Legislature(2019 - 2020)ADAMS 519

02/27/2020 01:30 PM FINANCE

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                  HOUSE FINANCE COMMITTEE                                                                                       
                     February 27, 2020                                                                                          
                         2:08 p.m.                                                                                              
2:08:05 PM                                                                                                                    
CALL TO ORDER                                                                                                                 
Co-Chair Johnston called the House Finance Committee                                                                            
meeting to order at 2:08 p.m.                                                                                                   
MEMBERS PRESENT                                                                                                               
Representative Neal Foster, Co-Chair                                                                                            
Representative Jennifer Johnston, Co-Chair                                                                                      
Representative Dan Ortiz, Vice-Chair                                                                                            
Representative Ben Carpenter                                                                                                    
Representative Andy Josephson                                                                                                   
Representative Gary Knopp                                                                                                       
Representative Bart LeBon                                                                                                       
Representative Kelly Merrick                                                                                                    
Representative Colleen Sullivan-Leonard                                                                                         
Representative Cathy Tilton                                                                                                     
Representative Adam Wool                                                                                                        
MEMBERS ABSENT                                                                                                                
ALSO PRESENT                                                                                                                  
Representative Chuck Kopp, Bill  Sponsor; Ken Truitt, Staff,                                                                    
Representative  Chuck Kopp;  Tom Wescott,  President, Alaska                                                                    
Professional     Firefighters;     Erin    Shine,     Staff,                                                                    
Representative Jennifer  Johnston; Elise  Sorum-Birk, Staff,                                                                    
Representative  Andy   Josephson;  Ashley   Carrick,  Staff,                                                                    
Representative Adam Wool.                                                                                                       
HB 30     WORKERS' COMP: DEATH; PERM PARTIAL IMPAIR                                                                             
          HB 30 was HEARD and HELD in committee for further                                                                     
HB 79     PEACE OFFICER/FIREFIGHTER RETIRE BENEFITS                                                                             
          HB 79 was HEARD and HELD in committee for further                                                                     
HB 102    RENTAL VEHICLE BY PRIVATE OWNER                                                                                       
          HB 102 was HEARD and HELD in committee for                                                                            
          further consideration.                                                                                                
HB 205    APPROP: OPERATING BUDGET/LOANS/FUNDS                                                                                  
          HB 205 was SCHEDULED but not HEARD.                                                                                   
HB 206    APPROP: MENTAL HEALTH BUDGET                                                                                          
          HB 206 was SCHEDULED but not HEARD.                                                                                   
Co-Chair Johnston reviewed the meeting agenda.                                                                                  
HOUSE BILL NO. 79                                                                                                             
     "An  Act relating  to  participation  of certain  peace                                                                    
     officers and  firefighters in  the defined  benefit and                                                                    
     defined  contribution plans  of  the Public  Employees'                                                                    
     Retirement  System of  Alaska; relating  to eligibility                                                                    
     of  peace   officers  and  firefighters   for  medical,                                                                    
     disability, and  death benefits; relating  to liability                                                                    
     of the  Public Employees' Retirement System  of Alaska;                                                                    
     and providing for an effective date."                                                                                      
2:09:27 PM                                                                                                                    
Co-Chair   Foster   MOVED   to  ADOPT   proposed   committee                                                                    
substitute  for  HB  79,   Work  Draft  31-LS0462\O  (Wayne,                                                                    
02/27/20) (copy on file).                                                                                                       
Co-Chair Johnston OBJECTED for discussion.                                                                                      
2:10:09 PM                                                                                                                    
REPRESENTATIVE CHUCK KOPP, BILL  SPONSOR, reviewed the bill.                                                                    
He  indicated  that HB  79  created  a new  tier  retirement                                                                    
system  containing  unique  features and  offered  financial                                                                    
sustainability.  He  characterized the  proposed  retirement                                                                    
plan  designed  for peace  officers  and  firefighters as  a                                                                    
hybrid between  a defined  benefit and  the current  Tier 4.                                                                    
He delineated that the bill  contained levers or adjustments                                                                    
designed  to  keep  the  plan   solvent  that  fell  into  3                                                                    
categories:  cost saving  features,  plan asset  enhancement                                                                    
adjustments, and plan benefit  reductions. He explained that                                                                    
the cost saving features  did not provide retirement medical                                                                    
insurance.  The  medical  benefit   was  the  equivalent  to                                                                    
current  Tier 4  benefits  offering  a Health  Reimbursement                                                                    
Arrangement (HRA)  acting as bridge  to Medicare.  The fixed                                                                    
age of  retirement was  55 years with  20 years  of service.                                                                    
Retirement prior to  the age of 55 with 20  years of service                                                                    
was prohibited.  The retirement benefits were  calculated at                                                                    
the  average  of the  top  earning  5 consecutive  years  of                                                                    
employment  rather than  the  highest 3.  The  plan did  not                                                                    
provide a  cost of living  adjustment. He reviewed  the plan                                                                    
asset   enhancement  adjustments.   He  reported   that  the                                                                    
employee  contribution  rate  could be  increased  based  on                                                                    
actuarial  calculations to  maintain solvency.  The employer                                                                    
contribution was  22 percent  with 12  percent going  to the                                                                    
plan and 10  percent for the current  unfunded liability. He                                                                    
elucidated   that  the   planned  benefit   reduction  could                                                                    
withhold the  post retirement enhancement adjustment  if the                                                                    
plans  funding  was less than  90 percent. He  restated that                                                                    
the three features kept the plan financially sustainable.                                                                       
2:14:21 PM                                                                                                                    
KEN TRUITT,  STAFF, REPRESENTATIVE CHUCK KOPP,  reviewed the                                                                    
explanation of  changes for the committee  substitute. There                                                                    
were no substantive changes to  the bill. The representative                                                                    
