Legislature(2001 - 2002)

04/23/2001 01:50 PM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
HOUSE BILL NO. 242                                                                                                            
                                                                                                                                
     "An  Act   relating  to  reemployment  of   and  medical                                                                   
     benefits   for   retired   members  of   the   teachers'                                                                   
     retirement  system  and   public  employees'  retirement                                                                   
     system;  relating  to the  inclusion  of  cost-of-living                                                                   
     differentials  on compensation  and  benefits under  the                                                                   
     public employees'  retirement system; and  providing for                                                                   
     an effective date."                                                                                                        
                                                                                                                                
REPRESENTATIVE PETE KOTT, SPONSOR  testified in support of HB                                                                   
242.  He noted  that the  workforce  is reduced  as the  baby                                                                   
boomer generation  retires. By the  year 2008 - 2009  a brain                                                                   
drain is  expected. The legislation  would provide a  tool to                                                                   
bring  retired   employees  back   into  the  workforce   and                                                                   
encourage employees to remain.                                                                                                  
                                                                                                                                
Section 1 adds  an incentive for a retired  teacher to return                                                                   
to full time  teaching for a Teacher Retirement  System (TRS)                                                                   
employer.  With  this  change,  a retired  teacher  who  took                                                                   
normal  retirement may  elect a new  option when  reemployed.                                                                   
The new  option allows the  teacher to elect  continuation of                                                                   
retirement benefit  payments during reemployment;  would stop                                                                   
additional  retirement  benefit  accrual;  must  be  selected                                                                   
within 30 days  of reemployment; and is not  available to RIP                                                                   
participants.  If  the  retired  teacher does  not  make  the                                                                   
election, the  current method would  apply. Sections 4  and 5                                                                   
provide the  same provisions of Public  Employees' Retirement                                                                   
System (PERS) employees.                                                                                                        
                                                                                                                                
Section  3 adds an  incentive  for teachers  to stay in  TRS.                                                                   
Currently Tier II  retirees are not eligible  for the medical                                                                   
coverage until  age 60, at  which time the retirement  system                                                                   
pays 1/2 the  medical premium and the retiree  is responsible                                                                   
for the other half, regardless  of how many years the teacher                                                                   
taught in TRS.                                                                                                                  
                                                                                                                                
With  this change  a  teacher who  stays  an additional  five                                                                   
years  beyond the  normal retirement  service requirement  of                                                                   
twenty years  will be eligible  for full system  paid medical                                                                   
coverage. In addition, all retired  teachers will be provided                                                                   
full system paid medical coverage at age 60.                                                                                    
                                                                                                                                
Section 6 adds  an incentive for public employees  to stay in                                                                   
PERS  through  30  years  of service.  Currently  a  Tier  II                                                                   
retiree is not eligible for system  provided medical coverage                                                                   
until age  60, at which time  the retirement system  pays 1/2                                                                   
the medical  premium and the  retiree is responsible  for the                                                                   
other  1/2, regardless  of how  many years  the person  is in                                                                   
PERS.                                                                                                                           
                                                                                                                                
With  this  change  a  public  employee  who  stays  in  PERS                                                                   
employment  a total  of 30 years  will be  eligible for  full                                                                   
system  paid  medical  coverage.  In  addition,  all  retired                                                                   
public employees  will be provided  full system  paid medical                                                                   
coverage at age 60.                                                                                                             
                                                                                                                                
Section  7   addresses  the  geographic   differential.  This                                                                   
section  attempts  to  clarify   language  that  has  created                                                                   
problems for the Division of Retirement and Benefits.                                                                           
                                                                                                                                
Representative Kott maintained  that the cost to the state of                                                                   
Alaska is  minimal: $96 thousand  dollars the first  year and                                                                   
$66  thousand dollars  for  subsequent  years. He  reiterated                                                                   
that  the legislation  will  help  attract and  retain  state                                                                   
workers and teachers.                                                                                                           
                                                                                                                                
