Legislature(2005 - 2006)CAPITOL 106

04/19/2005 08:00 AM STATE AFFAIRS


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08:08:51 AM Start
08:13:48 AM SB141
10:17:17 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Recessed to 6:00 pm --
+ HJR 12 CONST. AM: BUDGET RESERVE FUND REPEAL TELECONFERENCED
Scheduled But Not Heard
+= SB 141 PUBLIC EMPLOYEE/TEACHER RETIREMENT/BOARDS TELECONFERENCED
Heard & Held
<Public testimony: 6:00 p.m.>
+= HB 238 PUBLIC EMPLOYEE/TEACHER RETIREMENT TELECONFERENCED
Scheduled But Not Heard
Bills Previously Heard/Scheduled
                    ALASKA STATE LEGISLATURE                                                                                  
             HOUSE STATE AFFAIRS STANDING COMMITTEE                                                                           
                         April 19, 2005                                                                                         
                           8:08 a.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Paul Seaton, Chair                                                                                               
Representative Carl Gatto, Vice Chair                                                                                           
Representative Jim Elkins                                                                                                       
Representative Bob Lynn                                                                                                         
Representative Jay Ramras                                                                                                       
Representative Berta Gardner                                                                                                    
Representative Max Gruenberg                                                                                                    
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
All members present                                                                                                             
                                                                                                                                
OTHER LEGISLATORS PRESENT                                                                                                     
                                                                                                                                
Representative John Harris                                                                                                      
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
CS FOR SENATE BILL NO. 141(FIN)                                                                                                 
"An  Act   relating  to  the  teachers'   and  public  employees'                                                               
retirement systems  and creating defined contribution  and health                                                               
reimbursement  plans  for  members of  the  teachers'  retirement                                                               
system and the public employees'  retirement system who are first                                                               
hired  after  July 1,  2005;  relating  to university  retirement                                                               
programs; establishing the Alaska  Retirement Management Board to                                                               
replace  the Alaska  State Pension  Investment Board,  the Alaska                                                               
Teachers' Retirement Board, and  the Public Employees' Retirement                                                               
Board; adding  appeals of the  decisions of the  administrator of                                                               
the  teachers' and  public employees'  retirement systems  to the                                                               
jurisdiction of the office  of administrative hearings; providing                                                               
for nonvested members of the  teachers' retirement system defined                                                               
benefit plans  to transfer into  the teachers'  retirement system                                                               
defined  contribution  plan  and  for nonvested  members  of  the                                                               
public  employees' retirement  system  defined  benefit plans  to                                                               
transfer  into the  public employees'  retirement system  defined                                                               
contribution  plan;  providing  for  political  subdivisions  and                                                               
public  organizations to  request  to participate  in the  public                                                               
employees'  defined contribution  retirement plan;  and providing                                                               
for an effective date."                                                                                                         
                                                                                                                                
     - HEARD AND HELD                                                                                                           
                                                                                                                                
HOUSE JOINT RESOLUTION NO. 12                                                                                                   
Proposing amendments to  the Constitution of the  State of Alaska                                                               
relating to the repeal of the budget reserve fund.                                                                              
                                                                                                                                
     - SCHEDULED BUT NOT HEARD                                                                                                  
                                                                                                                                
HOUSE BILL NO. 238                                                                                                              
"An Act relating to contribution  rates for employers and members                                                               
in the defined  benefit plans of the  teachers' retirement system                                                               
and the  public employees'  retirement system  and to  the ad-hoc                                                               
post-retirement  pension adjustment  in the  teachers' retirement                                                               
system;  requiring insurance  plans  provided to  members of  the                                                               
teachers' retirement system, the  judicial retirement system, the                                                               
public  employees'  retirement  system, and  the  former  elected                                                               
public  officials   retirement  system  to  provide   a  list  of                                                               
preferred  drugs;  relating  to defined  contribution  plans  for                                                               
members  of  the  teachers'  retirement  system  and  the  public                                                               
employees'  retirement system;  and  providing  for an  effective                                                               
date."                                                                                                                          
                                                                                                                                
     - SCHEDULED BUT NOT HEARD                                                                                                  
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
BILL: SB 141                                                                                                                  
SHORT TITLE: PUBLIC EMPLOYEE/TEACHER RETIREMENT/BOARDS                                                                          
SPONSOR(s): FINANCE                                                                                                             
                                                                                                                                
03/14/05       (S)       READ THE FIRST TIME - REFERRALS                                                                        
03/14/05       (S)       FIN                                                                                                    
03/16/05       (S)       FIN AT 9:00 AM SENATE FINANCE 532                                                                      
03/16/05       (S)       Heard & Held                                                                                           
03/16/05       (S)       MINUTE(FIN)                                                                                            
03/17/05       (S)       FIN AT 9:00 AM SENATE FINANCE 532                                                                      
03/17/05       (S)       Heard & Held                                                                                           
03/17/05       (S)       MINUTE(FIN)                                                                                            
03/21/05       (S)       FIN AT 9:00 AM SENATE FINANCE 532                                                                      
03/21/05       (S)       Heard & Held                                                                                           
03/21/05       (S)       MINUTE(FIN)                                                                                            
03/22/05       (S)       FIN AT 9:00 AM SENATE FINANCE 532                                                                      
03/22/05       (S)       Heard & Held                                                                                           
03/22/05       (S)       MINUTE(FIN)                                                                                            
03/23/05       (S)       FIN AT 9:00 AM SENATE FINANCE 532                                                                      
03/23/05       (S)       Heard & Held                                                                                           
03/23/05       (S)       MINUTE(FIN)                                                                                            
03/29/05       (S)       FIN AT 4:30 PM SENATE FINANCE 532                                                                      
03/29/05       (S)       Heard & Held                                                                                           
03/29/05       (S)       MINUTE(FIN)                                                                                            
03/30/05       (H)       FIN AT 9:00 AM HOUSE FINANCE 519                                                                       
03/30/05       (S)       Heard & Held                                                                                           
03/30/05       (S)       MINUTE(FIN)                                                                                            
03/31/05       (H)       FIN AT 9:00 AM HOUSE FINANCE 519                                                                       
03/31/05       (S)       Heard & Held                                                                                           
03/31/05       (S)       MINUTE(FIN)                                                                                            
04/01/05       (H)       FIN AT 9:00 AM HOUSE FINANCE 519                                                                       
04/01/05       (S)       Heard & Held                                                                                           
04/01/05       (S)       MINUTE(FIN)                                                                                            
04/02/05       (S)       FIN AT 10:00 AM SENATE FINANCE 532                                                                     
04/02/05       (S)       Heard & Held                                                                                           
04/02/05       (S)       MINUTE(FIN)                                                                                            
04/03/05       (S)       FIN AT 10:00 AM SENATE FINANCE 532                                                                     
04/03/05       (S)       Heard & Held                                                                                           
04/03/05       (S)       MINUTE(FIN)                                                                                            
04/04/05       (S)       FIN AT 9:00 AM SENATE FINANCE 532                                                                      
04/04/05       (S)       Scheduled But Not Heard                                                                                
04/05/05       (S)       FIN AT 9:00 AM SENATE FINANCE 532                                                                      
04/05/05       (S)       Heard & Held                                                                                           
04/05/05       (S)       MINUTE(FIN)                                                                                            
04/06/05       (S)       FIN AT 9:00 AM SENATE FINANCE 532                                                                      
04/06/05       (S)       Moved CSSB 141(FIN) Out of Committee                                                                   
04/06/05       (S)       MINUTE(FIN)                                                                                            
04/08/05       (S)       FIN    RPT   CS        5DP   1DNP    1AM                                                               
                         NEW TITLE                                                                                              
04/08/05       (S)       DP:   GREEN,   WILKEN,   BUNDE,   DYSON,                                                               
                         STEDMAN                                                                                                
04/08/05       (S)       DNP: HOFFMAN                                                                                           
04/08/05       (S)       AM: OLSON                                                                                              
04/12/05       (S)       ENGROSSED                                                                                              
04/14/05       (S)       TRANSMITTED TO (H)                                                                                     
04/14/05       (S)       VERSION: CSSB 141(FIN)                                                                                 
04/14/05       (H)       READ THE FIRST TIME - REFERRALS                                                                        
04/14/05       (H)       STA, FIN                                                                                               
04/14/05       (H)       STA AT 8:00 AM CAPITOL 106                                                                             
04/14/05       (H)       <Pending Referral>                                                                                     
04/16/05       (H)       STA AT 9:30 AM CAPITOL 106                                                                             
04/16/05       (H)       <Bill Hearing Canceled>                                                                                
04/19/05       (H)       STA AT 8:00 AM CAPITOL 106                                                                             
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
SENATOR BERT STEDMAN                                                                                                            
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Presented SB 141 as sponsor.                                                                               
                                                                                                                                
MELANIE MILLHORN, Director                                                                                                      
Health Benefits Section                                                                                                         
Division of Retirement & Benefits                                                                                               
Department of Administration                                                                                                    
Juneau, Alaska                                                                                                                  
POSITION  STATEMENT:    Answered   questions  on  behalf  of  the                                                               
division during the hearing on SB 141.                                                                                          
                                                                                                                                
GINGER EVENS                                                                                                                    
Petersburg, Alaska                                                                                                              
POSITION  STATEMENT:     Testified   on  behalf  of   herself  in                                                               
opposition to SB 141.                                                                                                           
                                                                                                                                
DORIS TANNER                                                                                                                    
Willow, Alaska                                                                                                                  
POSITION STATEMENT:   Testified on behalf of herself  to urge the                                                               
committee  to  postpone  a  decision  on  SB  141  until  further                                                               
research has been conducted.                                                                                                    
                                                                                                                                
CONTESSA GOSSETT                                                                                                                
Palmer, Alaska                                                                                                                  
POSITION  STATEMENT:     Testified   on  behalf  of   herself  in                                                               
opposition to SB 141.                                                                                                           
                                                                                                                                
ANDREA ANDREWS                                                                                                                  
Palmer, Alaska                                                                                                                  
POSITION  STATEMENT:     Testified   on  behalf  of   herself  in                                                               
opposition to SB 141.                                                                                                           
                                                                                                                                
KEVIN BRENNAN                                                                                                                   
Kodiak, Alaska                                                                                                                  
POSITION  STATEMENT:     Testified   on  behalf  of   himself  in                                                               
opposition to SB 141.                                                                                                           
                                                                                                                                
PAT HOLMES                                                                                                                      
Kodiak, Alaska                                                                                                                  
POSITION STATEMENT:   Asked the  committee to put off  a decision                                                               
regarding SB 141 until further  information and options have been                                                               
considered.                                                                                                                     
                                                                                                                                
CARLENE AUGE                                                                                                                    
Salcha, Alaska                                                                                                                  
POSITION STATEMENT:   Testified on  behalf of herself  during the                                                               
hearing on SB 141.                                                                                                            
                                                                                                                              
BONNIE SULLIVAN                                                                                                                 
Fairbanks, Alaska                                                                                                               
POSITION STATEMENT:  Offered comments and concerns about SB 141.                                                              
                                                                                                                              
TIM VIAVANT                                                                                                                     
Fairbanks, Alaska                                                                                                               
POSITION STATEMENT:  Testified in opposition to SB 141.                                                                         
                                                                                                                                
SCOTT LEIGH                                                                                                                     
Fairbanks, Alaska                                                                                                               
POSITION STATEMENT:  Testified in opposition to SB 141.                                                                         
                                                                                                                                
MARTIN BRANVILLE                                                                                                                
Fairbanks, Alaska                                                                                                               
POSITION STATEMENT:   Testified on  behalf of himself  during the                                                               
hearing on SB 141.                                                                                                              
                                                                                                                                
