Legislature(2011 - 2012)SENATE FINANCE 532
03/30/2012 01:00 PM Senate FINANCE
| Audio | Topic |
|---|---|
| Start | |
| SB121 | |
| HB284 || HB285 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | SB 121 | TELECONFERENCED | |
| + | SB 100 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | HB 284 | TELECONFERENCED | |
| += | HB 285 | TELECONFERENCED | |
SENATE FINANCE COMMITTEE
March 30, 2012
1:17 p.m.
1:17:34 PM
CALL TO ORDER
Co-Chair Stedman called the Senate Finance Committee
meeting to order at 1:17 p.m.
MEMBERS PRESENT
Senator Bert Stedman, Co-Chair
Senator Lyman Hoffman, Co-Chair
Senator Lesil McGuire, Vice-Chair
Senator Johnny Ellis
Senator Dennis Egan
Senator Donny Olson
Senator Joe Thomas
MEMBERS ABSENT
None
ALSO PRESENT
Jessie Kiehl, Staff, Senator Dennis Egan; William B.
Fornia, Pension Trustee Advisors; Michael Barnhill, Deputy
Commissioner, Department of Administration; Marie Darlin,
American Association of Retired Persons; Bill Ernst,
Teacher; Sean Genson, Teacher; Jeff Jones, Firefighter;
Hillary Seeland, Teacher; Tim Grussendorf, Staff, Senator
Lyman Hoffman; Karen Rehfeld, Director, Office of
Management and Budget; Senator Cathy Giessel; Senator Joe
Paskvan; Senator Linda Menard.
PRESENT VIA TELECONFERENCE
Holley Dennison, Self, Sitka; Kristen Green, Self, Sitka;
Leila Sheffield, Self, Bethel; Dorothy Leake, Acting City
Clerk, City of Anderson, Anderson; Josephine Edwards, Self,
Anchorage; Ladawn Druce, President, Kenai Peninsula
Education Association, Kenai; Ted Moninski, Legislative
Director, Retired Public Employees of Alaska, Anchorage.
SUMMARY
SB 121 TEACHERS & PUB EMPLOYEE RETIREMENT PLANS
SB 121 was HEARD and HELD in committee for
further consideration.
SB 100 PERS TERMINATION COSTS
SB 100 was SCHEDULED but not HEARD.
CSHB 284(FIN) APPROP: OPERATING BUDGET/LOANS/FUNDS
SCS CS HB 284(FIN) was REPORTED out of committee
with a "do pass" recommendation.
CSHB 285(FIN) APPROP: MENTAL HEALTH BUDGET
SCS CSHB 285(FIN) was REPORTED out of committee
with a "do pass" recommendation.
SENATE BILL NO. 121
"An Act relating to the public employees' retirement
system and the teachers' retirement system; and
providing for an effective date."
1:19:30 PM
Senator Egan introduced SB 121 and read from the sponsor
statement:
SB 121 lets teachers, Troopers, firefighters and other
public employees choose one of two state retirement
systems: an individual defined contribution retirement
account, or earning a defined benefit pension.
A defined benefit pension takes time to earn, but
rewards a record of public service by paying a
guaranteed monthly benefit and, for long-term
employees, health insurance. An individual defined
contribution account is portable from one employer to
another, and flexible in how it can be used, but makes
no guarantees. SB 121 keeps these smart reforms,
making Alaska pensions stronger than ever.
And the defined benefit pensions for new employees
under SB 121 will cost employers less than the pension
tiers that came before, saving money for schools,
cities, and the State of Alaska.
Alaska teachers and public employees don't earn Social
Security benefits they earned in past jobs. S for
most, a defined benefit pension makes sense. Other
employees will choose individual defined contribution
accounts because they prefer flexibility, portability,
and control, or because their plans do not include
long-term service in the public sector. SB 121
maintains their option to choose an individual
account. The teachers who educate our children, their
police and firefighters who protect our families and
the public employees who serve our state and cities
will be able to choose the benefit that best fits
their service.
1:22:15 PM
JESSIE KIEHL, STAFF, SENATOR DENNIS EGAN, further explained
that SB 121 created a new defined benefit tier within
Alaska's pension systems: the Public Employees Retirement
System (PERS) and the Teachers Retirement System (TRS). He
communicated that a new-hire had a choice between a
guaranteed benefit and the ability to control their
retirement funds. The choice provided the state tools to
recruit and retain employees. He cited that the economic
benefit of defined benefit pensions in Alaska totaled $1.4
billion and supported approximately 9000 private sector
jobs in 2010. He noted that federal retirement systems were
excluded from the estimate.
Mr. Kiehl mentioned that the Senate State Affairs Committee
received significant testimony from Alaska municipalities
expressing concern about turn-over costs. The testimony
communicated difficulty recruiting and retaining public
employees in Alaska. Those municipalities testified that a
choice, such as the one proposed in SB 121, would provide
great benefit in both property and sales tax dollars.
Mr. Kiehl noted the strengths of the defined benefit and
the defined contribution systems. He explained that the
defined benefit system was attractive to employees because
it ensured that an established amount of money was
available to the retired person each month. The defined
contribution system was attractive because the participant
could make their own investment decisions. He added that
the defined contribution system did not provide guarantees.
1:25:56 PM
Mr. Kiehl began a PowerPoint presentation: "SB 121 Alaska
Pension" (Copy on File). He noted that the graphs included
in the presentation were prepared by the state's actuary,
Buck Consultants. The graphs intended to represent two
different situations. He pointed out that the pension
portion was included in the two charts.
