Legislature(2009 - 2010)BARNES 124

03/23/2009 03:15 PM LABOR & COMMERCE

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03:19:40 PM Start
03:20:17 PM HB30
05:17:49 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Heard & Held
HB 30-REPEAL DEFINED CONTRIB RETIREMENT PLANS                                                                                 
3:20:17 PM                                                                                                                    
CHAIR OLSON  announced that the  only order of business  would be                                                               
HOUSE BILL  NO. 30,  "An Act  repealing the  defined contribution                                                               
retirement  plans   for  teachers   and  for   public  employees;                                                               
providing  a defined  benefit retirement  plan  for teachers  and                                                               
public  employees; making  conforming  amendments; and  providing                                                               
for an effective date."                                                                                                         
3:21:10 PM                                                                                                                    
REPRESENTATIVE  BUCH  referred  to  a letter  he  received  dated                                                               
February 12, 2009  from the Legislative Research,  but noted that                                                               
he did  not have any backup  for the $202 million  in savings the                                                               
consultants  indicated  the state  has  saved  under the  defined                                                               
contribution (DC) plan in the past three years.                                                                                 
3:21:58 PM                                                                                                                    
PAT  SHIER,   Director,  Division   of  Retirement   &  Benefits,                                                               
Department of  Administration (DOA),  explained that  any savings                                                               
would be  due to  the difference in  the contributions  the state                                                               
must make  on behalf  of municipalities and  the state  to bridge                                                               
the  gap between  the  22  percent statutory  rate  and the  rate                                                               
calculated by the  actuary.  He reiterated  that calculations for                                                               
savings post  Senate Bill  141 were determined  by taking  the 22                                                               
percent  public employers'  rate and  any additional  amount that                                                               
the actuarial projects.                                                                                                         
3:24:15 PM                                                                                                                    
CHAIR OLSON  recalled that in 2007  - 2008 the City  of Fairbanks                                                               
rate was 124 or  125 percent.  He stated that  the state paid the                                                               
difference between  22 percent  and the 124  percent figure.   He                                                               
offered his  belief that  2007 was the  last year  for individual                                                               
rates.   After that the rates  are blended rates, he  opined.  He                                                               
further  recalled  that  the  amounts  varied  between  political                                                               
subdivisions  throughout  the  state.    He  mentioned  that  the                                                               
committee  anticipates receiving  a  breakout  that will  provide                                                               
additional  details.   He  stated  that  the Fairbanks  rate  was                                                               
124.66, with  the 2008 rate  of 135.91,  and the 2009  rate would                                                               
have  been 140  percent but  it was  a blended  rate.   Thus, the                                                               
state picked up a significant portion of the cost.                                                                              
3:25:07 PM                                                                                                                    
REPRESENTATIVE  CATHY MUNOZ,  Alaska State  Legislature, recalled                                                               
the discussion  of the $200  million figure at the  last meeting.                                                               
She  stated   that  it  is   very  difficult  to   ascertain  the                                                               
information source.   She  said this  is the  first time  she has                                                               
heard reference  to the contribution rates  throughout the state.                                                               
She  reviewed the  Buck Consultant's  projections and  the actual                                                               
fiscal  note, which  do not  match.   Thus, she  was not  certain                                                               
about the $200 million.                                                                                                         
CHAIR   OLSON  reiterated   that  the   committee  will   receive                                                               
additional information.   He offered his belief that  the bulk of                                                               
the amount is what the  state is absorbing from various political                                                               
3:26:23 PM                                                                                                                    
KEVIN BROOKS,  Deputy Commissioner,  Office of  the Commissioner,                                                               
Department of Administration (DOA), introduced himself.                                                                         
3:26:41 PM                                                                                                                    
REPRESENTATIVE  HOLMES  comparing  the Buck  Consultants'  letter                                                               
related her  understanding that the  TRS plan cost more  than the                                                               
defined benefit (DB) plan, but it  does not seem to mesh with the                                                               
fiscal notes.  She asked to  have the fiscal notes explained.  In                                                               
response  to Mr.  Brooks, Representative  Holmes referred  to the                                                               
February 12, 2009 letter from Buck Consultants.                                                                                 
MR. BROOKS opined  that it is important to note  that the letters                                                               
from Buck  Consultants are responses to  very specific questions.                                                               
He stated in  the first one, the state asked  for a comparison of                                                               
cost  between  two tiers:  the  new  tier  and the  last  defined                                                               
contribution (DC) tier.   He explained that  in subsequent memos,                                                               
the  state asked  for the  cost  to the  state in  order for  the                                                               
division to have  the ability to prepare the fiscal  notes on the                                                               
bill.   Thus, the  matter becomes  somewhat complex  because Buck                                                               
Consultants  uses the  total DB  payroll, which  is significantly                                                               
higher than  the DC system.   Thus, different rates  are assessed                                                               
against  both  of  them,  with different  normal  cost  for  each                                                               
MR. SHIER referred to Buck  Consultants letter dated February 12,                                                               
2009, to last sentence of the  first paragraph, which read:  "The                                                               
rates were determined using the  payroll applicable to each group                                                               
and are not  based on total payroll."   He referred to  page 2 of                                                               
the letter,  to the Teachers'  Retirement System to the  total of                                                               
8.96 percent.   He explained that is 8.96 percent  divided by the                                                               
TRS DB  payroll only.  He  further explained that on  page 2, the                                                               
Defined  Contributions  Retirement Plan  (DC)  is  a sum  of  the                                                               
contributions in that  column.  Thus, the total  is 11.40 percent                                                               
which is applied to payroll.   However, he pointed out that these                                                               
are  only the  normal cost  rates, without  any consideration  of                                                               
past service  cost, which  is a  feature of the  DB plans.   More                                                               
important, the denominator is separate.                                                                                         
MR. SHIER explained that in arriving  at the overall rate for the                                                               
DC plan,  the DCR  payroll is  included in  the denominator.   He                                                               
noted  that the  denominator  ranges from  $1.5  billion to  $1.9                                                               
billion for the combined systems.   He reiterated that Mr. Brooks                                                               
aptly pointed  out that  when the  division asked  the consultant                                                               
the  question,  "Can you  compare  the  rates  for us?"  that  it                                                               
received this letter.   Thus, the division soon  realized that it                                                               
was  not  useful to  help  determine  the actual  fiscal  effect.                                                               
Therefore, the  division asked the  next question, "What  are the                                                               
fiscal effects using  the current method of  arriving at employer                                                               
rates, keeping in  mind that the statutory rate  is 22 [percent];                                                               
that the state is on the  hook for everything above 22 [percent].                                                               
Tell us that number for a fiscal note period of significance."                                                                  
3:31:12 PM                                                                                                                    
MR. SHIER stated  that those numbers are reflected  in the fiscal                                                               
note.     He  highlighted  that  Buck   Consultants  performed  a                                                               
calculation,  as  actuaries  do,  which is  to  take  the  entire                                                               
payroll and  attempt to project the  DB rate.  Under  the current                                                               
scenario, the consultant used an  assumed level of 75 percent for                                                               
the  anticipated DB,  and calculated  how that  would affect  the                                                               
actuarial calculation  of the rate.   He opined the  fiscal notes                                                               
are reflective  of an  increase between 22  percent and  what the                                                               
actuarial rate would be in future periods.                                                                                      
3:32:38 PM                                                                                                                    
REPRESENTATIVE  HOLMES  related  her understanding  that  the  DB                                                               
system  is  closed.    She recalled  testimony  with  respect  to                                                               
timelines for  investing, that  once the  system is  closed, that                                                               
rates of returns  are reduced.  Thus, for those  employees in the                                                               
closed  DB system,  the state  may actually  end up  funding more                                                               
over time  since the system is  closed.  She inquired  as to what                                                               
effect  that has  to counterbalance  some of  the differences  in                                                               
cost between the two systems.                                                                                                   
3:33:53 PM                                                                                                                    
MR.  SHIER stated  that if  the  DB plan  were to  close for  new                                                               
participants, but also for new  funds, that would have a dramatic                                                               
effect  in  having  to  rebalance  asset  allocation.    However,                                                               
passage  of  Senate  Bill  123  allowed  the  assessment  in  the                                                               
employer   rate   of   an  additional   amount   above   the   DC                                                               
contributions.   He referred to  the Buck Consultants'  letter of                                                               
February  12,   2009,  to  the   figure  for   Public  Employees'                                                               
Retirement  System (PERS)  (All members)  to the  DC Plan  Tier 4                                                               
total of  9.23 percent.   Yet, employers  are paying  22 percent,                                                               
for  the  total  payroll.   Thus,  the  difference  between  9.23                                                               
percent and  22 percent continues  to flow  into the DB  plans to                                                               
help  pay  down  the  unfunded  liability.   As  the  DB  payroll                                                               
continues to grow,  currently at 20 percent of  the PERS payroll,                                                               
the funds are  a constant source of new investment  and new cash,                                                               
which delays any need to  reallocate assets.  He highlighted that                                                               
"there are  a lot of  other moving parts".   He surmised  that if                                                               
the current  markets dictate that  assets should  be reallocated,                                                               
it  could  result   in  a  different  assumed   rate  of  return.                                                               
Additionally,  changes  could  affect the  actuarial  projections                                                               
such that 8.25 percent might be considered too high.                                                                            
3:35:43 PM                                                                                                                    
MR.  SHIER recalled  a conversation  with the  department's chief                                                               