had met with the Division  of Retirement and Benefits during                                                                    
the  interim to  review the  bill. The  changes were  merely                                                                    
slight  language  changes  making   the  bill  clearer.  The                                                                    
sponsor  provided a  PowerPoint presentation  titled  HB  79                                                                    
Explanation of  Changes version  U To  version O.   He began                                                                    
with slide 2 portraying page 3  of the bill, lines 6 through                                                                    
9, which  dealt with the Alaska  Retirement Management Board                                                                    
(ARMB) as follows:                                                                                                              
     (C) an appropriate monthly employer contribution under                                                                     
     AS 39.35.255(i); and (D) appropriate adjustments, if                                                                       
     any, under (b)(5) and (b)(6)                                                                                               
Mr. Truitt  indicated that the change  provided instructions                                                                    
for  how the  ARMB  performed its  evaluation  of the  plan,                                                                    
specifically tracking the plans  features as proposed in the                                                                    
legislation. He moved to slide  3 that highlighted Section 2                                                                    
of the bill [edited]:                                                                                                           
     Sec. 2. AS 37.10.220(b) is amended to read:                                                                                
     (b) The board may                                                                                                          
     (5)  adjust  the amount  of  the  increase in  benefits                                                                    
     payable  to a  peace officer  or firefighter  who first                                                                    
     becomes  a  member after  June  30,  2006, as  provided                                                                    
     under AS 39.35.475;                                                                                                        
     (6)  adjust   employee  contribution  rates   under  AS                                                                    
Mr. Truitt  pointed to AS  37.10.220(b) which  included more                                                                    
of the  ARMBs  duties and functions  which corresponded with                                                                    
the boards  new function outlined  on lines 6 through 9. The                                                                    
administration  was backing  away from  the term  "Tier." He                                                                    
referred  to  Section  2,  lines  23 and  24  and  read  the                                                                    
language,   to  a peace  officer  or  firefighter who  first                                                                    
becomes a  member after  June 30, 2006.   He noted  that the                                                                    
word  tier was  not included  in  the language  in the  bill                                                                    
rather, the language  previously cited was used  to refer to                                                                    
the new tier 5.                                                                                                                 
2:18:35 PM                                                                                                                    
Mr. Truitt  continued to  the following  change on  page 10,                                                                    
Section 15 of the bill shown  on Slide 4. He delineated that                                                                    
the language  differed from  the prior  version only  in the                                                                    
manner the  provision proposed to  ensure that the  new tier                                                                    
contributed  to the  past service  liability  of the  Public                                                                    
Employees  Retirement  System   (PERS)  and  maintained  the                                                                    
employee  contribution  at  22 percent.  He  commented  that                                                                    
Section 15 amended AS 39.35.255(a):                                                                                             
     Sec. 15. AS 39.35.255(a) is amended to read:                                                                               
     (a)  Except as  required  by (i)  of  this section,  an                                                                    
     [EACH] employer  shall contribute  to the  system every                                                                    
     payroll period an amount calculated  by applying a rate                                                                    
     of 22 percent  of the greater of the total  of all base                                                                    
Mr.  Truitt  moved  to  Section  18  which  proposed  a  new                                                                    
subsection to AS 39.35.255:                                                                                                     
     Sec.  18.  AS  39.35.255   is  amended  by  adding  new                                                                    
     subsections to read:                                                                                                       
     (i)  An  employer  that  employs  a  peace  officer  or                                                                  
        firefighter who first participates in the plan after                                                                    
        June 30, 2006, shall contribute to the system every                                                                     
        payroll period an amount equal to the sum of                                                                            
          (1)  a per  capita  amount that  is calculated  by                                                                    
          applying a  rate, determined by the  board, of not                                                                    
          less  than   12  percent  of  the   total  monthly                                                                    
          compensation  the  employer   pays  to  all  peace                                                                    
          officers   and  firefighters   who  first   became                                                                    
          members of the plan after June 30, 2006; and                                                                          
          (2) an  amount, determined  by the board,  that is                                                                    
          equal  to the  difference between  the per  capita                                                                    
          amount  determined under  (1)  of this  subsection                                                                    
          and  the  amount  calculated  under  (a)  of  this                                                                    
Mr. Truitt  reported that  the new  subsection (i)  sets the                                                                    
employer contribution for  the employee's retirement benefit                                                                    
at 12  percent under paragraph (1).  Paragraph (2) specified                                                                    
that the remainder was applied  to the unfunded liability of                                                                    
the  existing PERS  plan. The  12 percent  contribution rate                                                                    
was greater than the contribution  rate found in Tier 4. The                                                                    
language was  clearer in  the current  version of  the bill,                                                                    
but the concept  remained the same as  the original version.                                                                    
He discussed the final change in  Section 25, page 13 of the                                                                    
bill depicted on Slide 5:                                                                                                       
     Sec.  25.  AS  39.35.475   is  amended  by  adding  new                                                                    
     subsections to read:                                                                                                       
     (g)  A   person  who  receives   a  benefit   under  AS                                                                    
     39.35.370(l)  is eligible  to  receive  an increase  in                                                                    
     benefits under this section.                                                                                               
     (h) If  the board  determines that  the portion  of the                                                                    
     unfunded liability of the plan  that is attributable to                                                                    
     all peace  officers and  firefighters who  first become                                                                    
     members of  the plan  after June  30, 2006,  is greater                                                                    
     than 10  percent, the  board may  reduce the  amount of                                                                    
     the increase under (b) of  this section that is payable                                                                    
     to a peace  officer or firefighter who  first becomes a                                                                    
