Legislature(1997 - 1998)
03/19/1997 08:05 AM House CRA
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 164 - TEACHERS RETIREMENT: ELIGIB. & SICK LEAVE CHAIRMAN IVAN indicated that the committee would consider Sponsor Substitute for House Bill 164, "An Act providing that employment as a legislator or with the National Education Association is not credited service under the teachers' retirement system; prohibiting membership in the teachers' retirement system for holders of limited certificates; removing teachers holding limited certificates to teach Alaska Native Language or Culture from membership in the teachers' retirement system; and repealing a provision permitting members of the teachers' retirement system to count unused sick leave credit as credited service." Number 099 REPRESENTATIVE AL VEZEY came forward as sponsor to testify on SSHB 164. He stated that this legislation stemmed from a considerable amount of research he conducted on the pension funds, the cost of areas where the legislature can take steps in statute to make the state's pension fund fiducially sound and more manageable. He noted that there were many reasons to do so including the projection of costs for providing these benefits to employees, for example, the cost in the Teacher's Retirement System took a substantial jump to about 15 percent in 1997. This was because some bad assumptions had been made and hence the rate had to be increased. This means that about $8 or $9 million went to benefits in 1997 in excess of what those benefits would have been in 1996. Number 246 REPRESENTATIVE VEZEY offered that when reviewing this statute over the years the state has granted special privileges to different groups of individuals, particularly employers. He said it was difficult in his mind to justify why the state would grant special privileges, but three of these instances are addressed in this present legislation. At one point, it was deemed that a member of the legislature could elect to participate in the Teachers Retirement System (TRS) rather than the Public Employees Retirement System (PERS). The state of Alaska in this situation is still the employer creating an equal playing field, but the cost of the TRS system is significantly higher than the cost of the PERS retirement, including the benefits which accrue to an employee which is also substantially higher. He stated it was difficult to justify why some legislators would receive a higher level of benefits and why the public should pay more benefits for some and not others. Number 346 REPRESENTATIVE VEZEY continued that another section addressed in this legislation deals with the National Education Association (NEA) which is by statute authorized to have its employees participate in the TRS. He thought it was difficult to understand why the state would extend this privilege to one employer, not to mention that the National Education Association is a lobbying organization. He added that if the state intended to open up their public retirement system they should open it up to all private employers. It shouldn't be limited to a few. The clear risk to the state is that they currently pay approximately $45 million a year for contributions to pension benefits for employees who have already retired. This is done so under a "past service" rate and it's a significant amount of money. Technically this rate reflects employers who did not pay the full cost of pension benefits that their employees were accruing at the time they were working. Now, current employers have to pay a percentage of current employees wages into the retirement fund to make good the benefits for those who have already retired. The private sector employer who is allowed to step into and out of this retirement system have the full option of walking away from the "past service" rate. Number 500 REPRESENTATIVE VEZEY stated that under the TRS there are 54 school districts who participate in this program. There are seven other employers. This is the limit of the information he was able to obtain from the Retirement and Benefits Division. He assumed that one of these employers was the NEA. He has not been able to find out who the other six are. It appears that under the state's Limited Certificate Program for teachers that the state allows the employers of people who teach in schools on a part-time basis who work for another entity other than the school districts to utilize the TRS. Because of the state's obligations to the past service rate and other factors involved, plus the obvious potential for abuse of the PERS by a private employer, he thought that it would be very prudent on the legislature's part to look at eliminating these private employers from the TRS also. He assumed these employees work under contracts. He thought that to obligate future generations of Alaskans to pay pension benefits per employee whether private or public is a concern of his. Number 632 REPRESENTATIVE VEZEY noted that the retirement system is a very complicated subject and the concept of the past service rate paying for benefits accrued and not funded at the time of accrual is very complex. He said he would attempt to answer any questions. This legislation attempts to remove the seven private sector employers as indicated and to disallow some legislators from participating in one retirement system versus another. Number 702 REPRESENTATIVE FRED DYSON assumed that this legislation looks forward, not back. He asked if it has changed the status of past employees. REPRESENTATIVE VEZEY answered that