Legislature(1999 - 2000)
04/27/1999 08:07 AM House STA
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 159-PERS PEACE OFFR STATUS CORRECTION EMPLOYE CHAIR JAMES announced the last order of business is HB 159, "An Act granting certain employees in correctional facilities status as peace officers under the public employees' retirement system." Number 026 REPRESENTATIVE GARY DAVIS presented HB 159 stating that it relates to certain employees in the correctional facilities who are on a 30-year retirement plan as opposed to other employees in the same facility that are on a 20-year retirement plan. It's an equality issue because those employees face the same conditions and risks as those on the 20-year plan. To correct that inequity, this legislation puts these employees under the 20-year plan. REPRESENTATIVE DAVIS said the fiscal note was prepared by the Division of Retirement and Benefits, Department of Administration, which states a $375,000 per year increase in benefits to the retirement fund by the state. CHAIR JAMES mentioned the committee didn't hold a hearing on HB 159 on April 22, because it did not have a fiscal note. Number 095 BILL CHURCH, Retirement Supervisor, Division of Retirement and Benefits, Department of Administration, came before the committee. CHAIR JAMES said HB 159 indicates that the employee would immediately have a liability to buy the past service. She asked what happens with the state's portion of that. MR. CHURCH replied that any additional costs to fund those benefits would become part of the past service rate for the employer. He said any bill that is crafted in this way, that's how it would function. CHAIR JAMES said she talked with the drafter about making it that the employee would have to pay the full actuary cost of buying the past service, the only ongoing expense would be that the state would have the additional money which would have to be paid by the state due to the shorter length of retirement. REPRESENTATIVE COGHILL said he was a little confused with the employees being able to buy back in - that incurs the $375,000 for that, or is it from then on. Number 141 MR. CHURCH explained that what their actuary did was value the benefits between the "all-other" and the peace officer and (indisc.) it over 25 years adding the additional normal cost for the ongoing peace officers' component came out to $375,000 a year. The actuary has indicated that there does not appear to be any measurable past service cost in this particular group. Mr. Church noted that there is only 8 percent of 274 that are actuary tier-one employees and that the tier-one employees do have a higher cost, as an employee group in general. MR. CHURCH pointed out that he is only separating the 274 employees between tier-one and tier-two. The actuary has to look at when are these benefits going to be payable, how much do we have to set aside today to pay a benefit in 20 years versus 30 years. Mr. Church further explained that the compacted time between that 10- year difference means that more money has to be set aside today to pay that benefit in the future. He said this is what we're talking about when we say, "The value difference between an all-other benefit and a peace officer benefit, and the impact of that to future state contributions." Number 210 REPRESENTATIVE COGHILL asked, if HB 159 becomes law, and they are now involved in a 20-year plan, and if they want to go back and claim the retroactive part, how is that calculated. MR. CHURCH clarified that the way the bill is currently written, they would be charged the difference in the contribution rate and all other employees -- or this particular group currently pays 6 3/4 percent of salary and a peace officer pays 7 1/2 percent salary, so they would pay the 3/4 of a percent based on all of their contributions during the period that they're in a position in a correctional facility. REPRESENTATIVE COGHILL asked what is the state's portion of that. MR. CHURCH replied that really is something that the actuary said "is not measurable." In other words it would be something extremely small. So we're saying "that part would not appreciably affect the state rate at all." CHAIR JAMES asked if they were currently paying 7 1/2 percent, how much does the state put in. MR. CHURCH explained the state rate for "all-other" and "peace officer" is valued two years in advance based on interest assumptions and the various assumptions are based on the number of members, salaries, mortality assumptions, disability and death rates. He added that any of these types of factors go into creating what the future rate is going to be for an employer. Number 255 CHAIR JAMES reiterated that with the 8 percent of the 274 people affecting that long-term contribution that the state has to make, (dumped into all the other folks) a contribution is not measurable, it's insignificant. MR. CHURCH replied, yes it is immeasurable. CHAIR JAMES expressed that it was her concern because she thought it was a chunk, but