investment officer.  The investment  officer recalled asking Buck                                                               
consultants  when asset  reallocation  might take  place and  the                                                               
consultants projected  that might happen  in 2025, based  on this                                                               
change alone.   Thus, he related he did not  want to suggest that                                                               
asset allocation  will never change.   He surmised that  it could                                                               
not be  predicted.  He further  surmised that as a  result of the                                                               
state changing  to a DC  plan that  asset reallocation is  far in                                                               
the future, if at all, and depends on a variety of factors.                                                                     
3:36:57 PM                                                                                                                    
REPRESENTATIVE  BUCH stated  that  some  information in  members'                                                               
packets  suggests that  the  DB investments  out  perform the  DC                                                               
investments.  He  inquired as to whether the  most current fiscal                                                               
note (FN) reflects this.                                                                                                        
MR. SHIER  explained that the FN  is a description of  the impact                                                               
on  the  General  Fund  for the  state's  contribution  above  22                                                               
percent in the event of this  change.  He offered his belief that                                                               
it  is  a  best  guess  and   discusses  a  75  percent  rate  of                                                               
individuals  choosing  to  participate.    He  opined  there  are                                                               
differences, with  respect to the  rates of  return comparatively                                                               
between the hybrid DC and the DB plan.                                                                                          
3:38:40 PM                                                                                                                    
REPRESENTATIVE  BUCH opined  that he  has been  calculating those                                                               
differences as  a function  of performance.   He stated  that one                                                               
component of  the discussion when reviewing  cost analyses should                                                               
be  to review  the impact  that investments  have on  retirees as                                                               
well as the state, the board, and the ending balance.                                                                           
MR. SHIER  advised that losses  that individuals in DC  plan have                                                               
sustained are not included in the fiscal note.                                                                                  
3:39:27 PM                                                                                                                    
REPRESENTATIVE DOOGAN referred to  the fiscal note dated 3/16/09,                                                               
labeled  "Statewide".   Per  the  fiscal note,  for  FY 2011  the                                                               
operating  expenditures  are  projected  at $15.6  million.    He                                                               
related  his   understanding  that  the  figure   represents  the                                                               
difference  between  actuarial  projections and  the  22  percent                                                               
employer rate  cap for PERS  and the 12.56 percent  employer rate                                                               
for TRS.  He asked the reason for such a large difference.                                                                      
MR.  BROOKS  explained  that  the   Division  of  Retirement  and                                                               
Benefits asked the  actuaries for the cost impact  on the systems                                                               
if the changes are made.   He highlighted that one of the biggest                                                               
changes going  back to  DB system  is the  impact of  health care                                                               
costs for retirees.  Currently  if an individual retires from the                                                               
DC  plan, the  retiree must  be 65,  or retire  from the  system.                                                               
Depending on  years of  service, there is  a co-pay  portion, but                                                               
the health  care benefits are limited  by the DC plan.   Thus, by                                                               
returning to the  DB plan, the state must also  cover health care                                                               
costs for  anyone 60 years  and older  with 10 years  of service.                                                               
Thus, the additional  health benefits for returning to  a DB plan                                                               
will cost  the state.   He  opined that  health insurance  is the                                                               
largest driving  factor.   He related the  state covers  the full                                                               
cost of  retirement between  60 and  65 years  of age  for anyone                                                               
with 10 years of service.  Thus,  a person can work from 50 to 60                                                               
years of age and retire, or work  from 20 to 30 years of age, and                                                               
leave the  state.   However, once  the person  turns 60  they are                                                               
eligible for  health care coverage  at 100 percent,  until he/she                                                               
reaches 65 years of age  and the state's system becomes secondary                                                               
to Medicare.   He reiterated  that the increased  cost associated                                                               
with  the  DB plan  contributes  significantly  to the  increased                                                               
annual cost reflected in the fiscal note.                                                                                       
3:42:39 PM                                                                                                                    
MR.  BROOKS  related  his  understanding that  there  is  not  an                                                               
increase  to the  unfunded liability  since the  bill is  written                                                               
such  that an  individual in  a DC  plan returning  to a  DB plan                                                               
would only be able to  bring whatever service he/she could afford                                                               
with their  prior earnings.   He  related a  scenario in  which a                                                               
person works under  a DC plan for  two years.  In  the event that                                                               
HB 30  passes, the  individual's account  would only  buy him/her                                                               
one year  in a DB plan.   Therefore, the change  in systems would                                                               
not increase the state's unfunded  liability.  Instead, the state                                                               
would  accrue   increased  costs  by  returning   to  a  "richer"                                                               
retirement plan.                                                                                                                
3:43:46 PM                                                                                                                    
REPRESENTATIVE DOOGAN  related his understanding that  the fiscal                                                               
note  is based  on a  certain number  of retirees,  which is  not                                                               
reflected in  the analysis section  of the fiscal note  since the                                                               
$15.6  million  increment for  FY  2011  would only  reflect  the                                                               
additional cost of reverting to a DB plan.                                                                                      
MR. BROOKS  agreed that  the fiscal  note reflects  the increased                                                               
cost.  He explained that  the actuaries would provide an employer                                                               
rate as a percentage of the  state's payroll that would result in                                                               
a $15.6 million increase.                                                                                                       
REPRESENTATIVE  DOOGAN asked  if that  increase would  be due  to                                                               
health care benefits.                                                                                                           
MR.  BROOKS  answered that  overall  health  care benefits  is  a                                                               
significant factor.   He explained  that the model  used actually                                                               
accounts for each person's age, and health.                                                                                     
REPRESENTATIVE  DOOGAN related  his understanding  that big  cost                                                               
causers were  Tier 1 and  Tier II  retirement plans.   He related                                                               
his  understanding   that  according  to  the   fiscal  note  the                                                               
difference between the  Tier III costs and the DC  plan is nearly                                                               
$16 million.                                                                                                                    
MR. SHIER  explained that earlier  tiers appear on  the actuarial                                                               
report.   The actuarial was  specifically asked to  compare costs                                                               
between the most  recent tiers for PERS and TRS,  and DCR.  Thus,                                                               
the  fiscal   note  reflects  an   increment  over   the  current                                                               
retirement costs.   He offered  his belief  the costs are  due to                                                               
the DCR  returning to  the most  recent tier.   Thus,  the fiscal                                                               
note  reflects an  increment  between  the DC  and  the Tier  III                                                               
retirement plan, for example.                                                                                                   
3:46:57 PM                                                                                                                    
REPRESENTATIVE HOLMES  asked whether a breakout  is available for                                                               
the health care.                                                                                                                
MR. SHIER referred  to a letter from Buck  Consultants that break                                                               
out the effects on normal cost of health care for both pensions.                                                                
CHAIR  OLSON requested  the information.   He  announced that  he                                                               
would take public  testimony and asked testifiers  to indicate if                                                               
they are participants of a DB or DC plan, and if so, which tier.                                                                
3:48:18 PM                                                                                                                    
JOSEPH MINNICK stated that he is  a state employee under the Tier                                                               
IV retirement plan.   He offered his support for  HB 30 and urged                                                               
the  committee to  support the  bill.   In 2006,  he applied  for                                                               
employment  with the  State  of  Alaska under  the  DB, Tier  III                                                               
retirement  plan.   He received  an invitation  for training  and                                                               
relocated  to Alaska  at  his own  expense.   He  stated that  as                                                               
training began he learned that  the retirement system was changed                                                               
and new hires  as of July 2006  would fall under the  Tier IV, DC                                                               
MR.  MINNICK  mentioned that  he  is  cannot participate  in  the                                                               
Social  Security  system.    Thus,   he  is  denied  yet  another                                                               
opportunity to establish  a DB plan.  He  related upon retirement                                                               
under his Tier IV DC plan,  that he will have a 401(k) investment                                                               
after  25  years  of  service,  without  health  benefits  or  DB                                                               
retirement.   He  informed  members  that he  and  his wife  have                                                               
decided  that they  need to  have a  DB retirement  plan such  as                                                               
those offered in  Tiers I, II, and III service.   He related that                                                               
as of  March 2009, contributions  to his Tier IV  retirement plan                                                               
total $20,482.   He highlighted that his Tier  IV retirement plan                                                               
is  currently valued  at  $12,433, which  reflects  a 66  percent                                                               
loss.   He opined that the  current benefits do not  outweigh the                                                               
future losses in  a poor retirement system.  He  surmised that on                                                               
his fifth  anniversary of state  employment in 2011 that  he will                                                               
reevaluate his employment if a DB plan is not restored.                                                                         
MR. MINNICK further opined that  the longer a peace officer works                                                               
the  more valuable  he/she becomes  to the  public's safety.   He                                                               
related that  the years  of service that  an officer  invests has                                                               
real monetary value.  He offered  his belief that losing a public                                                               
safety employee is similar to losing  a valuable asset.  The loss                                                               
is  exacerbated  since more  funding  must  be spent  to  select,                                                               
train,  and prepare  a  replacement.   The  Department of  Public                                                               
Safety (DPS) indicates that it  costs approximately $9,500 to get                                                               
a  prospective trainee  to the  police academy.   He  pointed out                                                               
that only  74 percent  of trainees complete  the academy,  and of                                                               