he would suspect this to be the case, but not that there was quite a body of law regarding current contract obligations. He didn't want to say for sure without researching this issue. An employee participating in TRS under statute now could probably not have this benefit taken away. Number 759 REPRESENTATIVE DYSON stated based on his understanding of the past service rate that if an employee has been participating in a retirement system which present analysis shows was underfunded, without enough contributions made, then the employer is in the unenviable position of having to make more contributions now to cover the under-funding of years past. REPRESENTATIVE VEZEY responded that this wasn't correct. Under- funding of pension obligations is paid for by employers assessed against current employees payroll. It's assessed at a percent of current payroll against current employers. Number 826 REPRESENTATIVE DYSON asked for clarification if an employer can choose at their own option to stop to provide funding for a retired employee. REPRESENTATIVE VEZEY stated that this would not be an unfair characterization. In the case of a private sector employer, and the only one he's been able to identify is the NEA, this employer could unilaterally decide not to participate in PERS anymore since they would not have any employees paying into the TRS. They would not be assessed any amount of money for past service pension obligations. Number 883 REPRESENTATIVE DYSON asked what would happen to the retirement benefits if that retired employee had assumed they would continue to receive. REPRESENTATIVE VEZEY responded that again this was a question related to a large body of established law. His understanding is that these benefits once accrued cannot be taken away. This is a constitutional guarantee in Alaska. Number 921 CHAIRMAN IVAN asked about Section 3 and the proposed changes to it. REPRESENTATIVE VEZEY responed that he'd have to look at each section specifically, but generally the statutes repealed deal with the issues of whether legislative members can participate in the TRS as opposed to the PERS if they are so qualified. Section 3 also refers to the special statute that allows employees of the NEA to participate in the teacher retirement system. The present statute does not limit this to Alaskan employees of the NEA, but could be applied to any employee, any affiliation in the United States. The other statute refers to a more complicated section where they have these limited certificates that allow individuals to teach in Alaska schools. This is also a complex area of law and it provides that they thought their employer, a private sector employer, other than a school district can participate in the TRS. Number 1078 BONNIE WILLIAMS, Legislative Assistant, Representative Pete Kelly, came forward to testify on SSHB 164. Ms. Williams from 1976 to 1991 ran the payroll system for the University of Alaska. She noted that this was the reason she was asked to testify. REPRESENTATIVE JOE RYAN noted that there was a portion of this bill which interested him, a portion that deals with using sick leave for retirement purposes. He asked, in her former capacity as Payroll Director for the University of Alaska, for instance, where people use this benefit, how much they use it, during what periods of time credits are for, etc. Number 1122 MS. WILLIAMS responded that the people on the PERS and TRS both accrued sick leave. The people on the PERS programs became sick and turned in sick leave hours. People on the TRS did not become sick. It was a interesting phenomenon. Sometimes they went to the hospital and had surgery. In these instances they couldn't avoid being sick. The rest of the time they weren't sick. They had twenty and twenty-five year careers without ever missing a day. When they retired the accrued sick leave hours were turned over to the retirement system as credited service which makes a big change in the multiplier. MS. WILLIAMS continued that this increased multiplier determines how much a retired employee draws off the retirement system. This is part of the equation of what percentage is charged the employers. This increases the cost of the TRS to the University of Alaska. It also increases the cost overall to all users of the system. "If they followed the same kind of practice in other public school systems of not reporting sick leave time, then you had a lot of false time reporting and false credit, unearned credit." Number 1226 REPRESENTATIVE RYAN asked in her 18 years of experience for a rough dollar figure to reflect the amount of people who participated in using this sick leave for retirement credits. MS. WILLIAMS responded that suppose there was a multiplier of 20 credited service years and this gets changed to 22. It could be $1,000 to $2,000 a year or more for the life of an individual once they've retired. REPRESENTATIVE RYAN asked what amount of individuals take advantage of this program. MS. WILLIAMS responded that everyone that becomes vested. It isn't something they ask for. It is a right that they have. It was simply rolled in and became part of the credited service. Number 1306 REPRESENTATIVE REGGIE JOULE asked that when all of this occured whether or not a sick leave bank was being utilized. MS. WILLIAMS stated that by the time she left service there was a sick leave bank in place for community college teachers with mandatory contributions. There was a voluntary sick leave bank in place for PERS employees. She didn't know if this had changed since. Any