     member  after June  30, 2006.  At any  time, the  board                                                                    
     may terminate a reduction made under this subsection.                                                                      
Mr. Truitt reported that the  administration had flagged the                                                                    
section  that  pertained   to  the  post-retirement  pension                                                                    
adjustment (PRPA)  benefit reduction. He explained  that the                                                                    
section had  intended to allow  the ARM board to  reduce the                                                                    
plans   benefit   when  necessary  to  keep   the  new  tier                                                                    
financially viable.  However, the  administration discovered                                                                    
that  the prior  version of  the bill  referred to  the PERS                                                                    
unfunded liability  as a  whole and the  HB 79  plan benefit                                                                    
would  always be  reduced until  the unfunded  liability was                                                                    
paid. The  change included the following  specific language,                                                                    
 the plan  that is  attributable to  all peace  officers and                                                                    
firefighters who first become as a corrective measure.                                                                          
Co-Chair Foster WITHDREW his OBJECTION.                                                                                         
Representative Carpenter OBJECTED.                                                                                              
Representative Carpenter  spoke to  his objection.  He asked                                                                    
for  clarification regarding  the  word  attributable.   Mr.                                                                    
Truitt  responded that  if the  language in  the CS  was not                                                                    
included  the  post-retirement  pension  adjustment  benefit                                                                    
would always be reduced and  the members would never receive                                                                    
it.  He clarified  that  the new  language  allowed for  the                                                                    
benefit if  the plan was found  to be solvent and  funded at                                                                    
90 percent or more.                                                                                                             
2:25:10 PM                                                                                                                    
Representative Carpenter  surmised that there was  a certain                                                                    
level  of risk  with the  proposed plan  and if  it was  not                                                                    
solvent the  benefit was not  distributed. He  asked whether                                                                    
he was correct.  Mr. Truitt answered in  the affirmative. He                                                                    
added that  all the  features in the  bill were  included to                                                                    
plan   for  uncertainty   in   the  future.   Representative                                                                    
Carpenter  thought  it was  worrying  that  a peace  officer                                                                    
would participate  in a retirement  plan with a risk  of not                                                                    
receiving benefits in the future.                                                                                               
Representative    Kopp    remarked    that    Representative                                                                    
Carpenters  statement was  oversimplified. He explained that                                                                    
there was  a lack of  certainty in a future  benefit because                                                                    
the  plans  levers  kept it  reactive to  market conditions.                                                                    
He  recounted  that the  committee  heard  testimony in  the                                                                    
prior session from an actuary  in the state of Washington in                                                                    
charge  of a  similar plan.  He reported  that the  plan was                                                                    
consistently  funded  at  over  100 percent  as  well  as  a                                                                    
similar plan  in Colorado. The  model was proven  to perform                                                                    
reliably in other states. The  proposed plan will be tracked                                                                    
separately  from other  PERS participants  to determine  the                                                                    
funding level of the plan. The  new language in the bill was                                                                    
necessary  to  target  the plans   members  apart  from  the                                                                    
larger  PERS  group  to  allow   calculation  of  the  post-                                                                    
retirement  pension adjustment.  He  reminded the  committee                                                                    
that the adjustment was eliminated  when the plan was funded                                                                    
under 90 percent and that  maintaining a funding level of 90                                                                    
percent  was   the  gold  standard  for   retirement  plans.                                                                    
Representative  Carpenter  understood  but was  uncertain  a                                                                    
peace  officer  or firefighter  would  find  comfort in  the                                                                    
2:29:13 PM                                                                                                                    
Representative  Josephson  inquired  whether only  the  PRPA                                                                    
could be suspended and not  the bulk of the pension benefit.                                                                    
Representative   Kopp   responded    in   the   affirmative.                                                                    
Representative   Josephson   surmised   that  the   tier   5                                                                    
participant  would  have  90  percent  confidence  in  their                                                                    
retirement benefit  amount. Representative Kopp  answered in                                                                    
the affirmative. He voiced that  there was a  high degree of                                                                    
confidence in  the overall  plan  but  the lever  to suspend                                                                    
the PRPA benefit  was available to the  actuary. He reminded                                                                    
the  committee  of  Deven  Mitchells   [Executive  Director,                                                                    
Alaska   Municipal  Bond   Bank  Authority,   Department  of                                                                    
Revenue]  prior testimony  regarding Tier  4 models  showing                                                                    
that within  10 years  Tier 4  was only  performing slightly                                                                    
better  than social  security alone.  He offered  that while                                                                    
the  HB 79  plan was  very conservative,  there was  greater                                                                    
surety  for peace  officers and  firefighters  than Tier  4.                                                                    
Representative  Josephson  wondered   about  the  difference                                                                    
between a Cost of Living Adjustment (COLA) and a PRPA.                                                                          
2:31:29 PM                                                                                                                    
TOM  WESCOTT, PRESIDENT,  ALASKA PROFESSIONAL  FIREFIGHTERS,                                                                    
responded that a  COLA was awarded under  the legacy Defined                                                                    
Benefit plans  (DB). He furthered  that in other  states the                                                                    
COLA was an inflation proofing  adjustment, but in Alaska it                                                                    
was  awarded  for  remaining  in the  state.  The  COLA  was                                                                    
eliminated in  HB 79. Representative Josephson  deduced that                                                                    
the  lack  of a  COLA  disincentivized  elderly retirees  to                                                                    
remain  in  the state.  Mr.  Wescott  agreed that  the  COLA                                                                    
benefit  had  been  stripped  out.  He  suggested  that  the                                                                    
 expensive   nature   of   living   in   Alaska  should   be                                                                    
compensated for in employees pay throughout their career.                                                                       
2:33:08 PM                                                                                                                    
Representative  LeBon asked  about  the 5  year average  the                                                                    
retirement benefit  was built upon. He  wondered whether the                                                                    