JEFF JABUSCH, Finance Director                                                                                                  
City of Wrangell                                                                                                                
Wrangell, Alaska                                                                                                                
POSITION STATEMENT:   Testified during  the hearing on SB  141 to                                                               
express that the bill is generally on the right track.                                                                          
                                                                                                                                
BOB PLUNELLA, City Manager                                                                                                      
City of Wrangell                                                                                                                
Wrangell, Alaska                                                                                                                
POSITION  STATEMENT:     Indicated   his  concurrence   with  the                                                               
testimony of Mr. Jabusch, during the hearing on SB 141.                                                                         
                                                                                                                                
LESLIE SIMMONS                                                                                                                  
Anchorage, Alaska                                                                                                               
POSITION  STATEMENT:   Testified  on behalf  of  herself and  the                                                               
southcentral state  supervisors [APEA AFT-SU] during  the hearing                                                               
on SB 141.                                                                                                                      
                                                                                                                                
PAT LUBY, Advocacy Director                                                                                                     
AARP-Alaska                                                                                                                     
Anchorage, Alaska                                                                                                               
POSITION  STATEMENT:   Discussed  the  consequences of  switching                                                               
from  a defined  benefit  plan to  a  defined contribution  plan,                                                               
during the hearing on SB 141.                                                                                                   
                                                                                                                                
STACY OATES                                                                                                                     
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:   Testified  on behalf  of herself  to relate                                                               
three  main  issues  she  has  with   SB  141,  and  to  ask  the                                                               
legislature to slow down it's process.                                                                                          
                                                                                                                                
STEVE HOFFMAN                                                                                                                   
Ketchikan, Alaska                                                                                                               
POSITION STATEMENT:   Testified on  behalf of himself  during the                                                               
hearing  on SB  141, and  warned that  a new  tier may  erode the                                                               
capability of the state to attract good employees.                                                                              
                                                                                                                                
CHARLIE ARTEAGA                                                                                                                 
Ketchikan, Alaska                                                                                                               
POSITION  STATEMENT:     Testified   on  behalf  of   himself  in                                                               
opposition  to portions  of SB  141, including  those related  to                                                               
changing to a defined benefit plan and lowered medical benefits.                                                                
                                                                                                                                
DUANE MORAN, President                                                                                                          
Anchorage Council of Education                                                                                                  
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:   Testified on  behalf of the  council during                                                               
the  hearing on  SB 141,  and  said a  defined contribution  plan                                                               
would make it easier for employees to leave the state.                                                                          
                                                                                                                                
SANDRA BESSER, President                                                                                                        
Fairbanks North Star Borough Employee Association                                                                               
Local 6125 APEA AFT                                                                                                             
Fairbanks, Alaska                                                                                                               
POSITION STATEMENT:  Testified in opposition to SB 141.                                                                         
                                                                                                                                
BURNS COOPER                                                                                                                    
Fairbanks, Alaska                                                                                                               
POSITION STATEMENT:   Testified on  behalf of himself  during the                                                               
hearing  on  SB  141  to address  issues  regarding  recruitment,                                                               
retention, and the challenges of saving for retirement.                                                                         
                                                                                                                                
GERRY GUAY, Chair                                                                                                               
Southcentral chapter, state supervisory, [APEA AFT-SU]                                                                          
Cordova, Alaska                                                                                                                 
POSITION STATEMENT:  Testified during  the hearing on SB 141, and                                                               
related concerns regarding the benefits and recruitment.                                                                        
                                                                                                                                
SANDRA BOATWRIGHT                                                                                                               
Fairbanks, Alaska                                                                                                               
POSITION  STATEMENT:     Testified   on  behalf  of   herself  in                                                               
opposition to SB 141.                                                                                                           
                                                                                                                                
PAULETTE WILLE                                                                                                                  
Fairbanks, Alaska                                                                                                               
POSITION  STATEMENT:     Testified   on  behalf  of   herself  in                                                               
opposition to SB 141.                                                                                                           
                                                                                                                                
VIOLA "VI" JERREL, Ph.D.                                                                                                        
Homer, Alaska                                                                                                                   
POSITION STATEMENT:  Testified in opposition to SB 141.                                                                         
                                                                                                                                
TIM JESTER                                                                                                                      
No address provided                                                                                                             
POSITION  STATEMENT:     Testified   on  behalf  of   himself  in                                                               
opposition to SB 141.                                                                                                           
                                                                                                                                
LUKE HOPKINS                                                                                                                    
Fairbanks, Alaska                                                                                                               
POSITION  STATEMENT:    Suggested  that  the  committee  consider                                                               
holding  SB 141  through the  interim and  establishing a  review                                                               
committee that  would move  around the  state and  take testimony                                                               
from the public.                                                                                                                
                                                                                                                                
MIKE DAVIDSON                                                                                                                   
No address provided                                                                                                             
POSITION  STATEMENT:     Testified   on  behalf  of   the  Alaska                                                               
Professional Fire Fighters Association in opposition to SB 141.                                                                 
                                                                                                                                
BEN STEWART                                                                                                                     
Fairbanks, Alaska                                                                                                               
POSITION STATEMENT:   Testified on  behalf of himself  during the                                                               
hearing on  SB 141, and asked  the committee to slow  the process                                                               
down and listen to constituents.                                                                                                
                                                                                                                                
MIKE HARBAUGH                                                                                                                   
Palmer, Alaska                                                                                                                  
POSITION  STATEMENT:     Testified   on  behalf  of   himself  in                                                               
opposition to SB 141.                                                                                                           
                                                                                                                                
JOE DINNOCENZO                                                                                                                  
Kodiak, Alaska                                                                                                                  
POSITION STATEMENT:   Testified on  behalf of himself  to address                                                               
the issue of recruitment and retention as it relates to SB 141.                                                                 
                                                                                                                                
JOHN DICKENSON                                                                                                                  
Anchorage, Alaska                                                                                                               
POSITION  STATEMENT:     Testified  as  a   supervisory  employee                                                               
representative to APEA AFT-SU, during the hearing on SB 141.                                                                    
                                                                                                                                
ROSS MARLEY                                                                                                                     
Homer, Alaska                                                                                                                   
POSITION  STATEMENT:     Testified   on  behalf  of   himself  in                                                               
opposition to SB 141.                                                                                                           
                                                                                                                                
BARBARA RICH                                                                                                                    
Fairbanks, Alaska                                                                                                               
POSITION STATEMENT:   Testified on  behalf of herself  during the                                                               
hearing on SB 141, and answered questions from the committee.                                                                   
                                                                                                                                
JIM DUNCAN, Business Manager                                                                                                    
Alaska State Employees' Association (ASEA)                                                                                      
Anchorage, Alaska                                                                                                               
POSITION  STATEMENT:   Testified on  behalf of  the approximately                                                               
8,000 current active ASEA members in opposition to SB 141.                                                                      
                                                                                                                                
DOUG STARK, DPA                                                                                                                 
Homer, Alaska                                                                                                                   
POSITION STATEMENT:   Testified on  behalf of himself  during the                                                               
hearing on SB 141.                                                                                                              
                                                                                                                                
MARY GRAHAM                                                                                                                     
Juneau, Alaska                                                                                                                  
POSITION  STATEMENT:     Testified   on  behalf  of   herself  in                                                               
opposition to SB 141.                                                                                                           
                                                                                                                                
KEVIN RITCHIE, Executive Director                                                                                               
Alaska Municipal League (AML)                                                                                                   
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:   Testified  on behalf of  AML in  support of                                                               
the efforts  being made  by the legislature,  and to  explain the                                                               
percentage increases being faced by municipalities.                                                                             
                                                                                                                                
TOM BRICE                                                                                                                       
Alaska State District Council of Laborers                                                                                       
Juneau, Alaska                                                                                                                  
POSITION  STATEMENT:   Testified  on behalf  of  the council  and                                                               
answered questions  from the committee  during the hearing  on SB
141.                                                                                                                            
                                                                                                                                
JIM HORNADAY, Mayor                                                                                                             
City of Homer                                                                                                                   
Homer, Alaska                                                                                                                   
POSITION STATEMENT:   Testified in support of  some provisions in                                                               
SB 141.                                                                                                                         
                                                                                                                                
TOM HARVEY, Executive Director                                                                                                  
NEA-Alaska                                                                                                                      
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:   On behalf  of NEA-Alaska,  made suggestions                                                               
for changes to SB 141 and answered questions from the committee.                                                                
                                                                                                                                
RON KING                                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:   Testified on  behalf of himself  during the                                                               
hearing on SB  141, to discuss the issue of  competition from the                                                               
private sector, and to answer questions from the committee.                                                                     
                                                                                                                                
BETH WYTHE                                                                                                                      
Homer, Alaska                                                                                                                   
POSITION STATEMENT:   Testified on  behalf of herself  to express                                                               
concerns regarding SB 141.                                                                                                      
                                                                                                                                
KEVIN BROOKS, Deputy Commissioner                                                                                               
Office of the Commissioner                                                                                                      
Department of Administration                                                                                                    
Juneau, Alaska                                                                                                                  
POSITION  STATEMENT:    Answered   questions  on  behalf  of  the                                                               
department during the hearing on SB 141.                                                                                        
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
CHAIR  PAUL  SEATON  called  the  House  State  Affairs  Standing                                                             
Committee  meeting  to  order at  8:08:51  AM.    Representatives                                                             
Gatto, Elkins,  Ramras, and  Seaton were present  at the  call to                                                               
order.   Representatives Lynn, Gardner, and  Gruenberg arrived as                                                               
the meeting was in progress.                                                                                                    
                                                                                                                                
SB 141-PUBLIC EMPLOYEE/TEACHER RETIREMENT/BOARDS                                                                              
                                                                                                                                
CHAIR SEATON  announced that the  first order of business  was CS                                                               
FOR SENATE BILL  NO. 141(FIN), "An Act relating  to the teachers'                                                               
and  public employees'  retirement systems  and creating  defined                                                               
contribution and  health reimbursement  plans for members  of the                                                               
teachers' retirement system and  the public employees' retirement                                                               
system  who are  first  hired  after July  1,  2005; relating  to                                                               
university   retirement   programs;   establishing   the   Alaska                                                               
Retirement Management  Board to replace the  Alaska State Pension                                                               
Investment Board, the Alaska Teachers'  Retirement Board, and the                                                               
Public  Employees'  Retirement  Board;   adding  appeals  of  the                                                               
decisions  of  the  administrator  of the  teachers'  and  public                                                               
employees' retirement  systems to the jurisdiction  of the office                                                               
of administrative  hearings; providing  for nonvested  members of                                                               
the  teachers'   retirement  system  defined  benefit   plans  to                                                               
transfer   into   the   teachers'   retirement   system   defined                                                               
contribution  plan  and  for  nonvested  members  of  the  public                                                               
employees' retirement  system defined  benefit plans  to transfer                                                               
into   the   public    employees'   retirement   system   defined                                                               
contribution  plan;  providing  for  political  subdivisions  and                                                               
public  organizations to  request  to participate  in the  public                                                               
employees'  defined contribution  retirement plan;  and providing                                                               
for an effective date."                                                                                                         
                                                                                                                                
SENATOR BERT STEDMAN, Alaska State  Legislature, presented SB 141                                                               
as sponsor.   He reviewed that several years  ago, some actuaries                                                               
asked another  actuary group to  perform an actuarial  audit, the                                                               
result  of which  was that  there  were some  adjustments to  the                                                               
liability portion  of the state  retirement plan that  caught the                                                               
state,  school  system,  and municipalities  by  surprise.    The                                                               
liabilities  in one  year jumped  up a  few billion  dollars, and                                                               
people wanted  to know why.   Last year was the  second year that                                                               
the numbers  were "out" and, with  no plan in place  to deal with                                                               
the escalations,  the legislature approached  the administration,                                                               
who  began  a process  of  having  the  boards that  oversee  the                                                               
retirement systems consider  possible alternatives, solutions, or                                                               
recommendations.                                                                                                                
                                                                                                                                