hours taken from an employee for a sick leave bank are no longer theirs. These hours would no longer roll into credited service. Number 1387 JOHN CYR, President, National Education Association of Alaska, came forward to testify on SSHB 164. He noted the position statement which he submitted to the committee. He stated the NEA was concerned with the chilling affect removing potential members of the Legislature from TRS would have. This would set up two separate classes of public employees. Those who are now in PERS would get to keep their retirement, but those in TRS would have to leave the system they are in and enter another one. NEA believed this was patently unfair. Educators across the state have and do make a valuable contribution to Alaska. If they choose to run for the legislature, they should be able to continue in the retirement system while serving in this capacity. MR. CYR noted the section which removes NEA Alaska from the TRS. He said they had no problem with this. The NEA has no employees in this program except for one and this person is grandfathered, he's been one of their employees for over twenty years. By regulation, NEA Alaska has been out of TRS for a while. This doesn't affect them. The NEA provides their own retirement system. Number 1495 MR. CYR stated that the next two sections gave them real concern, especially when the legislature proposes to remove individuals with limited certificates from schools. These individuals are predominately Native Language and Culture teachers, ROTC instructors and certain vocational education teachers. He didn't know why they would want to take those people who work in the classroom every day with children, who in fact, the programs they run throughout the state are seen as the most important programs in the schools. Solid vocational education programs are in demand, the ROTC programs provide millions of dollars in scholarships for students who wish to continue their education, the Native Language and Culture teachers are at the heart of many of the programs especially in rural Alaska. It seemed patently unfair to take this group of teachers out of the TRS program. He was at a loss to understand why the state would want to do this. The retirement system is sound. Number 1576 MR. CYR continued in regards to the sick leave question. Sick leave is an earned benefit. As a teacher he accrues 13 days a year of sick leave just like he earns his pay. When he retires those days of sick leave are transferred to his retirement. People will use a benefit which they earn. If the right to apply this sick leave to retirement is revoked people will use their sick leave. Under this scenario districts will be on the hook to provide substitutes and there will be a disruption in program. Teachers will be out of the classroom. Nobody will leave this sick leave money accrued on the table. It doesn't make economic sense to do this. Almost all districts have sick leave banks. They are voluntary for TRS employees, but all personal sick leave must be used before an individual applies for hours from a sick leave bank. Employees usually use sick leave bank hours in the case of a catastrophic illness to avoid economic hardship. MR. CYR summarized that the NEA thinks this is a bad bill. This hurts people unnecessarily and they saw no reason for this bill to continue. Number 1699 REPRESENTATIVE RYAN pointed out that the way the system has been set up Alaska has some basic problems from a legislative perspective. The legislature appropriates approximately $1.3 billion to K-12 to the university every year. He noted that this was an awful lot of money. The legislature has no control over the benefits and wages of teachers since this is decided by local school boards. All the legislature does is get the bill. The legislature has all the responsibility to fund this system, but none of the decision making. This situation needs to be addressed since it's becoming more and more difficult to fund with declining revenue and the lower production of oil. He understood that this was an earned credit, but he hoped that Mr. Cyr could understand the legislature's position. MR. CYR stated they believe that in point of fact the ability for people in TRS to use their sick leave credit towards retirement will actually save the system money. If a cost benefit analysis is undertaken he believed that this sick leave will be used whether the individual is sick or not. If people in TRS begin to take their sick leave while in the field, the cost of the teacher's salary is gone, they're not in the class room but they're still paid. Then there's the cost of the substitute added onto the salary plus there is the disruption of the program. The way the system works now is a cost benefit to the state. He said that he does appreciate the cost of education and the expense of it. He also noted that at the first year of statehood education cost 44 percent of the state budget. Now the cost of education is below 17 percent and dropping. They have made some real inroads on the cost of education percentage wise. He stated that education may be the best value that this state gets for its money. Number 1870 CHAIRMAN IVAN asked what changes would need to be made to make the system of personal leave a combination of sick leave and vacation time. MR. CYR responded that he didn't know that anyone in TRS gets vacation leave. He knew that teachers don't. They work so many days as stated in their contract, usually between 180 to 190 days, and they are paid only for these days. The