5 year average included  annual overtime pay. Representative                                                                    
Kopp replied in the affirmative.                                                                                                
Representative Carpenter WITHDREW his OBJECTION.                                                                                
There being  NO OBJECTION, it  was so ordered.  The proposed                                                                    
CS was ADOPTED.                                                                                                                 
Co-Chair  Johnston asked  for a  brief  introduction to  the                                                                    
Representative Kopp indicated that  the bill was in response                                                                    
to  recruitment  and  retention   issues  related  to  peace                                                                    
officers and fire fighters. He  detailed that only the older                                                                    
experienced  employees   in  DB  plans  and   younger,  less                                                                    
experienced new recruits were retained.  The middle class of                                                                    
managers, sergeants, lieutenants,  and battalion chiefs were                                                                    
leaving the  state for defined benefits.  Many positions had                                                                    
been left open  because of a lack of interest  due to a lack                                                                    
of surety in benefits. The  scenario resulted in proposing a                                                                    
very conservative hybrid plan. The  idea behind HB 79 was to                                                                    
retain employees  and address unmet needs.  The medical cost                                                                    
savings feature was  a  very significant  part  of the plan.                                                                    
The feature would  allow a person to purchase  the best plan                                                                    
possible  after retirement  until Medicare.  He acknowledged                                                                    
that  the fixed  age of  retirement at  55 was  an unpopular                                                                    
part of  the plan. He  shared that he retired  from policing                                                                    
at the  age of  44 and  felt it was  a more  appropriate age                                                                    
considering the  physical demands  of the job.  However, the                                                                    
older retirement  age was a  necessary feature of  the plan.                                                                    
He listed the  remaining cost saving features:  high 5 year-                                                                    
average  retirement  income  calculation, lack  of  a  COLA,                                                                    
employee  contribution rate  increase option,  and suspended                                                                    
PRPA.  He noted  the public  safety communitys   support for                                                                    
the  bill  despite  its limitations  when  compared  to  the                                                                    
current plan.                                                                                                                   
2:37:25 PM                                                                                                                    
Representative Sullivan-Leonard  asked whether  an actuarial                                                                    
fiscal  analysis  would  be  provided.  Representative  Kopp                                                                    
reported that  he had been  working with  the administration                                                                    
to  obtain  the  actuarial  analysis. He  thought  that  the                                                                    
information would be forthcoming shortly.                                                                                       
Vice-Chair Ortiz asked  if it was common  to begin receiving                                                                    
retirement   benefits   at   age   55   in   other   states.                                                                    
Representative  Kopp  indicated  that  in  the  states  with                                                                    
similar  plans  age  55  was  a  common  retirement  age.  A                                                                    
 couple   states lowered  the age  to 51.  He added  that in                                                                    
most states with  DB plans retirement was based on  20 to 25                                                                    
years  of  service.  However,   they  were  considered  high                                                                    
liability  plans. The  delayed  retirement  helped make  the                                                                    
hybrid plan affordable.                                                                                                         
Vice-Chair  Ortiz  asked  whether adopting  the  plan  would                                                                    
significantly  help accomplish  the  goal  of retention.  He                                                                    
believed that if the plan   did the job  of retaining enough                                                                    
employees,  other savings  would be  realized in  areas like                                                                    
recruitment.  Mr. Wescott  replied  in  the affirmative.  He                                                                    
accentuated  that  the  plan would  absolutely  assist  with                                                                    
recruitment  and  retention.  He   noted  that  one  of  the                                                                    
characteristics  of a  DB  plan was  that  the employee  was                                                                    
required to  invest time, which  was a deterrent  to leaving                                                                    
the position as the years  built up. He performed some rough                                                                    
estimates  and determined  that the  state saved  $4 million                                                                    
per  year by  retaining  one percent  of  the public  safety                                                                    
workforce at  $120 thousand per employee  in training costs.                                                                    
He ascertained  that completely  solving the problem was not                                                                    
required to pay for the new plan.                                                                                               
Representative  Wool  asked  Representative Kopp  to  review                                                                    
what  was available  to help  the retiree  fill the  medical                                                                    
gap;  the period  between  55 and  the  eligibility age  for                                                                    
Medicare.  He asked  whether there  was an  associated plan.                                                                    
Representative  Kopp replied  that the  health reimbursement                                                                    
arrangement  was   a  cash  pool   that  built   up  through                                                                    
contributions and  was available  for any market  based plan                                                                    
the employee  chose as a  bridge to Medicare.  Some agencies                                                                    
had   affiliations  with   certain  plan   participants.  He                                                                    
deferred further answer to Mr. Westcott.                                                                                        
Mr.  Westcott  agreed  that  the  gap  was  significant  and                                                                    
 tough   to  deal  with.  He  commented  that  it  could  be                                                                    
addressed  in the  future. He  expounded  that when  medical                                                                    
benefits  were  attached  to  a pension  plan  it  added  an                                                                    
 unknown  cost  that historically grew quickly.  He reported                                                                    
that  he had  analyzed  other pension  plans and  discovered                                                                    
that  the   medical  benefits  were   typically  problematic                                                                    
because they grew rapidly adding significant costs.                                                                             
2:43:56 PM                                                                                                                    
Representative Wool wondered what  happened to an employee's                                                                    
contributions  if  they had  to  leave  the state  prior  to                                                                    
retirement.  Representative  Kopp   responded  that  once  a                                                                    
participant  met the  vestment period,  an individual  could                                                                    
withdraw the benefit once they reached retirement age.                                                                          
Representative LeBon  had heard that one  problematic reason                                                                    
for the  liability in the Teachers'  Retirement System (TRS)                                                                    