In   response   to   a   question    by   Vice-Chair   Bunde,                                                                   
Representative  Kott  noted  that the  legislation  does  not                                                                   
include  RIP employees.  Representative  John Davies  pointed                                                                   
out that the  RIP employees would not want  to take advantage                                                                   
of  the bill  because  they would  have  to repay  retirement                                                                   
credit.                                                                                                                         
                                                                                                                                
ALISON    ELGEE,   DEPUTY    COMMISSIONER,   DEPARTMENT    OF                                                                   
ADMINISTRATION  spoke  in  support of  the  legislation.  The                                                                   
Teachers  Retirement System  Board and  the Public  Employees                                                                   
System  Board  have reviewed  the  legislation.  Both  Boards                                                                   
support elements contained in the legislation.                                                                                  
                                                                                                                                
Vice-Chair   Bunde   observed   that   teachers   and   other                                                                   
administrators requested early  retirement bills because they                                                                   
could  not   afford  [the   salaries]  of  "old-timers".   He                                                                   
questioned if there  is an inconsistency in  the principle of                                                                   
the legislation.                                                                                                                
                                                                                                                                
Ms. Elgee acknowledged  the questioned and noted  that "times                                                                   
change".  She stressed  that the  problem  is to  be able  to                                                                   
staff jobs in the public environment.  Persons who have taken                                                                   
an early-retirement are not eligible.                                                                                           
                                                                                                                                
Representative Whitaker  asked the rate of  reemployment. Ms.                                                                   
Elgee noted that there is no quota  of returned retirees. The                                                                   
retirees would return without  accruing additional retirement                                                                   
services, which would provide  some reduced employer and out-                                                                   
of-pocket  employee   costs.  The  employer  would   have  to                                                                   
indicate  the need. She  emphasized the  benefit on  projects                                                                   
with a limited duration.                                                                                                        
                                                                                                                                
Representative   Whitaker  summarized   that   there  is   no                                                                   
proscribed  reentry level.  Representative Davies  questioned                                                                   
if bargaining  units would be  involved. Ms. Elgee  clarified                                                                   
that  retirement is  not  subject to  collective  bargaining.                                                                   
Hiring terms would be subject to collective bargaining.                                                                         
                                                                                                                                
Representative  Hudson noted  that persons  over 65  years of                                                                   
age  can receive  social security  and continue  to work.  He                                                                   
stressed  that  it  is  a  powerful  incentive  to  continued                                                                   
working. He asked how many retirees would be affected.                                                                          
                                                                                                                                
Ms. Elgee  responded that there  is no way to  anticipate how                                                                   
many retirees would elect to return to work.                                                                                    
                                                                                                                                
TAPE HFC 01 - 92, Side B                                                                                                      
                                                                                                                                
Ms. Elgee  observed that teachers  often reach  retirement in                                                                   
their  mid 40's.  The  department anticipates  2,660  retired                                                                   
teachers  between the  age of  50 and  54 in  the year  2005.                                                                   
There  would be  another  5,600 teachers  between  55 and  60                                                                   
years of  age. This  pool of teachers  could be utilized  for                                                                   
the workforce.                                                                                                                  
                                                                                                                                
Vice-Chair Bunde referred to the fiscal note.                                                                                   
                                                                                                                                
Ms.  Elgee  noted  that  there  would be  no  impact  to  the                                                                   
retirement section. No additional  retirement credit would be                                                                   
accrued. The fiscal note would  request one additional person                                                                   
for  counseling and  some data  processing. Enhanced  medical                                                                   
benefits would result in a slight  increase of .17 percent in                                                                   
both  the   TRS  and   PERS  systems.   The  change   to  the                                                                   
geographical differential has no impact.                                                                                        
                                                                                                                                
Representative  Whitaker asked if  thought had been  given on                                                                   
the affect  on the entry-level  workforce. He noted  that new                                                                   
graduates  could  lose  in  the  choice  between  experience-                                                                   
retired teachers.                                                                                                               
                                                                                                                                