it's not. MR. CHURCH emphasized the 8 percent are what parts of this total group are tier-one employees. CHAIR JAMES understood that. REPRESENTATIVE HUDSON said he believes this group of people were overlooked years ago. They are in dangerous situations as are public safety officers and fish and game enforcement people. He said he wanted to applaud the prime sponsor for bringing HB 159 before this legislature. Number 281 REPRESENTATIVE WHITAKER said he was having difficulty understanding the statement, "There's no appreciable cost," and the fiscal note. He asked if the $375,000 is attached to HB 159. MR. CHURCH replied yes it is. CHAIR JAMES further explained the amount that it takes for them to be in the 20-year program, from now on, is the additional amount that the state would have to put in to make their annuity part come out right at the end. REPRESENTATIVE HUDSON emphasized that that's precisely the difference. He said, "We have them in a 30-year plan now and the state's contribution of their contribution is 6 3/4 [percent], and to put them into a 30-year plan, both the employee and the state have to 'anti up' more money in order to put more money into the actuarially established trust fund so that when they do retire that they'll be covered from there on out, that's the law." CHAIR JAMES said $375,000 for approximately 274 employees is a little more than $1,000 per employee per year. She said she doesn't know how many years they've worked (that's the additional amount that the state will have to pay every year) and that it's difficult for her to understand that the "catch up" is immeasurable. She said it seems it would be at least $27,000 if 10 percent of these people were there. Chair James further stated, "But I do understand the way we decide, every couple of years, how much is put into the pile so it's a different calculation, it has nothing to do with what the employer pays in, it has to do with the total amount of money that is in the fund and it needs to be - and calculated how many - if everybody retires, when they think they're going to and they keep it at a percentage that's safe and dump money in there. And a couple of years ago, that's where we cut the budget by $16 million because all of sudden they had put too much money in there and so we didn't have to put as much in. So that's done in another figure." Number 343 REPRESENTATIVE COGHILL indicated that he also has a hard time understanding that. He said, "But with the $100,000 a year going in from the state to squeeze that time down, the employee also is increasing their contribution." He asked what is the average for employee. MR. CHURCH said he doesn't have that information, however, he received information from the Department of Corrections [and is looking for it]. CHAIR JAMES said, if it is 7 1/2 percent, it would be similar to (indisc.--simult. speech) about the same as you would be paying for social security and Medicare if you were working anywhere else; it's about the same amount of money. REPRESENTATIVE COGHILL said that basically answers his question. REPRESENTATIVE COGHILL stated that he agrees with HB 159, but he also understands that the state is basically going to have to take this money from somewhere else, and how do we do that. He agrees with the concept but he may be one of those fellows that will say, "We can't afford it this year." Number 370 MR. CHURCH said the information from the Department of Corrections indicates that there are 15 political subdivisions that also run some sort of a correctional facility, that this would also impact them as well. He said Retirement and Benefits only valued the state portion because it was something that they could measure. CHAIR JAMES remarked, "And that's another unfunded mandate, [laugher] and we're good at that. We're good at that, we whine a lot about it when the federal government does it to us, so we do it all the time." Number 386 REPRESENTATIVE HUDSON moved to report HB 159 out of committee with individual recommendations and the accompanying fiscal note. REPRESENTATIVE SMALLEY asked if the bill was going to be amended so that the employee pays the arrears. CHAIR JAMES explained that it is an immeasurable amount so we don't need to do that. REPRESENTATIVE OGAN reported a conflict of interest because his sister-in-law would be affected by this. REPRESENTATIVE OGAN agrees that people who work in correctional facilities may be in dangerous situations, however, are not on the same level as public safety officers and fish and game enforcement officers because the facilities are a controlled environment. He said he also agrees with Representative Coghill's comment that this is a year that we can't afford this and objects to moving the bill. Upon a roll call vote, Representatives Hudson, Smalley, Kerttula, Whitaker and James voted in favor of moving HB 159, and Representatives Ogan and Coghill voted against it. Therefore, HB 159 passed 5-7.
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