01/22/2004 08:00 AM House STA
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ALASKA STATE LEGISLATURE
HOUSE STATE AFFAIRS STANDING COMMITTEE
January 22, 2004
8:00 a.m.
MEMBERS PRESENT
Representative Bruce Weyhrauch, Chair
Representative Bob Lynn
Representative Paul Seaton
Representative Max Gruenberg
MEMBERS ABSENT
Representative Jim Holm, Vice Chair
Representative John Coghill
Representative Ethan Berkowitz
OTHER LEGISLATORS PRESENT
Representative Harry Crawford
COMMITTEE CALENDAR
HOUSE JOINT RESOLUTION NO. 30
Relating to supporting the repeal of the Government Pension
Offset and the Windfall Elimination Provisions from the Social
Security Act.
- MOVED CSHJR 30(STA) OUT OF COMMITTEE
HOUSE JOINT RESOLUTION NO. 3
Proposing amendments to the Constitution of the State of Alaska
relating to the Alaska permanent fund.
- HEARD AND HELD
HOUSE BILL NO. 350
"An Act relating to adding personal injury, death, and property
damage from arson in the first degree to the offenses
compensable by the Violent Crimes Compensation Board."
- SCHEDULED BUT NOT HEARD
PREVIOUS ACTION
BILL: HJR 30
SHORT TITLE: ELIMINATE SOCIAL SECURITY OFFSET
SPONSOR(S): REPRESENTATIVE(S) GATTO
05/19/03 (H) READ THE FIRST TIME - REFERRALS
05/19/03 (H) STA
01/22/04 (H) STA AT 8:00 AM CAPITOL 102
BILL: HJR 3
SHORT TITLE: CONST. AM: PERMANENT FUND
SPONSOR(S): REPRESENTATIVE(S) CRAWFORD, CROFT
01/21/03 (H) PREFILE RELEASED (1/10/03)
01/21/03 (H) READ THE FIRST TIME - REFERRALS
01/21/03 (H) STA, JUD, FIN
02/07/03 (H) SPONSOR SUBSTITUTE INTRODUCED
02/07/03 (H) READ THE FIRST TIME - REFERRALS
02/07/03 (H) STA, JUD, FIN
01/13/04 (H) STA AT 8:00 AM CAPITOL 102
01/13/04 (H) Heard & Held
01/13/04 (H) MINUTE(STA)
01/22/04 (H) STA AT 8:00 AM CAPITOL 102
WITNESS REGISTER
REPRESENTATIVE CARL GATTO
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Testified as sponsor of HJR 30.
JERRY PATTERSON
Juneau, Alaska
POSITION STATEMENT: Testified on behalf of NEA-Alaska Retired
during the hearing on HJR 30.
MARIE DARLIN
Juneau, Alaska
POSITION STATEMENT: Testified on behalf of the Alaska
Federation for the National Association of Retired Federal
Employees (NARFE) in support of HJR 30.
ROGER GAY
Big Lake, Alaska
POSITION STATEMENT: Testified in opposition to HJR 3.
REPRESENTATIVE ERIC CROFT
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: As co-sponsor, expressed his wish for HJR 3
to move through committee as fast as possible.
ACTION NARRATIVE
TAPE 03-06, SIDE A
Number 0001
CHAIR BRUCE WEYHRAUCH called the House State Affairs Standing
Committee meeting to order at 8:00 a.m. Representatives Seaton,
Lynn, Gruenberg, and Weyhrauch were present at the call to
order.
HJR 30-ELIMINATE SOCIAL SECURITY OFFSET
Number 0180
CHAIR WEYHRAUCH announced that the first order of business was
HOUSE JOINT RESOLUTION NO. 30, Relating to supporting the repeal
of the Government Pension Offset and the Windfall Elimination
Provisions from the Social Security Act.
CHAIR WEYHRAUCH requested a motion be made to move HJR 30 "for
discussion purposes."
Number 0219
REPRESENTATIVE LYNN said, "I so move, Mr. Chair."