and PERS was due to  employees accepting positions in remote                                                                    
locations or working extra overtime  during their last three                                                                    
years  to  build  up the  retirement  benefit.  He  wondered                                                                    
whether the  practices affected the liability  the state was                                                                    
currently paying. Representative Kopp  reported that most of                                                                    
the    states    public    safety   employees    worked   in                                                                    
municipalities  and  were  not   entitled  to  a  geographic                                                                    
differential.  He stated  that few  state troopers  chose to                                                                    
work remotely for  a period of time, preferring  life on the                                                                    
road system. He  did not believe that  the practice affected                                                                    
the current  liability issues. He elucidated  that the state                                                                    
received poor  actuarial advice,  which caused the  state to                                                                    
underpay over  many years. In fact,  many municipalities did                                                                    
not  pay   an  employer  contribution  based   on  erroneous                                                                    
actuarial advice.                                                                                                               
2:46:58 PM                                                                                                                    
Representative  LeBon assumed  that a  trooper working  in a                                                                    
remote area  receiving differential  pay would  likely leave                                                                    
the  area upon  retirement. He  wondered why  the retirement                                                                    
benefit  was built  upon the  location  differential and  if                                                                    
eliminating  overtime and  location differential  would help                                                                    
protect  the plan.  Mr. Westcott  replied that  the practice                                                                    
Representative LeBon  described was  known as   spiking.  He                                                                    
noted  that the  highest five  years was  identified in  the                                                                    
Washington  state plan  as a  best  practice that  prevented                                                                    
spiking  and  was  more  representative   of  a  career.  He                                                                    
indicated that  a state  trooper had to  work 50  percent of                                                                    
their career  in the remote  location to receive  a location                                                                    
differential.  Representative LeBon  was  glad  to hear  the                                                                    
issue was addressed  in the bill. He  reported knowing state                                                                    
workers  that moved  to a  remote  location to  get their  3                                                                    
highest years.                                                                                                                  
2:49:36 PM                                                                                                                    
Representative  Carpenter voiced  that  just  the fact  that                                                                    
spiking  was  an established  term  meant  the issue  needed                                                                    
combating.  He suggested  inserting language  that prevented                                                                    
spiking rather than  using the 5 year average.  He felt that                                                                    
a   prohibition   in   statue   was   a   better   solution.                                                                    
Representative Kopp replied that  when a person earned more,                                                                    
they  also contributed  more  to the  plan.  He spoke  about                                                                    
peace   officers    aversion    to   forced   overtime   and                                                                    
experiencing burnt-out.  He indicated that  municipal police                                                                    
departments  forced  overtime  due to  staff  shortages  and                                                                    
burn-out  was  affecting   officers.  He  acknowledged  that                                                                    
working extra  overtime at  the end of  a career  to enhance                                                                    
retirement happened,  but it was not  currently the problem.                                                                    
He identified the lack of  recruitment, forced overtime, and                                                                    
burnout as  the problem.  He assured  that by  spreading out                                                                    
the retirement average  over 5 years a  person would burnout                                                                    
making  spiking  almost impossible.  He  was  unsure how  to                                                                    
nuance the bill to prohibit spiking.                                                                                            
Co-Chair  Johnston indicated  the  committee  would set  the                                                                    
bill aside.                                                                                                                     
HB  79  was   HEARD  and  HELD  in   committee  for  further                                                                    
HOUSE BILL NO. 30                                                                                                             
     "An Act  relating to the exclusiveness  of liability of                                                                    
     an  employer in  the  case of  death;  relating to  the                                                                    
     payment of  workers' compensation benefits in  the case                                                                    
     of permanent partial impairment;  relating to notice of                                                                    
     workers' compensation  death benefits; relating  to the                                                                    
     payment   of  workers'   compensation  death   benefits                                                                    
     payable to  a child  of an employee  where there  is no                                                                    
     surviving spouse;  relating to the payment  of workers'                                                                    
     compensation death  benefits for an employee  without a                                                                    
     surviving  spouse  or  child;   and  providing  for  an                                                                    
     effective date."                                                                                                           
2:52:54 PM                                                                                                                    
Co-Chair   Foster   MOVED   to  ADOPT   proposed   committee                                                                    
substitute  for   HB  30,  Work  Draft   31-LS0280\R  (Marx,                                                                    
Co-Chair Johnston OBJECTED for discussion.                                                                                      
2:53:43 PM                                                                                                                    
ERIN   SHINE,  STAFF,   REPRESENTATIVE  JENNIFER   JOHNSTON,                                                                    
reported   that   she   had   worked   with   Representative                                                                    
Josephson's  staff  to  produce  the version  of  the  draft                                                                    
Committee Substitute  (CS). She reviewed the  changes in the                                                                    
CS.  She reported  that on  page 1,  lines 1  through 5  the                                                                    
title was changed to reflect the  changes in the CS. On page                                                                    
1, line 7,  Section 1, the prior Section 1  was removed that                                                                    
included the  short title  of the  bill. She  explained that                                                                    
new  Section  1  included  all  new  language  and  added  a                                                                    
requirement  for notification  of workers  at time  of hire.                                                                    
The  notification    described  the  compensation  generally                                                                    
available  and  specifically   required  that  employees  be                                                                    
informed about  compensation available in the  case of death                                                                    
for  workers  who  are   unmarried  and  lacked  dependents.                                                                    
Section   3  included   2  edits   of  conforming   language                                                                    
corresponding to changes in other  sections in the bill. She                                                                    
noted that  new Section  4 eliminated  AS 23.30.215  (a) and                                                                    
