Legislature(2005 - 2006)CAPITOL 106
03/29/2005 08:00 AM House STATE AFFAIRS
| Audio | Topic |
|---|---|
| Start | |
| HB201 | |
| HB183 | |
| HB170 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 201 | TELECONFERENCED | |
| *+ | HB 183 | TELECONFERENCED | |
| += | HB 170 | TELECONFERENCED | |
| += | HB 177 | TELECONFERENCED | |
| += | HB 191 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
HB 170-PUB EMPLOYEES/TEACHERS RETIREMENT BOARDS 9:19:39 AM CHAIR SEATON announced that the next order of business was HOUSE BILL NO. 170, "An Act relating to the qualifications of public members of the Public Employees' Retirement Board and the Alaska Teachers' Retirement Board." 9:19:58 AM HEATH HILYARD, Staff to Representative Mike Kelly, Alaska State Legislature, on behalf of Representative Kelly, sponsor, reviewed the previous discussion of the bill from prior hearings. 9:21:20 AM PAT WELLINGTON, Elected member, Public Employees' Retirement (PERS) Board since 1977, commended Representative Kelly for realizing that "probably the solution to the problem is not throwing out the two boards and starting all over again." In HB 170, the three public members would be appointed by the governor and two would never have worked for "a participating political subdivision." He stated that he is not certain of the purpose of that. He said right now the governor has the authority to appoint three members to the PERS Board. He listed the current appointed members. He said Representative Kelly indicates in the proposed bill that there "should be a need for some expertise in administration, finance, accounting, or economic development." He opined that it is necessary to consider the responsibility of the PERS Board, and to realize that the board is not in the asset management end of the program. 9:23:54 AM MR. WELLINGTON estimated 80 percent of the board's work centers around appeals "from the administrator." He explained, "If a person is injured on a job and wants to apply for occupational or nonoccupational disability, and the director turns them down, the board hears those appeals with two doctors." The board also hears administrative appeals regarding retirement benefits, overpayments, or underpayments. The board meets once a year to set the employers' contribution rate, which is brought to the board by the administration, with the input it has received from its actuarial consultant - in this case, Mercer Human Resource Consulting. The board then acts upon that consolidated contribution rate. He stated that he has found the actuarial science interesting, and that information is what the board must rely on. He said, "That is about the only area of responsibility in the financial end that we would have any say in." He predicted the experts that Representative Kelly wants on the board would get bored "sitting there listening to a lot of disability appeals." 9:25:42 AM MR. WELLINGTON said the board also advises the administration on health insurance for retirees; however, that program is solely the responsibility of the commissioner of administration, who has the sole authority to make whatever changes to the health insurance he/she feels appropriate. He recognized that the largest current under funding is within the health insurance component. He said that the board has worked with the administration over the years to attempt to reduce costs. He said there is a health insurance subcommittee made up of two members from PERS and two from TRS, and he has sat on that subcommittee for the last 10 years. He noted one of the money- saving ideas that has been instituted with the administration has been the use of generic drugs and "an educational process," which he indicated has resulted in an annual savings of about $1 million. He indicated that health insurance may rank even higher in importance than the paycheck to most retirees. 9:27:49 AM MR. WELLINGTON concluded by reiterating that it isn't necessary to put people on the board with expertise as [proposed in the bill], because "that's really not the area that this board deals in." 9:28:21 AM CHAIR SEATON, regarding the board setting the contribution rates, asked Mr. Wellington if he would find it problematic if the legislature were to establish a floor that the board could not drop below. 9:29:08 AM MR. WELLINGTON answered no. He indicated that a number of years ago the PERS board made recommendations for a ceiling and floor. He said the [TRS board] doesn't "have that same provision." He said he thinks the ceiling is a good provision. Mr. Wellington said he thinks there has been some misconception that the PERS board has reduced the actuarial rate below what has been recommended by the consultant. He emphasized that the board has never done that, but has, in fact, set the rate higher than recommended. He explained, "We were trying to maintain about 100-102 percent funding for PERS and, had we adopted the rate as recommended by the administration at Mercer, we would have dropped below that. And it was a collective decision of the board not to do that." 9:30:26 AM CHAIR SEATON said the committee is not familiar with how the board works, and he indicated that he appreciates knowing that 90 percent of the board's time is involved in disability appeals. 9:30:39 AM MR. WELLINGTON noted that the board also does some administrative appeals. He offered an example. He said he thinks that that appellants who come before the board feel that they will get "a fair shake." 9:31:31 AM REPRESENTATIVE RAMRAS recognized the service of Mr. Wellington and of the late Robert Boko, "a spiritual, powerful member who left an extraordinary mark on the ... TRS board." He asked Mr. Wellington to list the governors under which he has served. 