salary is spread throughout the year if so chosen. He couldn't think of any instance in TRS of paid vacation days so the only days outside of regular contract days worked would be sick leave days. The exception to this is an illness in a direct family or a death. An individual can use up to 5 days of sick leave in this instance. If a direct family is ill or dies out of state most districts allow 10 days of sick leave because of travel time. He didn't think there was any other types of leave to be taken. Number 1955 CHAIRMAN IVAN asked Mr. Cyr who made contributions to his retirement during his tenure as President of NEA. MR. CYR responded that this varies from district to district depending on how the contract in each district is written. It varies from president to president. He noted that when he was a local president in Mat-Su he was full time release and his association reimbursed both halves of the districts money. When there are local release presidents, they are released either with pay and the association reimburses the district, or they are released without pay and the association pays them directly. Number 2002 REPRESENTATIVE DYSON referred to the letter submitted by Mr. Cyr regarding limited certificates and asked if these individuals had a different kind of credential than the rest of the staff and if so, why. MR. CYR stated that yes, they do. First language teachers are hired on their ability. It's what they know about the language and culture. A number of them do not have teaching degrees. If they do, then they are issued a type A certificate and are a regular teacher. If they don't, they're given a limited certificate, a type D certificate. Vocational education teachers who have gone through an education program get a type A certificate, but those who are recognized experts in their field, a welder for example, get a type D certificate to teach their craft. For ROTC people, the same applies. He didn't think there were any ROTC people in the state who hold a type A certificate. Their expertise is very specific. Number 2086 REPRESENTATIVE DYSON inquired about the individuals who hold type D certificates and asked if they are often not full time employees. MR. CYR responded that to his knowledge, the vocational education employees are almost all full time, employed directly by the school district and under contract. ROTC people are full time and employed directly by the school district. He believed that most of the first language teachers are full time employees of the school district, but that he could be wrong about the smaller villages. Number 2121 REPRESENTATIVE DYSON asked if the NEA or the contracts with districts treat all the different types of credential A through D the same in respect to tenure. MR. CYR responded that the law has changed. He wasn't exactly sure. In the past type D certificates did not get tenure, but they're evaluated on a yearly basis and added that he honestly didn't know. The NEA treats everyone the same way, but he didn't know about the retirement system. Number 2159 REPRESENTATIVE SANDERS referred to the statement made by Ms. Williams about teachers and sick leave. Ms. Williams stated that people under PERS get sick and people under TRS don't get sick. He asked if she meant that when teachers are sick they take off without pay or do they come to work sick or did she literally mean, "teachers don't get sick." MR. CYR shared his perception of what she might have meant. If a person is going to lose a benefit that's accrued and it's theirs, this person will probably spend it or use it. He thought that if they take the ability for people to apply their sick leave toward retirement, they will spend that money. They will in fact be sick. He noted like all of us, he's gone to work when he didn't feel well, but if he was going to loose this benefit maybe if he got a slight headache he might change his mind. Number 2285 RIC IANNOLINO, private citizen, came forward to testify on SSHB 164. The section he was particularly interested in dealt with teachers holding limited certificates to teach Alaska Native Language and Culture. He thought they would probably run into problems with this under federal law, especially in Native language dominant areas. He thought it was interesting to note that the population most affected by this section would be the Alaska Native people. If there was a disparate impact made along with a discrimination complaint filed at the federal level, an investigation would probably find that Alaskan Native people would be affected based on race. If after an investigation it was determined that Natives predominately fill these roles, they might have an interesting civil rights case to deal with. He didn't understand the import of naming this particular group. MR. IANNOLINO noted that the definition of employment under civil rights law includes benefits. This would squarely fit into the consideration of a disparate impact complaint he would guess. Number 2386 CHAIRMAN IVAN said that he could talk all day about his thoughts on the Native Language and Culture program and offered to meet with Mr. Iannolino individually. REPRESENTATIVE AL KOOKESH thanked Mr. Iannolino for his comments. He appreciated his observation and agreed with them. He noted that this was a sensitive area for all of them to look at, but for someone such as himself, a private citizen, to make these observations, Representative Kookesh appreciated Mr. Iannolino taking his time to do so. Number 2430 REVA SHIRCEL, Director of Education, Tanana