Mr. Kiehl reviewed slide 5, "Two PERS employees" and
pointed out that until an employee was vested, the defined
benefit and the defined contribution were similar. He
referred to slide 6 titled "Two TRS Employees" which
represented a potential monthly benefit amount. He stressed
that the choice was significant and presented a decision
for the public employee. He noted that once an employee
settled on a plan, the choice was permanent.
1:27:37 PM
Mr. Kiehl discussed slide 7 titled "What Stays the Same?
What's different?"
What Stays the Same?
· The Defined Contribution systems do not change.
· The 2005 safeguards remain in place
· DB pension benefits
· Health plan coverage
What's different?
· Most employees pay more into the new tier
· It takes longer to earn retiree health insurance
o Medicare eligibility for most
o Cost sharing
o Risk Sharing
· DB retirement eligibility similar to DC tiers.
· DC employees get one chance to switch.
1:33:11 PM
Mr. Kiehl explained the slide on page 8 titled "A
responsible approach."
· SB 121's new tier adjusts so it doesn't cost more than
DC tiers
· SB 121 takes longer to earn retiree health insurance
o Eliminates that most expensive years for most
retirees
o Shares the cost
o Shares the risk until the employee retires
· Conversions to the new tier at employee's option-and
cost.
· All the 2005 safeguards remain:
o Review by a second actuary
o Minimum salaries for elected officials
o Experience studies
o ARM Board
o No paying less than the cost
o Refunding DB contributions is permanent
1:34:38 PM
Mr. Kiehl explained the slide on page 9 titled "More for
Alaskans' Money."
· Professional managers earn more
· No added costs- we're already running two systems
· $762 million/year in DB benefits are a shock absorber
for the Alaska economy
· Employees who prefer portability and control have a
choice
· Cities, school districts, and the state have excellent
recruiting tools
1:36:13 PM
Mr. Kiehl discussed the slide on page 10 titled "Cost
Neutral." He explained that the slide provided a 22 year
actuarial projection for the new tier as compared to the
defined contribution system for the PERS system and a 24
year projection for TRS. The data was attached as analysis
to the indeterminate fiscal note in the member's packet. He
highlighted that the chart provided the cost difference
between the new defined benefit tier and the defined
contribution system. He pointed out that the new tier would
cost employers less than the defined contribution system.
As healthcare costs were projected to rise, the cost
savings would decline. A cost increase was prevented by
cost and risk sharing with employees. If healthcare
inflation costs did not trend down over time, the employees
would pay the difference.
1:37:46 PM
Mr. Kiehl stated that he was happy to answer questions
about the bill.
1:38:28 PM
WILLIAM B. FORNIA, PENSION TRUSTEE ADVISORS, presented a
PowerPoint presentation titled "Alaska Senate Finance
Hearing of SB 121."
1:39:34 PM
Mr. Fornia discussed the slide on page 2 titled "William B.
Fornia Credentials." He explained that he was a practicing
actuary specializing in public pensions. He was hired by
the Alaska Public Pension Coalition to help design a
defined benefit option. He furthered that he was an author
with much experience providing testimony to legislatures
and city councils.
1:40:43 PM
Mr. Fornia explained the slide on page 3 titled "Sample
Work History."
· Corporate actuary for Boeing 1980-1984
· Alaska related experience
o ARMB first ongoing review actuary 2005-2006
o Audited Alaska PERS/TRS actuarial valuations 2009
o Former leader of Buck Consultants' Denver
retirement practice
· Consulting services for 22 statewide retirement
systems in Alaska, Colorado, Missouri, North Dakota,
Oklahoma, Puerto Rico, Utah, Texas, Wyoming and
others.
o Served as system actuary for most of these
(including CO, MO, ND, OK, PR, UT, WY, Houston)
o Currently working on pension reform with Ohio
Retirement Study Council
· Expert testimony and consulting for pension systems,
governments and labor groups
· Other clients have included the US Department of
State, Cities of Baltimore, Oakland and Philadelphia,
IBM, US WEST and Ford Motor Company.
Mr. Fornia discussed the slide on page 4 titled "Agenda."
· Overview of SB 121
· Advantages of Including defined Benefit Plan Option
· Financial Analysis of Defined Benefit Plan Option
· History of SB 121 Fiscal Notes and responses
· Discussion
1:40:59 PM
Mr. Fornia addressed the slide on page 5 titled "Findings."
· DB plan option is more economical for Alaska
o DB more efficient delivery of retirement benefits
o Helps keep jobs in Alaska
o Provides the safety new other have from Social
Security
· Have structured DB choice alternative at $9,000,000 FY
2015 savings
o Health cost risk shifted to employees
o Higher employee contributions than current DB
o Employee health cost sharing
1:42:20 PM
Mr. Fornia explained that portions of his presentation were
previously covered by Mr. Kiehl.
1:42:33 PM
Mr. Fornia explained the slide on page 9 titled "Other
motives for SB 121."
· Alaska public servants not covered by Social Security
o Every state other than Alaska and Michigan offers
Defined Benefit Option
ƒMichigan public servants get Social
Security, Alaska Public servants don't
o All private US employers pay at least 6.2 percent
to Social Security; Alaska PERS employers pay
5.22 percent
o Soon, Alaska will be largest employer in America
with workers not covered by any safety net DB
plan
· Current DC structure facilitates short service workers
leaving Alaska public service for DB plan after a few
years of service
· Retirement in Alaska is good for the State economy
1:44:02 PM
Mr. Fornia discussed the slide on page 12 titled "Benefits
Available from DCR Program are Substantially Lower than
from Latest DB Tier" and the slide on page 13 titled
"Illustration of Hypothetical Teacher Benefits - $50,000
Final Average Salary." He explained that the slides
exemplified the benefits received by a teacher earning $50
thousand at the end of her career with 25 years of service.