those  84  percent  finish  field training.    He  surmised  that                                                               
training a  recruit could easily  cost $150,000 when  academy and                                                               
field training  costs are  considered.  He  emphasized that  a DB                                                               
plan that  includes health  care coverage is  a valuable  tool to                                                               
attract and  retain quality police  officers.  He stated  for the                                                               
financial  well-being of  his family  that he  will be  forced to                                                               
evaluate the retirement plan to  determine if he will continue to                                                               
work  for the  state.   He urged  members to  consider voting  in                                                               
favor of HB 30 and return to a DB retirement plan.                                                                              
3:51:56 PM                                                                                                                    
REPRESENTATIVE  BUCH   asked  Mr.  Minnick  about   any  personal                                                               
experience  he  has had  with  co-workers  who  are in  the  same                                                               
MR.  MINNICK stated  he  could  not speak  for  anyone else,  but                                                               
related  his   understanding  that   his  co-workers   have  also                                                               
expressed concern about the DC Tier IV retirement plan.                                                                         
3:52:30 PM                                                                                                                    
TOM BOUTIN  stated that he is  a retired Tier I  public employee.                                                               
He stated  that he has  been an  Alaskan for 27  years, primarily                                                               
working  in the  private sector.   He  noted he  also worked  for                                                               
state.   He mentioned he  listened to last week's  hearing twice.                                                               
He  asked to  clarify  several  points.   He  opined that  paying                                                               
employer contributions  as a  percentage of  payroll is  merely a                                                               
convention.   He further opined  that the unfunded  liability and                                                               
risk of it growing now or after  DB is a red herring and leads to                                                               
poor decisions.   He offered his belief that  the actual unfunded                                                               
liability would  be lower today if  Senate Bill 141 had  not been                                                               
MR. BOUTIN  stated that despite  DB not accepting  new enrollees,                                                               
the unfunded  liability continues to  grow.  He  emphasized there                                                               
is no  way any  proper accounting  could show  that DC  is saving                                                               
money,  in fact,  an  audit  would show  a  net  cost, which  are                                                               
demonstrated  by the  letters from  Buck  Consultants.   However,                                                               
there   are  greater   costs   with  DC.      He  recalled   that                                                               
Representative Munoz described one of  the larger ones last week.                                                               
He further recalled  that DC proponents state that  wages need to                                                               
be raised to  private sector levels.  However,  the public sector                                                               
has job  types that the private  sector does not, such  as police                                                               
officers,  correctional officers,  and  firefighter.   He  opined                                                               
that people would need to work  longer and it is not feasible for                                                               
older people to  climb ladders.  He further  opined that adopting                                                               
DC sends the message that when  their knees give out they need to                                                               
look to  Wal-Mart for jobs.   He stated that he  operated logging                                                               
camps for  many years,  and when  people became  too old  to fell                                                               
timber, the  people qualified for  disability.  He  recalled that                                                               
when the  employer provides health  insurance, that  workers will                                                               
get treatment  for pneumonia.  If  the same worker does  not have                                                               
health insurance,  he discovers he has  a "bad back" and  goes to                                                               
town on a Workers' Compensation  claim and still gets treated for                                                               
pneumonia.   He emphasized  that DC sets  up the  same situation.                                                               
He surmised that too often,  government claims savings but a full                                                               
accounting provides unaccounted  cost.  He urged  members to move                                                               
HB 30 to the next committee.                                                                                                    
3:57:23 PM                                                                                                                    
PATRICK OWEN explained  that he is a 45 year  Alaska resident and                                                               
has worked  in construction and  merchant marine employment.   He                                                               
stated that he  is a retired Tier  1 employee.  He  opined that a                                                               
lot of  good people need DB  and suggested reverting back  to the                                                               
DB plan.  He  offered his belief that the state  would be able to                                                               
hire good employees and retain them.                                                                                            
3:58:34 PM                                                                                                                    
BOB DOLL,  State President, Retired Public  Employees Association                                                               
(RPEA),  on behalf  of the  RPEA,  stated that  he is  a Tier  IV                                                               
retiree from  his service to  the Department of  Transportation &                                                               
Public Facilities (DOT&PF) in 2003, but  that he has less than 10                                                               
years  of   service.    He   applauded  his   representative  for                                                               
sponsoring HB  30.  He asked  to speak in  support of HB 30.   He                                                               
explained the  RPEA represents 2,200  retired teachers  and other                                                               
public employees.   He offered  that RPEA believes  that Alaska's                                                               
public policy should  be to support Alaska's  families from young                                                               
to old.   Alaska's leaders  should encouraged Alaskans  who built                                                               
careers and  raised families in  Alaska to remain  active members                                                               
of the community as retirees.                                                                                                   
MR.  DOLL  related that  RPEA  supports  HB  30 because  it  will                                                               
restore incentives the  state can provide to  public employees to                                                               
continue  to live  in Alaska  after retirement.   He  opined that                                                               
without the changes  proposed in HB 30, there  are few incentives                                                               
for state employees covered by DC  plan to stay and contribute to                                                               
Alaska after  retirement.  Currently, over  18,000 retired public                                                               
employees  reside in  Alaska.   According  to  a September  2006,                                                               
study  by the  University  of Alaska's  Institute  of Social  and                                                               
Economic  Research (ISER),  23 percent  of  retirees were  public                                                               
employees.   The  study  found that  in  2004, Alaska's  retirees                                                               
brought an estimated $1.46 billion  into the state, roughly equal                                                               
to what  Alaska's fishermen were  paid for their  seafood harvest                                                               
or  the  value  of  resources  mined  in  Alaska  in  2004.    He                                                               
summarized   that  Alaska   retired  public   employees  make   a                                                               
significant contribution to Alaska's economy.                                                                                   
MR.  DOLL stated  that  their spending  creates  many year  round                                                               
jobs, from low wage jobs to high  paying jobs in health care.  In                                                               
addition to  substantial financial contributions to  the economy,                                                               
retirees provide  significant volunteer  work.   If for  no other                                                               
reason  than  the  strength  and   health  of  Alaska's  economy,                                                               
Alaska's public employees should be  encouraged to live out their                                                               
retirement years in  Alaska and not relocate to  some other state                                                               
or  country  that  would  reap the  economic  benefits  of  their                                                               
retired investments.  Others have  testified about the DB program                                                               
and that it  provides a financial safety net compared  to what is                                                               
offered by  the DC  system.   He asked to  draw attention  to the                                                               
potential  to  restore  the  10 percent  Alaska  cost  of  living                                                               
allowance  (COLA), post  retirement pension  adjustment and  post                                                               
retirement health care benefits.   Retired public employees under                                                               
the  DB benefits  receive  the  COLA established  in  1966 as  an                                                               
allowance to assist retirees who elect  to remain in the state to                                                               
defray the higher cost of living  in Alaska.  He pointed out that                                                               
the  COLA is  not  awarded to  employees  in the  DC  plan.   The                                                               
retired  employee  under the  DB  plan  is  entitled to  a  post-                                                               
retirement adjustment when  the cost of living  increase is based                                                               
on a consumer price index for  Anchorage.  Like the COLA benefit,                                                               
current law  does not provide  a pension adjustment under  the DC                                                               
program.  In summary, 50  years ago Alaskans achieved a life-long                                                               
dream.   Alaskans gained the  legal status  as a state  and could                                                               
determine its  own future and  how its resources  were developed.                                                               
He said,  "To reach  these goals,  as it  does today,  required a                                                               
workforce  that could  make the  case on  Alaska's behalf."   The                                                               
Alaskans of that day attracted  and retained the talent necessary                                                               
to give  us the  advantages we  now enjoy.   That effort  has not                                                               
ended.  He said:                                                                                                                
     If we want  to compete with our sister  states, we need                                                                    
     to  find  the  same  kinds  of  talent.    We're  at  a                                                                    
     disadvantage,  however.   A  person  starting a  career                                                                    
     with the  State of  Alaska today  is denied  a reliable                                                                    
     retirement pension  with very little limited  access to                                                                    
     post-retirement  health care  coverage and  no cost  of                                                                    
     living  adjustments.   REPA  asks  that  the Labor  and                                                                    
     Commerce Committee move  HB 30 out of  committee with a                                                                    
     favorable  recommendation.   Thank  you, Mr.  Chairman,                                                                    
     for your time and attention.                                                                                               
4:03:49 PM                                                                                                                    
HOLLY ABEL,  Psychologist, Kenai Peninsula  Education Association                                                               
(KPEA) (NEA-AK),  stated that  she was born  in Soldotna  and was                                                               
raised in Kasilof.  She  explained that her parents were lifetime                                                               
educators who retired under the Tier  I TRS system.  She said she                                                               
was disappointed  to learn about  the retirement.   She explained                                                               
that she was excited to come home.   She stated that she does not                                                               
have  social security  and does  not know  what to  expect.   She                                                               
explained  that  this  is  unsettling   and  she  wants  to  have                                                               
something secure for  her retirement.  She  offered her gratitude                                                               
that  her parents  have a  good retirement  system.   She related                                                               
that she worries about becoming a  parent and what type of burden                                                               
her  children would  inherit.   She said  she considered  private                                                               
practice to  make more  money.   She apologized,  explaining that                                                               
