Legislature(1999 - 2000)

03/15/1999 03:15 PM House L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
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HB 17 - PERS CREDIT FOR NONCERTIFICATED EMPLOYEES                                                                               
                                                                                                                                
Number 0001                                                                                                                     
                                                                                                                                
CHAIRMAN ROKEBERG announced the committee's next order of business                                                              
is HB 17, "An Act relating to the calculation of employee                                                                       
contributions and credited service in the public employees'                                                                     
retirement system for noncertificated employees of school                                                                       
districts, regional educational attendance areas, the Alaska                                                                    
Vocational Technical Center, and the state boarding schools; and                                                                
providing for an effective date."  The chairman confirmed from                                                                  
Representative Brice that the legislation had been heard the                                                                    
previous legislative session as "HB 223" [HB 323].  He noted the                                                                
bill had been completely rewritten in the House Finance Standing                                                                
Committee.                                                                                                                      
                                                                                                                                
Number 0087                                                                                                                     
                                                                                                                                
REPRESENTATIVE BRICE indicated the changes had been made to address                                                             
AVTEC [Alaska Vocational Technical Center] but the bill had not                                                                 
been completely rewritten.  Representative Brice stated HB 17                                                                   
addresses an inequity within the Alaska's school districts between                                                              
certificated and noncertificated employees.  Certificated                                                                       
employees, teachers and principals, receive a year's credit for a                                                               
nine-month contract year.  This additional cost is split between                                                                
the school district and the employee.  Noncertificated employees                                                                
such as janitors and secretaries receive a day-for-day credit in                                                                
their retirement system.  This means they have to work 40 years to                                                              
receive a 30-year retirement if they are on a nine-month contract.                                                              
House Bill 17 would allow the employees the option of buying that                                                               
extra three months of credit, covering the entire cost themselves.                                                              
It is applicable to state boarding schools, school districts, REAAs                                                             
[Rural Education Attendance Areas] and "Alaska Voc-Tech Centers."                                                               
It is voluntary, the employee chooses to participate.  In response                                                              
to questions from Representatives Halcro and Murkowski based on                                                                 
NEA-Alaska's position paper in the bill packet, Representative                                                                  
Brice noted that position paper also refers to other legislation.                                                               
[The sponsor statement for HB 17 reads:                                                                                         
                                                                                                                                
     Alaska has many noncertificated employees in its schools                                                                   
     who work nine, ten or eleven months out of the year along                                                                  
     with their certificated counterparts.  The certificated                                                                    
     employees receive full year credit for the part of the                                                                     
     year they work while the noncertificated employee only                                                                     
     get credit for the actual time worked.  Because of this,                                                                   
     a nine month employee has to work 40 years to receive a                                                                    
     30-year retirement.                                                                                                        
                                                                                                                                
     This bill addresses the inequity in state law and PERS                                                                     
     system [Public Employees' Retirement System] by giving                                                                     
     noncertificated school employees who work a comparable                                                                     
     amount of days the option to use the same retirement                                                                       
     formula that certificated employees use.  This bill will                                                                   
     allow those noncertificated school district employees to                                                                   
     receive the same amount of credit toward retirement as                                                                     
     those certificated employees who work the same amount of                                                                   
     time and receive a full year of credit toward retirement.                                                                  
                                                                                                                                
     The cost of changing the PERS system, under this bill,                                                                     
     will be supported by the employees, rather than                                                                            
     increasing the burden to school districts.  Employees                                                                      
     currently active in the system will have 180 days to opt                                                                   
     into the new program.  New employees will have the option                                                                  
     to participate within 90 days of inception.  That is                                                                       
     within beginning employment within the system.]                                                                            
                                                                                                                                
Number 0381                                                                                                                     
                                                                                                                                
REPRESENTATIVE HARRIS referred to the comment in the fiscal note,                                                               
"The $72.4 [$72,400] is needed to hire contractors to update the                                                                
division's computer system to accommodate the proposed changes."                                                                
Representative Harris questioned what the obligation of the                                                                     
education units described here would be to these employees for                                                                  
their retirement.  He asked if there would be added financial                                                                   
responsibility for those institutions.                                                                                          
                                                                                                                                