Chiefs Conference, testified via teleconference from Fairbanks on SSHB 164. The Tanana Chiefs are opposed to the passage of SSHB 164 as much as they are opposed to the language in the original HB 164 that was scheduled for a hearing last week. No matter what efforts are made to improve HB 164, the bill still demonstrates unfair and unequal treatment towards teachers of Alaska Native Languages and Culture. In the current version of HB 164, a bone has been thrown to teachers of their indigenous languages in which they are allowed to obtain limited certificates, but are prohibited from membership in the Teachers Retirement System. MS. SHIRCEL continued that Alaska is noted by other cultures, other states and other countries for its rich diversity of its culture and languages. The people of the Tanana Chief Conference (TCC) region have great respect for their teachers of Native Language and Culture. They have teachers who have spent their entire life teaching others, both Native and Non-Native about the rich diversity of their Athabascan language and culture. Ms. Shircel noted that teachers should be treated equally and fairly. TAPE 97-13, SIDE B Number 000 REPRESENTATIVE VEZEY asked if the Tanana Chief Conference employed any persons who teach in the public school system. MS. SHIRCEL stated no. Number 050 REPRESENTATIVE RYAN asked where the funding came from for these teachers. MS. SHIRCEL responded that currently they are in process of applying for a grant from the Administration of Native Americans which is a federal government funding to hire seven interns to learn the language from the elders. These people hired would attend the Yukon College in Whitehorse to learn how to teach the language and they will be paid to do so through the ANA Grant. They also intend to apply for other grants that would supplement their income once the ANA Grant ended. MS. SHIRCEL added that they in the interior are in the process of establishing a tribal college. They have provided funding for certain people who wanted to teach a language in specific villages in the region and paid them out of the funds which they have in their TCC budget. As for public schools, these generally have been funded by Indian Education funds and Johnson-O'Malley funds and paid to teachers of the indigenous languages. Number 144 ISAAC JUNEBY, Tanana Chief Conference, testified via teleconference from Fairbanks on SSHB 164. He opposed the position that since Native teachers of Native Language, Culture or Heritage be excluded from TRS. In every village these are the individuals that everyone looks up to. These individuals have many years of experience and are the experts in everyone's respective minds. Teaching the Native languages is the way to bridge the gap between the Natives and Non-Natives. He shared his own personal experience of teaching Native languages. He is currently working towards obtaining his masters degree in Northern Studies/Linguistics. He urged the committee to vote no on this bill. Number 244 KEITH EVANS, Dillingham School District, testified via teleconference from Dillingham on SSHB 164. He stated that he wished to address two parts of the bill, the first, certification. He asked why special certification is needed. This is because there are not certifiable people currently available to teach these particular areas that they need teachers specifically in vocational areas and language areas. As a result, the local communities have deemed it necessary in order to have these classes they need to have someone to teach them. As a result they have special teachers who have the ability, but not the graduate credits to be certifiable as usual. If these individuals are eliminated from the opportunity to have the same benefits as other teachers this would be totally unfair. MR. EVANS said that if they were talking about fairness from the standpoint of being able to pay their way now and in the future, both teachers and employers pay into the retirement system. If they are currently not paying enough to "carry the ball" for the future, then both parties should be contributing more to do that. Number 290 MR. EVANS stated that the second thing he wanted to address was sick leave being applied to retirement. It would be considered an unusual benefit to go from state to state to have the unused sick leave apply, but he did say that this is an attractive benefit for teachers to come to Alaska. "If you don't use them, you lose them sort of attitude prevailing I think that it certainly will, if once we establish the fact that you have this available to use for retirement it is an incentive not to use them." In the bush communities they have so few individuals available to substitute. If there is not the incentive to have teachers apply their unused sick leave to retirement he believed it would cost the districts more money to find substitutes to fill in while teachers are out sick. He then gave an example of how their sick leave bank works in Dillingham. Number 448 KRIS TIERNEY-SWORD, Teacher, Dillingham School District testified via teleconference from Dillingham on SSHB 164. She wondered why these types of public hearings are scheduled during the school day when the potentially affected individuals cannot attend. CHAIRMAN IVAN responded that the committee has scheduling constraints which they must follow. He suggested that she submit any questions or written testimony by fax. Number 548 MS. TIERNEY-SWORD added that with a two-tier pay system frequently being bargained for because of the lack of