Legislature(2015 - 2016)BARNES 124
02/10/2015 08:00 AM House COMMUNITY & REGIONAL AFFAIRS
| Audio | Topic |
|---|---|
| Start | |
| HB47 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 47 | TELECONFERENCED | |
HB 47-PERS CONTRIBUTIONS BY MUNICIPALITIES
8:05:59 AM
CHAIR TILTON announced that the only order of business would be
HOUSE BILL NO. 47, "An Act requiring each municipality with a
population that decreased by more than 25 percent between 2000
and 2010 that participates in the defined benefit retirement
plan of the Public Employees' Retirement System of Alaska to
contribute to the system an amount calculated by applying a rate
of 22 percent of the total of all base salaries paid by the
municipality to employees of the municipality who are active
members of the system during a payroll period; reducing the rate
of interest payable by a municipality with a population that
decreased by more than 25 percent between 2000 and 2010 that is
delinquent in transmitting employee and employer contributions
to the defined benefit retirement plan of the Public Employees'
Retirement System of Alaska; giving retrospective effect to the
substantive provisions of the Act; and providing for an
effective date."
8:06:34 AM
REPRESENTATIVE NEAL FOSTER, Alaska State Legislature, speaking
as the sponsor of HB 47, paraphrased from the following written
sponsor statement:
HB 47 seeks to correct an unintended consequence of
the [Public Employees' Retirement System] PERS "salary
floor" established in [Senate Bill] 125 of the 25th
Legislature. [Senate Bill] 125 changed the PERS system
from a multiple employer plan to a cost share
plan. It transferred the individual liability of the
160 PERS employers and consolidated it so that all the
employers share in that liability. [Senate Bill]
125 also created what is commonly referred to as the
2008 salary floor, which requires that the employer's
contribution rate is paid at or above that floor. The
floor was instituted to ensure that the system could
not be "gamed." This discourages employers from
replacing PERS employees with contract hires to reduce
their base contribution to the system. Some
municipalities have found themselves under the 2008
floor through no fault of their own. A large change in
population results in a reduced tax base, which
affects the services a city can provide. As that
financial reality drives a city to downsize, current
law exacerbates this problem by keeping their PERS
contribution at the 2008 level. This bill targets the
communities whose population has dropped by more than
25% since the previous census. HB 47 will address this
issue in two ways: 1. Establish a new floor of FY
2012 for communities whose population decreased by
more than 25% between 2000 and 2010. 2. Provides
relief to communities that are delinquent in
transferring contribution if their population
decreased by more than 25% between 2000 and 2010. I
urge your support of this legislation. HB 47 does not
intend to repeat the "2008 floor" debate, but to
correct one of the unintended consequences caused by
the arbitrary line that debate created.
8:08:47 AM
PAUL LABOLLE, Staff, Representative Neal Foster, Alaska State
Legislature, began by characterizing the City of Galena as the
poster child for HB 47. He explained that in 2008 the floor
from Senate Bill 125 [25th Alaska State Legislature] was
enacted, it was the same year the Air Force Base left Galena.
The 25 percent population decrease [specified in HB 47] would
encompass the following five cities: Galena, Atka, Pelican,
Anderson, and St. George. Galena lost 30 percent of its
population, which resulted in downsizing its municipal
government while still being required to make payments based on
its 2008 salaries. Galena was unable to make those payments,
which resulted in the difference between the actual payments and
the required 2008 floor to accrue. Additionally, the accrued
amount has a 12 percent interest rate, which Galena can't
possibly administer. Further, bankruptcy is not an option as
the state doesn't provide for it nor is dissolution without
canceling out the debts. Therefore, the real possibility is
that the city would close down everything and stop being a city,
which has happened elsewhere. Should the aforementioned happen,
the state is on the hook for that entire liability whereas now
the City of Galena, although it's not making its floor payments,
is at least making its contribution rate on its actual salaries.
8:11:27 AM
REPRESENTATIVE HUGHES requested an explanation of the
indeterminate fiscal note as she thought there would be an
additional cost to the state if the [salary floor is changed].