The slides examined the benefits under Tier II (defined
benefit plan) and Tier III. He pointed out that the pension
decreased by one-third. He stated that a Social Security
benefit would provide an equal amount. He added that a
teacher in Alaska was not eligible to receive Social
Security benefits. He stated that a defined benefit plan
eliminated the risk of destitute former employee citizens
becoming a burden on the state.
1:45:44 PM
Mr. Fornia discussed the slide on page 16 titled "Why DB?-
More Economically Efficient."
· Longevity Risk Pooling
o DB plans better manage longevity risk, or the
chance of running out of money in retirement
o DB plans avoid the "over-saving" dilemma and do
more with less
· Maintenance of Portfolio Diversification
o DB plans are able to take advantage of the
enhanced investment returns that come from a
balanced portfolio throughout an individual's
lifetime
· Superior Returns
o DB plans, which are professionally managed,
achieve greater investment returns versus those
of individual accounts
1:46:26 PM
Mr. Fornia discussed the slide on page 18 titled "Under a
DC Plan 24% of Assets Are Not Used for Retirement - -1,000
Sample Teachers." He opined that the purpose of a public
sector retirement program was to help workers retire over
their lifetime. The purpose was not to build life insurance
benefits for the workers. He mentioned that an older
individual must become more conservative in their
investments. The Alaska Management Retirement Board (ARMB)
had a long time horizon and could invest more aggressively,
while individuals could not. He added that ARMB was an
efficient and experienced investor.
1:48:23 PM
Mr. Fornia spoke to the slide on page 22 titled "What about
Unfunded Liabilities?"
· Unfunded Liability has grown by more than $5 billion
since 2005
o "Unfunded Liability" is attributable to prior
benefits, not future benefits
o SB 141 DC approach was not designed to solve
unfunded liability
o Several safeguards have been introduced to manage
unfunded liability
· Addition of DB option not anticipated to increase
unfunded liabilities
o To the extent that actuarial assumptions'
conservatism is borne out, would actually
decrease unfunded liabilities
· DB systems are advance funded, not left to future
generations
1:49:21 PM
Mr. Fornia explained the slide on page 26 titled
"Contributions for Various Members." He stated that
contributions increased for PERS, while they decreased
slightly for TRS.
1:50:01 PM
Mr. Fornia discussed the slide on Page 27 titled "Retiree
Medical Coverage."
· Retirees eligible to receive retiree major medical
coverage with subsidized premiums, under the following
conditions:
o Retired teachers are eligible with 25 years of
service or at the age of Medicare eligibility
(65) with at least 10 years of service.
o Retired peace officers and firefighters are
eligible with 25 years of service or at the age
of Medicare eligibility with at least 10 years of
service
o Other PERS retirees are eligible with 30 years of
service or at the age of Medicare eligibility
with at least 10 years of service
· Retiree share of premiums range from 10 percent to 30
percent based on service at retirement
o This range may increase or decrease in future
based on experience
1:50:28 PM
Mr. Fornia explained the slide on page 28 titled "Cost
Comparison Estimates - Teachers." The slide exhibits the
first year's cost savings for teachers. The idea was to
make the bill cost-neutral because health care costs had
increased drastically.
1:51:32 PM
Mr. Fornia explained the slide on page 33 titled "Summary
of Revisions to SB 121."
· Initial SB 121 essentially was return to prior tier
o But with choice
o Members could trade DCR accounts to get prior DB
service
o Future pension costs were neutral
o But some past pension costs due to transition
o And health costs were not neutral due to
anticipated rapid increase in health care costs.
· Revisions include
o DB prior service can be purchased only, if DCR
accounts not adequate, service limited
o Increased worker contributions
o Reduced healthcare benefits
ƒpremium share rather than full premium paid
ƒonly for full career retirees or post-
Medicare
ƒif normal costs increase, sharing would be
reduced
1:51:59 PM
MICHAEL BARNHILL, DEPUTY COMMISSIONER, DEPARTMENT OF
ADMINISTRATION, began a PowerPoint presentation titled "SB
121: Making Promises and Keeping Promises" (copy on file).
He expressed respect for the good-faith intentions of the
bill sponsors. The legislation's intention was to provide
fair retirement security for public workers. The
administration expressed similar intentions. The difference
between the administration and the sponsor was the method
of providing a fair retirement security for public workers.
Mr. Barnhill discussed the slide on page 2 titled "Making
DB Promises."
· Defined Benefit Plan Promises
o Pension up to 67 percent of average salary
o Annual cost of living increases
o System-paid medical premiums
· Membership: 95,667
1:53:17 PM
Mr. Barnhill explained the slide on page 3 titled "Current
DB Promises Must be Kept."
· "Accrued benefits of these (retirement) systems shall
not be diminished or impaired." Alaska Constitution,
Article XII, Section 7
· Benefit payments-
o at least $1 billion per year from now until 2063
o $3 billion per year from 2027-2046
1:53:41 PM
Mr. Barnhill discussed the slide on page 4 titled "Cost of
keeping existing PERS and TRS." The graph showed the
benefits paid between 2012 and 2080. The benefits cost more
than $1 billion per year in 2012. He explained that when
the baby boomer generation retired, the state would pay in
excess of $3 billion per year, over the next 20 years. As
the existing members of the defined benefit systems pass
away, he stated that the amount that the system will pay
will decrease.