8:13:48 AM                                                                                                                    
                                                                                                                                
SENATOR  STEDMAN  said the  boards  looked  for comparisons  with                                                               
other states  and with major  competitors in the state,  and they                                                               
produced two new  tier proposals:  one was a  100 percent defined                                                               
contribution plan, and  the other was a combination  of a defined                                                               
contribution plan and  a defined benefit   plan.   He offered his                                                               
understanding of the history of  the events that occurred between                                                               
that time  and the  present.   He said  this issue  affects every                                                               
employee and those retired.                                                                                                     
                                                                                                                                
8:16:56 AM                                                                                                                    
                                                                                                                                
SENATOR  STEDMAN  said the  Senate  Finance  Committee took  both                                                               
plans and  started the process  of finding  the pros and  cons of                                                               
each.   He said the  first two goals  of that committee  were to:                                                               
address the issue  of retention and remain  competitive, not only                                                               
in Alaska, but also in the Northwest.                                                                                           
                                                                                                                                
8:18:54 AM                                                                                                                    
                                                                                                                                
SENATOR  STEDMAN remarked  that  the existing  Tier I  retirement                                                               
plan  is  "extremely  rich."    Some  adjustments  were  made  in                                                               
compiling the  Tier II plan,  and still further  adjustments were                                                               
made to  create the Tier III  plan.  He said  [the Senate Finance                                                               
Committee] chose to use a  100 percent defined contribution plan,                                                               
because it  felt it  was more  portable.   He noted  that today's                                                               
employees typically have multiple careers  and move around a lot.                                                               
He stated that, over the  last decade, the federal government has                                                               
modified  the  retirement  rules  to make  things  more  portable                                                               
between the  different retirement plans  and systems that  it has                                                               
around  the  country.    Senator  Stedman  said  there  are  some                                                               
liability  issues with  a defined  contribution plan  that "we're                                                               
all struggling with."  He  clarified that there is little ability                                                               
to move  and adjust the current  tier structures.  He  noted that                                                               
the defined  contribution plan, on  the other hand, is  much more                                                               
flexible; it  allows the  employer to respond  in the  event that                                                               
there are financial conditions -  both positive and negative - or                                                               
in the event that "you become  at a disadvantage in attracting or                                                               
retaining your employees."                                                                                                      
                                                                                                                                
8:22:10 AM                                                                                                                    
                                                                                                                                
SENATOR  STEDMAN  acknowledged  that   the  House  State  Affairs                                                               
Standing Committee  began a  process similar  to the  Senate's in                                                               
reviewing alternative  plans.   He observed  that there  are many                                                               
similarities between  the House's bill  and SB 141.   Both bodies                                                               
began  with  plans  from  the tier  review  committee  and  moved                                                               
forward from there.                                                                                                             
                                                                                                                                
8:23:27 AM                                                                                                                    
                                                                                                                                
SENATOR  STEDMAN  addressed the  key  issues  of  the plan.    He                                                               
directed attention to a handout  in the committee packet entitled                                                               
the  "CSSB 141(FIN)  Walkthrough,"  and indicated  that he  would                                                               
offer a synopsis of it.  He  stated his intent is to provide some                                                               
background  information  because  there  seems to  be  a  lot  of                                                               
misinformation concerning the issue.                                                                                            
                                                                                                                                
SENATOR STEDMAN listed the key elements  of SB 141:  to establish                                                               
a defined contribution plan, a  retiree medical benefit plan, and                                                               
a  health  reimbursement  arrangement;  to  replace  the  [Public                                                               
Employees'  Retirement  System   (PERS)]  board,  the  [Teachers'                                                               
Retirement  System (TRS)]  board, and  the [Alaska  State Pension                                                               
Investment Board (ASPIB)] with a  new, 9-member Alaska Retirement                                                               
Management Board;  to establish the  new board's role  to balance                                                               
the assets  and liabilities,  possibly over a  decade or  two; to                                                               
transfer the quasi-judicial responsibility  of hearing appeals to                                                               
the Office  of Administrative Hearings [within  the Department of                                                               
Administration];   to    transfer   to   the    commissioner   of                                                               
administration   the    responsibility   for    adopting   system                                                               
regulations,  and  review and  waver  requests;  and to  set  the                                                               
actuarial  computed normal  cost rate  as a  floor to  the annual                                                               
employer contribution rates.                                                                                                    
                                                                                                                                
SENATOR STEDMAN  listed the  benefits of SB  141:   to strengthen                                                               
management  in fiduciary  oversight;  to improve  the ability  to                                                               
protect and control costs; to  provide near-term financial relief                                                               
to  employers; and  to pave  the way  for developing  a long-term                                                               
financial fix.   He  said the  bill would  not address  the under                                                               
funding liability of  $5.7 billion.  He explained  the reason for                                                               
that is  that there are  structural problems with how  the system                                                               
is  set up,  and  if  the state  pours  hundreds  of millions  of                                                               
dollars into the problem, it will  never be fixed.  He said there                                                               
is a  two-step process.   The  first step  is to  restructure the                                                               
board system  to have  more accountability  and control,  and the                                                               
second is to ask  the new board to do a review  and return to the                                                               
legislature with recommendations next year.                                                                                     
                                                                                                                                
8:28:43 AM                                                                                                                    
                                                                                                                                
SENATOR STEDMAN said  the following was done over  the last year:                                                               
employer  surveys,  member  focus  groups,  benchmarking  benefit                                                               
levels,   demographic  projections,   implications  of   Medicare                                                               
changes,  consideration of  trans  issues  and alternatives,  and                                                               
cost analyses and projections.   Senator Stedman made comparisons                                                               
between the current and proposed  plans.  Under the current plan,                                                               
the  benefit is  based on  salary and  length of  service and  is                                                               
"paid to life"  and to the survivors,  which may or may  not be a                                                               
benefit to  the employer.   Under the proposed plan,  the benefit                                                               
would  be based  on  the amount  of money  invested  and what  is                                                               
earned over  time and is  paid until such  time as the  funds run                                                               
out  or the  money is  transferred to  the retiree's  heirs.   He                                                               
mentioned that the defined contribution  plan is portable; it can                                                               
be rolled over to the next  generation.  Senator Stedman said the                                                               
future benefit  payments under the  defined benefit plan  are not                                                               
affected by  the plan  funding level; it  makes no  difference to                                                               
the beneficiaries under  the current plan if the plan  is over or                                                               
under funded.   He said the liabilities of the  school system are                                                               
basically pushed back to the  state, because of the constitution.                                                               
The liabilities  of the municipalities  are not an  obligation of                                                               
the state; however,  at times when there  is substantial distress                                                               
within the finance  community on issues like this,  the state has                                                               
the obligation to step up and help.                                                                                             
                                                                                                                                
8:32:21 AM                                                                                                                    
                                                                                                                                
SENATOR  STEDMAN said  PERS and  TRS  are examples  of a  defined                                                               
benefit plan,  while the state's supplemental  benefit plan (SBS)                                                               
is  an example  of  a defined  contribution plan.    He said  the                                                               
advantages  of  the  defined  benefit plan  are  the  pooling  of                                                               
longevity  risk,  a guarantee  of  income  stream, and  that  the                                                               
system  favors   longer  service   and  older  employees.     The                                                               
advantages to the defined contribution  plan are its portability,                                                               
the fact that  it's self directed and  predictable - particularly                                                               
regarding cash  flow to  the employer, and  its stable  costs and                                                               
lower  long-term administrative  costs.   The  challenges on  the                                                               
current system  are that  the employer  bears all  the investment                                                               
risk, the  liabilities have  to be  estimated, health  care costs                                                               
are   rising,  and   other  costs   are   uncontrollable.     The                                                               
disadvantages  to  the defined  contribution  plan  are that  the                                                               
employee bears  the investment  risk and  there must  be employee                                                               
education and accurate retirement planning.                                                                                     
                                                                                                                                
8:34:46 AM                                                                                                                    
                                                                                                                                
SENATOR STEDMAN  noted that the  contribution rate is  the simple                                                               
percentage of  payroll required to  pay the benefits earned.   He                                                               
said currently it's  split approximately 60/40, but  SB 141 would                                                               
adjust that  split to roughly a  50/50 split at "50  basis points                                                               
per year  change," which he  said is one half  of 1 percent.   It                                                               
does not include the past  service cost or the unfunded liability                                                               
-  that's  the responsibility  of  the  employer, which  is  [the                                                               
state].  He continued as follows:                                                                                               
                                                                                                                                
     That  change  for  the average  [PERS]  employee  earns                                                                    
     $43,800  a year.   The  first year  it's going  to cost                                                                    
     them $18  before tax  - roughly $14  after tax.   After                                                                    
     it's fully implemented over 6  years, the change before                                                                    
     tax  is $121  a month  - after  tax is  about $96.   In                                                                    
     today's dollars  it's $81 a  month.  And  that's before                                                                    
     collective  bargaining works  its  magic.   And we  all                                                                    
     understand how  that works  ....   The TRS  numbers are                                                                    
     fairly  similar.    The average  TRS  employee's  right                                                                    
     under $54,000.   It would  cost, the first year,  $22 a                                                                    
     month - after ... tax about  $18 per month.  After it's                                                                    
     fully implemented, $125 - in  today's dollars about $86                                                                    
     - and it would take five years to get there.                                                                               
                                                                                                                                
8:37:06 AM                                                                                                                    
                                                                                                                                
SENATOR STEDMAN  said SB  141 would place  the system  assets and                                                               
liabilities with one  board and increase the  frequency of review                                                               
any  time there  is "a  reporting and  adopting of  the actuarial                                                               
assumptions."    The  bill  would   also  increase  the  employer                                                               
representation on the board.   He explained that the employer has                                                               
the ultimate responsibility  for the liabilities and  needs to be                                                               
"plugged  in"  and have  more  influence  on calling  the  shots,                                                               
because when  things go wrong, the  employer is the one  that has                                                               
to come to  the table and cover the liabilities.   He stated that                                                               
the bill  would establish minimum professional  qualifications of                                                               
the board.   He said  it's no benefit to  the employer to  have a                                                               
board that  doesn't spend  much time  dealing with  the actuarial                                                               
issues involved.                                                                                                                
                                                                                                                                
SENATOR STEDMAN  reiterated that the  bill would move  the appeal                                                               
process to  the Office of  Administrative Hearings and  power the                                                               
commissioner of the  Department of Administration to  do the day-                                                               
to-day and system  operations.  He noted that  currently the PERS                                                               
and  TRS  Boards  spend  roughly  80 percent  of  their  time  on                                                               
appeals; as  a result, 80  percent of  what those boards  do will                                                               
disappear.   The other two  responsibilities of the board  are to                                                               
set  the  employer contribution  rate  and  accept the  actuarial                                                               
assumptions.    Those two  functions  belong  in the  group  that                                                               
manages  the assets,  he  said,  thus those  two  items would  be                                                               
shifted to the new board and the  entire work of the PERS and TRS                                                               
Boards would  disappear.  He  said there  is a classic  asset and                                                               
liability  mismatch,   much  like  when  the   savings  and  loan                                                               
associations "all went broke."                                                                                                  
                                                                                                                                