this is an  emotional issue for her.  She  said, "I'm very scared                                                               
and anxious  about how  I'm going  to, whether I  can stay  in my                                                               
home, which  is Alaska, or if  I should look somewhere  else.  It                                                               
would  be really  heartbreaking  for  me to  have  to  leave.   I                                                               
suppose it  would be a  possibility, but I  prefer to stay.   I'd                                                               
like to see HB 30 pass."                                                                                                        
4:06:51 PM                                                                                                                    
GARY  MILLER, stated  he is  a Tier  I retiree.   He  offered his                                                               
belief  that his  retirement system  is very  good.   However, he                                                               
noted that he just qualifies  for social security, has 27.5 years                                                               
with the state  and a year and  a half with the  City and Borough                                                               
of Juneau that  his social security will be reduced.   He related                                                               
that he  does not  have any deferred  compensation since  he paid                                                               
for his  children and home.   He stated that he  has Supplemental                                                               
Benefits  System  (SBS)  annuity.    However,  since  the  market                                                               
crashed he said he  does not dare touch his SBS.   He opined that                                                               
if he did not  have a DB system, he would  need to consider going                                                               
back to work.  He urged members to vote yes and pass out HB 30.                                                                 
4:08:20 PM                                                                                                                    
CLIFFORD COLE  stated that he has  been a Juneau resident  for 45                                                               
years.  He  related he and his wife are  retired public employees                                                               
and receive  pension checks  from their  DB plan.   He  stated he                                                               
strongly endorses  the DB plan  and finds the stability  of their                                                               
plan makes it possible to stay in  Alaska.  He opined that the DC                                                               
plan is  more of  lottery such  that the retiree  hopes to  get a                                                               
return.  He offered his belief  that the defined benefit plan was                                                               
the reason  they went  to work  for the state.   He  related that                                                               
their private  sector experience  in accounting  and construction                                                               
management  was a  benefit to  the state.   In  turn, they  could                                                               
count on  a retirement.   He questioned  where funds to  keep the                                                               
retirement system solvent  would come from if the DB  plan is not                                                               
continued for  new employees.   He urged  members to  please move                                                               
the HB 30.   He mentioned that  he came to work at  age 50, after                                                               
running his own  companies.  He stressed his  inability to obtain                                                               
sufficient funds for  retirement in the private sector.   At that                                                               
time, health insurance plans were  just developing in the private                                                               
sector.  He  also mentioned he had performed  contracting for the                                                               
state so it  was an easy transition.   He said, "I  would hate to                                                               
see this slip by and not be,  and not have the benefits that I've                                                               
been  able to  acquire  to stay  in the  state  and keep  working                                                               
4:11:31 PM                                                                                                                    
LEE  BUTTERFIELD  stated that  he  currently  teaches at  Hanshew                                                               
Middle Schoolin Anchorage.  He indicated  that he was introduced                                                               
during  the legislative  session  as a  two-time combat  veteran.                                                               
During  that time,  he suffered  having his  left arm  paralyzed,                                                               
lost some  motor function  in his  left hand,  his right  hip was                                                               
pulled from the socket during  an explosion and he received eight                                                               
traumatic brain  injuries during five  days.  He said,  "If there                                                               
is any  question on whether I  know the true price  of serving my                                                               
community, I  hope they are now  gone."  He presented  himself as                                                               
three identities:   as a  28-year old  father of a  four-year old                                                               
who will attend  the Turnagain Elementary School,  as a homeowner                                                               
who pays  property taxes,  and as  a Tier III  TRS employee.   He                                                               
offered his hope  that the committee would move forward  HB 30 to                                                               
address each  of his identities.   First, as a Tier  III employee                                                               
his  retirement is  determined  by  the legislature's  decisions,                                                               
which are sometimes  "whims of people throwing paper  around in a                                                               
room  where I  never see  and I  have no  control over  it."   He                                                               
opined  that he  does  not  like putting  a  dollar  into a  slot                                                               
machine to risk receiving a return of seven cents.                                                                              
MR.  BUTTERFIELD  related  that  as a  homeowner,  he  recognizes                                                               
police  and firefighters  keep his  community, neighborhood,  and                                                               
family  safe.   He  opined that  someone who  has  worked in  his                                                               
community for  20 years knows  the area  "like the back  of their                                                               
hand" is  going to keep it  that way, rather than  someone who is                                                               
present  for three  to five  years  and leaves  due to  deficient                                                               
retirement systems.   He further opined that  raises his property                                                               
values and taxes that he pays.   He said he is willing to pay the                                                               
taxes.   He related  that as  a father he  wants his  daughter to                                                               
have  teachers who  are willing  to stay  and learn  to teach  in                                                               
Alaska.    He offered  his  belief  that  teaching in  Alaska  is                                                               
different.    He  explained  that   he  came  from  Montana,  and                                                               
graduated with  honors from the University  of Montana, Missoula.                                                               
He reiterated teaching is different in  Alaska.  He said he wants                                                               
his  daughter  to have  teachers  that  understand that  and  are                                                               
willing  to stay  long  enough to  understand  children in  their                                                               
classrooms.  He concluded by  saying, "Policemen and firefighters                                                               
protect, are present  in order to give a secure  and safe future,                                                               
and  teachers  are responsible  for  bringing  every person  that                                                               
contributes to society  up in this world,  including those people                                                               
who  run  our state  and  federal  governments.   Thank  you  for                                                               
letting me be here.  I'm honored to be in front of you."                                                                        
4:14:44 PM                                                                                                                    
JILL  SHOWMAN, President,  Mat-Su  Education Association  (MSEA),                                                               
stated that she is a Tier II  TRS employee.  She related that she                                                               
represents  about 1,200  educators from  Glacier View  Elementary                                                               
School to  Trapper Creek Elementary  School.  She  recalled prior                                                               
testimony, that  the community is  concerned about  retention and                                                               
recruitment  of teachers.   She  offered that  in the  past three                                                               
years, teacher turnover is 90 to  100 teachers per year, which is                                                               
close  to 8  to 10  percent turnover.   She  emphasized that  the                                                               
school district  is having a  difficult time finding  and keeping                                                               
educators, primarily  due to the DC  plan and the lack  of social                                                               
security  benefits.   She  highlighted  that recruitment  efforts                                                               
span many  Lower 48 states,  and in  job fairs to  supplement job                                                               
fairs held in  Alaska.  She opined each time  the school district                                                               
hires a  teacher who  is new  to the  district that  the district                                                               
must  provide professional  development  including materials  and                                                               
training that costs  upwards of $100,000.   She stressed training                                                               
is a burden to the school district.                                                                                             
MS. SHOWMAN  provided personal information, reiterating  that she                                                               
is a Tier II  TRS employee, who has been in Alaska  12 and a half                                                               
years,  relocating  from  Iowa.    She  highlighted  when  former                                                               
students ask  her about  teaching in Alaska  that she  tells them                                                               
with  the current  TRS retirement  system in  Alaska they  should                                                               
look  outside  the  state  for  employment  or  should  choose  a                                                               
different occupation.   She said, "That is  very disheartening to                                                               
me because education  is the soul of our community.   And without                                                               
good public schools we won't have  a future.  Thank you very much                                                               
for  this opportunity."   She  urged members  to pass  HB 30  and                                                               
thanked them for their service.                                                                                                 
4:18:01 PM                                                                                                                    
SHAWN ARNOLD stated that  he is a Tier III TRS  teacher.  He also                                                               
stated  he is  currently  an English  teacher  in the  Matanuska-                                                               
Susitna Valley at  Colony High School.  He offered  that he is in                                                               
his second year  of teaching, but spent 12 years  in the military                                                               
in  Air Force  and the  Army.   While he  is not  originally from                                                               
Alaska, he  says he  fell in  love with the  state when  he first                                                               
arrived in Alaska.   He mentioned that he joined  the military to                                                               
complete  his college  education.   He  knew he  wanted  to be  a                                                               
teacher.   He  reenlisted after  9/11  to serve  his country  for                                                               
another  four  years.    However,  once  he  began  teaching,  he                                                               
realized  the retirement  system had  changed.   He recalled  the                                                               
military retirement  such that  after 20  years service  he would                                                               
have  been under  a  plan that  is  similar  to a  DB  plan.   He                                                               
stressed that the military takes care of their enlistees.                                                                       
4:20:10 PM                                                                                                                    
MR.  ARNOLD  asked   why  troops  and  teachers   should  not  be                                                               
supported.   He opined that  with the current DC  retirement plan                                                               
the support is  not there.  He said, "The  support for my country                                                               
would have been rewarded but now  my support for my service in my                                                               
community, in  my service there,  isn't going to be  rewarded and                                                               
helped out."  He thanked members  and urged the committee to move                                                               
the bill forward.                                                                                                               
4:21:22 PM                                                                                                                    
BARB ANGAIAK,  President, National Education  Association, Alaska                                                               
(NEA-Alaska)  stated  that  the  NEA-Alaska  has  13,000  members                                                               
statewide.   She  offered NEA-Alaska's  support for  HB 30.   She                                                               
offered that  NEA-Alaska is very  concerned about new  people and                                                               
for the future of  our children.  She related that  she is a Tier                                                               