Mr. Barnhill elaborated that $140 billion was the total
anticipated cost of the defined benefit system. He pointed
out that the state had $15.5 billion in the bank. The
actuary suggested an unfunded liability of $11 billion in
Alaska. He noted that the slide demonstrated a defined
benefit system that was lengthy and expensive. He
acknowledged that the system had resources like employee
and employer contributions until 2032. The system also had
investment returns and the legislature was generous in
providing revenue from the general fund.
1:56:04 PM
Mr. Barnhill explained the slide on page 5 titled "How Long
Will Keep DB Promises?" He pointed out that the state would
continue to keep defined benefit promises through 2080, and
possibly longer. He pointed out that the US government
continued to pay pensions to two children of Civil War
veterans from their fathers' service.
1:56:33 PM
Mr. Barnhill discussed the slide on page 6 titled "Lessons
Learned: DB Pensions Need Revenue Backstops"
· Alaska's experience from the 2000s
· Unfunded liabilities arise for a variety of reasons,
negligent and non-negligent
o Rising medical costs
o Longer life spans
o Actuarial negligence
o Investment loss
· When unfunded liabilities have developed in Alaska, by
and large the GF has provided the solution.
1:57:47 PM
Mr. Barnhill spoke to the slide on page 7 titled "Breaking
Promises."
· Retirement promises have been broken elsewhere
· Private employer retirement plan defaults prompted
federal passage of ERISA in 1974
· Current threat of public pension defaults across the
country (Jefferson County, AL; Vallejo, CA; Central
Falls, RI; Harrisburg, PA)
1:58:41 PM
Mr. Barnhill addressed the slide on page 8 titled "Reduced
Post-Retirement Benefit Increases Enacted in 2010 and 2011
(NCSL)." He exthat 18 states have cut cost-of-living
adjustment benefits. He stated that six of the states cut
the benefits for active retirees. He stressed that the
administration did not want to place Alaska in that
position.
1:59:06 PM
Mr. Barnhill discussed the slide on page 9 titled "Pension
Headlines." He explained that other states had limited
resources to allocate fairly between priorities like
education, public safety, roads. Benefits were cut in Rhode
Island, New York and New Jersey.
1:59:48 PM
Mr. Barnhill explained the slide on page 10 titled "SB 121:
Making New DB Promises."
· SB 121 makes new DB retirement promises to the next
generation of state employees
· The State will need to keep those promises until at
least 2080-2090
· $3 billion in current annual DB payment obligations
will extend beyond 2047
· Where is the GF income in the future to backstop these
new DB retirement promises in 2070, 2080, 2090…?
2:00:08 PM
Mr. Barnhill referred back to the slide on page 4 titled
"Cost of keeping existing PERS and TRS." He queried the
source of revenue if new unfunded liabilities developed.
2:00:57 PM
Mr. Barnhill discussed the slide on page 11 titled what is
the Long-Term Future of GF Revenues?" He highlighted the
fact of declining oil production since 1989. He hoped for
an Alaska gas pipeline to extend the state's revenue.
2:01:39 PM
Mr. Barnhill pointed out that the fiscal note was
indeterminate. The actuary projected that SB 121 would save
money.
Mr. Barnhill looked at the slide on page 12 "Will SB 121
Save Money?"
· SB 121 will cost employers the same or less than the
current DCR plan if all of the ARMB adopted actuarial
assumptions remain true indefinitely
o Inflation
o Mortality
o Retirement date
o Investment return
2:02:44 PM
Mr. Barnhill discussed the slide on page 13 titled
"PERS/TRS Annualized Returns." He stated that the PERS and
TRS investment returns were volatile. He noted that the
ARMB board's actuarial assumption for investment return was
8 percent. The bill was balanced on an 8 percent return
assumption.
2:03:10 PM
Mr. Barnhill looked at the slide on page 14 titled "What is
the appropriate rate of return?" If returns come in at less
than 8 percent, an unfunded liability would exist at the
outset. He noted the national debate regarding the 8
percent return assumption, which resulted in public pension
plans reducing their rate of return. He mentioned various
states' decisions to reduce their rates of return. He
opined that the state would face further unfunded liability
with a rate of return that was less than 8 percent.
2:04:58 PM
Mr. Barnhill discussed the slide on page 15 titled "Impact
of Defined Contribution Retirement (DCR) Plan on
Retention." He stated that the DCR plan had a positive rate
of retention. Fewer people were leaving state service in
2012 than in 2005.
2:05:37 PM
Mr. Barnhill reviewed slide 16 titled "Retirement security
is important." He stated that the administration believed
in the importance of retirement security. The
administration also believed that the existing defined
contribution plan allowed retirement with dignity. He
opined that Alaska's defined contribution plan was one of
the most generous in the country.
2:07:06 PM
Mr. Barnhill discussed the slide on page 17 titled
"Administration Position re SB 121."
· Keep the retirement promises we have made to date
· Don't make the problem worse
· Don't make new DB retirement promises that we are not
sure we can keep
· A revenue backstop is necessary to ensure new promises
are kept; until Alaska's long term fiscal situation is
solved this discussion is premature
2:07:57 PM
Mr. Barnhill looked at the slide on page 18 titled "SB 121
Actuarial Fiscal Note Timeline."
· AS 24.08.036:
Before a bill which would have an effect on the
retirement systems of the state is reported to
the rules committee, there shall be attached to
the bill an analysis of the long-term and short-
term costs to the state if the bill is adopted,
as well as the impact of the bill on the
actuarial soundness of the fund. The analysis is
in addition to the fiscal note requirements of AS
24.08.035.