9:32:40 AM MR. WELLINGTON listed Governors: Jay Hammond, Bill Sheffield, Steve Cowper, Walter Hickel, Tony Knowles, and Frank Murkowski. 9:32:59 AM REPRESENTATIVE RAMRAS remarked that Mr. Wellington has seen the PERS fund living and breathing for many years. 9:33:35 AM MR. WELLINGTON said comments are made that "we probably couldn't invest our way out of the predicament that we're in today," but he said he thinks it's important to look at the whole picture. He said when the board considered a hybrid program in the past, it was basically told to stay on track. He said he thinks a better approach would have been to look at the whole system and to conduct a study to consider the medical portion of the program. He said the state's participation in the SBS program costs about $40 million per year, and perhaps there could be some reduction in that. He mentioned near-term, mid-term, and long-term results, and said he looks at defined contribution as a long-term [solution]. Mr. Wellington said, "I think a better approach would have been to study this, look at what's available, and then recommend the changes." He said he did not feel comfortable in recommending a "title only-type situation." He said, as a former law enforcement officer, he would not "sign off" on anything he had not had the opportunity to study in detail. He admitted that he may be overcautious, but said he has seen those who are not [cautious] get into trouble. He said he thinks the board would support a change, but not until it sees "what it would look like." 9:37:08 AM MR. WELLINGTON, in response to a question from Representative Ramras, spoke of his former career in law enforcement. He noted that he also sits on the Alaska State Pension Investment Board [ASPIB]. 9:37:30 AM REPRESENTATIVE RAMRAS asked Mr. Wellington if the PERS board is looking out for the worker or the institution. 9:38:20 AM MR. WELLINGTON responded that the board looks out for the system and the worker. He said, "We're a finder of facts, and develop the facts as presented. We do take in ... - through consideration - the evidence that the worker brings forth to us, but the bottom line is that our decisions have to stand the test of time, because there is an appeal process." He noted that, since he's been on the board, [both] the state [and] the appellant has had the right to appeal to the superior court. He offered further details. He said he knows a lot of people in Alaska, but doesn't let that interfere with his work. 9:39:40 AM CHAIR SEATON asked Mr. Wellington to describe the differences between the PERS and TRS Boards. 9:39:54 AM MR. WELLINGTON said the TRS Board includes certified teachers and deals only with occupational disability, while the PERS Board addresses both occupational and non-occupational disability. He said historically there have been two separate boards, and their constituency is a little different. He noted that the TRS Board is not as busy, because they don't have the same amount of appeals. He said the boards could be combined if the new single board was made bigger; however, he said he doesn't know that "bigger is always better." He indicated that the current boards function well and "it doesn't cost a lot to meet." 9:41:20 AM MR. WELLINGTON, in response to a question from Representative Ramras, noted that the [PERS] Board meets 4-5 times a year. Appeals take up a vast majority of the meeting. The upcoming meeting is scheduled to last four days. He offered an example of a fireman working for the municipality who fell off a ladder, but had preexisting conditions from a football injury. The board decided that falling off the ladder was not sufficient cause for disability, but the court told the board to reconsider the case under more liberal interpretations, whereby the fireman was given the disability. He offered more examples. He said, "Every once in awhile the system has to step up to the plate and say, 'We made a mistake.'" 9:44:39 AM CHAIR SEATON offered his understanding that every member of the current board has been employed at one time with PERS. 9:44:49 AM MR. WELLINGTON noted that Bronk Jorgensen has never been in the system. He said the governor can appoint whomever he/she wants. He said being a board member is a time-consuming job; for every day spent in hearings, hours are spent at home in preparation, without compensation. 9:45:48 AM CHAIR SEATON offered his understanding that currently there are no PERS employers represented [on the board] from municipalities or school districts. 9:46:02 AM MR. WELLINGTON said, "Not currently." 9:46:07 AM CHAIR SEATON asked Mr. Wellington if he would think it a positive move toward diversity of opinion if there was a requirement for "some participation by an employer within ... PERS." 9:46:17 AM MR. WELLINGTON responded that he thinks that would be good, because people don't feel they have a voice at the table. CHAIR SEATON, in response to a request by Representative Ramras and the ensuing remarks by Mr. Wellington, suggested that a biography of each of the PERS Board members could be provided to the committee. 9:51:36 AM JAY DULANY, testifying on behalf of himself, noted that he is a member of the Retired Public Employees Association (RPEA). He stated that it would be difficult to improve on the current makeup of the boards, and keeping those with experience in the system off the boards would be unwise. In particular, he said, removing the ability to elect the two members on the PERS board "kind of flies in the face of our representative democracy." Furthermore, he stated his belief that the TRS board should be changed to allow two elected members. Regarding having an employer on the boards, he said the governor certainly could appoint an employer; however, he doesn't see a problem with specifying that an employer be on the board. 