8:40:56 AM                                                                                                                    
                                                                                                                                
SENATOR  STEDMAN addressed  the health  reimbursement arrangement                                                               
(HRA).   He noted  that currently,  if a  person is  qualified to                                                               
retire,  the state  picks  up the  health  insurance "from  there                                                               
forward."  Under  the proposed plan, the state would  pick up the                                                               
health   benefit   cost   when  the   person   reaches   Medicare                                                               
eligibility, which  currently is age 65.   The plan has  a health                                                               
reimbursement arrangement  to supplement the  insurance premiums,                                                               
if needed.   Employer contributions would be set at  2 percent of                                                               
the average  PERS group salary and  would go "into the  pot."  He                                                               
explained that that  is a 100 percent  employer contribution that                                                               
compounds, tax-deferred,  and comes out tax-free.   Contributions                                                               
would be  recorded on an  individual account balance,  managed by                                                               
the  new  Alaska  Retirement   Management  Board,  with  interest                                                               
credited annually.   The  reimbursement would  be limited  to the                                                               
individual's   account   balance   until  it's   exhausted,   and                                                               
terminated  employees  would  forfeit  the  right  to  individual                                                               
accounts, unless  they are  reinstated back  into the  work force                                                               
[within] five years.   He said there is a  lot of federal control                                                               
regarding  health reimbursement;  basically  the  only thing  the                                                               
legislature can do is to change the contribution amount.                                                                        
                                                                                                                                
8:42:59 AM                                                                                                                    
                                                                                                                                
SENATOR  STEDMAN said  the proposed  legislation also  focuses on                                                               
trying  to control  liability  costs.   He  said  a  lot of  that                                                               
control should not  be set in legislation, but should  be left up                                                               
to the board.   He stated that the contribution  level or benefit                                                               
formulas  between  the  employer  and  employees  would  be  11.5                                                               
percent a  year, but that  may be amended.   He said  the vesting                                                               
schedule won't affect the employees,  but there would be a 5-year                                                               
vesting  schedule for  employers.   He offered  his understanding                                                               
that an amendment  may be offered to shorten that  time.  He said                                                               
the bill  has a  five-year vesting schedule,  which is  "zero the                                                               
first year  [and] escalates 25 percent  a year for the  next four                                                               
years."  He explained that that  is a claim that the employee has                                                               
on  the  employer  contributions  upon separation  in  that  time                                                               
frame.    He said  the  employer  contribution into  the  defined                                                               
contribution  amount  is  4.25 percent,  plus  1.75  percent  for                                                               
medical and 2  percent for health reimbursement.   The total cost                                                               
of the employer is 8.25 percent.                                                                                                
                                                                                                                                
8:45:53 AM                                                                                                                    
                                                                                                                                
SENATOR STEDMAN said:                                                                                                           
                                                                                                                                
     There is  a smaller  liability issue with  the medical,                                                                    
     being that  we assume, as a  state, at age 65.   So, we                                                                    
     get rid  of the  actuarial work  out of  the retirement                                                                    
     plan  for virtually  all  of it,  except  for that  one                                                                    
     component.   We still  need some  actuarial assumptions                                                                    
     and drivers  ... driven to  make sure that we  fund [at                                                                    
     the] appropriate level to deal with that.                                                                                  
                                                                                                                                
SENATOR  STEDMAN said  the  medical  plan would  be  the same  no                                                               
matter what tier level a person is.                                                                                             
                                                                                                                                
8:46:21 AM                                                                                                                    
                                                                                                                                
SENATOR  STEDMAN  mentioned the  subject  of  the proposed  board                                                               
restructuring,  but  suggested that  that  subject  be saved  for                                                               
later.                                                                                                                          
                                                                                                                                
8:47:38 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE RAMRAS  stated his  support of SB  141.   He noted                                                               
that he  participated in  a town hall  meeting in  Fairbanks last                                                               
weekend,  in  which he  tried  to  suggest  that if  the  retired                                                               
teachers present had  been on a defined contribution  plan in the                                                               
60s, their retirement would likely be  better today than it is as                                                               
a result of  the defined benefit plan.   He asked if  that was an                                                               
accurate suggestion.                                                                                                            
                                                                                                                                
8:49:35 AM                                                                                                                    
                                                                                                                                
SENATOR STEDMAN said he thinks that statement is true.                                                                          
                                                                                                                                
8:49:45 AM                                                                                                                    
                                                                                                                                
CHAIR SEATON said the committee  would get into that topic later.                                                               
He  said the  answer to  that question  depends on  the level  of                                                               
contribution into the defined contribution plan.                                                                                
                                                                                                                                
8:50:05 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE LYNN  said he thinks  the consolidation  of boards                                                               
is probably  a good idea, but  he doesn't understand the  need to                                                               
change the balance of the makeup of  the board.  He asked how the                                                               
state compares  with other state  boards' return  of investments.                                                               
He  stated   that  he  is   also  concerned  that   the  proposed                                                               
composition of the  board may be too top heavy,  and he indicated                                                               
that  he would  like to  see  more of  a balance  in the  parties                                                               
involved.  He said that issue  will likely determine how he votes                                                               
on the bill.                                                                                                                    
                                                                                                                                
8:52:02 AM                                                                                                                    
                                                                                                                                
SENATOR  STEDMAN indicated  that the  proposed reorganization  of                                                               
the boards is  "not a personality issue," but has  to do with the                                                               
fact that  SB 141 will  make the  individual PERS and  TRS Boards                                                               
unnecessary for the  reasons that he previously stated.   He said                                                               
it's  a  legitimate   question  to  ask  if   the  employees  are                                                               
adequately represented on  the board.  He asked  the committee to                                                               
keep in mind that the liabilities  are borne by the employer, not                                                               
the employee.   He noted  that under the current  board structure                                                               
there are  three independent members  that are  not beneficiaries                                                               
who have  not worked for  the state, schools,  or municipalities.                                                               
He stated, "The benchmark has  been raised for the qualifications                                                               
to  sit  on  the  board."   He  reemphasized  the  importance  of                                                               
grasping the issue of assets and liabilities.                                                                                   
                                                                                                                                
8:56:32 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE LYNN  said it is  important to keep  employment in                                                               
the state attractive.  He says  he has no problem having a public                                                               
member on the board, but three may be "overkill."                                                                               
                                                                                                                                
8:57:34 AM                                                                                                                    
                                                                                                                                
SENATOR STEDMAN  said none of the  appeal work would be  heard by                                                               
the board, but would be heard by administrative judges.                                                                         
                                                                                                                                
8:58:30 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GATTO offered an example  of an employee who quits                                                               
after four years.  He asked what that employee would get.                                                                       
                                                                                                                                
8:59:17 AM                                                                                                                    
                                                                                                                                
SENATOR  STEDMAN  answered  that  that  employee  would  get  all                                                               
his/her  individual  contributions.    He added,  "Plus,  on  the                                                               
vesting  schedule, at  four  years,  you would  get  most of  the                                                               
employer's."   He estimated  it would  be about  75 percent.   He                                                               
reiterated that  the employee is never  at risk "from his  or her                                                               
contributions if [he/she separates] after  a year or two years of                                                               
service."                                                                                                                       
                                                                                                                                
9:00:46 AM                                                                                                                    
                                                                                                                                
SENATOR   STEDMAN,  in   response   to   another  question   from                                                               
Representative   Gatto,   confirmed   that  under   the   defined                                                               
contribution plan,  the heirs  of a deceased  plan member  have a                                                               
connection to the plan.                                                                                                         
                                                                                                                                
REPRESENTATIVE GATTO said it's a  great opportunity to be able to                                                               
leave benefits to one's heirs.                                                                                                  
                                                                                                                                
9:01:02 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE RAMRAS  asked if a  "new member to PERS"  would be                                                               
able  to choose  to  switch  from a  defined  benefit to  defined                                                               
contribution  plan.   Second, regarding  investing, he  asked how                                                               
much harm a person can do to his/her [retirement].                                                                              
                                                                                                                                
9:01:42 AM                                                                                                                    
                                                                                                                                
SENATOR STEDMAN  said the  answer to the  first question  is yes,                                                               
but there are restrictions regarding the  time frame.  He said he                                                               
doesn't think it  would be beneficial for  employees presently on                                                               
Tier  I  and  II  to   switch,  particularly  those  on  Tier  I.                                                               
Regarding the second question, he  said there would be portfolios                                                               
like in  a money market account,  which is risk free.   The board                                                               
could also  offer a fixed rate,  bond fund, a balanced  fund, and                                                               
perhaps  something more  aggressive like  the [Standard  & Poor's                                                               
(S&P)] 500  index.  Employees  could pick their  assets depending                                                               
on their risk comfort level.  He offered further details.                                                                       
                                                                                                                                
SENATOR  STEDMAN said  when people  who testified  "on the  other                                                               
side" were asked if they like  their SBS accounts, they said yes.                                                               
He added, "Well, this virtually is very similar to that."                                                                       
                                                                                                                                
9:06:04 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE RAMRAS  said one  of the issues  that he  has been                                                               
presented with  is the anxiety  component.   He said there  is an                                                               
irrational  fear held  by  current retirees.    He mentioned  the                                                               
issue of  attraction and retention.   He asked what SB  141 would                                                               
do as a  vehicle to address the  concerns of people.   He said he                                                               
is  was "beat  on  over  the weekend"  by  concerned people  with                                                               
irrational fears; the message they gave  him was to "go slow" and                                                               
"be pensive."                                                                                                                   
                                                                                                                                
9:07:35 AM                                                                                                                    
                                                                                                                                
SENATOR  STEDMAN responded  that a  lot  of the  concern is  from                                                               
misinformation.  The  state of Alaska is not  going to relinquish                                                               
its  obligation to  take  care  of the  retired  people who  have                                                               
worked in  the system for  many years.  He  said it is  not their                                                               
fault   that  there   has  been   a  "mismatch   in  assets   and                                                               
liabilities."   Regarding  current employees,  he mentioned  cost                                                               
controls.    He  admitted  that the  50-basis-point  increase  to                                                               
employees is an  issue, because it's a real cost  increase to the                                                               
employees.   He stated his  belief that  a one-half of  1 percent                                                               
change a year is something the  employees can handle.  He said it                                                               
would  be foolish  not  to recognize  the  effects of  collective                                                               
bargaining.                                                                                                                     
                                                                                                                                
SENATOR  STEDMAN  said the  effort  is  being  made to  create  a                                                               
healthy system,  and the current  system is only being  tweaked a                                                               
little bit.  The major  change would affect future employees that                                                               
would start  on or after July  [2005].  He emphasized  that there                                                               
has been  no discussion  toward abolishing Tiers  I, II,  or III.                                                               
Regarding  addressing the  concerns of  constituents, he  said he                                                               
would  stand  up  and  explain the  reason  behind  the  proposed                                                               
changes - changes  that are being made in "a  slow and methodical                                                               
way."  He said people want this problem fixed.                                                                                  
                                                                                                                                
SENATOR  STEDMAN indicated  that if  the  state steps  up to  the                                                               
plate, the  cost of carrying  the contribution increase  is about                                                               
$350  million.   He  said  it  gets  worse when  considering  the                                                               
general fund.  He explained that  half of the general fund is out                                                               
of [the legislature's] control -  it's formula driven.  The other                                                               
half  - a  little over  $2 billion  - is  "relatively within  our                                                               
control."   He said, "That $350  million is going to  come out of                                                               
that one half of the budget."  He  said that's a huge impact.  He                                                               
noted that "some of us" would  like to "solve this problem sooner                                                               
than  later," because  the financial  redirection  of capital  is                                                               
huge and "it's starting this year."                                                                                             
                                                                                                                                
9:12:03 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GRUENBERG  asked what kind of  disability coverage                                                               
would exist under SB 141.                                                                                                       
                                                                                                                                
9:12:33 AM                                                                                                                    
                                                                                                                                
SENATOR  STEDMAN replied  that  a discussion  was held  regarding                                                               
disability  insurance, and  it was  decided not  to add  it.   If                                                               
individuals  want that  insurance,  it  would be  up  to them  to                                                               
purchase it.                                                                                                                    
                                                                                                                                
