state employees is
high. Alaska is a unique state and provides a lot of services,
so it is not comparable. It might be something to consider if a
position would remain vacant sooner under this if the state
decides to downsize. She is just throwing that out. That could
be of benefit to the state.
10:10:18 AM
JIM PUCKETT, Deputy Director, Division of Retirement and
Benefits, Department of Administration (DOA), Juneau, Alaska,
said he was available for questions.
CAROLINE SCHULTZ, Chief Policy Analyst, Office of Management and
Budget, Office of the Governor, Juneau, Alaska, said she was
available to answer questions.
SENATOR MICCICHE asked Mr. Puckett about the legal ability to
remove the TRS section of the bill and let it move forward with
PERS. He is just curious about that. This would not work for TRS
right now. He asked if it would be legal to have an RIP without
a TRS option.
MR. PUCKETT answered they are two separate retirement systems,
so there could be a bill that is only for PERS and not TRS.
There would be nothing wrong about that legally.
MR. HAYES said, unfortunately, the superintendent from Sitka
could not be present. Sitka is doing an RIP. He would like him
to testify at some point.
10:12:47 AM
CHAIR HOLLAND held SB 6 in committee.
| Document Name | Date/Time | Subjects |
|---|---|---|
| 01_SB020_TeacherCert_Reciprocity_Sponsor-Statement.pdf |
SEDC 3/15/2021 9:00:00 AM SFIN 3/29/2021 9:00:00 AM |
SB 20 |
| 02_SB020_TeacherCert_Reciprocity_BillText_version A.pdf |
SEDC 3/15/2021 9:00:00 AM |
SB 20 |
| 03_SB020_TeacherCert_Reciprocity_Sectional_version A.pdf |
SEDC 3/15/2021 9:00:00 AM |
SB 20 |
| 04_SB020_TeacherCert_Reciprocity_Research_Dept.Defense_Military-Spouses.pdf |
SEDC 3/15/2021 9:00:00 AM SFIN 3/29/2021 9:00:00 AM |
SB 20 |