CHAIR WEYHRAUCH clarified that the bill before the committee was
HJR 30 [the original bill Version] 23-LS1113\A.
Number 0279
REPRESENTATIVE CARL GATTO, Alaska State Legislature, as sponsor,
told the committee that [addressing this issue] is sort of like
"doing your taxes." Although there are many numbers and details
involved, "it boils down to something fairly easy."
REPRESENTATIVE GATTO paraphrased the first paragraph from his
sponsor statement as follows:
There are those Alaskans who, whether retired or
nearing retirement, ... are examining the issues of
income in retirement and measuring it against
expenses. Generally retirees consider two major
sources of retirement income: pensions and social
security. Added together, retirement becomes a better
alternative to continuing on the job, especially when
the job was a long career in public service.
Nonetheless, there are a pair of flies in the
ointment, and very large ones. They are two federal
social security requirements that effectively say that
if you receive a pension, the social security you have
come to believe you deserve is reduced and, in most
cases, eliminated. The effect is that spouses or
surviving members are being unreasonably penalized
because they earned a pension.
REPRESENTATIVE GATTO explained that when people are ready to
retire, they assume that they have paid into social security for
a long time. He said people have always heard that social
security may not be there for people 20 years from now. He
added, "Well, it may not be there for you today, either." He
continued as follows:
But, if you have planned on it and used it as a
calculation to determine your livability in the future
and your standard of living, you took it as a number
that you received from the social security office.
You then looked at your employer, which might be the
State of Alaska, which might be a ferry worker, or it
could be someone in this building, and you can get a
calculation of your benefit. You add the two together
and you say, "Should I retire, or not. Well, maybe I
should retire in the year 2005, in March." And you
plan on that.
Social security though has ... a little fly in the
ointment. And that: they're broke, or nearly broke.
And what they have done in the past is make some
provisions to help them. And that is, they say, "Hey,
if you have a retirement plan, maybe we can get out of
paying you social security." That's really the core
of the entire issue - a way for social security to get
out of paying.
Number 0544
They have two provisions: One is the social security
offset. And initially, they would simply say, "If
you're getting $3,000 a month in a pension and we owe
you $1,000 a month in social security, we don't owe
you anything, because you're already getting $3,000
and we only promised you would get $1,000, so we don't
have to give it to you." That got pretty bad, so they
decided, "Well, that's pretty severe." A few years of
complaints and they decided, "Maybe we ought to make
it only 60 percent." And then it goes on from there
and that's where it is.
The other one is a windfall offset. And they think
you're pension is a windfall, and so have managed to
make more deductions against that, so that ultimately
they don't pay anything. Most of us, if we're [a]
government worker, will not get any social security,
if you're retiring at this point.
REPRESENTATIVE GATTO said he retired about four years ago from
the fire department, which is a government organization. He
said, "You're supposed to pay 40 quarters." He revealed that he
had paid "50-something quarters," but social security thought he
didn't pay enough. He reported that he thinks he gets "a
hundred-and-something dollars" now in social security after
"paying in for 50 quarters." He remarked that this doesn't
affect him as much as other people who won't even get the $111
dollars a month; they'll get considerably less.
Number 0702
REPRESENTATIVE GATTO said this is a national issue, which is the
reason for a resolution to speak to [Alaska's] representatives
and senators in Washington, D.C., who will the join a large
group of other states to address this issue.
Number 0737
CHAIR WEYHRAUCH remarked that this whole matter "smacks of ...
an interment of contract," where people thought they had
something coming and the government is saying they don't. He
asked if there have been any case law regarding this issue.
REPRESENTATIVE GATTO responded, "How many of us have ever tried
to sue the federal government?" He stated that there are a lot
of repercussions "here" for public services workers. If someone
is getting social security as a teacher in Oregon, for example,
and he or she wants to come up [to Alaska], "the benefit [he or
she has learned to expect can go away." He noted that there are
teachers "here" who had a previous job, in [an industry outside
of teaching]. He said, "In order to keep that, they have to
quit their job here and go somewhere else and continue
teaching." He said he used the example of teachers because, to
some degree, [the state] is having trouble recruiting teachers.