9:12:53 AM                                                                                                                    
                                                                                                                                
CHAIR  SEATON clarified  that active  employees  are covered  for                                                               
disability under active employment.                                                                                             
                                                                                                                                
9:13:06 AM                                                                                                                    
                                                                                                                                
SENATOR STEDMAN  said, "There's a workers'  [compensation] issue,                                                               
but  ...  the structure's  different  from  under [today's]  tier                                                               
plan."  He deferred further comment to Melanie Millhorn.                                                                        
                                                                                                                                
9:13:54 AM                                                                                                                    
                                                                                                                                
MELANIE MILLHORN, Director, Health  Benefits Section, Division of                                                               
Retirement & Benefits, Department  of Administration, in response                                                               
to Representative  Gruenberg's previous question,  explained that                                                               
active  employees who  are  injured  on the  job  are covered  by                                                               
workers' compensation.   They  also have the  option of  paying a                                                               
premium to  obtain additional disability  benefits.   In response                                                               
to a  follow-up question from Representative  Gruenberg, she said                                                               
that would not be affected by the proposed legislation.                                                                         
                                                                                                                                
9:16:10 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GRUENBERG asked about long-term care.                                                                            
                                                                                                                                
9:16:18 AM                                                                                                                    
                                                                                                                                
MS. MILLHORN  responded that  long-term care  is available  as an                                                               
elective coverage.   She stated  that there is a  high percentage                                                               
of  employees that  elects  to  have long-term  care.   She  said                                                               
that's  a  premium paid  for  by  the  member  and would  not  be                                                               
affected by the legislation.                                                                                                    
                                                                                                                                
REPRESENTATIVE GRUENBERG  asked, "So,  that wouldn't  be affected                                                               
by either bill?"                                                                                                                
                                                                                                                                
MS. MILLHORN answered that's correct.                                                                                           
                                                                                                                                
REPRESENTATIVE GRUENBERG asked what happens  when a person with a                                                               
defined  contribution  plan  outlives  his/her  retirement  plan,                                                               
particularly for those without social security.                                                                                 
                                                                                                                                
9:16:44 AM                                                                                                                    
                                                                                                                                
SENATOR STEDMAN  responded that it's theoretically  possible, but                                                               
unlikely.   He surmised that it  could be possible if  the person                                                               
didn't work long enough with the  state to accumulate assets in a                                                               
retirement plan, or  if there may have been  economic events that                                                               
were detrimental to the person's  long-term financial well being.                                                               
He  said  the  state  offers  SBS  -  a  replacement  for  social                                                               
security.    He  also  mentioned deferred  compensation  and  the                                                               
retirement  system.   He stated,  "There is  no guarantee,  under                                                               
this plan, for a life income,  unless - at the time of retirement                                                               
-  ... they  decided as  an option  under a  defined contribution                                                               
plan to do an annuity, which you can do."                                                                                       
                                                                                                                                
9:18:54 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE ELKINS  asked if the  chair of the board  would be                                                               
selected by the governor or by the board itself.                                                                                
                                                                                                                                
9:19:13 AM                                                                                                                    
                                                                                                                                
SENATOR  STEDMAN  stated  his assumption  that  the  board  would                                                               
select, because it is not specified in the bill.                                                                                
                                                                                                                                
9:19:31 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE ELKINS  stated that he  has a problem  with having                                                               
the governor pick  the chair, because "they tend to  end up being                                                               
dictators ...."                                                                                                                 
                                                                                                                                
9:19:39 AM                                                                                                                    
                                                                                                                                
SENATOR STEDMAN  directed attention  to page  47, line  22, which                                                               
shows that the board would select its chair.                                                                                    
                                                                                                                                
9:20:16 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GRUENBERG asked  how  retirees  are faring  under                                                               
defined contribution plans in the private sector.                                                                               
                                                                                                                                
9:20:36 AM                                                                                                                    
                                                                                                                                
SENATOR STEDMAN  stated that  the private  sector has  moved away                                                               
from  defined  benefit  plans [because  those  plans]  bankrupted                                                               
numerous  corporations.   Those  corporations that  have not  are                                                               
paring back  benefit levels  in an effort  to manage  the system.                                                               
Unlike the  public sector, he  explained, the private  sector can                                                               
go  bankrupt  and restructure.    He  said  the State  of  Alaska                                                               
doesn't have that option.                                                                                                       
                                                                                                                                
9:21:31 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GRUENBERG asked  if there are any  changes in that                                                               
practice under the new bankruptcy law.                                                                                          
                                                                                                                                
9:21:46 AM                                                                                                                    
                                                                                                                                
SENATOR STEDMAN said he doesn't know.                                                                                           
                                                                                                                                
9:21:55 AM                                                                                                                    
                                                                                                                                
MS. MILLHORN also said she doesn't know that answer.                                                                            
                                                                                                                                
9:22:18 AM                                                                                                                    
                                                                                                                                
SENATOR  STEDMAN  offered  further examples  of  the  differences                                                               
between the private and public sectors.                                                                                         
                                                                                                                                
9:22:54 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GRUENBERG  asked what  the startup costs  would be                                                               
for SB 141 and how they would be covered.                                                                                       
                                                                                                                                
9:23:13 AM                                                                                                                    
                                                                                                                                
SENATOR  STEDMAN said  the costs  would  be covered  in a  fiscal                                                               
note.                                                                                                                           
                                                                                                                                
9:23:34 AM                                                                                                                    
                                                                                                                                
CHAIR SEATON noted  that there are fiscal notes  in the committee                                                               
packet.                                                                                                                         
                                                                                                                                
9:23:58 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   GRUENBERG   asked   if  other,   less   drastic,                                                               
alternatives had  been considered  as a  way to  protect workers'                                                               
retirement security  and to reduce  costs, and, if so,  what were                                                               
the pros and cons of those alternatives.                                                                                        
                                                                                                                                
9:24:13 AM                                                                                                                    
                                                                                                                                
SENATOR  STEDMAN prefaced  his  answer by  saying  that he  would                                                               
categorize  this plan  as neither  drastic nor  fast moving.   He                                                               
reminded   Representative   Gruenberg   that   there   were   two                                                               
alternatives that were produced by the  PERS and TRS Boards.  One                                                               
was  the hybrid  defined contribution/defined  benefit plan,  and                                                               
the other  was solely  a defined contribution  plan.   He warned,                                                               
"You can always, in the future,  add a defined benefit portion to                                                               
your retirement  plan, but  once it's  in, you  can never  get it                                                               
out."   He  said  he thinks  the State  of  Alaska, as  employer,                                                               
should maintain as much flexibility  as possible in its system to                                                               
be able to respond to changing market conditions.                                                                               
                                                                                                                                
9:25:15 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GRUENBERG returned to the  issue of when a retiree                                                               
dies.   He mentioned that,  due to the  repeal of the  death tax,                                                               
people  are concerned  about  estate planning.    He offered  his                                                               
understanding  that Senator  Stedman had  said that  if a  person                                                               
dies  before  accessing all  of  his/her  benefits in  a  defined                                                               
contribution  plan,  those  assets   would  become  part  of  the                                                               
person's estate.                                                                                                                
                                                                                                                                
9:26:02 AM                                                                                                                    
                                                                                                                                
SENATOR STEDMAN responded that that  could be the case, depending                                                               
on "how  it's structured."   In response to a  follow-up question                                                               
from Representative Gruenberg, he  explained that annuities would                                                               
generally  expire upon  a person's  death, unless  "you pick  ...                                                               
your spouse and  yourself."  He indicated that  people will "roll                                                               
it" into their IRA, which opens  up the possibility of moving the                                                               
money from generation to generation.   He mentioned beneficiaries                                                               
and money  passing from a spouse  to children.  In  response to a                                                               
question  from  Representative  Gruenberg, he  confirmed  that  a                                                               
person  could  decide  to  give the  money  to  his/her  children                                                               
directly.    He explained  that  a  person  can  have a  list  of                                                               
beneficiaries.  He  said the employer rarely  gets restrictive on                                                               
these types  of issues, because  the employer wants  the employee                                                               
to have a happy retirement.   In response to a follow-up question                                                               
from  Representative Gruenberg,  he confirmed  that there  are no                                                               
restrictions in the bill.   He offered his understanding that the                                                               
new  board   would  set  up   the  investments,   the  retirement                                                               
mechanisms, and  some of the selections.   He said he's  sure the                                                               
board could attach restrictions, but  most likely the focus would                                                               
be on what can be done, not what can't.                                                                                         
                                                                                                                                
9:29:49 AM                                                                                                                    
                                                                                                                                
CHAIR SEATON  clarified that  upon retirement  there's a  list of                                                               
selections that  a person can  make regarding investments;  it is                                                               
the person's  account to  do [with  as he/she  wishes].   For the                                                               
benefit of  the public, he  clarified that the board  cannot take                                                               
the account away or restrict access to it.                                                                                      
                                                                                                                                
9:30:07 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GRUENBERG  clarified that his question  is related                                                               
to restriction on transferability at death.                                                                                     
                                                                                                                                
9:30:32 AM                                                                                                                    
                                                                                                                                
SENATOR  STEDMAN opined,  "You don't  want  to put  this type  of                                                               
structure in  statute.  You want  it in regulation; you  want the                                                               
board to  create it.   And  then you  want the  board to  bump up                                                               
against federal  guidelines."  He  indicated that  emphasis would                                                               
be to have  as many options and as much  flexibility to employees                                                               
as possible.                                                                                                                    
                                                                                                                                
9:32:11 AM                                                                                                                    
                                                                                                                                
CHAIR SEATON moved Amendment 1, which read as follows:                                                                          
                                                                                                                                
     Page 15, line 18:                                                                                                          
          Delete "eight"                                                                                                        
          Insert "11"                                                                                                           
                                                                                                                                
     Page 16, line 8:                                                                                                           
          Delete "4.5"                                                                                                          
          Insert "5.25"                                                                                                         
                                                                                                                                
     Page 81, line 17:                                                                                                          
          Delete "eight"                                                                                                        
          Insert "ten"                                                                                                          
                                                                                                                                
CHAIR  SEATON  explained  that   Amendment  1  would  change  the                                                               
contribution rate in PERS and TRS.                                                                                              
                                                                                                                                
9:32:39 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  RAMRAS  objected to  Amendment  1.   He  said  he                                                               
thinks  savings  rates  are  difficult   for  most  Americans  to                                                               
achieve,   because   "we're   extraordinarily   concerned   about                                                               
consumption."  He  stated that although a better  savings rate is                                                               
better   for  people,   it's  not   the  responsibility   of  the                                                               
legislature to "do this."                                                                                                       
                                                                                                                                
9:33:24 AM                                                                                                                    
                                                                                                                                
CHAIR SEATON referred  to an eight-page handout  in the committee                                                               
packet showing  a comparison of contribution  rates and projected                                                               
benefits for HB 238 and SB 141.   He said there are two scenarios                                                               
for each.   Page 1 and  page [7] compare [TRS  projected benefits                                                               
for the  two bills].   He also noted that  page 1 of  the handout                                                               
correlates with  the proposed  changes in Amendment  1.   He said                                                               
the projected benefits would accumulate  faster with Amendment 1,                                                               
and  he offered  an example.   He  also noted  that the  employer                                                               
contribution  rates included  in  Amendment 1  are basically  the                                                               
employer contribution  rates for  the normal  costs, as  they are                                                               
now.    He  noted  that,  in  the  past  20  years,  the  average                                                               
contribution rate  for the  employer has  been 11.16  [under TRS]                                                               
and 10.68 under PERS.                                                                                                           
                                                                                                                                