I TRS  employee and a  28-year middle  school math veteran.   She                                                               
opined that  she has  a great retirement  system.   She expressed                                                               
concerned about the  future, if the system is not  repaired.  She                                                               
noted  that she  served  three  years as  a  statewide mentor,  a                                                               
program  that  helps  first  and   second  year  teachers  become                                                               
familiar with  classroom teaching  and to  reduce time  to become                                                               
comfortable in the classroom.   She explained that research shows                                                               
it  takes teachers  five years  to  hit their  stride and  become                                                               
effective teachers.   Good mentoring can reduce that  time by two                                                               
to three years.  She recalls  young teachers who relate that five                                                               
years  will  give  them  a glimpse  their  overall  career  path.                                                               
However,  she stressed  that if  teachers of  five or  less years                                                               
decide to leave Alaska our children will suffer.                                                                                
MS.  ANGAIAK provided  her personal  history.   Her daughter  was                                                               
born  and raised  in Bethel.   She  is currently  attending Brown                                                               
University, an Ivy League college.   She opined that her daughter                                                               
received a  good public education  in Alaska.  However,  she said                                                               
she worries about  the future education of  Alaska's students and                                                               
whether teachers will be able to offer high quality programs.                                                                   
4:25:11 PM                                                                                                                    
CHAIR OLSON inquired as to  the retirement plan that the National                                                               
Education Association (NEA) has for its own employees.                                                                          
MS.  ANGAIAK answered  that NEA  offers two  plans, depending  on                                                               
when employees came into the system.                                                                                            
CHAIR OLSON  remarked that is  similar to the  state's retirement                                                               
system which is based on when employees enter the system.                                                                       
MS.  ANGAIAK noted  her  agreement.   She  pointed  out that  the                                                               
difference is  that NEA also  offers social security  benefits to                                                               
employees, which provides a safety net.                                                                                         
CHAIR  OLSON   mentioned  that  the   state  also   provides  the                                                               
Supplemental Benefits System (SBS).                                                                                             
4:25:57 PM                                                                                                                    
REPRESENTATIVE SEATON  asked for  clarification.  He  related his                                                               
understanding that  any new  NEA employees  have a  DC retirement                                                               
MS. ANGAIAK responded  that new NEA employees have  a 401(k), but                                                               
also have social security benefits.                                                                                             
4:26:22 PM                                                                                                                    
REPRESENTATIVE CHRIS TUCK, Alaska  State Legislature, stated that                                                               
he is  not in the  state retirement system.   He related  that he                                                               
has  a   DB  plan  through   the  International   Brotherhood  of                                                               
Electrical Workers  (IBEW) Local 1547.   He further  related that                                                               
he has both a DB retirement plan  and a DC plan both of which are                                                               
paid on  his behalf through his  employers.  He stated  that IBEW                                                               
members  vote  on   the  total  package  of   benefits  that  are                                                               
negotiated.   He  said he  is proud  of the  membership since  it                                                               
votes in  favor of a  DB plan.   He opined  that it is  "the most                                                               
bang for the  buck per participant."  He offered  his belief that                                                               
it is almost  like putting money in a slot  machine.  He recalled                                                               
after 9/11,  many plans  were hard  hit.   He explained  that the                                                               
IBEW  has a  partnership  between employers  and  employees.   He                                                               
acknowledged some adjustments were made  such as for past service                                                               
credit, health plan,  and the definition of  the contribution and                                                               
amount paid  out.  Fortunately,  by making those  adjustments and                                                               
by  recognizing the  potential for  unfunded liability,  the fund                                                               
has  grown and  IBEW has  been  able to  add additional  employee                                                               
benefits.  He said, "So it never  made sense to me when the state                                                               
had a  $6, 7, 8 billion  in unfunded liability it  was facing why                                                               
you would stop  future contributions into a  defined benefit plan                                                               
by rolling  it into a defined  contribution."  He opined  that if                                                               
it continued  the DB  plan, the  state could  continue investing,                                                               
continue its  support, and bail  itself out.   He stated  that in                                                               
serving in  the legislature that  he takes a three  month absence                                                               
from his  IBEW job, which  results in  a 25 percent  reduction to                                                               
his retirement.   He concluded by  stating that he would  like to                                                               
see  Alaskans  retire with  dignity  without  being a  burden  on                                                               
4:30:06 PM                                                                                                                    
REPRESENTATIVE SEATON  related his  understanding the IBEW  has a                                                               
DB plan  but due to  unfunded liability,  the union voted  to cut                                                               
some benefits for awhile.                                                                                                       
REPRESENTATIVE TUCK agreed for future  contributions.  He related                                                               
under the  Taft-Hartley Act, also  known as  the Labor-Management                                                           
Relations Act, the IBEW has an obligation.                                                                                      
REPRESENTATIVE  SEATON  recalled  that  the  amount  of  benefits                                                               
evened out for employees.                                                                                                       
REPRESENTATIVE TUCK  stated that if he  understands the question,                                                               
for the  unfunded liability obligation that  future contributions                                                               
will benefit the plan                                                                                                           
REPRESENTATIVE  SEATON asked  how  IBEW structures  its plan  and                                                               
pays beneficiaries when  the plan has an unfunded  liability.  He                                                               
further asked who incurs the liability.                                                                                         
4:31:54 PM                                                                                                                    
REPRESENTATIVE  TUCK  answered  that   the  plans  are  federally                                                               
regulated and  federally backed similar  to banks that  have FDIC                                                               
insurance.    He stated  that  the  IBEW  has a  Pension  Benefit                                                               
Guarantee Corporation (PBGC).   He recalled that  until 2004 that                                                               
PBGC has  not changed  its rate  due to the  stability of  the DB                                                               
CHAIR OLSON  offered his belief  that the initial portion  of the                                                               
bailout funds into industries that  had significant shortfalls on                                                               
their DB programs,  such as the auto and airline  industries.  He                                                               
recalled that 30  percent of the funding went to  fund plans that                                                               
were collapsing.                                                                                                                
4:33:09 PM                                                                                                                    
REPRESENTATIVE BUCH  related that his retirement  plan is similar                                                               
and financially allows him to be  in the legislature.  He related                                                               
that  his  union  uses  a  system that  assesses  about  a  dozen                                                               
actuarial  services that  project  100 years.    He offered  that                                                               
since 2002 instead of paying  a thirteenth check to retirees, the                                                               
union  reduced  retiree's  benefits  by  eliminating  the  check.                                                               
Additionally, in 1998,  one option was to  provide a supplemental                                                               
to be  401(k).  He recalled  some members wished to  be active in                                                               
control  of  their money.    Thus,  retirees  can opt  to  select                                                               
investment strategies.   He opined  that some accounts  have lost                                                               
half  their value  and the  union  is working  to rebuilding  the                                                               
funds.   He offered his  belief that  the accounts are  viewed as                                                               
savings accounts and not retirement accounts.                                                                                   
4:35:51 PM                                                                                                                    
LADAWN  DRUCE, President,  Kenai Peninsula  Education Association                                                               
(KPEA),  stated that  the KPEA  is an  affiliate of  the National                                                               
Education Association (NEA).   She related that she is  a Tier II                                                               
public  employee and  her husband  is a  Tier I  public employee.                                                               
She  asked the  committee  members  to move  HB  30  to the  next                                                               
hearing.    She thanked  the  bill  sponsors.   She  opined  that                                                               
members obviously  know her  position as  president of  the KPEA.                                                               
She recalled speaking to Chair  Olson and Representative Chenault                                                               
on several occasions.  She  mentioned that she received an e-mail                                                               
today  from  a  Tier  III  teacher  who  would  like  to  have  a                                                               
conversation with  her about social security  and her retirement.                                                               
She related  that with respect  to social security  benefits, the                                                               
NEA is  fighting at  the national level  to right  the injustice.                                                               
She  said she  would  love  to report  that  her legislators  are                                                               
anxious  to "do  the  right  thing" and  return  Alaska  to a  DB                                                               
system.   She agreed with  the sponsor's statement that  the bill                                                               
would provide an  affordable retirement plan, that  it would help                                                               
reduce  employee turnover.   She  said she  would really  like to                                                               
keep  people like  Holly  Abel  and her  expertise  in the  Kenai                                                               
Peninsula.  Further, she would like  to keep Matt Johnson, who is                                                               
a second  year teacher in  Soldotna who just took  the basketball                                                               
team to  the state playoff  last Saturday  for the first  time in                                                               
Soldotna's history.   She  stated that these  are the  people she                                                               
would like to keep in  Alaska, teaching and working with students                                                               
in  the  school.   She  also  appreciated  Representative  Buch's                                                               
statement of the  necessity for a cost analysis  for all parties,                                                               
including retirees.   She asked to characterize the DC  plan as a                                                               
failed experiment.   She concluded  by urging members to  move HB
4:39:05 PM                                                                                                                    
REPRESENTATIVE  SEATON recalled  statistics  that indicated  that                                                               
the last two years  in which there was a DB  plan only, the state                                                               
experienced a  59 percent two-year  retention rate  for teachers.                                                               
For those  hired under  the first  two years of  the DC  plan the                                                               
state experienced a  64 percent retention rate.  He  asked if the                                                               