created a  new subsection (j)  on line 9 that  contained the                                                                    
following conforming language:                                                                                                  
       continues until the child reaches the 23 years of                                                                        
     age unless extended                                                                                                        
Ms. Shine read the prior language as follows:                                                                                   
       shall terminate five years after the person is no                                                                        
     longer considered a child                                                                                                  
Ms.  Shine concluded  that the  effective  date was  changed                                                                    
from January 1, 2020 to January 1, 2021.                                                                                        
Co-Chair  Johnston WITHDREW  her OBJECTION.  There being  NO                                                                    
OBJECTION, it was so ordered.                                                                                                   
2:56:18 PM                                                                                                                    
ELISE  SORUM-BIRK,  STAFF,  REPRESENTATIVE  ANDY  JOSEPHSON,                                                                    
addressed  the current  version of  the bill.  She explained                                                                    
that  the  bill  updated the  permanent  partial  impairment                                                                    
rates and the language had not  changed in the CS. The rates                                                                    
had not  been adjusted since  2000. The state was  ranked as                                                                    
one  of  the  lowest  in  the  country  regarding  permanent                                                                    
partial impairment rates. She pointed  to page 2, line 15 of                                                                    
the CS  and noted  that the impairment  rate rose  from $177                                                                    
thousand to  $255 thousand, which  was the  national average                                                                    
rate. She reported that new  Section 1 required notification                                                                    
of employees  regarding death  benefits. She  indicated that                                                                    
the original bill  added a death benefit  for single workers                                                                    
and recalled  that the issue  was discussed in  committee in                                                                    
the prior session.  The provision was withdrawn  from the CS                                                                    
due to  philosophical  issues  among some committee members.                                                                    
She relayed  that Representative Josephson felt  that it was                                                                    
imperative   that  employees   were   made   aware  of   the                                                                    
disparities  between the  amount a  single childless  worker                                                                    
would  receive in  death benefits  versus  a married  worker                                                                    
with  dependents.  She  cited  an  additional  provision  in                                                                    
Section  3 regarding  death benefits,  which  stated that  a                                                                    
personal  representative of  a  deceased  employee would  be                                                                    
notified regarding available benefits.  She moved to Section                                                                    
4 and  related that the  provision pertained to  orphans who                                                                    
were parentless.  She recounted that an  issue regarding the                                                                    
definition  of   child   arose in  the  prior  session.  The                                                                    
current version of  the bill allowed for  benefits until the                                                                    
age of  23. Therefore, an  orphaned child would  continue to                                                                    
receive death benefits until 23 years of age.                                                                                   
3:00:21 PM                                                                                                                    
Representative Knopp  inquired whether the  orphaned childs                                                                     
age  limit  was  specified  in the  prior  legislation.  Ms.                                                                    
Sorum-Burke replied  that a specific  age was  not provided.                                                                    
However,  the   provision  stated  that  if   a  person  was                                                                    
attending college  full-time, they  were still  considered a                                                                    
child. She remarked that the  language created a  gray area                                                                     
that the  sponsor was  not comfortable  with. Representative                                                                    
Knopp clarified  that the change  meant the  benefits ceased                                                                    
at  the age  of 23  regardless  of what  the individual  was                                                                    
doing. Ms.  Sorum-Burke articulated that the  reason for the                                                                    
age 23  was that an  individual might still be  dependent on                                                                    
their family. She  provided an example of a  young person in                                                                    
the  military whose  parents died  and would  not receive  a                                                                    
benefit.  Representative Knopp  wondered what  the allowable                                                                    
extension  under   AS  23.30.395(8)  was.   Ms.  Sorum-Burke                                                                    
responded that  it applied to children  with intellectual or                                                                    
physical disabilities considered a dependent.                                                                                   
Representative Carpenter asked  for clarification on Section                                                                    
1.  He  ascertained  that  the   employer  must  notify  the                                                                    
employee  of the  death benefits  available  for single  and                                                                    
married employees.  He asked if  he was correct.  Ms. Sorum-                                                                    
Burke responded that his  assessment was generally accurate.                                                                    
She   delineated  that   an  equal   protection  issue   was                                                                    
discovered  while drafting  the legislation.  Therefore, all                                                                    
employees regardless of their  marital status had to receive                                                                    
notification  concerning  single  and  childless  employees                                                                     
benefits. Representative Carpenter  was trying to understand                                                                    
the reason for the notification.                                                                                                
3:03:39 PM                                                                                                                    
Representative Josephson  provided the example of  a 19 year                                                                    
old man  working in  Prudhoe Bay without  a wife  and family                                                                    
who died  on the  job. He indicated  that under  current law                                                                    
nothing was available  to the worker, even if  his death was                                                                    
due to gross  negligence on the employer's  part. The family                                                                    
had no recourse;  they could not sue the  employer nor could                                                                    
they  collect   workers   compensation.  He   believed  that                                                                    
notification  would  provide  the   worker  the  insight  to                                                                    
purchase life  insurance. He  added that  the intent  was to                                                                    
provide  notice to  the  workers that   they  were on  their                                                                    
Co-Chair Johnston would be setting the bill aside.                                                                              
HB  30  was   HEARD  and  HELD  in   committee  for  further                                                                    
HOUSE BILL NO. 102                                                                                                            
     "An  Act  relating  to  rental  vehicles;  relating  to                                                                    
     vehicle  rental  networks;  relating to  liability  for                                                                    
     vehicle rental  taxes; and  providing for  an effective                                                                    