Representative John Davies echoed  concerns of Representative                                                                   
Whitaker and noted  that he would propose a  3-year sunset to                                                                   
allow assessment of unintended consequences (copy on file).                                                                     
                                                                                                                                
Representative  Hudson asked why  the additional cost  to the                                                                   
employer  was  necessary when  PERS  and TRS  funds  generate                                                                   
through  investment in  excess of  a hundred  percent of  the                                                                   
actual  cost.  He noted  that  these  funds  are two  of  the                                                                   
healthiest funds in the nation.  He observed that the medical                                                                   
benefits were reduced in Tier II due to costs.                                                                                  
                                                                                                                                
Ms.  Elgee  acknowledged  that  the funds  are  healthy.  She                                                                   
clarified  that the actuary  looks at  changes in  isolation.                                                                   
There would  not necessarily  be an increase  as a  result of                                                                   
the change  due to  a variety of  offsetting factors  such as                                                                   
the  investment  rate  of  return,  which  would  negate  any                                                                   
increased  cost as  a result  of the  legislature. She  added                                                                   
that none of  the effects would be immediate.  Changes in the                                                                   
rates would  not be reflected  until 2005. The  department is                                                                   
not requesting funding for the  change, but is estimating the                                                                   
impact.                                                                                                                         
                                                                                                                                
DEL SMITH, DEPUTY  COMMISSIONER, DEPARTMENT OF  PUBLIC SAFETY                                                                   
spoke in support. He noted that  it is difficult to get young                                                                   
people  to go  to remote  areas  of the  state  and spoke  in                                                                   
support of  the change to  the geographical differential.  He                                                                   
noted there  are talented individuals  that could add  to law                                                                   
enforcement  that are  precluded from  doing so because  they                                                                   
can go on to other careers and still draw their retirement.                                                                     
                                                                                                                                
BRUCE JOHNSON, DEPUTY COMMISSIONER,  EDUCATION, DEPARTMENT OF                                                                   
EDUCATION  AND  EARLY DEVELOPMENT  spoke  in  support of  the                                                                   
legislation.  The legislation  adds  to the  capacity of  the                                                                   
school districts in terms of encouraging  individuals to stay                                                                   
within  the system.  Reemployment  of retired  teachers is  a                                                                   
good tool.  He pointed  out that there  is no guarantee  that                                                                   
they  would  be  rehired  in   the  same  or  another  school                                                                   
district. He stressed  that Alaska is only producing  20 - 30                                                                   
percent  of  the   teachers  needed  to  fill   its  teaching                                                                   
positions. He  maintained that  the questioned is  whether it                                                                   
would be  better to  employ someone  from out  of state  or a                                                                   
retired  teacher. Districts  currently  compete against  each                                                                   
other. He stressed that the systems  are better off with some                                                                   
new and  some old blood. He  pointed out that  recruiters out                                                                   
numbered  applicants at  the recent Anchorage  job fair  (150                                                                   
applicants).                                                                                                                    
                                                                                                                                
Vice-Chair Bunde  observed that teaching is  a stressful job.                                                                   
He asked if there had been discussion  with retired teachers.                                                                   
Mr.  Johnson  noted  that  there have  not  been  any  formal                                                                   
discussions. He recounted personal  discussions with retirees                                                                   
noted that teachers may want to  rehire after being refreshed                                                                   
by time off. He added that the  RIP bill's intent was to make                                                                   
ends meet within their budget.                                                                                                  
                                                                                                                                
Vice-Chair Bunde  acknowledged that  teaching is  a stressful                                                                   
job. He asked  how much discussion has occurred  with retired                                                                   
teachers  to  assess their  desire  to  return to  work.  Mr.                                                                   
Johnson  responded  that there  has  not been  a  coordinated                                                                   
effort to interact with retired  teachers. He emphasized that                                                                   
the early  retirement (RIP)  effort was  a resource  issue of                                                                   
trying to make budgets balance.                                                                                                 
                                                                                                                                