funds, they begin eroding the benefits that are already in existence for new teachers. This impacts the new hires who might be attracted to Alaska. They will have a hard time attracting quality professionals in light of the lower pay and the higher cost of living. MS. TIERNEY-SWORD continued that she had not heard any compelling testimony that makes this bill sound like a good idea for anyone. She questioned Representative Vezey's motives. She understood that he had targeted NEA Alaska employees and they aren't even impacted by this legislation. She thought it was interesting that he ran against an ex-president of NEA Alaska, Claudia Douglas, in the last election and Ms. Tierney-Sword knew this had gotten a little ugly for a number of reasons. She said she would hate to think that Representative Vezey is using his position of power in the House of Representatives to further a personal vendetta against anyone. She hoped that this wasn't the case. Number 640 REPRESENTATIVE VEZEY commented that there were two areas of confusion that seem to have arisen during testimony. The section regarding the repeal of statutory right of teachers to turn in their sick leave also entails the statutory right that the employer pays both the employer contribution for this benefit and the employee's contribution for this benefit. By taking this out of statute they are not saying it can't be a benefit, but that it's not statutorily mandated. This would go back to each school district to determine a benefit to be negotiated or granted to their teachers or not. REPRESENTATIVE VEZEY addressed limited certificates. He noted that a teacher is a teacher. He said he had studied the requirements to be in TRS, but it's at the school district's discretion who is eligible to participate in TRS. Regardless of what type of certificate someone possesses if they are an employee of a public employer they are eligible to participate in TRS. The existing statute allows private sector employers to furnish contractors to a public school and to participate as a private sector employer in the TRS system. He believed that this was a loop-hole they should address. He added that anyone working for a public employer and that is a teacher under any kind of certificate is allowed to participate in TRS, but if someone is working for a private sector employer and they are providing free service or are under contract to a school district, then he felt it was a legitimate public issue. He asked if they wanted these private sector employers participating in a public retirement system. Number 764 CHAIRMAN IVAN stated that he had two amendments to propose to this legislation. The first he would not offer, but the second amendment labeled as such would delete all reference to teachers holding limited certificates to teach Alaska Native Language or Culture. He noted the limited amount of these teachers in the program and the importance of keeping these languages and culture alive was the reason this amendment was being offered. Number 808 REPRESENTATIVE JOULE made a motion to adopt this amendment number two which read: Page 1, Line 4, following "certificates;": Delete "removing teachers holding limited certificates to teach Alaska Native Language or culture from membership in the teachers' retirement system;" Page 1, Line 6: Delete all material in Section 1. Renumber sections accordingly. Page 2, Line 8, following "14.25.045": Delete "14.25.048," Page 2, Line 9, following "14.25.220(6)(D)": Delete "14.25.220(21)(F)," Number 816 REPRESENTATIVE RYAN stated he wasn't clear on who actually pays the individuals with limited certificates. If the money comes from the federal government or by grants he asked if these individuals are hired by the state of Alaska to perform this function. He wanted clarification that these individuals are school district employees paid through the K - 12 foundation formula or the whether the money comes from another source which might mean that these people are not technically employees of the state. Number 869 BILL CHURCH, Retirement Supervisor, Division of Retirement and Benefits, Department of Administration, came forward to testify on SSHB 164. He responded that he didn't know where school districts receive all of their funding from and how it applies. Within the retirement system these individuals are hired as employees of the school district. Contributions are made to the teacher retirement system by both the employee and employer to fund their benefits. As a note on this, in 1988, the law was established to allow Alaska Native Language and Culture experts to participate in the retirement system under TRS. Prior to this they were participants under the PERS. If they were removed from TRS, they would be enrolled in the PERS, as well as any new hires. MR. CHURCH continued that this bill is prospective in nature. There is a body of law tested in the Alaska Supreme Court that guarantees benefits upon hiring and not upon eligibility for this. Number 967 REPRESENTATIVE RYAN asked what would be the employer's contribution under TRS and PERS. He asked if there was a substantial difference under each of these. MR. CHURCH responded that for about the last six to eight years the TRS has been operating under a smooth contribution rate of 12 percent. This came into effect in 1990, when the TRS was changed, reducing benefits but also adding the automatic post-retirement pension adjustment which is a pre-funded cost of living increase. At the time, this had a tendency to put upward pressure on the contribution