· 04/07/2011: SB 121 introduced (version I)
· 04/14/2011: Hearing Senate State Affairs
· 04/17/2011: Regular session adjourns
· 08/04/2011: Governor's legislative office
transmits actuarial fiscal note (version I) to
sponsor and Senate State Affairs
· 09/07/2011: Kiehl asks DRB whether actuary (Buck)
correctly understands bill
· 09/15/2011: Hearing Senate State Affairs; DOA
acknowledges actuarial fiscal note in error
· 10/07/2011: DOA transmits revised actuarial
fiscal note (version I) to sponsor and Senate
State Affairs
· 10/13/2011: Hearing in Senate State Affairs;
revised actuarial fiscal note discussed; actuary
explains why the actuarial note is positive; DOA
agrees to make actuary available to achieve
neutral actuarial note
· 01/26/2012: Hearing in Senate State Affairs;
version R. introduced
· 02/07/2012: DOA provides Buck 30 year actuarial
analysis on version R to sponsor and Senate State
Affairs; analysis shows that note will remain
positive; DOA offers to refrain from filing a
second positive fiscal note pending amendment to
version R.
· 02/9/2012: Hearing in Senate State Affairs;
amendment R.2 introduced
· 02/16/2012: Hearing in Senate State Affairs;
version R, amended, moved from committee
· 03/09/2012: Governor's legislative office
transmits indeterminate actuarial fiscal note
(version R, amended) to sponsor and Senate
Finance
18
2:08:14 PM
Co-Chair Stedman wondered about available risk analysis on
the proposed 8 percent target.
Mr. Barnhill responded that the department had not asked
the actuary to run analysis using different return rates,
although he agreed to provide the information to the
committee upon request. He noted the priority of refining
the fiscal note attached to the legislation prior to the
hearing.
2:08:54 PM
Senator Thomas recalled earlier conversations regarding the
actuarial assumption of 8 percent. He recalled that
decreasing the actuarial assumption would increase the
unfunded liability.
Mr. Barnhill replied that more money would be required to
pay the benefits if the actuarial assumption was decreased
to 7 percent. He stated that the structure of the bill kept
employer costs lower than the defined contribution employer
costs.
2:09:44 PM
Senator Thomas proposed the idea of an average, long-term
actuarial assumption.
Mr. Barnhill spoke of the ongoing debate regarding the
precise actuarial assumption. He offered to provide
testimony from the actuaries and economists involved in the
debate, if desired by the committee. He furthered that the
bill initiated a new defined benefit tier without any
unfunded liability for the future generations of public
employees. He argued that the legislature should make the
decision regarding the initial assumptions.
2:11:39 PM
Co-Chair Stedman highlighted the three fiscal notes
attached to SB 121 including one indeterminate fiscal note
from Department of Administration, another for $769,700 in
general funds for FY 13 from DOA and the third note from
the Department of Revenue (DOR) for management fees costing
$593 thousand annually beginning in FY 14 for the ARMB
additional management fees.
2:13:07 PM
MARIE DARLIN, AMERICAN ASSOCIATION OF RETIRED PERSONS,
testified in support of SB 121. She understood that
considerable discussion was warranted, but the American
Association of Retired Persons (AARP) was in favor of
providing retirement options for public employees.
2:13:40 PM
BILL ERNST, TEACHER, expressed support of SB 121 and
relayed a personal story of his family's journey to Alaska.
He pointed out that Alaska attracted his family because it
was a land of opportunity and adventure. He shared that
both of his daughters were raised and educated in Alaska,
but that they had chosen not to work in the state because
of the lack of a defined benefit retirement system. He
reported additional acquaintances whose grown children left
the state for economic opportunities outside of Alaska. He
wished to see his state value its public employees by
encouraging them to remain in Alaska. He believed that the
changes proposed in SB 121 would make Alaska competitive
and encourage retention in the workplace.
2:16:53 PM
SEAN GENSON, TEACHER, testified in support if SB 121 and
relayed that he was uncertain about his retirement in
Alaska. He shared that he did not feel comfortable relying
on the state's retirement plan. He pointed out that Alaska
should be a leader in attracting and maintaining a viable
workforce. He observed that the bill provided a good
economic option for the state.
2:19:18 PM
JEFF JONES, FIREFIGHTER, spoke in support of SB 121 and
stated that he was a firefighter with the city of
Ketchikan. He noted that his defined contribution plan had
$40 thousand. He admitted that he was not an expert in
money management and expertise was necessary to make the
best decisions with his investment. He had coworkers with
defined benefit plans controlled by world-class money
managers.
2:22:06 PM
HILLARY SEELAND, TEACHER, spoke in support of SB 121. She
reported to the committee that she taught at a small school
in Sitka. She expressed trepidation about her future
retirement in Alaska. She pointed out the high cost of
living in Sitka, and without a secure retirement plan her
future felt uncertain. She wished to see Alaska as a leader
in education. She supported the option of a defined benefit
retirement plan for Alaska's public employees.
2:25:20 PM
HOLLEY DENNISON, SELF, SITKA (via teleconference),
testified in support of SB 121 and stated that she spoke in
representation of five other employees with the Department
of Fish and Game (DFG). She stated that she was born and
raised in Sitka and had worked for DFG for four years. She
enjoyed her job and loved living in Sitka. She expressed a
lack of confidence in her current retirement plan. She
stated that the Tier IV defined contribution plan might
prove sufficient for short-term employees.
2:27:47 PM
KRISTEN GREEN, SELF, SITKA (via teleconference), spoke in
support of SB 121 and relayed concerns about her future
with the state's defined contribution plan. She expressed a
lack of security that might affect her decision to remain
in the state throughout the course of her career. She
advocated for a Tier V system for employees currently
enrolled in a defined contribution plan.