Representative Croft questioned  what salary retired teachers                                                                   
would be  returned at their  same salary. Mr.  Johnson stated                                                                   
that it  would be  up to the  individual school district.  He                                                                   
observed that it  could be a negotiated item.  Teachers could                                                                   
be  paid on  the  salary  schedule  but without  the  benefit                                                                   
package.                                                                                                                        
                                                                                                                                
Representative  Hudson observed that  the teachers  that took                                                                   
early retired  would be excluded.  He noted that the  RIP was                                                                   
an attempt  to retire higher  paid, longer tenured  teachers.                                                                   
He  questioned if  it would  be  the best  policy to  exclude                                                                   
these qualified employees.                                                                                                      
                                                                                                                                
Mr. Johnson  observed that it  would create a larger  pool if                                                                   
teachers  that  took  early  retirement   were  included.  He                                                                   
acknowledged the  challenge of accommodating the  rules under                                                                   
which teachers  who took early retirement operated.  He added                                                                   
that the rip program resulted in a brain drain.                                                                                 
                                                                                                                                
Vice-Chair Bunde pointed out that  the agencies requested the                                                                   
rip bill. He  questioned what would prevent  retired teachers                                                                   
from coming back  to work at the same wage  with the addition                                                                   
of  their  retirement.  Mr.  Johnson   responded  that  these                                                                   
teachers are currently taking  teaching jobs in other states.                                                                   
Some  of these  people  might  stay in  the  state and  serve                                                                   
Alaskan  children.  Rehiring retired  teachers  would  become                                                                   
part of collective bargaining  to prevent misuses. He did not                                                                   
know if  the best  public policy  would be  to rehire  on the                                                                   
current salary schedule and negotiate  the 30 percent benefit                                                                   
package in some other way in order  to allow school districts                                                                   
to achieve a savings.                                                                                                           
                                                                                                                                
KEVIN BROOKS, DIRECTOR, DIVISION  OF ADMINISTRATIVE SERVICES,                                                                   
DEPARTMENT  OF FISH  AND  GAME testified  in  support of  the                                                                   
legislation.  He  observed  that   the  agency  has  lost  25                                                                   
biologists in  their commercial fish  division in the  last 6                                                                   
months to jobs  with the federal government.  The legislation                                                                   
would allow the  department to keep some of  these employees.                                                                   
He noted  that  that department  anticipates federal  funding                                                                   
for marine  mammal research.  The best  candidates for  these                                                                   
projects  would  be  retired  marine  mammal  biologists.  He                                                                   
stressed that  rehired retired  employees would not  maintain                                                                   
their  longevity,   which  would  allow  a   savings  to  the                                                                   
department.                                                                                                                     
                                                                                                                                
Vice-Chair  Bunde  questioned  if discussions  have  occurred                                                                   
with retired employees. He noted  that he has received emails                                                                   
requesting early  retirement. Mr. Brooks stressed  that there                                                                   
are recruitment and retention  issues along with fairness and                                                                   
equity issue. He maintained that  there isn't any one tool to                                                                   
address every need.                                                                                                             
                                                                                                                                
Representative Lancaster questioned  if the legislation would                                                                   
allow double  dipping. Mr. Brooks  reiterated that  the state                                                                   
of  Alaska  is  losing  personnel to  other  states  and  the                                                                   
federal government. He stressed  that nothing will change. He                                                                   
acknowledged  that  retired  employees  would  still  receive                                                                   
retirement while  drawing a paycheck, but emphasized  that an                                                                   
asset would be  preserved while getting the job  done for the                                                                   
state.                                                                                                                          
                                                                                                                                
Representative John  Davies pointed out that  employees would                                                                   
not earn additional retirement.                                                                                                 
                                                                                                                                