He indicated that teachers get a penalty for coming up to Alaska
to teach. He added that this concern does not just apply to
teachers, but to anybody who has received a "government
retirement."
Number 0869
REPRESENTATIVE LYNN noted that, as a retired public school
teacher himself, he is a victim of "this very thing." He
suggested that the resolution also be sent to President Bush.
REPRESENTATIVE GATTO responded, "We can."
CHAIR WEYHRAUCH suggested Tommy Thompson, [Secretary of Health
and Human Services for the U.S. Department of Health and Human
Services], as well as President Bush. He asked Representative
Gatto if he would mind if the committee added [those two names
to the resolution].
Number 0960
REPRESENTATIVE GATTO indicated that [HJR 30 is a] very friendly
[resolution]. [The addition of Tommy Thompson and President
Bush was treated as a friendly amendment to HJR 30.]
Number 0965
REPRESENTATIVE SEATON asked, "Is this off-set any different
[from] the off-set for income?" He asked if the problem is that
retirement proceeds are being considered as income. He gave an
example whereby a person has another source of income "that
equals the $3,000" [in a previously stated example]. He asked
if that would be the same offset.
REPRESENTATIVE GATTO replied that that is a good question.
CHAIR WEYHRAUCH stated that the committee would get other
testimony regarding that [question].
REPRESENTATIVE SEATON turned to a page [included in the
committee packet] that shows the states in which public
employees are not covered by social security, and he noted that
Alaska is one of those states. He recalled a time when he lived
in Seward and public employees voted not to be covered by social
security; therefore they haven't been paying into social
security. He added, "You know, that was the time where you had
to opt in or opt out." He asked for confirmation that the
intent of the proposed resolution is not to say, "Okay, we
haven't been paying into social security at all, but now we want
to be covered," but rather to say, "If you had not opted out of
social security, then you shouldn't receive the deduction."
REPRESENTATIVE GATTO answered that he believes Representative
Seaton is correct. He noted that when he worked for the fire
department, he received a letter one day that said, "Do you want
in or out?" He related that his response was, "You must be
kidding. I'm out." He noted that when working as a kid in a
grocery store, he didn't "pay that much in," and social security
rates were low; therefore, he said, "I don't feel terrible about
this." Conversely, he said, there are any number of people who
have been paying in considerably more and feel like, "I'm paying
in, I get something back." He added that what they are getting
back is nil.
REPRESENTATIVE SEATON said he knows that one of the things that
has plagued social security is the reduction in the number of
people who currently are working [compared to the number of]
retirees. He stated that he wants to ensure that the intent of
the resolution is not to include people who opted out of social
security payment and are asking that they be covered, but solely
to cover those people who "paid in."
REPRESENTATIVE GATTO answered, "Right." He clarified that the
people who opted out did pay something in or there wouldn't be
anything to opt out of; therefore, they have some investment.
But, he explained, the social security administration uses what
they paid in to do some of the calculations of what they could -
emphasis on the word "could" - earn. That administration then
"applies these deductions to what they could have earned from
social security."
REPRESENTATIVE SEATON stated that he just wants it on the record
that [the resolution] is not trying to expand social security
payouts for people who had been in public service, where the job
had been opted out and they "might not have ever paid anything
in."
Number 1237
CHAIR WEYHRAUCH, for the public's benefit, explained that [HJR
30] is a resolution asking Congress to take action; there is
nothing in the resolution that could bind the state or amend
state statute.
Number 1290
JERRY PATTERSON, testifying on behalf of NEA-Alaska Retired,
told the committee that he taught in the Lower 48 and had social
security credits from all that time, including having worked
through summer. He noted that he worked after retirement, here
in Alaska. Social Security, in its last statement, informed him
that he earned a $400 benefit, of which he will receive $160.
That means [his benefit] will be reduced by 60 percent, solely
for the reason that he worked as a teacher in Alaska and the
teacher's retirement system (TRS) does not pay into social
security.