2:30:13 PM
LEILA SHEFFIELD, SELF, BETHEL (via teleconference)
testified in support of SB 121. She believed that a public
servant provided an honorable profession. She pointed out
that state employees lose the majority of their Social
Security benefits.
2:33:46 PM
JOSEPHINE EDWARDS, SELF, ANCHORAGE (via teleconference),
expressed her support of SB 121 and shared that she was an
Alaskan high school and college graduate. She was employed
as a program manager for the Anchorage School District
within the Title VII Indian Education Program. She stated
that she was a Tier IV employee. She expressed concern
about her future.
2:35:22 PM
LADAWN DRUCE, PRESIDENT, KENAI PENINSULA EDUCATION
ASSOCIATION, KENAI (via teleconference), testified in
support of SB 121 and related that she had transmitted a
letter to the committee regarding the resignation of a
teaching couple in her district. She expressed the
difficulty filling the position in the village school. She
stated that the couple did enjoy their post, but would
leave the state because of the lack of a secure retirement
plan.
2:36:37 PM
TED MONINSKI, LEGISLATIVE DIRECTOR, RETIRED PUBLIC
EMPLOYEES OF ALASKA, ANCHORAGE (via teleconference), spoke
in support of SB 121 and shared that the legislation
provided good public policy. He explained that a defined
benefits option would enhance the public workforce and he
advocated for the reinstatement of the defined benefit
retirement program.
SB 121 was HEARD and HELD in committee for further
consideration.
2:39:47 PM
AT EASE
CS FOR HOUSE BILL NO. 284(FIN)
"An Act making appropriations for the operating and
loan program expenses of state government and for
certain programs, capitalizing funds, amending
appropriations, and making reappropriations; and
providing for an effective date."
CS FOR HOUSE BILL NO. 285(FIN)
"An Act making appropriations for the operating and
capital expenses of the state's integrated
comprehensive mental health program; and providing for
an effective date."
2:42:10 PM
RECONVENED
2:42:25 PM
Co-Chair Stedman moved to ADOPT Amendment number 1.
Co-Chair Hoffman OBJECTED for purpose of discussion.
2:42:49 PM
AT EASE
2:43:26 PM
RECONVENED
2:43:30 PM
Co-Chair Hoffman clarified that the working document before
the committee SCS CSHB 284(FIN), version O.
2:43:38 PM
Co-Chair Stedman MOVED to ADOPT Amendment number 1 for
version O.
Co-Chair Hoffman OBJECTED for the purpose of discussion.
2:43:47 PM
TIM GRUSSENDORF, STAFF, SENATOR LYMAN HOFFMAN, discussed
the new amendment:
AMENDMENT #1
FY13 OPERATING BUDGET AMENDMENT
OFFERED IN: The Senate Finance Committee
TO: HB 284/HB 285
OFFERED BY: Senator Hoffman
Part A
Add the following subsection to the FUND TRANSFERS
section after (d):
The sum of $50,000,000 is appropriated from the
general fund to the Alaska marine highway vessel
replacement fund (AS 37.05.550).
Effective Date 6/30/12 (FY12)
Part B
Add the following subsections to BUDGET RESERVE FUND
section.
(a) The sum of $1,750,000,000 is appropriated from the
general fund to the statutory budget reserve fund (AS
37.05.540).
Effective Date 6/30/12 (FY12)
(b) The sum of $250,000,000 is appropriated from the
general fund to the statutory budget reserve fund (AS
3 7.05.540).
Effective Date 7/1/12 (FY13)
Part C
Add subsections to section 26. RETIREMENT SYSTEM
FUNDING.
(d) The sum of $500,000,000 is appropriated from the
general fund to the Department of Administration for
deposit in the defined benefit plan account in the
public employees' retirement trust fund for payment of
public employees' retirement system unfunded
liability.
(e) The sum of $500,000,000 is appropriated from the
general fund to the Department of Administration for
deposit in the defined benefit plan account in the
teachers' retirement trust fund for payment of
teachers' retirement system unfunded liability.
(f) The sum of $50,000,000 is appropriated from the
general fund to the judicial retirement trust fund (AS
22.25.048) for payment of the judicial retirement
system unfunded liability.
Effective Date for Part C is 6/30/12 (FY12)
PART B
DEPARTMENT: Commerce, Community and Economic
Development
APPROPRIATION: Community and Regional Affairs
ALLOCATION: Community and Regional Affairs
ADD: $200,000 General Fund Match, 1003
EXPLANATION: This amendment adds funding to the
Division of Community and Regional Affairs for a Named
Recipient Grant to Kawerak, Inc. The grant will be
used to cover administration and 50% match to the
federal Essential Air Service program for the city of
Diomede.
PART E
DEPARTMENT: Commerce, Community and Economic
Development
APPROPRIATION: Corporations, Business & Professional
Licensing
ALLOCATION: Professional Licensing
DELETE Intent Language:
It is the intent of the legislature that the
Department of Commerce, Community and Economic
Development set license fees approximately equal to
the cost of regulation per AS 08.01.065(c). Further,
it is the intent of the legislature that the
Department of Commerce, Community and Economic
Development submit a six year report annually to the
legislature that includes at least the following
information for each licensing board: revenues from
license fees; revenues from other sources;
expenditures broken out by direct expenditures, RSAs
for investigations, RSAs for other services,
interdepartmental cost allocation plans, departmental
cost allocation plans and internal cost sharing plans;
number of licensees; carry forward balance and
proposed license fee increase/decrease.