9:37:20 AM                                                                                                                    
                                                                                                                                
SENATOR STEDMAN noted that the  tier review committee recommended                                                               
the 11.5 percent,  and the Senate Finance  Committee changed that                                                               
number to  12.5 [percent].   He  stated that  if the  House State                                                               
Affairs Standing Committee is comfortable  changing that to 15.25                                                               
percent, that  would definitely  create a  larger pool  of assets                                                               
available for retirement for the employees.                                                                                     
                                                                                                                                
9:38:17 AM                                                                                                                    
                                                                                                                                
CHAIR SEATON asked if the  average normal cost rate for employers                                                               
in the past has been about 11 percent.                                                                                          
                                                                                                                                
9:38:33 AM                                                                                                                    
                                                                                                                                
SENATOR STEDMAN responded,  "There abouts."  He said,  "This is a                                                               
whole different  mechanism than the defined  benefit."  Generally                                                               
speaking,  he noted,  when  trying to  save  for retirement,  "10                                                               
percent is kind of a base number to start with."                                                                                
                                                                                                                                
9:39:25 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GATTO asked  if an  employee can  "elect a  lower                                                               
number."                                                                                                                        
                                                                                                                                
9:39:42 AM                                                                                                                    
                                                                                                                                
SENATOR STEDMAN answered  that the number is fixed; it  is set in                                                               
statute.   However, he  said the employee  does have  the ability                                                               
through deferred compensation to contribute more.                                                                               
                                                                                                                                
9:42:12 AM                                                                                                                    
                                                                                                                                
A  roll  call vote  was  taken.   Representatives  Gruenberg  and                                                               
Seaton voted  in favor of  Amendment 1.   Representatives Elkins,                                                               
Lynn, Ramras, and  Gatto voted against it.   Therefore, Amendment                                                               
1 failed by a vote of 2-4.                                                                                                      
                                                                                                                                
9:42:26 AM                                                                                                                    
                                                                                                                                
CHAIR SEATON moved Amendment 2, which read as follows:                                                                          
                                                                                                                                
     Page 18, line 12:                                                                                                          
          Delete "five"                                                                                                         
          Insert "three"                                                                                                        
                                                                                                                                
     Page 18, lines 15 - 17:                                                                                                    
          Delete all material and insert:                                                                                       
               "(1)  50 percent with one year of service;                                                                       
     and                                                                                                                        
               (2)  75 percent with two years of service."                                                                      
                                                                                                                                
9:42:31 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE RAMRAS objected to Amendment 2.                                                                                  
                                                                                                                                
9:42:40 AM                                                                                                                    
                                                                                                                                
CHAIR SEATON addressed  Amendment 2.  Through  the proposed bill,                                                               
members  would  be  vested  fully  in  the  defined  contribution                                                               
account  after  5 years  on  a  gradated scale,  incrementing  25                                                               
percent each  year with 0  percent for the  first year.   He said                                                               
Amendment 2  would change that so  that a member is  vested after                                                               
three  years,  with the  member  vesting  in  50 percent  of  the                                                               
employer  contribution after  one year  of full  service, and  75                                                               
percent after two years.  He  said the plan outlined in Amendment                                                               
2 is similar to what the State  of Colorado adopted.  He said the                                                               
purpose for changing to a defined  contribution plan is to have a                                                               
means by which to attract employees.   A number of employees come                                                               
to the state  thinking that they will be here  a very short time.                                                               
Having a portable  plan that takes longer to vest  in would lower                                                               
the ability to attract people to the plan.                                                                                      
                                                                                                                                
9:43:53 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE RAMRAS  explained his  opposition to  Amendment 2.                                                               
He said  the amendment favors  short-term employees and  he likes                                                               
"people that  make a longer  term commitment  to the state."   He                                                               
revealed  that he  employs 300  people  and one  of his  greatest                                                               
expenses is training employees.                                                                                                 
                                                                                                                                
9:44:33 AM                                                                                                                    
                                                                                                                                
SENATOR STEDMAN  stated that  the reason for  deciding on  the 5-                                                               
year vesting schedule was due  to a request by NEA-Alaska because                                                               
of its concern  for teacher retention.   Notwithstanding that, he                                                               
said  he  is open  to  the  wishes  of  the House  State  Affairs                                                               
Standing Committee.                                                                                                             
                                                                                                                                
9:45:36 AM                                                                                                                    
                                                                                                                                
CHAIR SEATON said  the two purposes of "the  benefit package" are                                                               
to  attract and  retain.   He  added, "And  the  purpose of  this                                                               
earlier vesting  schedule is  so that we  have a  more attractive                                                               
package  for  attracting  people  initially  to  come  into  this                                                               
system, as well as giving  some incentive for remaining longer in                                                               
service."                                                                                                                       
                                                                                                                                
9:46:03 AM                                                                                                                    
                                                                                                                                
A  roll  call vote  was  taken.   Representatives  Gruenberg  and                                                               
Seaton  voted in  favor of  Amendment 2.   Representatives  Lynn,                                                               
Ramras,  Gatto,   and  Elkins  voted  against   it.    Therefore,                                                               
Amendment failed by a vote of 2-4.                                                                                              
                                                                                                                                
9:47:16 AM                                                                                                                    
                                                                                                                                
CHAIR SEATON directed attention to Amendment 3, which read as                                                                   
follows:                                                                                                                        
                                                                                                                                
     Page 18, line 18, through page 19, line 11:                                                                                
          Delete all material.                                                                                                  
                                                                                                                                
     Page 48, lines 10 - 17:                                                                                                    
          Delete all material and insert:                                                                                       
               "(A)  AS 39.30.150 - 39.30.180 (State of                                                                         
     Alaska Supplementary Annuity Plan); and                                                                                    
               (B)  AS 39.45.010 - 39.45.060 (public                                                                            
     employees' deferred compensation program);"                                                                                
                                                                                                                                
     Page 84, line 16, through page 85, line 9:                                                                                 
          Delete all material.                                                                                                  
                                                                                                                                
CHAIR SEATON stated the following:                                                                                              
                                                                                                                                
     One  of  the  big  perceived problems  with  a  defined                                                                    
     contribution  ... program  is that  ... people  tend to                                                                    
     invest  too  conservatively  and  not  build  up  their                                                                    
     accounts  over time.   However,  this option  would not                                                                    
     give employees enough  options.  And so,  I'm not going                                                                    
     to  offer this  amendment.    What we  will  do is  ...                                                                    
     request ...  a new investment option  that would mirror                                                                    
     [the  Alaska   Retirement  Management   board's  (ARM)]                                                                    
     investment strategy,  so that  they could get  the same                                                                    
     return rate ... like ASPIB has right now.                                                                                  
                                                                                                                                
9:47:52 AM                                                                                                                    
                                                                                                                                
CHAIR SEATON moved to adopt [Conceptual] Amendment 4, as follows                                                                
[original punctuation provided]:                                                                                                
                                                                                                                                
     To become  eligible for medical  coverage under  SB 141                                                                    
     you must  be Medicare eligible  with at least  10 years                                                                    
     of service, or of any age  with 25 years of service for                                                                    
     police/fire and  30 for all  others.  If  you terminate                                                                    
     employment  before  Medicare   eligible  age  but  have                                                                    
     fulfilled  the minimum  service  requirement, you  will                                                                    
     receive  access-only to  the medical  plan but  will be                                                                    
     required  to  pay  the  full   premium.    At  Medicare                                                                    
     eligible age  the member receives a  percentage subsidy                                                                    
     of the  premium based on  the years of  service ranging                                                                    
     from 70% for  10 years of service to 90%  for 30+ years                                                                    
     of  service.     Retirees  and  their   dependents  are                                                                    
     eligible,   however,  a   different  premium   will  be                                                                    
     established for a  single member from that  of a member                                                                    
     with dependents.                                                                                                           
                                                                                                                                
     Amendment  number 4  substitutes the  language from  HB
     238  regarding the  medical plan  discussed extensively                                                                    
     in  committee,  which  provides  medical  coverage  for                                                                    
     members 60 months pre-Medicare eligible age.                                                                               
                                                                                                                                
          Delete p. 26 line 3 to page 28 line 1, and p. 28                                                                      
          lines 12-19, Insert medical language provided and                                                                     
          amended as necessary for drafting purposes.                                                                           
          Corresponding medical language for PERS is found                                                                      
          on p. 92 line 20 through p. 93 line 27.                                                                               
                                                                                                                                
          Minor changes will have to be made throughout the                                                                     
          bill to make SB 141 congruent with the inserted                                                                       
          language from HB 238.                                                                                                 
                                                                                                                                
9:48:25 AM                                                                                                                    
                                                                                                                                
CHAIR  SEATON  indicated  that  [Conceptual]  Amendment  4  would                                                               
provide  medical coverage  for members  ["60 months  pre-Medicare                                                               
eligible  age"].    He  asked  if  there  was  any  objection  to                                                               
[Conceptual]  Amendment  4.     There  being  none,  [Conceptual]                                                               
Amendment 4 was adopted.                                                                                                        
                                                                                                                                
9:48:40 AM                                                                                                                    
                                                                                                                                
CHAIR SEATON moved Amendment 5, which read as follows:                                                                          
                                                                                                                                
     Page 46, line 30, following "system":                                                                                      
          Insert "selected from a list of three to five                                                                         
     persons nominated by the members of the system"                                                                            
                                                                                                                                
     Page 46, line 31, following "system":                                                                                      
          Insert "selected from a list of three to five                                                                         
     persons nominated by the members of the system"                                                                            
                                                                                                                                
     Page 47, line 2:                                                                                                           
          Following "terms of":                                                                                                 
          Delete "three"                                                                                                        
          Insert "six"                                                                                                          
          Following "total of":                                                                                                 
          Delete "three"                                                                                                        
          Insert "two"                                                                                                          
                                                                                                                                
     Page 47, line 3, following "served":                                                                                       
          Delete "three"                                                                                                        
          Insert "two"                                                                                                          
                                                                                                                                
     Page 105, line 26, following "AS 39.05.055(7).":                                                                           
          Insert   "Notwithstanding   AS 39.05.055(7),   the                                                                    
     terms  of  the  two finance  officers  appointed  under                                                                    
     AS 37.10.210(b)(2) and  (3), as repealed  and reenacted                                                                    
     by sec. 59  of this Act, shall be set  so that the term                                                                    
     of  one of  the  finance officers  expires three  years                                                                    
     apart from the  term of the other  finance officer, and                                                                    
     the terms of the two  members of the retirement systems                                                                    
     appointed  under     AS 37.10.210(b)(4)  and   (5),  as                                                                    
     repealed and  reenacted by sec.  59 of this  Act, shall                                                                    
     be set so  that the term of one of  the members expires                                                                    
     three years apart from the term of the other member."                                                                      
                                                                                                                                
9:48:48 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE RAMRAS objected [to Amendment 5].                                                                                
                                                                                                                                
9:49:18 AM                                                                                                                    
                                                                                                                                
CHAIR SEATON  addressed Amendment  5.  He  explained that  SB 141                                                               
would  require a  board of  nine members,  two of  which must  be                                                               
active or retired  PERS or TRS employees, and all  of which would                                                               
be appointed by  the governor.  Amendment 5  would effect changes                                                               
regarding  the Alaska  Retirement Management  Board, including  a                                                               
requirement that  the nominees for  PERS and  TRS representatives                                                               
be  chosen   from  candidates  put   forth  by   the  appropriate                                                               
bargaining  units.   He said  it would  generate more  continuity                                                               
over  time by  ensuring  that  the process  is  not "a  political                                                               
appointee kind of situation."                                                                                                   
                                                                                                                                
9:50:05 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE RAMRAS  stated that he likes  SB 141 as it  is and                                                               
the formulation of  the board as the bill outlines  it.  He said,                                                               
"I'm more interested in managing this like it's a business."                                                                    
                                                                                                                                