Kenai  Peninsula  is  experiencing  the  same  level  of  teacher                                                               
4:39:54 PM                                                                                                                    
MS.  DRUCE  asked  for  clarification  that  the  statistics  are                                                               
showing teachers are staying longer with a DC plan.                                                                             
REPRESENTATIVE  SEATON answered  yes.   He  reiterated that  from                                                               
July 2003  to June 2004  the retention  rate for teachers  was 59                                                               
percent, while  those who were  hired between July 2006  and June                                                               
2007 under the DC plan had a retention rate of 64 percent.                                                                      
MS.  DRUCE stated  she did  not  have statistics.   However,  she                                                               
related  from her  own experience  as a  member of  the education                                                               
community  that  it takes  teachers  a  couple  of years  to  get                                                               
settled.  She  opined that once they have three  to five years of                                                               
experience,  they tend  to  think about  their  retirement.   She                                                               
mentioned  this  year, the  district  as  a  whole is  "not  non-                                                               
retaining non-tenured people."   Thus, the statistics  for the DB                                                               
plan,   the  Kenai   district  was   not  retaining   non-tenured                                                               
employees.  She surmised a lot  of people probably left the state                                                               
for that  reason and  not due to  the DB plan.   She  offered her                                                               
belief that  it is not  really sufficient time to  provide proof.                                                               
She said,  "What I can  tell you is  people are looking  long and                                                               
hard after that  second and third year and saying,  "I may not be                                                               
able to afford to stay in education in Alaska"."                                                                                
4:42:18 PM                                                                                                                    
MELODY DOUGLAS,  Chief Financial Officer, Kenai  Peninsula School                                                               
District,  stated  on  behalf  of   the  Kenai  Peninsula  School                                                               
District  (KPBSD) that  she has  been actively  communicating the                                                               
KPBSD's concerns  with the  PERS and  TRS retirement  plans since                                                               
2003.  She  related that the missing component  in the discussion                                                               
is how  to limit the  growth of debt and  the ability to  pay the                                                               
debt.  She asked the committee to consider her letter as part of                                                                
the official record concerning maintaining the DB and blended DC                                                                
currently in place.  She read:                                                                                                  
     My comments  will focus on the  district's general fund                                                                    
     using audited  FY 08  information.   Thank you  for the                                                                    
     $19.3 million dollar:  $17.2 TRS and $2.1  for PERS, in                                                                    
     on behalf  retirement funding provided  to KPBSD  in FY                                                                    
     08, and similar  funding planned for FY  09.  Continued                                                                    
     legislative   support  for   supplemental  funding   is                                                                    
     critical for  KPBSD to  maintain the  current education                                                                    
     KPBSD  is proud  of making  [adequate yearly  progress]                                                                    
     (AYP) as a  district in FY 07 and FY  08 and is pleased                                                                    
     to note  that the  Kenai Peninsula Borough  funds Kenai                                                                    
     schools  to  the  maximum allowed  per  state  statute.                                                                    
     KPBSD FY 08 employer  percentage rates for TRS relative                                                                    
     to on-behalf  approximate for TRS 41.7  percent and for                                                                    
     PERS   14.48  percent.      KPBSD   had  596   fulltime                                                                    
     equivalency  certified teaching  staff in  FY 08.   Had                                                                    
     the  legislature not  provided  on-behalf payments  the                                                                    
     most  likely   method  of  addressing  a   $17  million                                                                    
     shortfall  in  TRS funding  would  be  to reduce  staff                                                                    
     since approximately  80 percent of our  budget consists                                                                    
     of salary and benefits.   A $17 million reduction would                                                                    
     mean a loss of approximately  274 teaching positions or                                                                    
     46 percent of general teaching  staff.  This means that                                                                    
     without the  on-behalf funding  class sizes  would have                                                                    
     practically  doubled   and  AYP  would   have  probably                                                                    
     vaporized for the district.   This picture for KPBSD is                                                                    
     the  same on  a  go forward  basis for  as  long as  an                                                                    
     unfunded  liability exists  in the  retirement systems.                                                                    
     My guess is  all school districts in Alaska  are in the                                                                    
     same  boat.    I   concur  and  support  the  testimony                                                                    
     provided by  Larry Semmens to  this committee  on March                                                                    
     18, 2009.  I will  not reiterate his points but instead                                                                    
     talk  about the  DC plan  relative to  hiring staff  at                                                                    
     KPBSD.  Frankly, I believe  it is premature to evaluate                                                                    
     the effect of implementation of  the DC plan on July 1,                                                                    
     2006 on hiring as we are  in year three of the DC plan.                                                                    
     However, in discussing this  matter with the district's                                                                    
     HR department,  the DC  plan has not  been an  issue in                                                                    
     hiring.    KPBSD  is actively  involved  in  recruiting                                                                    
     statewide and by traveling  outside annually to several                                                                    
     job fairs.   The district  hired 76 teachers in  FY 08,                                                                    
     107  teachers  in  FY  98,  and  is  expected  to  hire                                                                    
     approximately 75 teachers for FY  10.  To date, none of                                                                    
     the  teachers hired  has expressed  concern to  HR over                                                                    
     the DC plan.   It will be a surprise  if this matter is                                                                    
     an issue  in the  upcoming hiring  season, particularly                                                                    
     in light  of teachers  being laid  off by  many outside                                                                    
     school districts.                                                                                                          
4:46:24 PM                                                                                                                    
MS. DOUGLAS read:                                                                                                               
     In  addition, none  of  the  interviews conducted  with                                                                    
     exiting teachers  included concerns about the  DC plan.                                                                    
     In conclusion, much  work has been done  to implement a                                                                    
     blended  DC plan,  managed by  knowledgeable investment                                                                    
     professionals.    This arrangement  benefits  employees                                                                    
     more than  a straight DC  plan would.   Essentially, by                                                                    
     the next time the numbers  are released all the various                                                                    
     changes  to the  retirement plans,  skyrocketing health                                                                    
     care cost, and unrealized  investment earnings over the                                                                    
     years have  created what will  likely be a  $10 billion                                                                    
     debt  that  now must  be  paid.   Employers,  including                                                                    
     school   districts   cannot   function   viably   under                                                                    
     retirement  rates  like  54 percent  for  TRS,  and  36                                                                    
     percent for  PERS indicated for  KPBSD in FY  08, until                                                                    
     the unfunded  liability is finally  paid some  25 years                                                                    
     or  more down  the  road.   The  public  sector can  no                                                                    
     longer  fund  a   DB  plan.    The   course  of  action                                                                    
     implemented July 1,  2006, is the best  solution to the                                                                    
     problem.   Please  stay the  course set  at that  time.                                                                    
     Thank  you,  Mr.  Chairman,   for  the  opportunity  to                                                                    
     comment  on a  matter  of such  importance to  Alaska's                                                                    
     economic future  and to the students  who are committed                                                                    
     to paying the debt already incurred.                                                                                       
4:47:48 PM                                                                                                                    
DON  GRAY,   Volunteer,  Alaska  Retired   Educators  Association                                                               
(AREA),  stated that  he  has been  a resident  since  1970.   He                                                               
provided his work history, noting  that he taught at Lathrop High                                                               
School for  twenty-three years, was  a financial advisor  for two                                                               
brokerage  firms for  11  and a  half years,  then  retired.   He                                                               
related that he is  a Tier I TRS retiree.  He  related that he is                                                               
a volunteer for the Alaska  Retired Educators Association (AREA),                                                               
and  is  also  the  legislative chair  of  the  AREA's  education                                                               
MR. GRAY  stated that he is  speaking in favor of  passing HB 30.                                                               
He said that he thinks the  state should examine the reason for a                                                               
pension plan.  He stated the  whole idea is to maintain a similar                                                               
standard of  living.  He  opined that  teachers in Alaska  do not                                                               
have social security.   He related the goal is  to have a pension                                                               
plan effectively that  provides the lowest cost  to taxpayers yet                                                               
still maintains  adequate retirement  benefit.  He  recalled last                                                               
week's   testimony  raised   concerns  about   the  growing   and                                                               
unpredictable retirement  obligation, and projecting  an enormous                                                               
unfunded liability.   He  offered his  belief that  describes the                                                               
future  cost  of  health  insurance  which is  not  known.    The                                                               
retirement benefit  components are  the pension plan,  DB pension                                                               
plan for Tier I and Tier II,  and health care.  He mentioned that                                                               
health  care  is  provided  under that  plan  until  Medicare  is                                                               
provided  at age  65,  at  which time  the  PERS/TRS health  care                                                               
becomes secondary.   He explained that when he  began teaching he                                                               
only  had a  DB  plan.   In  the  mid-1970s  since teachers  were                                                               
leaving  to   work  on  the  pipeline   construction,  the  state                                                               
negotiated health care benefits for retirement.                                                                                 
4:51:08 PM                                                                                                                    
MR. GRAY related that he was a  young teacher and did not pay too                                                               
much attention.   After he  retired he realized how  important it                                                               
was to  have the health care  benefit.  He opined  the DB pension                                                               
is  predictable and  it is  not  too difficult  to calculate  the                                                               
benefit.    He recalled  testimony  from  the researcher  at  the                                                               
National  Institute on  Retirement Security  that longevity  risk                                                               
pooling  can be  used.   Thus, all  the contributions  are lumped                                                               