MR. LABOLLE explained that fiscal notes that require an
actuarial assessment aren't due until the legislation is in
possession of the House Rules Standing Committee. Therefore,
the indeterminate fiscal note for HB 47 only deals with state
appropriations not the actuarial account that touches the PERS
or Teachers' Retirement System (TRS) liability. Within the
fiscal note statute, PERS and TRS liabilities are their own
separate item in fiscal notes. The indeterminate fiscal note is
not what it will cost the retirement system but rather what it
will cost the state.
8:12:35 AM
REPRESENTATIVE SEATON inquired as to how many other communities
have fewer employees now than when the salary floor was set.
MR. LABOLLE said that he has numbers from last year that will
need to be updated. Last year, the communities with fewer
employees now than when the salary floor was set were: Tanana,
Sand Point, Dillingham, Ketchikan, Craig, Galena, Pelican,
Whittier, Thorne Bay, Aleutians East Borough, Husila, Kaltag,
Noorvik, Lake and Peninsula, Mekoryuk, St. George, Allakaket,
Quinhagak, Toksook Bay, Anderson, Upper Kalskag, and Shaktoolik.
REPRESENTATIVE SEATON remarked that although he wasn't sure that
list would be different because HB 47 would reset the salary
floor to the 2010 census, he expressed interest in updated
information. He requested that the updated information also
include the number of employees as a percentage of lost
population.
MR. LABOLLE agreed to provide that updated information. He then
noted that part of the impetus of HB 47 is to silo what [the
state] covers as sort of a cost control measure. Since HB 47
only involves those communities that lost 25 percent or more of
their population between the 2000 and 2010 census, no more
communities will be added to the list. The aforementioned, he
stressed, is by design. He suggested that any communities
facing similar problems in the future should be addressed as the
problem arises rather than creating a measure to identify it
without legislative oversight.
8:16:05 AM
MR. LABOLLE, in response to Representative Ortiz, specified that
the communities he listed were communities that are underneath
their floor payment and it's not respective of any population
loss. In fact, those communities could have had an increase in
population, but they just aren't making their floor.
8:16:43 AM
REPRESENTATIVE HUGHES inquired as to whether the assumption is
that the amount of employees will decrease by the same
percentage as the population decreases. She said she didn't
believe it really worked that way because certain positions
would be necessary; for instance, a school would need a janitor
no matter the size of the school. Therefore, she questioned
whether the number of positions is being decreased such that the
[salary floor] rate aligns the population decrease with the
position decrease. Or, are adjustments being made because some
positions have to stay regardless of the size of the town, she
asked.
MR. LABOLLE clarified that HB 47 simply resets the floor to the
salary [floor] of 2012. Mr. LaBolle further clarified that it's
not really the number of positions but rather the total salary
amount. Theoretically, the salary base could stay the same in a
situation in which there was a decrease in one position while
everyone else received a raise. Therefore, it's about the
actual expenditure not the number of positions.
8:18:35 AM
REPRESENTATIVE HUGHES asked whether an adjustment is being made
to realize that some positions will have to remain no matter
whether it's salary or positions.
MR. LABOLLE answered that in concept that's addressed by
resetting the floor to 2012, acknowledging that the requisite
employees are being retained even though the community isn't
making the 2008 floor.
8:19:25 AM
REPRESENTATIVE HUGHES, returning to the [indeterminate] fiscal
note, related her understanding that lowering the rate for these
communities places the state on the hook through PERS/TRS.
Therefore, she surmised that although the [fiscal impact] might
not have to be in the budget this year, it would be felt at some
point.
MR. LABOLLE replied yes. In further response to Representative
Hughes, Mr. LaBolle noted that he has last year's fiscal note,
which is out of date. The bulk of the expense would arise in
the first year of implementation due to the retroactivity clause
embodied in Section 3. The fiscal note from last year reported
an expense of $706,000 and then decreased every year following.
He pointed out that the current payment to the state for
PERS/TRS is about $226 million, and thus the $700,000 is a
rounding error.
REPRESENTATIVE HUGHES surmised then that the forthcoming [fiscal
note] will have slightly higher amounts.
MR. LABOLLE replied yes, pointing out that there has been an
additional year of delinquent payments and an additional year of
12 percent interest rate running on the previous delinquent
payments. In further response to Representative Hughes, Mr.