ADD Intent Language:
It is the intent of the legislature that the
Department of Commerce, Community and Economic
Development set license fees approximately equal to
the cost of regulation per AS 08.01.065(c). Further,
it is the intent of the legislature that the
Department of Commerce, Community and Economic
Development submit a six year report annually to the
legislature that includes at least the following
information for each licensing board: revenues from
license fees; revenues from other sources;
expenditures by line item, including separate
reporting for investigative costs, administrative
costs, departmental and other cost allocation plans;
number of licensees; carryforward balance; and
potential license fee changes based on statistical
analysis.
EXPLANATION: This amendment clarifies intent language
that was added by the Senate Finance Subcommittee.
PART F
DEPARTMENT: Education & Early Development
APPROPRIATION: Teaching & Learning Support
ALLOCATION: Early Learning Coordination
ADD: $250,000 GF (1004)
EXPLANATION: The funding added to the grants line for
the Parents as Teachers program is to support pre-
kindergarten, parent-based programs throughout the
state. The House added $250,000 UGF as one-time
funding. The Governor did not request additional
funding for the program but $300,000 is included in
the base budget for the Parents as Teachers program.
PART G
DEPARTMENT: Education & Early Development
APPROPRIATION: Teaching & Learning Support
ALLOCATION: Early Learning Coordination
ADD: $400,000 GF (1004)
EXPLANATION: The funding added to the grants line for
the Best Beginnings program is to strengthen and
expand early learning partnerships, expand the
Imagination Libraries, and provide additional parent
resources to increase public engagement in early
literacy and learning.
The House added $250,000 UGF. No additional funding
was included in the Governor's Amended budget for Best
Beginnings but $612,500 is included in the base budget
for this program.
PART H
DEPARTMENT: Fish and Game
APPROPRIATION: Commercial Fisheries
ALLOCATION: Headquarters Fisheries Management
ADD: $300,000 General Fund (1004)
Explanation: This project will provide for genetic-
based stock composition estimates of sockeye salmon
harvested in Chatham Strait, Icy Strait, and District
15 fisheries.
$300,000 annually is needed for four years. The
sockeye stock composition data from the commercial
fisheries would, in conjunction with existing
escapement monitoring projects, provide for more
complete run reconstruction for the stocks.
The six reporting groups identified as being important
in this study include Chilkat River, Chilkoot River,
Taku River, northern Chatham Strait (conglomerate of
several small stocks), Port Snettisham (Crescent
Lake/Speel Lake/Snettisham Hatchery), and "Other"
(sockeye salmon not included in any of the other
reporting groups). Mixed stock fishery samples will be
collected from selected purse seine harvests (e.g.,
statistical area 112-16 Hawk Inlet shoreline, 112-
14/114-27 Augusta/Whitestone shoreline, and 112-17
west Admiralty shoreline), the District 15 drift
gillnet fishery, and other area fisheries harvesting
sockeye salmon. Fishery harvests will be sampled to
achieve levels of precision and accuracy sufficient
for fishery management. Approximately 9,600 samples
are expected to be used annually for mixed stock
analysis.
In addition to mixed stock fishery samples the
Department will attempt to obtain baseline genetic
samples from several (Hasselborg, Gut, Lake Eva,
Sitkoh, Kutlaku, and Pavlof small sockeye systems in
Chatham Strait. These populations are not yet
adequately represented in the sockeye salmon genetic
baseline.
PART I
DEPARTMENT: Office of the Governor
APPROPRIATION: Office of Management and Budget
Insert Intent Language:
It is the intent of the legislature that the office of
management and budget develop a plan to address the
declining balance of the oil and hazardous substance
release prevention and response fund. The plan should
include an analysis of prior expenditures from the
fund for the remediation of state owned contaminated
sites and a proposal to expeditiously remediate state
owned contaminated sites.
PART J
DEPARTMENT: Health and Social Services
APPROPRIATION: Office of Children's Services
ALLOCATION: Children's Services Management
ADD: It is the intent of the legislature that $200,000
GF be used for the Education and Training Voucher
program within the Independent Living Program.
Explanation: The House added the above intent language
and $200,000 UGF for the Education and Training
Voucher program within the Independent Living Program.
The Senate Subcommittee added the funding but not the
intent language.
PART K
Add a subsection to Sec. 14. DEPARTMENT OF HEALTH AND
SOCIAL SERVICES.
(b) The sum of $5,000,000 is appropriated from the
general fund to the Department of Health and Social
Services, public assistance, energy assistance
program, for the purpose of making payments under AS
47.25.621 - 47.25.626, for the fiscal year ending June
30, 2013.
Explanation: This amendment appropriates $5 million of
UGF for the Energy Assistance program. This funding is
in excess of the statutory formula and exceeds the
amount required to fully fund all applications for
assistance for Alaska affordable heating payments
under AS 47.25.621 - 47.25.626, and will be
distributed according to AS 47.25.623(d)(2).
PART L
DEPARTMENT: Health & Social Services
APPROPRIATION: Human Services Community Matching Grant
ALLOCATION: Human Services Community Matching Grant
ADD: $200,000 GF 1004
EXPLANATION: Increase funding by $200,000 (from
$1,685,300 to $1,885,300) to keep pace with increasing
costs and need.
PART M
DEPARTMENT: Health & Social Services
APPROPRIATION: Community Initiative Matching Grants
ALLOCATION: Community Initiative Matching Grants
ADD: $150,000 UGF 1004
EXPLANATION: This amendment increases UGF in this
component by $150,000 (from $744,300 to $894,300) to
keep pace with increasing costs and need.