9:50:52 AM                                                                                                                    
                                                                                                                                
CHAIR SEATON clarified  that Amendment 5 would not  change any of                                                               
the membership  of the board;  it simply would lengthen  the term                                                               
of  service  and would  allow  a  system  for nomination  of  the                                                               
members.                                                                                                                        
                                                                                                                                
9:51:22 AM                                                                                                                    
                                                                                                                                
A roll  call vote was  taken.  Representatives  Gruenberg, Gatto,                                                               
Lynn, and Seaton voted in  favor of Amendment 5.  Representatives                                                               
Ramras  and Elkins  voted  against it.    Therefore, Amendment  5                                                               
passed by a vote of 4-2.                                                                                                        
                                                                                                                                
9:52:33 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  LYNN moved  to  adopt  [Conceptual] Amendment  6,                                                               
which read as follows [original punctuation provided]:                                                                          
                                                                                                                                
     Conceptual Amendments to Section 37.10.210                                                                               
                                                                                                                                
          Page 46  Line 21: Include one trustee from                                                                            
                    general public                                                                                              
            Line 29: Include two trustees from PERS                                                                             
                    Line 31: Include two trustees from TRS                                                                      
                                                                                                                                
REPRESENTATIVE RAMRAS objected to [Conceptual] Amendment 6.                                                                     
                                                                                                                                
REPRESENTATIVE LYNN  said the [board membership]  structure needs                                                               
to   be   balanced,  because   it's   too   top-heavy  with   the                                                               
administration.  He opined that the  PERS and TRS members need to                                                               
have more control over what happens to their own money.                                                                         
                                                                                                                                
9:54:07 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  RAMRAS   said  he   likes  the  fact   that  "the                                                               
governor's held accountable  to manage this."  He  added, "If the                                                               
permanent fund would have been as  mismanaged as PERS and TRS is,                                                               
heads would have rolled."                                                                                                       
                                                                                                                                
9:55:01 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE LYNN  said he doesn't  know that the  current PERS                                                               
and  TRS members  have mismanaged  the investments.   He  stated,                                                               
"Whatever they've got, the legislature  put it together - not the                                                               
PERS and TRS  Board."  He said  the board was stuck  with what it                                                               
was given  and worked well with  it, and he stated  his hope that                                                               
it  would continue  to  do  so with  whatever  new structure  the                                                               
legislature puts together.                                                                                                      
                                                                                                                                
9:55:41 AM                                                                                                                    
                                                                                                                                
CHAIR SEATON stated his opposition  to Amendment 6.  He indicated                                                               
that there  was or would  be many members  of PERS on  the board,                                                               
including the commissioner of the Department of Administration.                                                                 
                                                                                                                                
9:56:15 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE LYNN  noted that  the commissioner reports  to the                                                               
governor.                                                                                                                       
                                                                                                                                
CHAIR SEATON said he understands that.                                                                                          
                                                                                                                                
9:56:22 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GRUENBERG  stated  that  was  his  concern.    He                                                               
illustrated  that  it could  be  said  that anybody  representing                                                               
management  is technically  a member  of  the retirement  system;                                                               
however, their loyalty  is to management, not to labor.   He said                                                               
that's a  real conflict  and may  be "one  of the  most important                                                               
flash points in the bill."                                                                                                      
                                                                                                                                
9:57:04 AM                                                                                                                    
                                                                                                                                
CHAIR SEATON said,  "We do have a totally changed  board that has                                                               
a fiduciary responsibility; it's going  to be managing assets and                                                               
... liabilities.   The  decisions on benefits  will have  to come                                                               
back through the legislature."                                                                                                  
                                                                                                                                
9:57:11 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GRUENBERG said  the question  is not  a technical                                                               
one  regarding a  fiduciary responsibility,  because the  current                                                               
board  has  the  same  fiduciary responsibility.    He  said  the                                                               
question  is who  decides  who's on  the board.    He stated  the                                                               
following:                                                                                                                      
                                                                                                                                
     These  funds are  funds that  belong to  the employees.                                                                    
     The  employer  loses  the  funds  when  the  funds  are                                                                    
     contributed.     They  are  held   in  trust   for  the                                                                    
     employees, and  to give  the employees  no more  than a                                                                    
     pittance  in the  makeup of  the  board really  doesn't                                                                    
     give the employees the respect  they need - the respect                                                                    
     they  deserve.   This is  their money  - at  least give                                                                    
     them a couple extra people on the board ....                                                                               
                                                                                                                                
9:58:13 AM                                                                                                                    
                                                                                                                                
A roll  call vote was  taken.  Representatives  Gruenberg, Gatto,                                                               
and   Lynn  voted   in  favor   of   [Conceptual]  Amendment   6.                                                               
Representatives  Elkins, Ramras,  and  Seaton  voted against  it.                                                               
Therefore, [Conceptual] Amendment 6 failed by a vote of 3-3.                                                                    
                                                                                                                                
9:58:54 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GRUENBERG indicated that  he would like to revisit                                                               
Conceptual  Amendment  6  later  in the  meeting  when  the  full                                                               
committee was present.                                                                                                          
                                                                                                                                
9:59:07 AM                                                                                                                    
                                                                                                                                
9:59:31 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GRUENBERG [asked that  the committee again vote on                                                               
whether to adopt Conceptual Amendment 6].                                                                                       
                                                                                                                                
9:59:39 AM                                                                                                                    
                                                                                                                                
A roll  call vote was  taken.  Representatives  Gruenberg, Gatto,                                                               
Lynn,  and  Seaton voted  in  favor  of Conceptual  Amendment  6.                                                               
Representatives Elkins  and Ramras voted against  it.  Therefore,                                                               
Conceptual Amendment 6 passed by a vote of 4-2.                                                                                 
                                                                                                                                
10:00:45 AM                                                                                                                   
                                                                                                                                
CHAIR  SEATON [moved]  to adopt  [Conceptual] Amendment  7, which                                                               
read as follows [original punctuation provided]:                                                                                
                                                                                                                                
     p. 58  line 16.  Delete "AS  14.25.470" insert  "(b) of                                                                    
     this section".  Delete p. 58  line 16 starting  at "or"                                                                    
     through line  21 ending at  "adjustment". Insert  "If a                                                                    
     person resumes employment the  balance of their account                                                                    
     is restored plus any accumulated interest."                                                                                
                                                                                                                                
     Insert  line  22, (b)  A  member  has access  to  their                                                                    
     Health  Reimbursement  Arrangement  after 10  years  of                                                                    
     service, whether  or not they retire  directly from the                                                                    
     system.   However, the  member is  not allowed  to draw                                                                    
     from that  account until they  reach the age  60 months                                                                    
     pre-Medicare  eligible, or  any  age with  30 years  of                                                                    
     service as defined in AS 14.25.470.                                                                                        
                                                                                                                                
     *Note:  all  changes  in  the  TRS  section  should  be                                                                    
     reflected in the subsequent PERS section.                                                                                  
                                                                                                                                
CHAIR SEATON  asked if  there was  any objection  to [Conceptual]                                                               
Amendment 7.  There being  no objection, [Conceptual] Amendment 7                                                               
was adopted.                                                                                                                    
                                                                                                                                
10:02:15 AM                                                                                                                   
                                                                                                                                
CHAIR SEATON  directed attention to  a page labeled,  "Changes to                                                               
CSSB 141 to be incorporated in  a House State Affairs CS."  [That                                                               
page  shows  Amendments  8-13, although  some  of  the  amendment                                                               
numbers were later changed.]                                                                                                    
                                                                                                                                
CHAIR SEATON [moved to adopt  Amendment 8], which read as follows                                                               
[original punctuation provided]:                                                                                                
                                                                                                                                
      p. 3 line 12.  Insert "(e) A report of the valuation                                                                      
     of the plan's projected liabilities."                                                                                      
                                                                                                                                
CHAIR SEATON explained that Amendment  8 would require the Alaska                                                               
Retirement  Board to  evaluate the  plan's projected  liabilities                                                               
annually.   He asked if there  was any objection to  Amendment 8.                                                               
There being none, Amendment 8 was adopted.                                                                                      
                                                                                                                                
10:04:19 AM                                                                                                                   
                                                                                                                                
CHAIR SEATON [moved to adopt]  Amendment 9, which read as follows                                                               
[original punctuation provided]:                                                                                                
                                                                                                                                
     p.8 line 10. Delete "less than" and insert "the lesser                                                                     
     of"                                                                                                                        
     line 11 after "active members" insert "11 percent for                                                                      
     TRS employer [sic] and 10 percent for PERS employers"                                                                      
                                                                                                                                
CHAIR SEATON explained  that Amendment 9 would  establish a floor                                                               
for employer contributions  at 11 percent for TRS  and 10 percent                                                               
for PERS.  He  stated the purpose of the amendment  is to avoid a                                                               
situation  under the  current  retirement plan  where  a rate  is                                                               
adopted and "we dig ourselves into the hole."                                                                                   
                                                                                                                                
10:05:31 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE RAMRAS objected to Amendment 9.                                                                                  
                                                                                                                                
10:05:39 AM                                                                                                                   
                                                                                                                                
SENATOR STEDMAN said he thinks  the issue has been addressed, but                                                               
in a different way - by  saying that the amount cannot be lowered                                                               
below the normal  cost.  He posited that Amendment  9 might "make                                                               
it a  little bit more  restrictive on  the ability to  manage the                                                               
plan."                                                                                                                          
                                                                                                                                
10:06:06 AM                                                                                                                   
                                                                                                                                
CHAIR  SEATON  stated that  is  the  purpose;  the intent  is  to                                                               
prevent the board from adopting  the rate and subsequently having                                                               
a swing  that makes the adopted  rate be too low.   He reiterated                                                               
that this would be for the current plan.                                                                                        
                                                                                                                                
10:07:24 AM                                                                                                                   
                                                                                                                                
CHAIR  SEATON announced  that Amendment  9,  with its  objection,                                                               
would be held to address later.                                                                                                 
                                                                                                                                
10:07:39 AM                                                                                                                   
                                                                                                                                
CHAIR  SEATON  [moved  to  adopt] Amendment  10,  which  read  as                                                               
follows [original punctuation provided]:                                                                                        
                                                                                                                                
     p. 15. line 13. After "contribution retirement plan."                                                                      
     Add "A teacher becomes a member on their first date of                                                                     
     employment."                                                                                                               
                                                                                                                                
CHAIR  SEATON  explained that  Amendment  10  would clarify  that                                                               
membership to  the system commences  for teachers on  their first                                                               
day of employment.                                                                                                              
                                                                                                                                
10:08:19 AM                                                                                                                   
                                                                                                                                
SENATOR STEDMAN said he has no objection to Amendment 10.                                                                       
                                                                                                                                
10:08:26 AM                                                                                                                   
                                                                                                                                
CHAIR SEATON  asked if there  was any objection to  Amendment 10.                                                               
There being none, Amendment 10 was adopted.                                                                                     
                                                                                                                                
10:08:38 AM                                                                                                                   
                                                                                                                                
CHAIR SEATON moved  to adopt Amendment 11, which  read as follows                                                               
[original punctuation provided]:                                                                                                
                                                                                                                                
     p. 32  line 10,  insert "'member  contribution account'                                                                    
     means  the   member's  contributions  to   their  [sic]                                                                    
     defined  contribution  account   plus  any  accumulated                                                                    
     interest."                                                                                                                 
                                                                                                                                
10:08:54 AM                                                                                                                   
                                                                                                                                
SENATOR STEDMAN said he has no  objection to Amendment 11 at this                                                               
time.                                                                                                                           
                                                                                                                                
10:09:06 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE   GRUENBERG  stated   his   assumption  that   the                                                               
contribution, if  it's in stocks, would  include any appreciation                                                               
of depreciation.                                                                                                                
                                                                                                                                