LaBolle agreed that the costs should be considered, but
suggested that one should definitely consider the cost of not
solving this problem.
8:22:17 AM
REPRESENTATIVE SEATON inquired as to factors that would increase
the fiscal note as it refers to a limited number of communities
and the floor is reset to 2012. He indicated his understanding
that last year's fiscal note would accurately reflect the cost
to the system.
MR. LABOLLE explained that Section 3 makes the changes in
Sections 1 and 2 retroactive to July 1, 2009, which was when the
floor was implemented. The retroactivity eliminates those
delinquent payments, and thus every year there are delinquent
payments going forward would add to the fiscal impact to the
system. He further explained that costs will be added to the
system because since the last fiscal note there has been another
year of delinquent payments as well as the retroactivity aspect.
8:23:47 AM
REPRESENTATIVE SEATON requested last year's fiscal note.
MR. LABOLLE said that it should be in the committee's packet.
He then related his understanding that the department doesn't
intend to provide an updated fiscal note until the legislation
reaches the House Rules Standing Committee.
8:24:42 AM
REPRESENTATIVE SEATON asked if any of the earlier listed
communities have actually made their payments, which might
result in taking money from the general fund (GF) to make
reimbursement payments. If that is the case, he inquired as to
the size of that impact.
MR. LABOLLE noted that he had asked the department about that,
but had not received a response from them.
8:25:34 AM
CHAIR TILTON opened public testimony.
8:25:59 AM
KATHIE WASSERMAN, Executive Director, Alaska Municipal League
(AML), stressed the importance of HB 47 since the 2008 floor has
had a negative effect on communities. As explained earlier, the
2008 floor was placed into law by Senate Bill 125 because there
was fear that municipalities would pull out employees and hire
contractors in order to avoid the PERS liability. Although that
could have happened, she said she hadn't heard of it happening
and the unintended consequence is not worth it. She pointed out
that no municipality or business would find themselves in a
position in which they were penalized for having fewer employees
than they had before, especially in the face of impending
deficits. She suggested that the list of communities impacted
by the 2008 floor could increase when municipalities [due to the
deficit] find they have to lay off employees. Thankfully, the
state doesn't face the same penalty or consequence when it lays
off employees. She acknowledged that addressing this issue may
incur a small cost to the state, but emphasized that not
addressing the issue will cause larger costs to the state when
some of these municipalities can't function. Although those
communities who can't function are required to file a petition
with the Local Boundary Commission and pay their bills, she
characterized that as crazy since the reason they can't function
is because they can't pay their bills. At some point, the
responsible party for those bills will be the state. She opined
that a concerted decision has to be made in regard to what is
going to be done with these small municipalities. The very
entity that is intended to keep these communities healthy is now
charging them and charging them with a 12 percent interest rate.
She recalled Galena's first bill was approximately $150,000 and
now it's up to $600,000. She characterized Galena's case as
hopeless as its budget will never allow it to catch up. Ms.
Wasserman echoed Mr. LaBolle's testimony that there are other
communities in the same situation and although they may not be
as deeply mired, they will be over time. For three years, AML
has been trying to get this addressed by the legislature, she
lamented.
8:30:02 AM
REPRESENTATIVE SEATON asked if AML is supportive of the 25
percent reduction in population as the [trigger for] resetting
the [salary] floor.
MS. WASSERMAN answered that for the five communities specified,
yes.
REPRESENTATIVE SEATON clarified that he is interested in whether
there are other communities similarly situated to the five
communities identified in terms of the [salary] floor, but that
haven't lost 25 percent of their population. He then asked
whether AML is supportive of the legislation if it applies to
communities that have lost over 25 percent of their population.
MS. WASSERMAN related that AML is supportive of HB 47 for the
five communities identified as there are discussions regarding
how to address the other communities.
8:31:59 AM
JOHN KORTA, Mayor, City of Galena, paraphrased from the
following written remarks [original punctuation provided]:
I'd like to thank the committee for taking time today
so that I may explain the importance of this
legislation for communities like Galena that have seen
significant population decreases in the last decade.