REPRESENTATIVE BRICE responded there is no added financial                                                                      
responsibility in terms of the retirement system itself.  He                                                                    
indicated there might be a cost of a couple hundred to a thousand                                                               
dollars to provide the paperwork for an employee to elect in.  He                                                               
stated there is no financial obligation to the school district; the                                                             
school employee shoulders the entire burden of the change to ensure                                                             
actuarial soundness of the system.  In response to the chairman's                                                               
question about the whether the fiscal note was a disappointment                                                                 
and/or surprise, Representative Brice indicated there is some                                                                   
question with the Department of Administration about the costs of                                                               
developing the tracking and estimating computer programming.  On                                                                
the other hand, he noted those are non-general fund dollars; the                                                                
employees would pay for the cost of those changes.  Representative                                                              
Brice agreed with the chairman that that could be discussed in the                                                              
House Finance Standing Committee.                                                                                               
                                                                                                                                
Number 0548                                                                                                                     
                                                                                                                                
RICK HELMS, Southeast Political Alternate, Board of Directors,                                                                  
Alaska Public Employees Association/Alaska Federation of Teachers                                                               
(APEA/AFT), came forward to testify in support of HB 17.  He asked                                                              
for the committee's support, noting this legislation would benefit                                                              
the approximately 600 APEA/AFT members who work nine months out of                                                              
the year.  These members are professionals just like the teachers                                                               
and administrators; they should not be penalized for choosing this                                                              
career.  Referring to Representative Brice's comments, Mr. Helms                                                                
said it takes 37.5 years of work for 30 years of service.  He                                                                   
commented a companion Senate bill, SB 9, has already passed out of                                                              
the Senate Labor and Commerce Standing Committee, and he encouraged                                                             
this committee to do the same.  Mr. Helms noted, as Representative                                                              
Brice had also mentioned, this legislation had passed the previous                                                              
session as HB 323, which died on the Senate floor due to late                                                                   
action.  Mr. Helms expressed the hope that with sooner action, HB
17 or SB 9 might be passed into law this year.                                                                                  
                                                                                                                                
Number 0667                                                                                                                     
                                                                                                                                
JOHN CYR, President, NEA-Alaska, came forward to testify in support                                                             
of HB 17.  He noted NEA-Alaska, the National Education Association                                                              
of Alaska, represents about 11,000 employees.  Three thousand of                                                                
these are classified employees:  janitors, classroom aides, food                                                                
service workers.  House Bill 17 would directly affect these                                                                     
employees' lives.  Mr. Cyr noted the committee has NEA-Alaska's                                                                 
position statement.  He said this has been a priority of NEA and                                                                
its members for a number of years.  They believe they have finally                                                              
worked out a way to do this where the employees would bear the                                                                  
total costs and he reiterated NEA-Alaska's support for the                                                                      
legislation.                                                                                                                    
                                                                                                                                
REPRESENTATIVE MURKOWSKI asked who would actually be covered under                                                              
this plan.                                                                                                                      
                                                                                                                                
Number 0722                                                                                                                     
                                                                                                                                
MR. CYR replied that it covers anyone who works in a school who is                                                              
not certified.  Teachers, principles and administrators are                                                                     
certified employees and are in TRS [Teachers' Retirement System].                                                               
                                                                                                                                
CHAIRMAN ROKEBERG confirmed with Mr. Cyr that the classified                                                                    
employees would be under the state program, PERS.  The chairman                                                                 
asked if they receive any SBS [Supplemental Benefits System] and                                                                
whether it varies by district.                                                                                                  
                                                                                                                                