together.  While  one cannot predict when people will  die, it is                                                               
possible to  predict when a  group will  die, which is  the basis                                                               
for   life    insurance.      He   explained    with   investment                                                               
diversification,  that  the  state  can invest  for  the  maximum                                                               
return.  Therefore,  the two elements make  the cost predictable.                                                               
He concluded by  stating that the goal is to  provide the benefit                                                               
and  does  not  cost  too  much.   He  pointed  out  that  health                                                               
insurance component is  separate from DB.  He  offered his belief                                                               
that  more  discussion  needs  to happen,  that  changes  at  the                                                               
national level will  address the health care costs.   He surmised                                                               
that we  do not  know what  the health  care cost  will be  in 25                                                               
years.  He  mentioned that 25 years ago hip  transplants that are                                                               
commonplace were not being done.                                                                                                
4:53:38 PM                                                                                                                    
CHARLEY WALTON,  Representative, Alaska  Local 302 and  Local 71,                                                               
stated that  he is  a 45  year resident,  and lifetime  member of                                                               
Local 302,  and Local 71.   He related that  he has been  a union                                                               
steward and a lifetime union member.   He offered his belief that                                                               
he is fortunate to have  a pension, social security benefits, and                                                               
Tier III pensions.   He also mentioned he had a  DB plan to cover                                                               
costs of  heart bypass surgery three  years ago.  He  opined that                                                               
without a DB  plan that the public sector is  losing workers.  He                                                               
said, "You can't  outlive social security, but you  can outlive a                                                               
contribution  plan."    He  stated  that was  a  quote  from  Ann                                                               
Seacrest.   He  related statistics  such that  29 percent  of the                                                               
women who reach 65  years of age will reach 90 years  of age.  He                                                               
said 18 percent of  men who reach 65 years of  age will reach 90.                                                               
He asked,  "What will Alaska  do with all these  teachers, police                                                               
officers,  firefighters,  public  works  people  when  they  have                                                               
outlived their  contributions.  Alaska's got  the largest growing                                                               
seniors per capita  in the United States."  He  explained that is                                                               
due  to  the pipeline  workers  who  are relocating  their  aging                                                               
parents.  He  surmised that at some point the  health care issues                                                               
will be put  forth to the Alaskans.   He stated that  the cost of                                                               
retaining   someone   in   his  department   at   the   Fairbanks                                                               
International Airport  is enormous.   He detailed the  skills and                                                               
training that  are safety related.   He emphasized that  it takes                                                               
five to six years to train  people and that the airport cannot be                                                               
a  revolving  training ground  or  have  unqualified people  that                                                               
cannot be trained.   He opined that the DC plan is  "not a way to                                                               
do it."  He said, "I support HB 30 very, very highly."                                                                          
RYAN MARQUIS  stated that he  is a  public employee of  the Kenai                                                               
Peninsula  Borough and  a PERS  Tier IV  employee.   He expressed                                                               
concern with the DC system.   He related his fear of the negative                                                               
impacts of a  DC system on the  future of the public  sector.  He                                                               
stated that  he has discussed  the retirement plans with  some of                                                               
the  newer employees  that he  works with  and the  responses are                                                               
less than  comforting.  He  opined that  there appears to  be two                                                               
different groups  of people  in the workplace.   The  first group                                                               
does not  realize what type of  system they are in  such that may                                                               
did not  realize they  would outlive  their retirement  and their                                                               
retirement  security is  in someone  else's hands.   They  do not                                                               
understand  how they  can retire  on  what amounts  to a  savings                                                               
account when they  do not have an option to  choose how much they                                                               
can contribute.   Many believe  that chances are slim  that their                                                               
retirement will  provide them  with secure  future.   Others have                                                               
expressed they do not intend to work until retirement.                                                                          
MR.  MARQUIS stated  that the  second  group likes  the DC  plan.                                                               
They plan  on working for  five years  until they are  vested and                                                               
then plan to  work some place else for a  more secure retirement,                                                               
either in a DB  plan or in a job with higher  wages.  He surmised                                                               
that these people will leave  the system with all the investments                                                               
that  the employer  has  invested in  training  and the  employer                                                               
contributions  made over  those five  years.   He stated  that he                                                               
does not  want to pick  either group since  he loves his  job and                                                               
the satisfaction gained from providing  public service.  However,                                                               
he noted  that he  must be  mindful of his  future.   He stressed                                                               
that  his concerns  are more  about Alaska's  public sector.   He                                                               
expressed concerned  that with employees  leaving the  state with                                                               
employer contributions and training,  that the public sector will                                                               
have  a  hard  time  attracting  quality  employees.    He  urged                                                               
legislators to work to help secure Alaska's future.                                                                             
4:58:57 PM                                                                                                                    
FRANCIS MCLAUGHLIN stated that he  would like to speak in support                                                               
of HB 30.   He explained that it  is time to repeal Tier  IV.  It                                                               
is about fiscal  responsibility in that a pension  system such as                                                               
Tier I,  II, and III only  work when younger people  pay into the                                                               
system  while retirees  draw  retirement funds.    Since Tier  IV                                                               
employees are not  paying into the pensions system  it has become                                                               
a "giant  Barney Madoff Ponzi  scheme."  The pension  system will                                                               
be depleted  unless the  Tier IV  DC system  is repealed  and the                                                               
Tier IV  employees are put back  into the DB system.   He offered                                                               
his  belief  that the  Tier  IV  created the  unfunded  liability                                                               
problem  for the  state.   He  further opined  that  it would  be                                                               
cheaper to  place the Tier IV  employees into the DB  system than                                                               
to bail out  Tier's I, II, and  III.  He stated that  he was born                                                               
in North Pole,  has a Master's degree in  community planning, and                                                               
has  worked  as an  urban  regional  planner.   He  was  educated                                                               
Outside and always planned on  returning home.  He explained that                                                               
he  was   hired  by  the   Municipality  of   Anchorage  Planning                                                               
Department  three  years  ago  and  bought  his  first  house  in                                                               
Anchorage.  He said, "I'm stuck  in a Tier IV category which only                                                               
encourages me  to take my 401(k)  and move to another  state when                                                               
I'm vested  in two more  years.  My boss  is hopeful that  I will                                                               
make my career  in the Anchorage Planning Department  and take up                                                               
the slack  when the senior  planners begin to retire  next year."                                                               
He offered his  belief that he will  not be able to  do so unless                                                               
Tier  IV is  repealed.    He related  his  intention  to move  to                                                               
another state such as New York,  that offers a pension and health                                                               
insurance upon retirement.  He related  that he does not have any                                                               
incentives  to work  for Anchorage  since  he has  a 401(k)  plan                                                               
without a  pension or health  insurance.  He highlighted  that if                                                               
he works for  35 years in Anchorage that he  still would not have                                                               
guaranteed  health insurance.    Instead, he  would  have to  buy                                                               
health insurance  for the rest  of his life.   He said,  "That is                                                               
not a risk that I am willing to  take.  That is not a choice that                                                               
Tier  III  employees  have  to  make  since  they  obtain  health                                                               
insurance upon retirement.  Furthermore,  Tier III employees also                                                               
get a pension."   He offered his belief that  this is about being                                                               
fair to  employees in the  long run.   He emphasized  that Alaska                                                               
should  try  to recruit  and  retain  the best  qualified  public                                                               
servants.   He recalled his  best friend in  New York City  is an                                                               
urban planner,  whose retirement  is the same  as PERS  Tier III.                                                               
Thus, he will have a  pension and health insurance in retirement.                                                               
He said, "That's what I want.  That  is what I'll get when I move                                                               
to New York  City or another similar city."   He urged members to                                                               
support for HB 30.  He said,  "It is good public policy, the only                                                               
fiscally responsible thing  to do, and simply the  right thing to                                                               
do for the future of the state."                                                                                                
5:02:14 PM                                                                                                                    
DAMON  JACKSON,  Police  Officer,  Anchorage  Police  Department,                                                               
stated that  he is a  PERS Tier IV  police officer and  works the                                                               
swing  shift  patrol at  the  Anchorage  Police Department.    He                                                               
explained  that  he  is  also  a Staff  Sergeant  in  the  Alaska                                                               
National Guard.  He provided  a brief history, explaining that he                                                               
was born  in Los Angeles and  started his career there.   He said                                                               
he loved  his job  but could  not complete  education due  to his                                                               
schedule.   He joined the  U.S. Air Force, completed  his degree,                                                               
as  well  as  obtained  a   Master's  degree  in  Human  Resource                                                               
Management.   After  ten  years  of service  he  was deployed  to                                                               
Kuwait.   He move  to Anchorage  in 2004, and  joined the  APD in                                                               
November 2007 but was not aware that  he had DC plan and not a DB                                                               
plan.   He  related  that with  a single  family  income and  two                                                               
special needs  children that it  is especially important  for him                                                               
to have a DB plan.  He opined  that the current DC plans place he                                                               
and others like  him in tough positions.  He  emphasized that the                                                               
military took  care of us.   He offered his belief  that a change                                                               
in the retirement system would show support for law enforcement.                                                                
5:04:59 PM                                                                                                                    
JAMES DOKKEN stated that he is  a Tier IV PERS employee, employed                                                               