As you may know, the Galena Forward Operating Location
(FOL) was closed by the United States Air Force. As
part of the [Base Realignment and Closure] BRAC
process, the Galena FOL closure was effective October
1, 2008, but had been in process for four years. The
Air Force base was the main source of employment for
Galena residents. Not surprisingly, the base closure
resulted in a reduction of the population. Galena had
almost 50% more residents in 2000 than it had in 2010.
Galena was again struck by hardship in spring of 2013
when ice dammed the Yukon River and inundated the
City, leading to a disaster declaration.
The 2008 "Floor" established by the current law exists
to prevent a municipality from gaming the PERS system
by contracting out work previously performed by
municipal employees in order to avoid making ongoing
contributions to PERS. The current minimum PERS
contribution is based on the level of salaries that
existed in 2008. This purpose does not account for
Galena's situation. It was not intended, nor does it
contemplate, municipalities with sharply declining
populations. The legislation does not change the PERS
policy, but rather recognizes nuance.
The legislation affects only communities that suffered
a minimum 25% decline in population between 2000 and
2010, like Galena. To put that in perspective, the 25%
threshold would represent the loss of 75,000 people
from Anchorage or 8,000 people from Juneau. What would
happen to Fairbanks if the Borough's population
declined by 30,000, while at the same time seeing the
closure of Eielson and Fort Wainwright? The demand for
municipal administrative and public services would
decline sharply; so would the municipality's ability
to provide these services having lost the region's
economic driver.
The legislation, which moves the floor year from 2008
to 2012 for the communities that experienced these
huge losses, does not provide a "loophole" allowing
Galena or any other community with a similar
population loss between 2000 and 2010 to "game" the
system now or in the future. The 2008 floor for these
communities is replaced with a 2012 floor. Galena's
budgeted payroll for FY 2015 is above the 2012 amount
for 17 employees.
Galena's circumstances are not a result of any choice
the city made. The base closure and subsequent loss of
close to 1/3 of the city's population was entirely
involuntary. The relationship between a declining
population and declining payroll is clear: fewer
residents = fewer public employee = lower public
payroll. Based on the 2008 floor, Galena is required
to pay an amount owed by a city substantially larger
than Galena. Galena's required PERS contribution
approaches half of the City's entire payroll.
The 2008 Floor is, overall, a sound piece of
legislation, furthering sound policy, but it does not
account for all situations. It does not account for
cities that have suffered massive population
contractions. This legislation furthers the underlying
policy goals of the regulatory structure: It helps
ensure that municipalities are able to continue
contributing to PERS, while recognizing that a city
cannot, and should not, have to make the contribution
of a city that has a significantly larger population.
Recognizing that Galena is not the same city it was
before the base closed and 30% of its population moved
away is simply good policy, policy that helps ensure
that Galena continues to contribute to PERS.
Recognizing the reality of sharply declining
populations is a worthy amendment and is just plain
fair. Thank you for your time this morning. I would be
happy to answer any questions you may have.
8:36:47 AM
REPRESENTATIVE SEATON related his understanding that Galena's
current salary base is higher than the 2012 floor.
MAYOR KORTA explained that the City of Galena is paying current
on its PERS contribution, but it hasn't been paying at the level
established with the 2008 floor.
8:37:35 AM
REPRESENTATIVE SEATON asked whether the City of Galena is
currently, in 2015, paying more salaries than the 2012 floor.
MAYOR KORTA responded, "I believe so, yes."
8:38:20 AM
SHANDA HUNTINGTON, City Manager, City of Galena, paraphrased
from the following written remarks [original punctuation
provided]:
Before serving as the city manager, I served as the
city clerk for 6 years. I was also born in Galena,
grew up there, and raised my four children in Galena.
I would like to follow up on Mayor Korta's testimony
with information relating to Galena's population
decline, the base closure, and the effects on city
payroll and finances.
As Mayor Korta said, the air force base officially
closed in 2008, following a multi-year drawdown. In
1990, before base realignment, Galena's population was
847. Galena has always been a small city and the base
was the driver of economic activity. According to the
2000 census, the number of residents, which does not
include all of the Air Force personnel, was 675. That
number had dropped to 470 with the 2010 census. 205
people may not sound like a lot, but it represents a
30% decrease in the City's resident population between
the two censuses. 30% of residents moved away, but the
decline in the city's economic activity was much
greater.
