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