TIM ROGERS, LEGISLATIVE PROGRAM  COORDINATOR, MUNICIPALITY OF                                                                   
ANCHORAGE  testified   in  support.  He  observed   that  the                                                                   
municipality  is  experiencing  a brain  drain  as  employees                                                                   
leave the  municipality. He  maintained that the  legislation                                                                   
would help resolve  their problems. He noted  that 25 percent                                                                   
of  the  police  officers  in   Anchorage  are  eligible  for                                                                   
retirement.  He noted  that  the issue  is  how to  encourage                                                                   
these  employees to  retire and  come back  or not retire  at                                                                   
all.  The Anchorage  police  department  employees went  into                                                                   
PERS in 1994 so the legislation  would not solve that problem                                                                   
for a number of years.                                                                                                          
                                                                                                                                
VERON  MARSHALL,  EXECUTIVE  DIRECTOR,   NEA-ALASKA,  JUNEAU,                                                                   
spoke in support of the legislation.  He stressed that the 25                                                                   
and  out  provision   would  help  retain  teachers   in  the                                                                   
classroom. He maintained that  the qualifying factor of major                                                                   
medical after 25  years would encourage a number  of teachers                                                                   
to stay in  the state. The legislation would  provide another                                                                   
tool to  enhance the pool  of qualified teachers  to reenter.                                                                   
He  noted that  most  collected bargaining  agreements  allow                                                                   
teachers to be  hired from out of district.  He stressed that                                                                   
a retired teacher  would be viewed as a break  of service and                                                                   
come  under the  experienced  credit  variable  and would  be                                                                   
subject to scrutiny.                                                                                                            
                                                                                                                                
Vice-Chair  Bunde noted  that there  is a  limitation of  how                                                                   
much service can be brought back.  Salaries would be reduced.                                                                   
                                                                                                                                
Representative  John Davies  MOVED to  ADOPT Amendment  1. He                                                                   
reiterated that the amendment  would provide a 3-year sunset.                                                                   
He expressed  support for  the legislation  but felt  that it                                                                   
would be good legislative policy to review the change.                                                                          
                                                                                                                                
Representative Kott  did not object to the  sunset provision.                                                                   
He   acknowledged  that   the   sunset   would  require   the                                                                   
legislature to review  the issue, but felt that  any problems                                                                   
would be discovered in the next few years.                                                                                      
                                                                                                                                
Ms.  Elgee testified  that the  amendment would  not have  an                                                                   
adverse affect but questioned  if 3 years would be sufficient                                                                   
time to review the program.                                                                                                     
                                                                                                                                
Representative  John Davies stated  that he would  not object                                                                   
to a longer period.                                                                                                             
                                                                                                                                
Co-Chair Williams  questioned if a five-year  period would be                                                                   
too long.                                                                                                                       
                                                                                                                                
Representative  Kott  observed  that the  sunset  would  fall                                                                   
before the increase in retiring  teachers that is expected in                                                                   
the year 2005. He suggested the time be expanded.                                                                               
                                                                                                                                
Vice-Chair Bunde  reiterated that actuarial impact  would not                                                                   
be felt until 2005.                                                                                                             
                                                                                                                                
Representative John  Davies stated that he would  entertain a                                                                   
motion to change the date to 2006.                                                                                              
                                                                                                                                
Vice-Chair Bunde  Moved to Amend Amendment 1  by changing the                                                                   
sunset date  to the year 2005.  There being NO  OBJECTION, it                                                                   
was so ordered.                                                                                                                 
                                                                                                                                
There being NO OBJECTION, Amendment 1 was adopted.                                                                              
                                                                                                                                
Representative Foster  MOVED to report CSHB 242  (FIN) out of                                                                   
Committee with  the accompanying fiscal note.  There being NO                                                                   
OBJECTION, it was so ordered.                                                                                                   
                                                                                                                                
CSHB  242 (FIN)  was REPORTED  out  of Committee  with a  "do                                                                   
pass"  recommendation and  with  previously published  fiscal                                                                   
impact note (#1) by the Department of Administration.                                                                           

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