For FY 2008, the current floor year, Galena's salary
total was $1,513,365.19 for 36 employees. Therefore,
Galena's annual minimum PERS contribution is $332,940.
In FY 2012, the amended floor year, Galena's payroll
was $765,776 for 17 employees. Between FY 2008 and FY
2012, Galena's payroll was cut in half, reflecting the
decrease in population and in economic activity.
Galena's current annual minimum PERS contribution of
$332,940 is nearly half of the City's FY 2012 total
payroll costs. Allowing a floor year of 2012 for
cities that experienced a drastic decrease in
population changes Galena's annual minimum
contribution to $168,940.
For Galena, the difference in PERS contributions
between the 2008 floor and FY 2012 actual payroll is
$164,000. This difference will continue going forward
creating an ever increasing obligation. By statute,
any amount unpaid accrues interest at 12%. This ever-
increasing obligation adds to an already stressed
situation. The City's financial situation was so
severe in FY 2009 that it required a low interest loan
through the Alaska Municipal Bond Bank to deal with a
severe cash flow crisis that was preventing us from
being able to secure fuel for heat and electricity.
Simply put, if Galena can't pay its bills, the lights
go out in Galena.
Reasonably adjusting the floor year for severely
impacted cities does not mean that the cities will pay
the minimum amount only. Modifying the floor year
changes Galena's minimum annual contribution from
$332,940 to $168,940; the actual contribution may be
higher. For FY 2013, Galena would in fact pay more
than that amended minimum. For FY 2013, Galena added
one employee, for a total payroll of $895,784.53. For
FY 2013, Galena's contribution would have been above
the 2012 floor by approximately $30,000.
This amendment simply recognizes that reality of
drastic population decreases experienced by some
Alaska cities, using a clearly defined metric: a 25%
decrease in population according the 2000 and 2010
censuses.
The base closure has been very difficult for Galena.
As previously noted, Galena required a low interest
loan through the Alaska Municipal Bond Bank to secure
fuel for heat and electricity in FY 2009. In the last
several years, Galena's finances have stabilized and
there are even indicators of recovery after the
catastrophic decline. We cannot say what will happen
to Galena's population long-term, but we believe that
we've turned a corner in terms of population and
finances.
The City of Galena is adjusting to a new reality
following the base closure and loss of 30% of the
population. This amendment is one part of that
adjustment. I became city manager during a difficult
period for the City. Our finances have stabilized
somewhat over the last several years. Requiring the
City of Galena to pay to PERS a contribution owed by a
much larger city weakens Galena, and threatens its
ability to provide any contribution to PERS. We are
cautiously optimistic that the City will become
stronger and even grow over time. If and when Galena
becomes the city it was in 2008, the city will be
required to make a PERS contribution comparable with
that size and payroll, and will do so gladly, but it's
not that city right now and the oversized PERS
contribution inhibits it from becoming so.
Recognizing the reality of drastically declining
populations is a matter of simple fairness. The
amendment recognizes this and ultimately promotes the
goals of PERS: ensuring that Alaska municipalities
continue to contribute their fair share to the system.
I'd like to thank the committee for taking time today
so that I may explain the importance of this amendment
for communities like Galena that have seen significant
population decreases in the last decade.
8:44:58 AM
MAYOR KORTA, in summary, informed the committee that Galena is a
functional community, but this salary floor issue has hurt it.
Therefore, he requested the committee truly consider HB 47.
8:47:54 AM
REPRESENTATIVE SEATON surmised that HB 47 seems to attempt to
balance the objective of cities not going out of business and
the salary floor. He then inquired as to the relative cost to
the system of small cities going out of business without assets
to make the payments versus making adjustments to stay in the
system by changing the date when the floor is imposed.
