Legislature(1999 - 2000)
02/10/2000 03:00 PM House HES
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 277-RETIREMENT BENEFITS FOR REHIRED TEACHERS CHAIRMAN DYSON announced the first order of business is House Bill No. 277, "An Act relating to payment of retirement benefits for subsequently reemployed retired members of the teachers' retirement system." Also, he said that the Alaska Native Health Board (ANHB) had asked him to distribute a booklet to committee members which is in the information packet before them. Number 0206 JONATHON LACK, Legislative Assistant to Representative Halcro, Alaska State Legislature, came forward to present HB 277. He stated that HB 277 would allow retired teachers in Alaska to be re-employed in Alaska schools without jeopardizing the collection of their retirement benefits. Schools throughout the state of Alaska are experiencing a dire shortage of teachers. Today there are almost 8,000 retired Alaskan teachers living outside Alaska. It is unknown how many of these have taken jobs with outside school districts, but they represent a lost opportunity for the people of Alaska. These are experienced teachers who could be filling a need here in Alaska. They understand the Alaskan way of life but have moved on to teach outside so they can collect their Alaskan retirement and a paycheck from the outside school. MR. LACK went on to say the bill is a very broad concept. Representative Halcro drafted it not to restrict the ability of school districts and teachers to negotiate the terms of how to implement the language of this bill. Each school district would go to their respective bargaining units and establish a system for rehire. Presumably teachers would be able to come back at a lower salary; they might even come back without health benefits because rehired teachers would be eligible for health insurance through the Teachers' Retirement System (TRS). Each school district and bargaining unit would be able to work out a system for rehire that would best benefit that individual school district. Members of the Anchorage School District brought this bill to Representative Halcro's attention, and they support the bill. MR. LACK indicated that Representative Halcro asks the committee to support it. Number 0231 CHAIRMAN DYSON asked how present law precludes a retired teacher from working full time. MR. LACK replied that actual language in AS 14.25.043 prohibits a retired teacher from returning to service in more than a 40 percent capacity. A retired teacher can work for a school district on a part-time basis but if they return full time, they lose their retirement benefits. He said HB 277 allows retired teachers to return to a school district to teach and continue to receive their retirement benefits. Number 0272 CHAIRMAN DYSON clarified if a retired teacher returned to teach full time, he/she would actually receive two paychecks, one for retirement and one for teaching. Number 0282 MR. LACK answered yes. He further stated that HB 277 does not address at what step or range a retired teacher would be rehired. He presumed that the school district and the teacher's union bargaining unit would negotiate the pay range of the rehired retired teacher. He believes that school districts will not want to rehire retired teachers at the high twenty-year salary level, so the school districts will probably negotiate less than the high retirement figure. Initially Representative Halcro had wanted to designate that retired teachers return at year one salary level to the school district. In answer to Representative Halcro's idea, school districts indicated they would like to offer more, maybe year four or five. Subsequently, it was Representative Halcro's decision to leave the pay rate issue up to school districts and the teacher's union bargaining unit. Number 0422 LARRY WIGET, Executive Director, Public Affairs, Anchorage School District, testified via teleconference from Anchorage. He said that the Anchorage School District supports the concept of HB 277 very strongly. He explained that the Anchorage School District sees HB 277 as a tool to attract school psychologists, special education teachers and physical therapists, of which there is a nationwide shortage. Nevertheless, he commented that the Anchorage School District does not see HB 277 as a panacea for all teachers who may think they can retire and then be rehired. He noted that in Anchorage there were up to potentially 300 teachers who would be eligible for rehire but that the Anchorage School District would probably not want to rehire the majority of those eligible. The Anchorage School District is interested in rehiring teachers who serve the critical needs areas previously mentioned. Number 0537 GUY BELL, Director, Division of Retirement & Benefits, Department of Administration, testified for the Teachers' Retirement System (TRS) and discussed the implications HB 277 could have on the teachers retirement fund. He said the Teachers' Retirement System is funded from three sources: 1) school district employer contributions, 2) employee contributions and 3) interest earnings on investments. MR. BELL explained that the TRS fund is used to pay for current benefits of retired members and to provide health benefits for retirees. The number of state employees affected by HB 277 is only about 100 out of about 930 active TRS members now employed in the Department of Education, the Alaska Vocational Technical Institute and Mt. Edgecumbe High School. Therefore, he explained, when the Division of Retirement & Benefits produces a fiscal note on legislation which affects the TRS, very often minimal fiscal impact to the state is cited on the fiscal note even if a piece of legislation could have a financial impact. He reminded the committee that actual impact on employer rates is hard to measure because the employer rate is variable. He noted that the teacher contribution rate is set in statute at 8.65 percent. The school district employer rate has been variable but Teachers' Retirement board policy has set it at 12 percent for the past seven years in an effort to keep the rate level