3:05:23 PM                                                                                                                    
REPRESENTATIVE  ADAM WOOL,  BILL SPONSOR,  provided a  brief                                                                    
statement about the bill. He read the sponsor statement:                                                                        
     The ways that  Alaskans procure transportation services                                                                    
     have  changed over  time. In  the past,  getting off  a                                                                    
     commercial  flight and  heading to  the nearest  rental                                                                    
     car  agency was  common  practice.  Now, consumers  are                                                                    
     turning  increasingly to  ridesharing, carpooling,  and                                                                    
     rental vehicle  network options to get  around. Vehicle                                                                    
     rental networks are rental  car businesses that arrange                                                                    
     or execute  personal passenger vehicle  rentals through                                                                    
     a network of individual  private vehicle owners and are                                                                    
     becoming  a common  alternative  to traditional  rental                                                                    
     car options.                                                                                                               
     HB  102  adds  a  definition for  the  new  service  of                                                                    
     providing  private vehicle  rental programs,  including                                                                    
     these  services into  existing  statutes that  regulate                                                                    
     car rental  providers to reflect changes  in how people                                                                    
     secure transport  in Alaska.  It also extends  the same                                                                    
     laws  and   regulations  which  apply  to   rental  car                                                                    
     companies   to   private   vehicle   rental   networks,                                                                    
     including  the payment  of the  State's Vehicle  Rental                                                                    
     Tax.  Therefore, HB  102 brings  equity  to the  rental                                                                    
     industry   for  motor   vehicles   and  will   generate                                                                    
     additional income  for the State's general  fund as the                                                                    
     private  vehicle rental  network industry  continues to                                                                    
     grow and diversify in the Alaskan economy.                                                                                 
     Please join  me in supporting  House Bill 102  to bring                                                                    
     our statutes  up to  date and  to incorporate  this new                                                                    
     industry into  the existing language  governing vehicle                                                                    
     rentals in Alaska.                                                                                                         
Representative Wool  compared a peer-to-peer auto  rental to                                                                    
Airbnb. He  detailed that  if an  individual wanted  to rent                                                                    
out their car,  they listed it on a platform  such as  Turo                                                                     
and paid a  fee to Turo. An interested party  could rent the                                                                    
car through the platform. He  pointed out that Airbnb paid a                                                                    
bed tax in  the municipalities that they  operated. The bill                                                                    
indicated  to the  platform companies  that  the car  renter                                                                    
must  pay the  state vehicle  rental tax  and any  municipal                                                                    
tax,  if applicable,  and  aligned  peer-to-peer car  rental                                                                    
companies with traditional vehicle rental companies.                                                                            
3:09:36 PM                                                                                                                    
ASHLEY  CARRICK, STAFF,  REPRESENTATIVE ADAM  WOOL, reviewed                                                                    
the sectional analysis:                                                                                                         
     This bill amends Alaska Statutes 43 and 45.                                                                                
     Section 1:  States that  this act may  be known  as the                                                                    
     "Vehicle Rental Modernization Act."                                                                                        
     Section  2: Specifies  that  Alaska's existing  Vehicle                                                                    
     Rental Tax should be paid  by the individual who either                                                                    
     provides the leased or rented  vehicle, or by a vehicle                                                                    
     rental network.                                                                                                            
     Section  3:  References  the definitions  for  "Vehicle                                                                    
     Rental  Business"  and   "Vehicle  Rental  Network"  in                                                                    
     Section 7.                                                                                                                 
     Section  4: A  "Vehicle Rental  Network" is  a business                                                                    
     that  arranges or  executes personal  passenger vehicle                                                                    
     or recreational  vehicle rentals, and which  is subject                                                                    
     to  laws   which  govern  vehicle   rental  businesses,                                                                    
     including AS 19.75.915, AS  28.10.375, AS 28.35.320, AS                                                                    
     45.32,  and  AS 45.45.425-459.  Electronic  notices  or                                                                    
     disclosures apply to vehicle rental networks.                                                                              
     Section  5: Adjusts  language to  specify that  vehicle                                                                    
     rental  businesses  and  individual owners  leasing  or                                                                    
     renting  their  vehicles  should  disclose  all  costs,                                                                    
     fees, airport-costs,  government taxes,  and government                                                                    
     surcharges applied to consumers.                                                                                           
     Section  6: Adjusts  language to  specify that  vehicle                                                                    
     rental business  may only  charge renters  or consumers                                                                    
     fees relevant  to recovering actual costs  of operating                                                                    
     and  must adjust  costs based  on the  actual costs  of                                                                    
     Section 7:  Deletes existing  definitions of  "car" and                                                                    
     "rental car business." Adds  new definitions to include                                                                    
     passenger    vehicles,     personal    vehicles,    and                                                                    
     recreational  vehicles, vehicle  rental businesses  and                                                                    
     vehicle rental networks. A  vehicle rental business can                                                                    
     be  either a  direct renter  of vehicles  or a  vehicle                                                                    
     rental network.                                                                                                            
3:11:49 PM                                                                                                                    
Representative LeBon  asked if a Bed  and Breakfast operator                                                                    
offering  a  peer-to-peer car  rental  not  going through  a                                                                    
platform  could carry  out the  transactions  on  the quiet                                                                     
and not  be subject to  taxes. Ms. Carrick responded  in the                                                                    
negative. She  related that the  individual would  be liable                                                                    
for  state and  local taxes,  but it  would be  difficult to                                                                    
collect  it.  Representative  LeBon   asked  if  there  were                                                                    
individuals  on Turo  that had  multiple  vehicles and  were                                                                    
essentially running a business.                                                                                                 
Representative  Wool answered  that the  number of  vehicles                                                                    