8:49:06 AM
KEVIN WORLEY, Chief Financial Officer, Division of Retirement
and Benefits, Department of Administration (DOA), said that he
had no statement on HB 47 itself. Regarding resetting the floor
to 2012, Galena hasn't paid its salary floor. He informed the
committee that Galena's 2012 gross salaries were about $765,000,
the 2008 salaries were $1.5 million, and in fiscal year 2010
Galena was billed $115,000. Therefore, [if the floor was reset
to a salary base of 2012 and was made retroactive to July 1,
2009], the state would forgo the receipt of $115,000 from
Galena. In fiscal year 2011, [the bill] to Galena was about
$139,000. Therefore, by using the 2012 salary base, the state
would forgo $164,000. In fiscal year 2013, Galena's gross
salaries would be above the 2012 salary floor and the state
would forgo $136,000. In fiscal year 2014, Galena's gross
salaries would again be above the 2012 salary floor and the
state would forgo $138,000. Therefore, [were the 2012 salary
floor used] the state would lose a total of about $693,000 in
addition to the 12 percent interest charge of $154,000, which
would amount to a grand total loss to the state of $850,000.
This is just the loss from Galena, one of the five communities
impacted. In response to Representative Seaton, Mr. Worley
agreed to provide the committee with the aforementioned loss
data for each of the five communities that HB 47 would address.
8:52:05 AM
REPRESENTATIVE SEATON asked if other communities have
closed/gone out of business. He then inquired as to what
happens to the PERS liability if a community can't pay and
doesn't have physical assets to meet its obligations.
8:52:48 AM
KATHLEEN LEA, Chief Pension Officer, Division of Retirement and
Benefits, Department of Administration, explained that the only
recourse PERS has is to intercept funds coming from the state to
the community that is delinquent or has defaulted in its
contributions. The state intercepting the funds from the
state to these small communities would impact these small
communities' ability to pay for very basic necessary services in
the communities. Therefore, the amount these communities don't
pay becomes part of the unfunded liability and "the state on
behalf" that needs to be paid unless those payments are received
from the community at some point, which would reduce future
obligation for the state on the "on behalf." However, the
reality is the state hasn't received any funds.
8:54:19 AM
The committee took a brief at ease.
8:55:03 AM
MS. LEA, correcting earlier testimony, clarified that if the
state, as an employer in PERS, fell below its salary floor, the
state would be charged the interest and the contributions
through the plan.
8:55:32 AM
REPRESENTATIVE SEATON directed attention to the provision in HB
47 that would change the interest rate on delinquent [payments]
and asked whether the PERS Board or its managers believe that
change in interest rate is reasonable.
MR. WORLEY explained that by statute the state is required to
charge the actuarial rate of return, which is currently 8
percent for PERS and TRS plus one half that amount. Therefore,
it's one and a half times the actuarial rate of return of 12
percent. He opined that the [12 percent] is charged because
it's assumed that the 8 percent rate of return on those
investments will be made. Furthermore, by the state not
receiving the contributions in a timely manner and getting them
into systems for investment purposes, the state is forgoing
interest/investment earnings from each of those funds. A charge
below that [12 percent] is in effect helping an employer by not
obtaining the 8 percent charge.
8:57:13 AM
REPRESENTATIVE SEATON surmised that if the actuarial investment
return is 8 percent and [the community] is charged that, the
division is making the actuarial investment rate. Therefore,
the division isn't foregoing the investment rate because the
average investment rate is achieved in the 8 percent interest.
Therefore, he questioned why the half [percent] penalty is
necessary.
MR. WORLEY reminded the committee that the statute specifies one
half times the actuarial rate of return. Statute withstanding,
when the division isn't receiving contributions on a timely
basis, the division is foregoing interest being earned on each
of those payrolls. Currently, there are some employers who
haven't paid their salary floors for a number of years and thus
the state is forgoing a $150,000 contribution from 2009.
Receiving only 8 percent on that this year means the division
has lost investment and interest earnings from 2009-2013 have
been lost.
8:59:00 AM
REPRESENTATIVE SEATON surmised then the division is not charging
8 percent on the total debt. Rather, it's charging 8 percent
for one year and then the debt is set aside as a fixed amount
and the 8 percent interest rate is not being charged on the
entire debt the next year.