PART N
DEPARTMENT: Transportation and Public Facilities
APPROPRIATION: Highways, Aviation and Facilities
ALLOCATION: Central Region Highways and Aviation
DELETE: $897,400 of Unrestricted General Funds (Fund
Code 1004)
ADD: $897,400 of Vehicle Rental Tax Receipts
(Designated General Funds -Fund Code 1200).
EXPLANATION: The House budget utilized Vehicle Rental
Tax Receipts (derived from car rentals) in the amount
of $850,000 for maintenance of roads in the Central
Region. This amendment matches the House level and
adds the remaining available receipts ($47,400) for
road maintenance in FY13.
PART 0
LTC and TEAME bargaining unit agreements:
FY2013 OPERATING BUDGET AMENDMENT
OFFERED IN: The Senate Finance Committee
TO: CSHB 284(FIN)
CSHB 285(FIN)
OFFERED BY:
ADD: Amend the SALARY AND BENEFIT ADJUSTMENTS section
as follows:
SALARY AND BENEFIT ADJUSTMENTS. (a) The operating
budget appropriations made in sec. 1 of this Act
include amounts for salary and benefit adjustments for
public officials, officers, and employees of the
executive branch, Alaska Court System employees,
employees of the legislature, and legislators and to
implement the terms for the fiscal year ending June
30, 2013, of the following ongoing collective
bargaining agreements:
(1) Alaska Public Employees Association, for the
confidential unit;
(2) Alaska State Employees Association, for the
general government unit;
(3) Alaska Public Employees Association, for the
supervisory unit;
(4) Alaska Vocational Technical Center Teachers'
Association, National Education Association,
representing the employees of the Alaska Vocational
Technical Center;
(5) International Organization of Masters, Mates, and
Pilots, for the masters, mates, and pilots unit;
(6) Inlandboatmen's Union of the Pacific, Alaska
Region, for the unlicensed marine unit;
(7) Marine Engineers Beneficial Association;
(8) Public Safety Employees Association, representing
the regularly public safety officers unit;
(9) Public Employees Local 71, for the labor, trades,
and crafts unit;
(10) Teachers' Education Association of Mt. Edgecumbe.
(b) The operating budget appropriations made to the
University of Alaska in sec. 1 of this Act include
amounts for salary and benefit adjustments for the
fiscal year ending June 30, 2013, for university
employees who are not members of a collective
bargaining unit and for the terms of the current
agreements for the fiscal year ending June 30, 2013,
providing for the staff benefits for university
employees represented by the following entities:
(1) Alaska Higher Education Crafts and Trades
Employees, Local 6070,
APEA/AFT (AFL-CIO);
(2) University of Alaska Federation of Teachers;
(3) United Academics-AAUP/AFT;
(4) United Academics-Adjuncts;
(5) Fairbanks Firefighters Association, IAFF Local
1324.
(c) If a collective bargaining agreement listed, in
(a) of this section is not ratified by the membership
of the respective collective bargaining unit, the
appropriations made by this Act applicable to the
collective bargaining unit's agreement are reduced
proportionately by the amount for the collective
bargaining agreement, and the corresponding funding
source amounts are reduced accordingly
(d) If a collective bargaining agreement listed in (b)
of this section is not ratified by the membership of
the respective collective bargaining unit and approved
by the Board of Regents of the University of Alaska,
the appropriations made by this Act applicable to the
collective bargaining unit's agreement are reduced
proportionately by the amount for the collective
bargaining agreement, and the corresponding funding
source amounts are reduced accordingly.
EXPLANATION:
The State of Alaska has reached agreement on
bargaining unit terms with the Public Employees
Local 71, for the labor, trades, and crafts unit, and
the Teachers' Education Association of Mt. Edgecombe.
2:49:23 PM
KAREN REHFELD, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET
appreciated the inclusion of the amendment's items. She
hoped to continue working with the legislature on refining
the two versions of the bill.
2:49:52 PM
Co-Chair Hoffman removed his OBJECTION.
There being NO FURTHER OBJECTION, Amendment number 1 for
version O was ADOPTED.
2:50:04 PM
Co-Chair Stedman MOVED to report SCS CSHB 284(FIN) out of
committee with individual recommendations.
There being no OBJECTION, SCS CSHB 284(FIN) was REPORTED
out of committee with a "do pass" recommendation.
2:50:25 PM
Co-Chair Stedman MOVED to report SCS CSHB 285(FIN) out of
committee with individual recommendations.
There being NO OBJECTION, SCS CSHB 285(FIN) was REPORTED
out of committee with a "do pass" recommendation.
2:50:46 PM
Co-Chair Stedman MOVED that authorization be given to the
Legislative Finance Division and Legislative Legal Services
to make any necessary technical and/or conforming changes
to SCS CS HB 284(FIN) and SCS CS HB 285(FIN).
2:51:06 PM
There being NO OBJECTION, authorization was given to the
Legislative Finance Division and Legislative Legal Services
to make any necessary technical and/or conforming changes
to SCS CS HB 284(FIN) and SCS CS HB 285(FIN).
2:51:08 PM
AT EASE
2:51:23 PM
RECONVENED
2:51:29 PM
Co-Chair Hoffman expressed appreciation for the Legislative
Finance Division and the Senate Secretaries and
acknowledged the savings of $2 billion, which exemplified
fiscal responsibility. He pointed out the $1 billion
allocated toward the unfunded liabilities in the PERS and
TRS system. He expressed concern about the absence of a
solution to the long-term needs of education. He hoped to
include additional funding for education through fiscal
notes for legislation heard in the House.
ADJOURNMENT
2:53:47 PM
The meeting was adjourned at 2:53 PM.