9:53:09 AM KEVIN RITCHIE, Alaska Municipal League (AML), mentioned a recent meeting that had taken place. He stated that about 63 percent of PERS and TRS systems are in schools, municipalities, and the university. Currently, he noted, there is no structural connection between those three to the program, so "this is a program which is obviously key to employers." He said it would certainly be reasonable to add seats. 9:55:09 AM MR. RITCHIE, in response to a question from Chair Seaton regarding combining the two boards, said AML has been meeting for about six months, and that issue has not been addressed. He stated his personal experience with "this board" is that it has a very open system. For example, he said several months ago AML was invited to the table to work through the Mercer information. He concluded, "I do agree that the boards are functioning very openly [and] very well right now." 9:55:59 AM SAM TRIVETTE, President, Retired Public Employees of Alaska (RPEA), revealed that his involvement with RPEA began in 1998. He said RPEA represents thousands of the ten thousands of retirees from PERS, TRS, and other public retirement systems, and opposes the proposed legislation for a number of reasons. He paraphrased his written testimony as follows: For all of the public members the governor has the authority to appoint, this bill would, for no good reason, exclude well over 50,000 Alaskans from being considered for the positions, just because they have at some time in their lives, worked for a public employer. Furthermore, the bill excludes numerous other Alaskans from appointment that have significant public sector experience - but not private sector experience - in administration, financing, accounting or economic development. Not having seen a [sponsor's] explanation of the bill, it is unclear to me what the purposes of these sections were. Having attended numerous PERS & TRS board meetings in the last 5 years, ... I understand what their duties and responsibilities are and what they spend most of their time on. A majority of the [board's] time is spent hearing appeals from members of the system. The board members need to be very familiar with Alaska employee and retiree laws & benefits, and how the system really works. Let me say that [in] my observations of current and past PERS/TRS Board members at their meetings in the last half decade, an observer would not know who was elected, who was appointed, who was a former public employee or not, based upon their comments and actions at the meeting. They all understood their statutory and fiduciary responsibilities, no matter what the issue was. I would add that the members without public employee experience tended to lean upon board members with the public employee experience to effect the best possible outcome for the state and any individuals involved. The boards have a history of fair and equitable hearings. Many potential court appeals are avoided, as employees and retirees are more accepting of even adverse decisions when they know the board members understand the system and the appellant believes they are getting reasonable consideration. Clearly, having board members with public employment experience has enhanced the ability of the state to make many changes to the retirement benefits system that has resulted in many millions of dollars of savings in recent years. Without [the] excellent cooperation of the current [Division of] Retirement & Benefits staff ..., retired PERS and TRS board members, and RPEA volunteers, the fund balances would be in much worse shape today. ... I'm assuming this bill does not tamper with the two ... elected ... PERS Board members, and I think if it were to tamper with that ... you would find yourself in a potential diminishment of benefits situation, which, if that were the case, ... would certainly be subject to legal challenges. I've worked with organizations for over 40 years .... In spite of individual PERS and TRS Board member views, I've not seen a group - even with changes over time and many new board members of the last 2-plus years - that has better served the interest of ... all of the citizens of Alaska. They are efficient - they use their time wisely; they are effective - they find ways to contain and reduce costs; and the are beholden to no one - including employers, retirees, [the Division of] Retirement & Benefits, [and] consultants. 10:01:18 AM MR. TRIVETTE, regarding combining the two boards, said he is not an expert but has spent time talking with TRS Board members. He pointed out that PERS and TRS statutes were enacted at different times and the boards have different types of teachers. In terms of how the money is paid out of the system, TRS and PERS are quite different; the average payment for PERS is approximately $1,500, while the average payment for TRS is $2,500. He noted that many of the university employees fall under PERS, rather than TRS. He said he doesn't want to tell the committee members that it would be impossible to combine the two boards, but he suggested they withhold judgment and raise those questions with some of the other PERS and ... TRS board members that would be in town next week. He also suggested that the committee speak with some of the former members of the PERS and TRS boards; he estimated there are probably five or six members that have been replaced in the last couple of years. Another person of note, he said, would be the board attorney, who is not a member of the board, but has been working with the board for many years. 10:02:55 AM CHAIR SEATON recognized that Representative Mike Kelly, sponsor, had just joined the committee. After discerning that Representative Kelly did not wish to add further testimony at this time, he closed public testimony.
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