by the  APD, and is a  member of the Anchorage  Police Department                                                               
Employees  Association.   He has  resided in  Alaska five  years,                                                               
served in Iraq, and decided to  remain in Alaska when his service                                                               
was completed.   He applied  for the Anchorage  Police Department                                                               
and  completed their  academy.   He  said, "I  felt  I wanted  to                                                               
contribute  my skills  to a  more  local standpoint  than in  the                                                               
[U.S.]  Army, and  I felt  that Anchorage  was a  great place  to                                                               
work."  He liked the community.   He recalled testimony today and                                                               
the main  argument to  return to  a DB  plan is  the cost  to the                                                               
state.  He  further recalled last week's testimony  that there is                                                               
a cost with  a DB plan, but  it provides more at  retirement.  He                                                               
expressed concern that a 401(k)  plan will not secure his future,                                                               
and he will  have to reevaluate his position.   He opined that if                                                               
he leaves Alaska to acquire a  better pension that it is unlikely                                                               
he would  return since  it is  isolated.   He related  one reason                                                               
people  work as  teachers, firefighters,  and police  officers is                                                               
for the security.   However, a DC plan will  not provide security                                                               
without raising salaries.  He opined  that a DC plan will attract                                                               
the wrong kind of people to  public service.  He offered the goal                                                               
should  be to  attract people  who  want to  return something  to                                                               
their  community after  retirement.   He recalled  another reason                                                               
for  a  DB  plan  is  for stability  as  retirees  spend  in  the                                                               
community.  He thanked members of the committee.                                                                                
5:09:22 PM                                                                                                                    
LAWRENCE  WEISS, Executive  Director,  Alaska  Center for  Public                                                               
Policy, stated that he a Tier I  retiree in TRS.  He related that                                                               
he formerly  taught at  the University of  Alaska Anchorage.   He                                                               
related he wanted to discuss  the approach many people have taken                                                               
with respect  to a DB  plan.  He  recalled that Mr.  Semmens used                                                               
the concept  of unfunded  liability frequently.   He  offered his                                                               
belief that this method of  viewing the pension plan obscures the                                                               
facts and the  actual status of the plan.   He characterized that                                                               
approach as a means  of framing the issue as a  scare tactic.  He                                                               
described another way  of viewing the issue.  When  a person buys                                                               
a  house he/she  owes $500,000  in  a 30-year  mortgage.   He/she                                                               
could  develop heart  palpitations because  he/she earns  $70,000                                                               
per year and there is no way to  come up with the $500,000 to pay                                                               
off that  "unfunded liability."   However, you owe  $500 thousand                                                               
over 30  years, which comes  out to  a planned payment  of $2,000                                                               
per month.   He  stressed that  the only way  to feel  good about                                                               
taking out  a mortgage  is to  look at the  entire 30  years, not                                                               
just the "unfunded  liability" at one point in time.   He offered                                                               
his belief that  unfunded liability is similar  to pensions since                                                               
they must  be analyzed  over 25  to 30 years  in order  to really                                                               
understand what they mean.  He  said, "In fact, the definition of                                                               
unfunded liability  is the amount  by which the liabilities  of a                                                               
program exceed program  assets at a given date.   The last phrase                                                               
is very  important.  What  will the  unfunded liability be  in 10                                                               
years, or  20 years,  or 30  years when perhaps  it will  be paid                                                               
off, he asked.   Actuaries can tell you that, and  it is far more                                                               
useful information than harping on  the unfunded liability at one                                                               
point in  time, particularly at  this point  in time.   It really                                                               
does not  carry the  conversation forward  in a  productive way."                                                               
He provided an example.  He asked  to quote a note sent to him by                                                               
a  colleague who  was close  to the  actuarial reports  that were                                                               
issued at the time.                                                                                                             
5:12:38 PM                                                                                                                    
MR. WEISS said,  "She says, Proponents of [Senate  Bill] 141", of                                                               
course, [Senate  Bill] 141  is the legislat[ion]  that got  us to                                                               
where we are now - destroyed  the pension system.  "Proponents of                                                               
[Senate Bill]  141 should  have done a  bit more  homework before                                                               
imposing a  defined contribution on  new employees.   They should                                                               
have paid  more attention  to funding  ratios rather  than dollar                                                               
amounts."  By  dollar amounts, of course she is  referring to the                                                               
unfunded liabilities.   "For the 2005 valuation  performed by the                                                               
new actuary, Buck  Consultants, the PERS funding  ratio for total                                                               
benefits  was 70  percent.   In  1979 the  funding  ratio was  68                                                               
percent  -  less -  yet  the  funds recovered  without  Draconian                                                               
measures."  Thus,  a crisis was framing the issue  as an unfunded                                                               
liability,  a huge  scary figure,  rather than  a funding  ratio,                                                               
with historical precedent,  even here in Alaska.   He opined that                                                               
it really was  not a crisis at  all.  He offered  his belief that                                                               
one  additional way  of viewing  the  cost is  by evaluating  the                                                               
various tiers and what  they cost.  He read:   "The PERS Tier III                                                               
defined  benefit  employees  are just  slightly  more  expensive,                                                               
according to  Buck Consultants than the  new defined contribution                                                               
employees  and the  new TRS  defined  contribution employees  are                                                               
very  slightly  more  expensive  than the  TRS  Tier  II  defined                                                               
benefit employees."  This means  that before Senate Bill 141 went                                                               
into effect,  before it obtained  a defined  contribution system,                                                               
the problems had already been addressed.                                                                                        
5:14:40 PM                                                                                                                    
PAT  LUBY,   Advocacy  Director,   AARP,  stated   that  lifetime                                                               
financial security  is a cornerstone  of the American dream.   He                                                               
said, "If  you work  hard, follow  the rules,  you'll be  able to                                                               
retire without  financial worries."   AARP  has a  major concern.                                                               
Most  of  our public  employees  do  not participate  in  federal                                                               
social security.  He said,  "You cannot outlive social security."                                                               
He opined  that in the  past it did not  matter so much  that our                                                               
public employees  did not  participate since they  had a  DB plan                                                               
that would  last as  long as  they live.   However, now  they are                                                               
without a DB plan and social security.  He said:                                                                                
     The American dream of a  secure financial retirement no                                                                    
     longer   exists   for   Alaska's  duly   hired   public                                                                    
     employees.     It  is  possible   to  make   a  defined                                                                    
     contribution plan  work for  you as  long as  you don't                                                                    
     live too long.  But, most  of us will live into our mid                                                                    
     80s, many  of us into  90s.  If a  defined contribution                                                                    
     plan is  to work for  you, you  need to know  your life                                                                    
     expectancy.   If  married, how  long  will your  spouse                                                                    
     live.   Will you be  healthy right up until  your heart                                                                    
     stops beating or  will you need some  form of long-term                                                                    
     care?    Medicaid  does  not pay  for  home  health  or                                                                    
     nursing  homes.    You're responsible  for  that  bill.                                                                    
     What will inflation be for  the next 20 years?  Defined                                                                    
     benefits and  social security  provide annual  [Cost of                                                                    
     living  allowances] COLAs.   The  new DC  plan doesn't.                                                                    
     Will there be  inflation in health care  costs over the                                                                    
     next 20 years?   Any chance your utility  bills will go                                                                    
     up?   What are the  odds that  fuel oil or  natural gas                                                                    
     may cost more?  How about  gasoline?  You better have a                                                                    
     crystal ball  to make DC  plan work.   It is  true that                                                                    
     many  companies  switched   from  defined  benefits  to                                                                    
     defined  contribution plans  over the  past few  years.                                                                    
     But all  of all of  us who  work in the  private sector                                                                    
     have  social  security.   No  matter  how much  or  how                                                                    
     little we  save in  401(k)'s or  [Individual Retirement                                                                    
     Accounts] IRAs we will always  have the defined benefit                                                                    
     plan of  social security that  will last as long  as we                                                                    
     live.   Our  public  employees used  to  have the  same                                                                    
     financial security  before Senate Bill 141.   No matter                                                                    
     how  long they  lived,  no matter  what  bad luck  life                                                                    
     circumstances dealt them, they  would not starve.  They                                                                    
     would not  end up on  public assistance.   AARP members                                                                    
     rely  on   our  public   servants.    They   teach  our                                                                    
     grandchildren.   They  put out  our home  fires.   They                                                                    
     respond when we  call for police assistance.   We don't                                                                    
     want these  honorable public servants to  help us their                                                                    
     entire career,  then worry about their  health coverage                                                                    
     and whether  they will outlive their  savings when they                                                                    
     retire.    They  deserve  better  than  that.    Please                                                                    
     support HB 30 and give them the security they deserve.                                                                     
5:17:37 PM                                                                                                                    
CHAIR OLSON, after first determining no one else wished to                                                                      
testify, closed public testimony on HB 30.                                                                                      

Document Name Date/Time Subjects
32 HB30-DOA-DRB-03-20-09 admin costs.pdf HL&C 3/23/2009 3:15:00 PM
HB 30
33 HB30 Letter of Support - Cole 3-17-09.pdf HL&C 3/23/2009 3:15:00 PM
HB 30
34 HB30 Letter of Support - AARP 3-18-09.pdf HL&C 3/23/2009 3:15:00 PM
HB 30
36 HB30 Written testimony Melody Douglas 3-23-09.pdf HL&C 3/23/2009 3:15:00 PM
HB 30
37 HB30 Written testimony Bob Doll L&C 3-23-09.pdf HL&C 3/23/2009 3:15:00 PM
HB 30
38 HB30 Written testimony Tom Boutin L&C 3-23-09.pdf HL&C 3/23/2009 3:15:00 PM
HB 30
39 HB30 Written testimony Clifford Cole L&C 3-23-09.pdf HL&C 3/23/2009 3:15:00 PM
HB 30