MR. WORLEY explained that 12 percent is the interest charged
each month. If the division doesn't receive the amount due in
2009, 12 percent interest will be charged. As any other bill
becomes due with interest charges to it, the 12 percent will
continue to accrue. In 2009, if that hasn't been paid, interest
will be accrued through 2010, 2011, 2012, 2013, and 2014. If
the payment due in 2010 isn't received, there will be an
interest rate charge for 2011, 2012, 2013, and 2014. Therefore,
it's compounding interest over time. Receiving a payment one
year at a rate well below 8 percent would result in forgoing
investment earnings and there would be interest expense to the
communities that are still due to the plan. He noted that those
would be significantly less than 8 percent.
9:00:57 AM
REPRESENTATIVE SEATON related his analysis that if 8 percent
interest is achieved, when a payment comes in the actuarial 8
percent would be achieved and the [payment] would be whole. He
clarified that he wasn't saying that the interest rate in the
bill is giving the division 8 percent, rather it's merely
earning 8 percent in another place and then coming into the
division's account.
9:02:37 AM
REPRESENTATIVE SEATON said he appreciated the necessity for
making an adjustment; however, he expressed concern about
setting the floor and contributions at less than the actuarial 8
percent that PERS is to return on its investment. He then
requested an analysis of whether the 8 percent interest rate
would eliminate another potential gaming situation as well as
avoid losing [money] on delayed contributions.
REPRESENTATIVE FOSTER agreed to run those calculations.
MR. LABOLLE, referring to Section 2, asked if Representative
Seaton is referring to resetting that interest rate based on the
population loss criteria or the entire system.
REPRESENTATIVE SEATON said he would have to review that. He
related his understanding that HB 47 resets the entire system
and ongoing calculation rates if communities don't make the
floor contribution. He expressed the need to avoid a situation
in which the contribution rates are calculated one way on an
ongoing basis for one community that doesn't make its payments
and calculate the nonpayment of the floor of another community
at another rate. Therefore, he opined that it would be the
system related to not meeting the floor, not the entire rest of
the system.
MR. LABOLLE explained that under HB 47 the new interest rate
applies only to those communities that meet the population loss
criteria.
REPRESENTATIVE SEATON remarked that the committee needs to
review whether that's a fair and equitable way in which to
address the matter. He opined that meeting the population
criteria shouldn't take one community to one percentage while
another community that doesn't meet the floor is calculated at
another percentage. The calculation should be fair and
equitable across the communities. He offered his initial
thought that if a community isn't meeting the floor, the
legislation would cover that interest rate but nothing else in
the entire system.
REPRESENTATIVE FOSTER offered to review that as well.
9:08:26 AM
MR. LABOLLE pointed out that theoretically the retroactivity
clause would eliminate the interest on those delinquent
payments, and therefore the committee could consider eliminating
Section 2 of HB 47. With the elimination of Section 2,
theoretically the communities would still be made whole due to
the retroactivity clause.
9:09:09 AM
CHAIR TILTON announced that HB 47 would be held over.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 47 Sponsor Statement.pdf |
HCRA 2/10/2015 8:00:00 AM |
HB 47 |
| HB 47-Supporting Documents amended statutes.pdf |
HCRA 2/10/2015 8:00:00 AM |
HB 47 |
| HB 47-Supporting Documents effected employers.pdf |
HCRA 2/10/2015 8:00:00 AM |
HB 47 |
| HB 47-Supporting Documents Employers impacted by salary floor.pdf |
HCRA 2/10/2015 8:00:00 AM |
HB 47 |
| HB 47-Supporting Documents PERS cities by 2010 population.pdf |
HCRA 2/10/2015 8:00:00 AM |
HB 47 |
| HB 47-Supporting Documents PERS Employer Salaries for FY08 - FY12 Affected Muniticaplities.pdf |
HCRA 2/10/2015 8:00:00 AM |
HB 47 |
| HB 47-Supporting Documents PERS Employer Salaries for FY08 - FY12.pdf |
HCRA 2/10/2015 8:00:00 AM |
HB 47 |
| HB 47-Supporting Documents Total Active PERS employees.pdf |
HCRA 2/10/2015 8:00:00 AM |
HB 47 |