MR. PATTERSON noted that he has a teacher friend in Juneau whose
husband worked as an accountant in the private sector. Her
husband paid into social security for 44 years, passed away a
couple of years ago, and because she's a teacher, she will not
receive any spousal benefit. He added, "It will be offset
against any spousal benefit that she would receive by two-thirds
of her teacher's retirement." He stated that that happens to
approximately 90 percent of spouses nationwide.
Number 1400
CHAIR WEYHRAUCH asked, "Did this occur with the social security
administration in the off-set because of the status of the
social security funds? And is it a recent creature - of let's
say the past 10 years - that Congress enacted?"
MR. PATTERSON answered as follows:
This was enacted in 1983, and it was at a time when
they were concerned about [the] funding status of
social security. And they, essentially, went after
public employees as a sector, (indisc.) in states that
were not participating. In all cases, we have paid
the money; it's not like ... we're asking for
something we haven't paid for. In fact, we're carried
on the books for social security. In all their
estimates, we're carried on the books as 100 percent.
But when we go to collect, we get 40 cents on the
dollar. Or, in the case of a spouse, you get zero
cents on the dollar, in nine out of ten cases. So,
the penalty is quite severe.
CHAIR WEYHRAUCH asked, "This doesn't affect, say, people who are
in the military and then work for another branch or another
state; they still get their military over and above their other
pensions, right?"
Number 1500
MR. PATTERSON answered, yes; the military would get any other
pension. However, he mentioned that there is a National Troops
to Teachers program, and if [military personnel] were to come
teach in Alaska, they would have a portion of their social
security reduced. He said the same is true of someone who is
earning social security in the private sector, comes to work for
the state as a computer analyst, and gets vested, for example.
He explained, "You only have to become vested to be penalized."
He stated that this penalty is becoming much more widespread and
people are becoming much more knowledgeable about it.
REPRESENTATIVE GATTO asked for the record if getting vested
means 8 years.
MR. PATTERSON answered that eight years is how long it takes for
a teacher to get vested. He offered his understanding that a
public employee gets vested in five years.
REPRESENTATIVE GATTO asked, "And so we're encouraging people,
before they reach that year, to quit and go somewhere else. Is
that correct?"
MR. PATTERSON indicated he is aware of three teachers that have
left Alaska because of their social security penalties.
Number 1558
REPRESENTATIVE SEATON asked if this penalty also would apply to
railroad workers who pay into a separate system of retirement.
MR. PATTERSON answered that he is not certain if this affects
railroad [workers'] retirement. He said, "All I'm familiar with
is the social security side."
REPRESENTATIVE SEATON said he is trying to figure out the
rationale behind this, and he asked if the following is correct:
It seems like what they're saying is that if you are
in a state and you opt out of paying into social
security - which we have done ... -- so all those
accumulated payments that are going along, when that
generates income in retirement, then that income -
because it wasn't coming through the social security
system - is going to be counted just ... as if you had
been contributing to social security and you're
receiving that benefit. And then they pay only the
portion of your other benefit that would bring that up
to your amount.
MR. PATTERSON interpreted, "What they're saying is, you've got a
retirement from a noncontributor and that's good enough, and
we're going to penalize you on the other; we don't want you to
get rich."
MR. PATTERSON noted that 283 representatives and 20 senators,
including U.S. Senator Lisa Murkowski, have signed on the
proposed resolution. He told the committee that Representative
Young's aide indicated that U.S. Representative Young would vote
for [the resolution] on the floor, although he has not signed
on. Mr. Patterson also noted that U.S. Senator Steven's aide
had told him that Senator Stevens is sympathetic, but had made a
comment in regard to the cost. Mr. Patterson noted that the
cost would be $50 billion over 10 years. That $50 billion has
already been accounted for; therefore, it would not change the
projections on social security if it was paid out. He said
[Senator Steven's] is waiting until "after the election" to see
if the issue is dealt with [during possible] overhaul of the
social security system.
CHAIR WEYHRAUCH said, "They continue to talk of overhaul of the
social security system."
