Legislature(2013 - 2014)BARNES 124
04/02/2014 03:15 PM House LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Adjourn | |
| Start | |
| HB309 | |
| HB152 | |
| HB160 |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 309 | TELECONFERENCED | |
| += | HB 152 | TELECONFERENCED | |
| *+ | HB 160 | TELECONFERENCED | |
| + | TELECONFERENCED |
HB 152-PERS TERMINATION COSTS
3:50:22 PM
CHAIR OLSON announced that the next order of business would be
HOUSE BILL NO. 152, "An Act requiring certain employers who
terminate participation in the defined benefit retirement plan
or the defined contribution retirement plan of the Public
Employees' Retirement System to make contributions related to
past service liability and pay termination costs; repealing a
requirement that employers who terminate participation in the
defined contribution retirement plan or the defined benefit
retirement plan of the Public Employees' Retirement System pay
for a termination cost study; and providing for an effective
date."
3:50:29 PM
CHAIR OLSON explained the committee heard this bill last year
and had hearings on March 5, March 10 and March 19, 2014. The
committee adopted a proposed committee substitute (CS), Version
Y, on March 10, 2014, and took public testimony.
3:50:52 PM
REPRESENTATIVE STEVE THOMPSON, Alaska State Legislature, as
prime sponsor of HB 152, stated that he is very passionate about
this bill. He said passage of HB 152 would mean viability and
existence for many small communities and villages in the state.
He emphasized that the state has experienced declining revenues
with less revenue sharing. He explained that with layoffs,
termination studies add to the debt. For example, the community
of Galena pays over $20,000 per month for debt and it means this
small community has less money to keep people employed. He said
he doesn't want to see the communities go bankrupt.
3:53:21 PM
SALLIE STUVEK, Human Resources Director, Fairbanks North Star
Borough (FNSB), asked to testify in support of HB 152. She said
the FNSB believes that infusing money into the unfunded PERS and
TRS system will save the state and municipalities future
contributions. Prefunding will allow the FNSB to reduce
contributions in future years and allow for interest earnings to
be utilized now, increasing the funding ratio for both systems.
In addition, the repeal of the termination study requirement
will allow municipal employers necessary operational flexibility
to manage their programs and services. Municipalities should be
able to adjust their workforce without concern for an
administrative decision today having long lasting financial
impacts to the municipality's PERS liability. She reported that
the FNSB assembly passed a resolution on January 30, 2014,
supporting this and reiterated the FNSB's support of HB 152.
3:54:53 PM
CHAIR OLSON, after first determining no one else wished to
testify, closed public testimony on HB 152.
3:55:13 PM
REPRESENTATIVE REINBOLD referred to the 4/2/14 fiscal note and
asked for clarification.
JANE PIERSON, Staff, Representative Steve Thompson, Alaska State
Legislature referred to a March 4, 2014, fiscal note from the
Department of Administration that is indeterminate; however, the
last line on page 2 of the fiscal note reads, "Termination costs
would be approximately $75,000,000."
REPRESENTATIVE REINBOLD said the fiscal note is $75 million.
MS. PIERSON agreed that is correct. She said it assumes that 20
percent of the workforce would be laid off.
3:56:28 PM
REPRESENTATIVE JOSEPHSON expressed concern that this could
increase local government contributions. He expressed further
concern that it will grow unfunded liability. He acknowledged
the problem exists for small communities, which is why he
thought the original version of the bill was more compelling.
He understood the need to privatize the work force, but he
remains concerned about what happened in the Municipality of
Anchorage last year. Yesterday an election result was arguably
a referendum on last year's events, although the results of the
election are not yet clear. He highlighted his concerns about
unnecessarily privatizing the public sector since it can be more
responsive to public need than the private sector since it is
difficult to know who to direct a complaint to in the private
sector. He acknowledged that this issue is complicated. He was
unsure whether Version Y is the right mechanism, particularly
since it is vastly different from the original version. He did
not think he would recommend its passage.
3:59:01 PM
CHAIR OLSON offered his belief that it is important to bring
forth the issue to the public; however, with such a large fiscal
impact he wondered if it would have a tough time in the next
committee of referral.
REPRESENTATIVE JOSEPHSON acknowledged that Representative
Thompson was previously a city mayor, which provides him with a
unique perspective.
REPRESENTATIVE THOMPSON provided some history, noting that years
ago the state went to villages, communities, and boroughs to ask
them to join in the retirement system to enhance their hiring
ability, stabilize the retirement benefit package, and become a
tool for communities. He said most joined and it was good for
communities until the state discovered its actuary misquoted the
debt. The state outlined the percentage of payment, and
communities complied. Through no fault of their own, these
communities have been assessed a portion of unfunded liability
that is detrimental to the future of some of the communities.
He hoped that the state and governor would provide a PERS fix to
address the unfunded liability; however, in the meantime the
state could lose small communities. He said that if 20 percent
of the employees were all laid off, it could result in $75
million. Some communities are not closing departments or
terminating employees because they can't afford the termination
costs. He characterized this as being a big problem and he
reiterated the importance of not losing communities.
4:01:54 PM
CHAIR OLSON said that this has been an issue for several years.
REPRESENTATIVE HERRON concurred with Representative Thompson.
He said that the choice has negative connotations, but he
emphasized the importance of protecting the "little people."
REPRESENTATIVE REINBOLD pointed out she knows where to go in the
private sector. She offered her belief that businesses are very
responsive. She thanked the sponsor for bringing this issue up.
4:03:08 PM
REPRESENTATIVE REINBOLD moved to report the proposed committee
substitute (CS) for HB 152, labeled 28-LS-272\Y, Wayne, 2/26/14
out of committee with individual recommendations and the
accompanying fiscal notes. There being no objection, the CSHB
152(L&C) was reported from the House Labor and Commerce Standing
Committee.