rate, but by putting in the smoothing rate contributions stayed at the level of 12 percent. In the PERS each employer is funded independently. The rate is calculated by the actual experience of the employer. There is a tendency to have rates that may go up and down depending on the employer and the experience they have regarding retirements, numbers of people drawing benefits, disabilities, deaths, etc., anything which affects the actuarial process. Number 1041 REPRESENTATIVE RYAN asked what the percentage rate was in PERS. MR. CHURCH stated that he didn't have this rate. It varies each fiscal year. He would have to calculate what the average rate is and this is certainly calculable, but it is figured on each individual employer and they pay this rate separately. Number 1077 REPRESENTATIVE RYAN asked what the total dollar amount of the TRS and he asked what the funding level was on this program. MR. CHURCH responded that he didn't have the funding ratio, but believed it was around 92 percent last year. It will probably go up this year. As of last year, FY 95, there were 9,452 active participants in this program. Number 1100 REPRESENTATIVE RYAN asked that if he was a member of TRS and he got elected to the legislature he noted that normally he would be eligible for PERS. He asked as a member of TRS would he receive a greater benefit than someone in PERS. MR. CHURCH responded that this would certainly depend on how many years an individual has put into each of the systems. He noted that if someone has put in 20 years of service into PERS versus TRS there is a greater multiplier under the PERS than under the TRS at this point of 20 years. In PERS it's multiplied at two percent for the first ten years, two and 1/4 percent for the next years and two and 1/2 percent for each year over twenty. The TRS system is two percent for the first twenty years, and 2 1/2 for each accrued year after this as a multiplier. Number 1150 REPRESENTATIVE RYAN asked what the disparity is between the two systems regarding the amount of money a person would receive. MR. CHURCH responded that this would be based on the salary that one is paid in each system. As far as career tracks, someone in the TRS can cover this track throughout 20 or 30 years or however long they spend in the system. There is not a transfer so to speak between PERS and TRS, in other words, someone cannot buy their PERS time into the TRS to accumulate this under one retirement program. The opposite is true as well. The only provision in the legislature is that if someone is vested in one system and the individual has a minimum of two years in the other system, they can receive what's called a conditional service retirement benefit. The salary used in the conditional benefit would be those that would be achieved from the higher system. MR. CHURCH continued that they could say that the benefit would be fundamentally the same, however, retirement age differs when someone would be eligible for that benefit. A teacher can retire after 20 years, a PERS employee, if their a non-peace officer has to wait until 30 years. The normal retirement age is 60 in PERS, as well as in TRS. If a TRS member has their service interrupted by a two to four year period while in the legislature, they will not be able to receive a normal benefit for this period of service until they reach the age of 60. From this aspect this would be somewhat of a diminishment in their overall return of money over their life expectancy. Number 1361 REPRESENTATIVE RYAN asked if it was the same in TRS as in PERS that the highest three years of employment figures are used as the base to figure retirement benefits. MR. CHURCH said that there was a slight difference. In TRS the three highest years are used regardless of when worked. In PERS it is three highest consecutive years whenever they were worked. This has changed for newly hired individuals hired after July 1, 1996, it is now the highest five consecutive years in PERS. The TRS hasn't changed. Number 1408 REPRESENTATIVE VEZEY referred to two comments which Mr. Church made, one was that if they repeal this one statute with limited certificates participating in TRS he said they would then go into PERS. He asked why this was. MR. CHURCH stated that permanent employees of an employer, i.e. a school district in this case, if their position requires a certificate and they do hold one, they are eligible for the TRS. If they are in a position that does not require a certificate, but they are a permanent employee of that employer, then they are covered under the PERS, this situation defaults to the PERS. Number 1465 REPRESENTATIVE VEZEY noted that this was not his understanding of the law. He interpreted the law to mean that people with certificates would qualify under TRS. He said if this was not the case, he would like someone to explain to him why. In other words, he didn't understand why these individuals would revert to PERS. He stated that it was not the intent of this present legislation to take people under the TRS program who are public employees and enroll them in PERS. He didn't think this bill did that. MR. CHURCH offered that in order for an individual to participate in PERS they are required to possess a certificate along with the fact that their position requires a certificate as well. They do have folks with certificates in the school districts who's position does not require a teaching certificate and these individuals are in the PERS. This is a matter of fact of how people are situated in the