Number 1720
REPRESENTATIVE GRUENBERG, taking the devil's advocate position -
because he said that's what "they" will be taking in Washington,
D.C. - stated that the reason this is happening is because the
federal budget is "so out of whack." He said [the federal
government] is trying to find money anywhere it can, and "they
come out of your pocket." He said the same kind of issue is
going on at the state level "here, in other areas." All levels
of government, he said, are having difficulty trying to finance
the war in Iraq and have "a bunch of tax deductions." He added,
"And you are the people who are paying, as a result of them
taking the money out of the social security." He stated that
it's important that the people testifying on this [resolution]
really understand what the political problem is back in
Washington, D.C. To get the money back in the social security
system the unbalanced federal budget will have to be addressed.
Number 1820
MARIE DARLIN, testifying on behalf of the Alaska Federation for
the National Association of Retired Federal Employees (NARFE),
noted that as of October of 2002, there are 6,636 surviving
annuitants in Alaska. About 1,500 of those are actually members
of a NARFE chapter, of which there are five in Alaska.
MS. DARLIN said this issue is a complicated one. She continued
as follows:
This started, actually, with a government pension
offset in 1977, although that did not go into effect
until 1982.
She said NARFE has been working for years to get Congress to
repeal these pension offsets. [The offsets] are intended to
reduce the social security annuities of anyone who also receives
a federal or state government annuity. She stated that this is
unfair, because these social security payments were made by
these workers, wherever it was that they worked while covered by
social security. She stated that the government pension offset
(GPO) reduces or eliminates the social security benefit from the
spouse's social security. Some people can "get hit two
different ways," she added. The windfall elimination provision
reduces a person's own earned benefit, by using a formula that
can result in a loss of as much as 60 percent of their social
security, "just because their career was as a government
employee of some type." She added, "Again, they also paid into
that fund for social security benefits and then [found] they
don't have them."
MS. DARLIN said that many government pensions are not that much
[money], for example, when a person worked in a lower-paying
position for less than the full 20 or 30 years. Many times, she
said, those most affected by these offsets are low-income
widows. She stated, "These off-sets affect thousands ... of not
only federal retirees, but state municipal workers, as well as
teachers and school district employees, just as you've heard."
MS. DARLIN urged the committee's support of HJR 30, to show
Congress that the states are also concerned about their
retirees. She offered "back-up" information [included in the
committee packet].
Number 2015
REPRESENTATIVE GRUENBERG suggested that language be crafted to
ask the federal government to look at other ways of adjusting
its budget, "rather than on the backs of social security." He
explained that he is trying to get at the root of the problem in
a positive way by showing that "we" recognize "what's causing
this."
Number 2082
REPRESENTATIVE LYNN opined that what Representative Gruenberg is
suggesting "goes outside" [the intent of the resolution]. Other
than the addition of the names previously suggested, he said he
thinks the resolution should "go as is."
Number 2100
REPRESENTATIVE SEATON stated that he would vote [HJR 30] out of
committee; however, he said he thinks the problem is not so much
social security as it is that the total pool of people paying
into social security has been reduced by opt out provisions. He
said that government employees and railroad [employees] were the
only people who were given the option to opt out of social
security, and they did, because they "saw a better road." He
stated that he doesn't think "we" want to identify the problem
as being the federal budget so much as it is in regard to when
the opt out system was [enacted].
Number 2190
REPRESENTATIVE GRUENBERG said he would not want to offer that
suggestion as an amendment unless everyone was in favor of it.
Number 2211
REPRESENTATIVE LYNN moved to report HJR 30, as amended, out of
committee with individual recommendations and the accompanying
fiscal note. There being no objection, CSHJR 30(STA) was
reported out of the House State Affairs Standing Committee.
HJR 3-CONST. AM: PERMANENT FUND
Number 2323
CHAIR WEYHRAUCH announced that the last order of business was
HOUSE JOINT RESOLUTION NO. 3, Proposing amendments to the
Constitution of the State of Alaska relating to the Alaska
permanent fund.
CHAIR WEYHRAUCH opened public testimony.
Number 2370
ROGER GAY told the committee that he is from Big Lake, Alaska.