stable for all employers. He indicated that if teachers' behavior did not change as a result of HB 277 and everything stayed the same, there would be no impact on employer rates. MR. BELL informed the committee that the Division of Retirement & Benefits had asked their actuarial firm to assess the impact of HB 277 on contribution rates if teacher behavior changed. The fiscal note analysis in the last paragraph indicates that if half of the people who had twenty years of service stayed an additional two years, then the impact on employer rates would be .75 percent. He said that figure does not exert a huge impact on rates but .75 percent does add up to about $3 million on a yearly basis. However, he cautioned the committee to remember that the scenario he has presented is a big "what if." Number 0755 MR. BELL admitted that there is no way to know how many teachers will take advantage of HB 277 or how many teachers the school districts will allow to return, assuming that the school districts can have the option to rehire retired teachers. He wanted the committee to understand that HB 277 could have a fiscal impact, depending on what happened in response to HB 277 if the legislation is adopted as it is drafted now. CHAIRMAN DYSON commented that the committee is working with an undetermined fiscal note. He inquired as to what it would cost the state if 100 retired teachers came back to work. Number 0790 MR. BELL answered by posing a hypothetical scenario of a total teacher salary base of $1 million. Of that $1 million, .75 percent would result in $75,000 of additional cost. However, he believes that due to the size of the TRS system, the first scenario he presented would cost the state about $3.6 million annually. REPRESENTATIVE COGHILL said he understands that if a retired teacher is rehired, employer and employee contributions would be deposited in the TRS for that employee. MR. BELL agreed and said that whenever a retired teacher is rehired, the requirement still exists of employer and employee contribution to TRS. Number 0867 REPRESENTATIVE WHITAKER asked Mr. Bell to repeat the $1 million example of percentage because Mr. Whitaker had not heard it clearly and did not think the $75,000 figure was correct. MR. BELL explained again that supposing a .75 percent rate increase were imposed on a $1 million salary cost for state employees, the fiscal impact annually would be $7,500, not $75,000 [he had made a mistake in figuring]. Number 0962 JOHN CYR, President, NEA-Alaska [National Education Association], came forward to testify in favor of HB 277. He stated that NEA-Alaska is especially pleased that HB 277 will be bargained at a local level. He believes there is enough variance of need from one school district to another that it is appropriate for union bargaining units to negotiate with school districts about how to use HB 277. He does not believe districts will hire hundreds of retired teachers; he believes districts will recruit new teachers. In his opinion, districts will only use HB 277 when they have no other choice. Therefore, he does not believe there will be any impact on the TRS system. Even if some teachers are rehired, they will continue to contribute to the TRS system at the same rate as they would have originally. Number 1048 REPRESENTATIVE COGHILL asked if Mr. Cyr knew, from a bargaining perspective, what the original 40 percent number in AS 14.25.043 was based upon. MR. CYR answered he did not know; that number has been on the books for years. BILL CHURCH, Retirement Supervisor, Division of Retirement & Benefits, Department of Administration, came forward to answer questions regarding HB 277. He explained that an employee became a member of the TRS if he/she worked a minimum of 50 percent of a contract for a school district or another employer that qualified for TRS. Individuals who work less than 50 percent of a contract are not covered by TRS. DARROLL HARGRAVES, Executive Director, Alaska Council of School Administrators, came forward to testify and said he supported HB 277 if certain things are true. He understood from testimony heard that HB 277 is actuarially sound. If HB 277 is actuarially sound in TRS, HB 277 allows teachers to form a hiring pool for school district critical need shortages. Statistics that he has read indicate that there are many certified teachers in Alaska. He reminded committee members that these numerous certificate holders are people in the retired category and that under HB 277, they could be rehired to meet school district needs. It is important that school districts retain jurisdiction over who is rehired. That way school districts can fill a critical need. For this reason, not all retired teachers will be rehired. He indicated that if a teacher were rehired, that teacher would be rehired under policies, terms and conditions of a negotiated agreement at the local level. MR. HARGRAVES noted that HB 277 is a winning proposition for both school districts and retired teachers. He said that HB 277 seems to maintain an actuarially sound TRS, saves money for school districts and provides quality instruction performed by certified teachers. Number 1343 CARL ROSE, Executive Director, Alaska Association of School Boards (AASB), came forward to testify. He said that the AASB is trying to address the teacher shortage issue. His membership has not had an opportunity to address HB 277. He will review HB 277 with his membership within the next two weeks and bring an answer back to the committee. CHAIRMAN DYSON commented that if HB 277 passes, it is his intention to include a note to the Finance Committee asking them to explore actuarial soundness and advise if anything needs to be added to the fiscal note. Number 1400 REPRESENTATIVE WHITAKER made a motion to move HB 277 out of committee with individual recommendations, attached note to the Finance Committee and attached fiscal note. There being no objection, HB 277 moved from the House Health, Education and Social Services Standing Committee. The committee took an at-ease from 3:24 p.m. to 3:25 p.m.
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