field. This legislation does not affect anyone who is presently employed in one of these positions. For example, someone in a TRS position with a limited certificate, teaching Alaska Language and Culture will not be impacted by this bill. He added that the financial impact this legislation will have on the retirement fund will be immeasurable as far as the fund is concerned on removing the Alaska Native Language and Culture teachers. Number 1561 REPRESENTATIVE VEZEY noted that several people were under the misconception that what this legislation proposes to do is to remove limited certificate holders from TRS. What the bill attempts to do is to remove private sector employers from being able to use the PERS. He stated that he doesn't understand some of Mr. Church's testimony. He interpreted it to mean that without this statute a person who is required to have a limited certificate would not be able to stay in TRS they would have to participate in PERS. He didn't think this was correct. REPRESENTATIVE VEZEY continued that what they were attempting to address is private sector employers using the PERS. This report says that there are seven other employers participating in TRS other than school districts, he noted that one of them is the NEA. He added that they have written to Mr. Church's department and have not heard back who the other six are. Number 1621 MR. CHURCH offered that he would be happy to provide the identity of these other six. He attempted to list these entities: the NEA, Southeast Regional Resource Center, Special Education Attendance Area in Anchorage, TRS Legislators, but he couldn't remember the others off hand. He inquired as to whether Representative Vezey was interested in an employer hiring someone under a personal services contract or an outside contractor. REPRESENTATIVE VEZEY said both. Number 1680 MR. CHURCH stated that he didn't believe that these types of people cannot participate in TRS anyway. They would not be considered an employee of a given school district. They would have a separate contract with this school district as an independent company to perform some service, but they wouldn't be a permanent full time or part time employee of this employer. He wasn't sure if these situations existed. REPRESENTATIVE VEZEY stated that his interpretation of the statute is that this is one of the vehicles that allows employers, not necessarily public ones, to utilize the TRS if they are employing persons with limited certificates. The legislature has a responsibility to determine who is accessing the states public retirement system. Number 1789 REPRESENTATIVE DYSON stated that in light of what he just heard he recommended that the committee postpones further consideration on this legislation until some of these questions get answered. CHAIRMAN IVAN noted that it was his intention to hold the bill over for further consideration. He then asked Mr. Church if limited certificate teachers are enrolled in TRS, including ROTC, Native Education, and vocational education. Number 1877 MR. CHURCH stated that he knows of one school district where the ROTC instructors are in TRS, but are PERS employees. He knows of one school district where the Vocational Education teachers are in PERS. The employers have said a teaching certificate is not required and some of their employees have type A certificates and some do not have a type A certificate, but yet, they are only covered under PERS because the position itself does not require a certificate. Number 2008 CHAIRMAN IVAN asked that Mr. Church provide written responses to some of the issues raised. REPRESENTATIVE VEZEY stated that he appreciated having this bill held over. He knew there were a lot of questions unanswered. He suggested preparing a committee substitute for next time. He said it seemed 90 percent of the questions pertained to the limited certificate area. He suggested taking this out of the bill in this committee substitute and this issue could be addressed separately later. Number 2105 REPRESENTATIVE DYSON said he'd be interested to see if Representative Vezey hits his target which he understood to be that a contractor or a non-school district employee through a private employer are granted access to TRS. REPRESENTATIVE VEZEY again stated he would remove all these sections from the proposed committee substitute and then those issues can be addressed later. Number 2200 CHAIRMAN IVAN stated that he would withdraw amendment number two as proposed. REPRESENTATIVE KOOKESH stated that the Johnson-O'Malley Funds and the Indian Education money goes directly to the school district which is then allocated to teachers. He thought this information would also be helpful in reflecting how these limited certificate teachers are being funded in the school district. REPRESENTATIVE JOULE added that last week when reviewing some minutes of his local school board he noted a limited certificate had been granted to someone who had been in the classroom for years. This woman stated that she didn't want a raise, she just wanted to teach. He noted that the reasons these people were getting in the classroom should be looked at and commended. Number 2452 CHAIRMAN IVAN stated that any opportunity they can give these limited certificates to teachers he would recommend. He thought this would go a long way to help children in the schools to respect institutions and the authority of their elders. He indicated that 164 would be held over until the next committee meeting.
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