He stated his objection to the legislature and governor "always
trying to set their sights on the permanent fund." He stated
his belief that the state has assets that it refused to use to
pay its bills. While the state owns practically all of the
coal, zinc, lead, timber, gold, oil, gas, and land, he said,
"you" depict the state as being poor. He suggested the state
sell some of its land, dig up some of its gold, or drill for its
own oil. The state should make its own money, he opined. Mr.
Gay said the people [of Alaska] own less than one percent of
"what's up here." He added, "And of the land we allegedly own,
we only control the surface rights, and we pay taxes on that."
He stated that the state has had plenty of time to have "forward
funded" the government, but has failed to do so. He said, "And
now you want to reach into my pocket instead of your own." He
opined that [the legislature's] duty is to defend the
constitution, including Article 9, Section 15; and when it tries
to change the constitution it is not protecting and defending
it.
CHAIR WEYHRAUCH noted that [HJR 3] would change the
constitution. He asked Mr. Gay if he is testifying in
opposition to the resolution.
MR. GAY responded that he is opposed to HJR 3. He stated that
he thinks [the legislature] has been irresponsible in not
properly conducting its financial affairs. He reiterated that
he thinks the legislature should not use the permanent fund to
solve its fiscal problems, because people need the money to pay
for their food and medical bills. He said, "The state is not a
living entity and the people of the state are." He suggested
that [the legislature] could sell enough land to forward fund
its bills for a year, and then "you'd be ahead of the curve."
He indicated this step should be taken before taking money from
the people of the state. He said, "You've got lots of money,
and you're just not looking at it, you're looking at that
permanent fund."
Number 2548
REPRESENTATIVE SEATON noted that the state has been trying to
give incentives to increase development in the state. He said
there are five major world-class mines that "might come on
line." He added that [due to the cost of getting] those mines
going, and [because of] the way the tax structure is, basically,
the state will receive no money from those mines. He asked Mr.
Gay if he is suggesting that the legislature redo the tax
structure on those kinds of developments so that the state
garners significant quantities of money to pay its bills from
that development, even if it would stop that development and
those jobs from going forward.
Number 2602
MR. GAY replied, "You own the land and you own the resources,
and if you wanted to, you could develop them yourselves and make
money." He gave the example of the gas pipeline. He said [the
state] could build and own the gas pipeline if it wanted to. He
listed state investments, such as the Delta barley project, the
grain mill in Seward, and the farms out on Point Mackenzie, and
he said, "They're not good." However, as far as the state's
land holdings, he suggested that the state divest itself of
those by giving them to local governments who would in turn be
encouraged to sell those to the people to gain revenue through
the taxes that the people would pay on the land. Instead, he
said, [the state] is just holding on to that land and claiming
that it's broke.
Number 2637
REPRESENTATIVE SEATON continued his line of questioning as
follows:
So then, you're testimony would be that you would
favor the state, as a state itself, developing those
mines, and also probably using the permanent fund to
finance and construct the gasoline.
MR. GAY replied, "If those are appropriate uses of the permanent
fund investments, then I would say yes." He opined, "The
permanent fund should invest its money in Alaskan projects that
benefit Alaska, instead of sending the money to New York
bankers."
Number 2696
CHAIR WEYHRAUCH stated that, based on all the amount of e-mails
he received on this issue, he is shocked that there aren't more
people who want to testify on this resolution. He expressed his
reluctance to close public participation; therefore, he said he
would not close it at this time. He also said he wants to give
the resolution the benefit of the full committee.
Number 2743
REPRESENTATIVE ERIC CROFT, Alaska State Legislature, as co-
sponsor of HJR 3, in response to a question by Chair Weyhrauch,
said he and co-sponsor Representative Harry Crawford would like
to see the resolution move forward to the House Judiciary
Standing Committee and do so as quickly as possible.
[HJR 3 was heard and held.]
ADJOURNMENT
Number 2772
There being no further business before the committee, the House
State Affairs Standing Committee meeting was adjourned at 8:42
a.m.
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