MR. CYR replied some districts get SBS and some do not.  For                                                                    
example, the classified employees in "Mat-Su" [Matanuska-Susitna                                                                
Borough] are eligible.  He believes that was a one-time opt-in                                                                  
provision districts had.                                                                                                        
                                                                                                                                
CHAIRMAN ROKEBERG questioned if the employees have social security,                                                             
or if they are not allowed.                                                                                                     
                                                                                                                                
MR. CYR replied he thinks they do not have social security,                                                                     
indicating he is not really familiar with PERS.  Referring to the                                                               
previous questions about the NEA-Alaska position statement, Mr. Cyr                                                             
indicated he believes the inability of classified employees to                                                                  
collect unemployment during layoff does have a bearing on HB 17                                                                 
because custodians and secretarial staff used to be year-round                                                                  
employees in Alaska.  However now because of budget cuts, et                                                                    
cetera, they are nine-month, and some even less.  The employees are                                                             
laid off, cannot collect unemployment, and do not receive                                                                       
retirement for that period.  Mr. Cyr stated that to NEA-Alaska this                                                             
really is equity:  if the classified employees are willing to pay                                                               
their own way, the state should allow them to do so.                                                                            
                                                                                                                                
CHAIRMAN ROKEBERG invited Guy Bell and Bill Church forward [Bill                                                                
Church, Retirement Supervisor, Division of Retirement and Benefits,                                                             
Department of Administration].                                                                                                  
                                                                                                                                
Number 0885                                                                                                                     
                                                                                                                                
GUY BELL, Director, Division of Retirement and Benefits, Department                                                             
of Administration, came forward to testify on HB 17.  Mr. Bell said                                                             
he has little to add to Representative Brice's testimony.  He noted                                                             
a couple of small points:  this will be prospective only; it would                                                              
apply from the date of passage forward.  Those people in the system                                                             
today would be able to, within six months of the bill's effective                                                               
date, elect to pay a higher charge for the future service they                                                                  
would accrue.  New employees would have 90 days to make that                                                                    
determination.  In working on the bill last year with                                                                           
Representative Brice, Mr. Bell indicated the concern was expressed                                                              
to the division that this be a fixed charge to the employee, so the                                                             
employee would know the charge from year to year.  This concern was                                                             
brought to the division's actuaries in the development of the rate                                                              
calculation.  The revised number given last week by the actuaries                                                               
is approximately 1.25 percent.  Mr. Bell explained that if a person                                                             
wants this service they would be paying approximately 8 percent of                                                              
their salary as opposed to 6.75 percent, the current PERS                                                                       
contribution.  He confirmed to the chairman that it is an                                                                       
irrevocable election; once the decision is made it cannot be                                                                    
changed.  In response to the chairman's further question about what                                                             
kinds of problems a revocable decision would add to the                                                                         
administration, Mr. Bell said he thinks technically it would become                                                             
more difficult to administer because each year the employee would                                                               
have to be asked his or choice for that year; he thinks that why it                                                             
was drafted as irrevocable.                                                                                                     
                                                                                                                                
Number 1011                                                                                                                     
                                                                                                                                
CHAIRMAN ROKEBERG said this is done all the time with benefits and                                                              
health insurance, noting elections and open periods.                                                                            
                                                                                                                                
MR. BELL stated, "Our thought was to try to keep this as benign as                                                              
possible and the way we thought about administering it is develop                                                               
a form in our division [and] send it out to the school districts.                                                               
When the people come in on the job at the beginning of the school                                                               
year, they would provide that form with some basic education, sign                                                              
the form and that's the time they make their decision.  Certainly                                                               
it could be done otherwise, it would -- the bill would need to be                                                               
changed if that were the decision."                                                                                             
                                                                                                                                
Number 1044                                                                                                                     
                                                                                                                                
REPRESENTATIVE BRICE indicated that there have been other systems                                                               
where a move was made from a 30-year retirement plan to a 20-year                                                               
plan, specifically correctional officers.  This vote [election] has                                                             
been patterned along that same irrevocable system to insure that                                                                
the administrative costs would stay very low.  The intention is to                                                              
minimize the impact as much as possible.                                                                                        
                                                                                                                                