rented through Turo  in Alaska was unknown.  Turo refused to                                                                    
release the  information to the  state. He relayed  that the                                                                    
State of Alaska  was currently involved in a  lawsuit to get                                                                    
Turo to release information  about the individuals operating                                                                    
through  Turo. He  shared from  personal experience  that he                                                                    
knew  someone who  operated  an Airbnb  and  ran a  multiple                                                                    
vehicle  rental through  Turo.  He was  also  aware of  many                                                                    
people who  purchased cars for  the sole purpose  of renting                                                                    
them  out on  Turo. He  offered  that the  Turo rentals  are                                                                    
often more expensive than the rental car companies' rates.                                                                      
3:14:45 PM                                                                                                                    
In  response   to  a  question  by,   Representative  Knopp,                                                                    
Representative Wool  indicated that Turo was  not happy with                                                                    
the idea  of paying the  tax and other  technology companies                                                                    
along  with  Turo  were  in  opposition  to  the  bill.  The                                                                    
platforms wanted to negotiate and  pay lower tax rates  than                                                                    
entities  such  as  Uber and  Lyft  or  through  traditional                                                                    
rental  car companies.  He recounted  that  Uber, Lyft,  and                                                                    
Airbnb had  to pay the  full amount of applicable  taxes. He                                                                    
did  not  understand the  logic  for  a discounted  tax  but                                                                    
acknowledged  that   the  car  rental  platforms   made  the                                                                    
argument for lower taxes.                                                                                                       
3:17:18 PM                                                                                                                    
Representative Carpenter pointed to page  1, lines 11 and 12                                                                    
of the  bill and  read,  person who  provides the  leased or                                                                    
rented vehicle;  vehicle rental business.   He asked  if the                                                                    
legislation  would apply  to a  mother and  father who  rent                                                                    
their vehicle to their  child. Representative Wool responded                                                                    
that it  was not his  intent for  family members to  have to                                                                    
pay a  tax. He reiterated  that the  intent of the  bill was                                                                    
strictly  meant  for  peer-to   peer  rental  platforms.  He                                                                    
emphasized  that people  in the  car rental  business should                                                                    
pay the tax.  He revealed that the state  collected over $10                                                                    
million  in  vehicle  rental  tax  in  the  prior  year  and                                                                    
expected the number would be  higher if peer-to-peer rentals                                                                    
were  included.  He reminded  the  committee  that a  rental                                                                    
transaction  between two  individuals was  still liable  for                                                                    
the  tax.  Representative  Carpenter  wanted  to  avoid  any                                                                    
unintended consequences of a non-business owing taxes.                                                                          
Ms.  Carrick interjected  that if  someone  wanted to  start                                                                    
their  own  traditional car  rental  business  with a  small                                                                    
number of cars the bill  would capture that type of business                                                                    
as well. The  bill included any type of  car rental business                                                                    
that was a source of  income. She recounted testimony in the                                                                    
prior year  in the House  Labor and Commerce  Committee from                                                                    
Brandon  Spanos [Deputy  Director, Tax  Division, Department                                                                    
of  Revenue]  that it  would  be  unlikely that  individuals                                                                    
would  do  proper reporting  to  alert  the department  that                                                                    
taxes were owed making enforcement difficult.                                                                                   
3:21:11 PM                                                                                                                    
Representative  Josephson referred  to  his  notes from  the                                                                    
previous hearing of  the bill. He noted  testimony that over                                                                    
700 peer-to-peer  cars were  being rented.  He asked  for an                                                                    
estimate  of  the  amount  of   income  the  state  was  not                                                                    
collecting.  Representative Wool  responded that  presently,                                                                    
Turo would not  release information and without  the data it                                                                    
was  difficult  to calculate.  He  was  unaware of  the  700                                                                    
figure.  He   asked  Ms.  Carrick  if   she  remembered  the                                                                    
Ms.  Carrick recalled  that in  the prior  year a  testifier                                                                    
from  Turo  had roughly  estimated  the  number   of  owners                                                                    
renting  vehicles  at  700. She  emphasized  that  the  Turo                                                                    
testifier  stressed  that  his   number  was  a  very  rough                                                                    
Co-Chair Johnston  referenced Representative  Wool's account                                                                    
of a  person who was  running a car rental  business through                                                                    
Turo.  She wondered  if the  individual  received a  vehicle                                                                    
manufacturer's  discount as  well.  Representative Wool  did                                                                    
not know  the answer  to the question.  He guessed  that the                                                                    
purchases were random. Co-Chair  Johnston commented that one                                                                    
platform that was highly likely to  pop up in Alaska was the                                                                    
popular  scooter rentals.  She  wondered how  it would  work                                                                    
with  HB  102.  Representative  Wool  replied  that  he  was                                                                    
familiar with  the scooter rental.  He voiced that it  was a                                                                    
vehicle rental  platform and wanted  to see it under  the HB
102 umbrella  as a  vehicle rental. He  did not  believe the                                                                    
state should  forego potential  revenue especially  when the                                                                    
traditional vehicle rental companies were collecting it.                                                                        
Co-Chair  Johnston reviewed  the  agenda  for the  following                                                                    
HB  102  was  HEARD  and   HELD  in  committee  for  further                                                                    
3:25:38 PM                                                                                                                    
The meeting was adjourned at 3:25 p.m.                                                                                          

Document Name Date/Time Subjects
HB 30 Explanation of Changes ver. R 2.27.2020.pdf HFIN 2/27/2020 1:30:00 PM
HB 30
HB 30 Maximum Benefit for PPI by State - Workers' Compensation Research Institute 1.29.20.pdf HFIN 2/27/2020 1:30:00 PM
HB 30
HB 30 ProPublica Graphic - Alaska v National Average 1.29.20.pdf HFIN 2/27/2020 1:30:00 PM
HB 30
HB 30 ProPublica Graphic - How Much is a Limb Worth 1.29.20.pdf HFIN 2/27/2020 1:30:00 PM
HB 30
HB 30 ver. R 1.31.20.pdf HFIN 2/27/2020 1:30:00 PM
HB 30
HB 102 TuroLetterFebruary 022720.pdf HFIN 2/27/2020 1:30:00 PM
HB 102
HB 79 Explantion of Changes ver O 2.27.2020.pdf HFIN 2/27/2020 1:30:00 PM
HB 79
HB 79 Sectional Analysis ver O 2.27.2020.pdf HFIN 2/27/2020 1:30:00 PM
HB 79
HB 79 Presentation Explanation of Changes Ver U to Ver O 2.27.2020.pdf HFIN 2/27/2020 1:30:00 PM
HB 79
HB 79 ver. O 2.27.2020.pdf HFIN 2/27/2020 1:30:00 PM
HB 79
HB 30 Letter of Support NEA.pdf HFIN 2/27/2020 1:30:00 PM
HB 30
HB 102 State by State Comp 021020.pdf HFIN 2/27/2020 1:30:00 PM
HB 102