CHAIRMAN ROKEBERG asked Mr. Bell if there are problems with Section                                                             
1 regarding the contribution surcharge.  He mentioned the                                                                       
stipulated amount.                                                                                                              
                                                                                                                                
MR. BELL indicated that, since it will be a fixed cost, the                                                                     
alternative could be the deletion of the second sentence in Section                                                             
1 which discusses the way the calculation would be made and the                                                                 
insertion "of 1.25 percent" on page 1, line 11, after "surcharge".                                                              
It does the same thing, it just says it more directly.  In response                                                             
to the chairman's question about where the 1.25 percent comes from,                                                             
Mr. Bell noted it comes from the language in the second sentence.                                                               
It is the actuarial cost of that additional benefit the employees                                                               
would receive if they made the selection.                                                                                       
                                                                                                                                
CHAIRMAN ROKEBERG asked if it could vary by contract.                                                                           
                                                                                                                                
MR. BELL explained that the actuary did it on a universal charge                                                                
basis, which means it may vary slightly from individual to                                                                      
individual.  However, in the aggregate, that is the cost arrived at                                                             
if a fixed rate which would apply to the entire group is being                                                                  
sought.  Doing it on an individual-by-individual basis would                                                                    
produce something similar but it would also be much more costly                                                                 
because characteristics and status - age, salary, et cetera - would                                                             
have to be examined for each individual.                                                                                        
                                                                                                                                
Number 1190                                                                                                                     
                                                                                                                                
REPRESENTATIVE BRICE indicated there has been some discussion on                                                                
whether a specific percentage should be included, or not included                                                               
"but ... have one number generated that every employee would have                                                               
to kick in if they wanted to opt to discuss."  It comes down to the                                                             
possibility of a future change that might affect the actuarial                                                                  
soundness of the system, whether an increase or decrease in                                                                     
contribution.  Representative Brice noted he wants to ensure that                                                               
a number is not set in statute and then left to the political whims                                                             
of the legislature:  if that number were to increase and the                                                                    
administration has no authority to increase that number.  He                                                                    
commented he is willing enter into this discussion, and added that                                                              
the fiscal note had not surprised him, it is the same or very close                                                             
to the previous session's.                                                                                                      
                                                                                                                                
CHAIRMAN ROKEBERG commented on the apparent size of the fiscal note                                                             
this year as compared to the previous year.                                                                                     
                                                                                                                                
MR. BELL said the fiscal note is smaller this year.                                                                             
                                                                                                                                
Number 1289                                                                                                                     
                                                                                                                                
REPRESENTATIVE MURKOWSKI asked if HB 17 is basically the same bill                                                              
that went through last year.                                                                                                    
                                                                                                                                
REPRESENTATIVE BRICE answered it is very substantially the same.                                                                
He thinks there was one change on page 1, line 10, and that the                                                                 
first word, "and", should probably be "or" for complete clarity.                                                                
Representative Brice indicated "or" was used in the previous                                                                    
legislation but legislative legal counsel feels it can be either                                                                
one.  [HB 17, page 1, lines 9 and 10, "of a state boarding school,                                                              
of a school district or regional educational attendance area, and                                                               
of the Alaska Vocational Technical Center determined by reference                                                               
to".]                                                                                                                           
                                                                                                                                
CHAIRMAN ROKEBERG stated that AVTEC was added.                                                                                  
                                                                                                                                
REPRESENTATIVE BRICE explained that the addition of AVTEC was the                                                               
primary change from last year's House Labor and Commerce Standing                                                               
Committee version.  He indicated the changes were made last year in                                                             
the House Finance Standing Committee.                                                                                           
                                                                                                                                
CHAIRMAN ROKEBERG commented lightly he probably shouldn't take it                                                               
personally that the entire bill had been changed after leaving                                                                  
House Labor and Commerce the previous session.                                                                                  
                                                                                                                                
REPRESENTATIVE BRICE replied that the election of participation had                                                             
come from discussions with the Administration, and the addition of                                                              
AVTEC from other discussions.  He indicated it was the continuation                                                             
of the committee process.                                                                                                       
                                                                                                                                
Number 1390                                                                                                                     
                                                                                                                                
BARBARA HUFF TUCKNESS, Director, Governmental and Legislative                                                                   
Affairs, General Teamsters Local 959 State of Alaska, came forward                                                              
to testify in support of HB 17.  She referred to a letter of                                                                    
support in the bill packet in lieu of giving more detailed                                                                      
testimony.  Ms. Huff Tuckness noted HB 17 would have an impact on                                                               
several hundred members within the Anchorage School District                                                                    
including food service employees, bus drivers, and a few                                                                        
maintenance workers.  [The March 8, 1999, letter mentioned is to                                                                
the committee from Gerald L. Hood, Secretary-Treasurer, Teamsters                                                               
Local 959, and reads:                                                                                                           
                                                                                                                                
     Teamsters Local 959 represents non-certified employees                                                                     
     most predominantly in the Anchorage School District.                                                                       
     Several hundred of those members actually work less than                                                                   
     twelve months of the year due to the nature of their                                                                       
     jobs.  As we understand HB 17, it would allow those                                                                        
     members, by individual choice, the opportunity to receive                                                                  
     the same credited year as their certified counterparts                                                                     
     for purposes of retirement.  Any increased cost under                                                                      
     this bill would be born by the employee, not the employer                                                                  
     (Anchorage School District).                                                                                               
                                                                                                                                
     We urge your support and passage of this bill to allow,                                                                    
     by employee choice, the opportunity to increase their                                                                      
     credited service time as is currently the option for the                                                                   
     certified employees.]                                                                                                      
                                                                                                                                
Number 1426                                                                                                                     
                                                                                                                                
CHAIRMAN ROKEBERG indicated to Representative Brice that there had                                                              
been conversations about some special education personnel.                                                                      
                                                                                                                                
REPRESENTATIVE BRICE replied there had been some talk by SESA, the                                                              
Special Education Service Agency [stated as "Special Education                                                                  
Support Agency"], at the end of the previous session.  He noted                                                                 
SESA is a function of state government [Department of Education],                                                               
not necessarily of a school district.  Representative Brice said he                                                             
had been contacted after the end of the previous session but had                                                                
not heard from the organization in three months.  He indicated he                                                               
would be happy to follow this up if the chairman wished.                                                                        
                                                                                                                                
Number 1493                                                                                                                     
                                                                                                                                
CHAIRMAN ROKEBERG responded it was just something that had been                                                                 
brought to his attention and that he did not have an opinion on.                                                                
Confirming there were no further witnesses, Chairman Rokeberg                                                                   
announced the public testimony on HB 17 was closed.  He commented                                                               
on the absence of a supporting letter from the Anchorage School                                                                 
District (ASD) in the bill packet.                                                                                              
                                                                                                                                
REPRESENTATIVE BRICE replied that Larry Wiget [Director, Government                                                             
Relations, Anchorage School District] had said there is no problem                                                              
with the bill during an informal discussion.  Representative Brice                                                              
noted this discussion had been after the strike.  However, he                                                                   
indicated he does not know if the Anchorage School District has                                                                 
taken a formal position on HB 17.                                                                                               
                                                                                                                                
CHAIRMAN ROKEBERG indicated ASD was not in opposition to the                                                                    
legislation.                                                                                                                    
                                                                                                                                
Number 1606                                                                                                                     
                                                                                                                                
REPRESENTATIVE HARRIS made a motion to move HB 17 out of committee                                                              
with individual recommendation and the attached fiscal note.  There                                                             
being no objection, HB 17 moved out of the House Labor and Commerce                                                             
Standing Committee.                                                                                                             

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