CHAIR  SEATON   said,  "Yes,  it  means   ...  'plus  accumulated                                                               
interest' would fall under this."                                                                                               
                                                                                                                                
10:09:22 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE GATTO asked, "Would you rather say 'gain'?"                                                                      
                                                                                                                                
10:09:32 AM                                                                                                                   
                                                                                                                                
CHAIR  SEATON announced  that Amendment  11 would  be held  until                                                               
later.                                                                                                                          
                                                                                                                                
10:09:41 AM                                                                                                                   
                                                                                                                                
CHAIR  SEATON  [moved  to  adopt] Amendment  12,  which  read  as                                                               
follows [original punctuation provided]:                                                                                        
                                                                                                                                
     p.35 line 31. Delete "65 years of age" and insert "60                                                                      
     months pre-Medicare eligible age"                                                                                          
                                                                                                                                
      p.54 line 26. Delete "age 65" and insert "60 months                                                                       
     pre-Medicare eligible age"                                                                                                 
                                                                                                                                
      p. 101 line 28. Delete "65 years of age" insert "60                                                                       
     months pre-Medicare eligible age"                                                                                          
                                                                                                                                
CHAIR SEATON explained that Amendment  12 would make revisions to                                                               
accommodate overall changes to the medical portion of the bill.                                                                 
                                                                                                                                
10:10:00 AM                                                                                                                   
                                                                                                                                
SENATOR STEDMAN  stated his  need to leave  to attend  the Senate                                                               
Finance  Committee meeting.    He  said it  would  be  nice if  a                                                               
decision could be made tonight regarding the bill.                                                                              
                                                                                                                                
10:10:56 AM                                                                                                                   
                                                                                                                                
CHAIR SEATON  asked if there  was any objection to  Amendment 12.                                                               
There being none, Amendment 12 was adopted.                                                                                     
                                                                                                                                
10:11:27 AM                                                                                                                   
                                                                                                                                
CHAIR  SEATON  [moved  to  adopt] Amendment  13,  which  read  as                                                               
follows [original punctuation provided]:                                                                                        
                                                                                                                                
     p.14  line. 19.  Insert "(D)  a full-time  or part-time                                                                    
     instructor  of the  Department of  Labor and  Workforce                                                                    
     Development  who is  a  non  certificated employee  who                                                                    
     enters employment covered under  AS 25.009 may elect to                                                                    
     retain coverage under AS 29.009."                                                                                          
                                                                                                                                
CHAIR SEATON clarified that Amendment  13 would allow instructors                                                               
from the  Department of Labor  & Workforce Development  to choose                                                               
between PERS and TRS.                                                                                                           
                                                                                                                                
10:11:57 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE GRUENBERG asked Ms.  Millhorn [who was standing at                                                               
the back  of the room  off microphone]  if there is  anybody else                                                               
who would fall  into this category who should be  included in the                                                               
amendment.   He indicated  that Ms. Millhorn  shook her  head no.                                                               
He said, "I remove my objection."                                                                                               
                                                                                                                                
10:12:29 AM                                                                                                                   
                                                                                                                                
CHAIR  SEATON announced  that, [hearing]  no further  objections,                                                               
Amendment 13 was adopted.                                                                                                       
                                                                                                                                
10:12:39 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE GRUENBERG  [moved to adopt] Amendment  14, labeled                                                               
24-LS0637\L.9, Craver, 4/18/05, which read as follows:                                                                          
                                                                                                                                
     Page 13, following line 11:                                                                                                
          Insert a new bill section to read:                                                                                    
        "* Sec. 26.  AS 14.25.210(a) is amended to read:                                                                    
          (a)  A person who knowingly makes a false                                                                             
     statement, or falsifies or permits  to be falsified any                                                                    
     record of this plan [SYSTEM],  in an attempt to defraud                                                                
     this plan [SYSTEM], is guilty  of a class A misdemeanor                                                                
     [AND FORFEITS ALL RIGHTS UNDER THIS CHAPTER]."                                                                             
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
     Page 29, line 30, following "Fraud.":                                                                                    
          Insert "(a)"                                                                                                          
                                                                                                                                
     Page 30, following line 1:                                                                                                 
          Insert a new subsection to read:                                                                                      
          "(b)  In this section, "knowingly" has the                                                                            
     meaning given in AS 11.81.900(a)."                                                                                         
                                                                                                                                
     Page 95, line 29, following "Fraud.":                                                                                    
          Insert "(a)"                                                                                                          
                                                                                                                                
     Page 95, following line 31:                                                                                                
          Insert a new subsection to read:                                                                                      
          "(b)  In this section, "knowingly" has the                                                                            
     meaning given in AS 11.81.900(a)."                                                                                         
                                                                                                                                
     Page 105, line 25:                                                                                                         
          Delete "sec. 59"                                                                                                      
          Insert "sec. 60"                                                                                                      
                                                                                                                                
     Page 108, line 25:                                                                                                         
          Delete "14.25.210"                                                                                                    
                                                                                                                                
     Page 109, line 19:                                                                                                         
          Delete "SECTIONS 139 AND 140"                                                                                         
          Insert "SECTIONS 140 AND 141"                                                                                         
                                                                                                                                
     Page 109, line 20:                                                                                                         
          Delete "secs. 139 and 140"                                                                                            
          Insert "secs. 140 and 141"                                                                                            
                                                                                                                                
     Page 109, lines 21 - 22:                                                                                                   
          Delete "secs. 139 and 140"                                                                                            
          Insert "secs. 140 and 141"                                                                                            
                                                                                                                                
     Page 109, line 23:                                                                                                         
          Delete "89 - 94, 107, 114, and 131"                                                                                   
          Insert "90 - 95, 108, 115, and 132"                                                                                   
                                                                                                                                
     Page 109, line 25:                                                                                                         
          Delete "Section 141"                                                                                                  
          Insert "Section 142"                                                                                                  
                                                                                                                                
     Page 109, line 26:                                                                                                         
          Delete "secs. 142 and 143"                                                                                            
          Insert "secs. 143 and 144"                                                                                            
                                                                                                                                
                                                                                                                                
10:13:06 AM                                                                                                                   
                                                                                                                                
CHAIR SEATON objected for discussion purposes.                                                                                  
                                                                                                                                
10:13:12 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE GRUENBERG  stated that there are  two provisions -                                                               
one in  Title 14  and one in  Title 39 -  regarding a  person who                                                               
knowingly  makes  a  false  statement.   He  said  he  considered                                                               
current language.  He said, "We  have made them congruent so that                                                               
anybody who  makes a  false statement  is guilty  of a  Class [A]                                                               
misdemeanor,  but they  ... no  longer will  'forfeit all  rights                                                               
under  this  chapter'."     He  noted  that   the  definition  of                                                               
"knowingly"  is  in criminal  code.    He  said Amendment  14  is                                                               
basically a technical  amendment, except that "it  says you don't                                                               
forfeit all your rights."                                                                                                       
                                                                                                                                
CHAIR SEATON removed his objection to  Amendment 14.  He asked if                                                               
there was any further objection.   There being none, Amendment 14                                                               
was adopted.                                                                                                                    
                                                                                                                                
10:14:42 AM                                                                                                                   
                                                                                                                                
CHAIR SEATON stated:                                                                                                            
                                                                                                                                
     By  the way,  the  amendments that  we adopted  earlier                                                                    
     were  the conceptual  amendments, and  now we  have ...                                                                    
     those  amendments by  [Legislative  Legal and  Research                                                                    
     Services] - the actual language.   And so, what I'd ask                                                                    
     is  [that] the  committee ...  accept the  [Legislative                                                                    
     Legal and  Research Services] terminology for  the ones                                                                    
     we adopted ....                                                                                                            
                                                                                                                                
CHAIR SEATON asked, "Is there any  objection to that?"  [None was                                                               
stated.]  He announced that  there would be further amendments to                                                               
be discussed  when the  committee reconvenes  later tonight.   In                                                               
response to a request from  Representative Gruenberg, he said the                                                               
committee would  have a committee substitute  before them tonight                                                               
[incorporating the amendments adopted thus far].                                                                                
                                                                                                                                
The meeting  was recessed at 10:16:05  AM to a call  of the chair                                                             
at 6:00 p.m.                                                                                                                    
                                                                                                                                
CHAIR  SEATON called  the meeting  back to  order at  6:12:22 PM.                                                             
Present  at the  call back  to order  was Representative  Seaton.                                                               
Representatives  Gatto,   Elkins,  Lynn,  Ramras,   Gardner,  and                                                               
Gruenberg arrived as  the reconvened portion of  this meeting was                                                               
in progress.                                                                                                                    
                                                                                                                                
6:12:56 PM                                                                                                                    
                                                                                                                                
GINGER EVENS testified  on behalf of herself in  opposition to SB
141.    She  told  the  committee   that  she  is  a  teacher  in                                                               
Petersburg,  Alaska.   She stated  that the  defined contribution                                                               
retirement plan,  as outlined in  [SB 141]  is not good  for PERS                                                               
and  TRS  [members].    She  said  the  current  defined  benefit                                                               
retirement system  "provides retirement  security for all."   Ms.                                                               
Evens indicated  that [the plan  under SB 141] would  not attract                                                               
new teachers  to the  state and  Alaska's school  districts would                                                               
suffer.   She opined  that in  order to  attract and  retain good                                                               
quality educators, the retirement system  needs to stay the same.                                                               
Educators, she  explained, tend to  stay in the system  for their                                                               
entire career; therefore, having a  portable retirement is a moot                                                               
point.   She  noted that  she has  "sent in  quite a  few [public                                                               
opinion messages (POMs)] regarding this issue."                                                                                 
                                                                                                                                
6:14:31 PM                                                                                                                    
                                                                                                                                
DORIS  TANNER,   testifying  on  behalf  of   herself,  told  the                                                               
committee that she began working for  the State of Alaska in 1982                                                               
and  currently works  with the  Department of  Corrections.   She                                                               
said she is  also an officer on the  statewide supervisory unit's                                                               
executive board, under  APEA AFT.  She said she  is testifying on                                                               
two issues:  the cost  of the legislation to individual employees                                                               
and the lack  of research and planning required to  fix "the PERS                                                               
problem."    She   mentioned  a  document  that   she  sent  that                                                               
demonstrates  the impact  of the  proposed  legislation on  base-                                                               
level  employees at  a range  15  - a  middle of  the road  range                                                               
beginning at $1,571 semi-monthly.   She said a single parent with                                                               
one child  cannot meet reasonable monthly  expenses, even without                                                               
the proposed increase.  She  predicted that "the scenario's going                                                               
to deteriorate" in the coming years.                                                                                            
                                                                                                                                
MS.  TANNER noted  that, in  the last  20 years,  state employees                                                               
have only  seen increases  in pay  for 10 of  those years.   Last                                                               
year, she said,  the legislature approved no  increase for fiscal                                                               
year  (FY) 04  and  a small  1.5 percent  increase  in wages  for                                                               
employees effective  July 1, 2005.   She indicated that  there is                                                               
appreciation  for the  increase,  even though  it  is not  large.                                                               
However,  under "some  of the  PERS legislation  being proposed,"                                                               
the increase will be negated by  an increase in the employee cost                                                               
of retirement.   She added, "At a minimum, a  .5 percent increase                                                               
a year will still disable income levels."                                                                                       
                                                                                                                                
MS.  TANNER  opined that  the  options  available have  not  been                                                               
exhausted, nor  does anyone know  the exact size of  the problem.                                                               
She said  she's seen a lot  of different figures.   She continued                                                               
as follows:                                                                                                                     
                                                                                                                                
     Similar   to  what   is   occurring   in  our   current                                                                    
     procurement   legislation,  the   legislature,  in   my                                                                    
     opinion, has  failed to seek  the advise of  the people                                                                    
     most  affected and  the people  closest  to the  issue.                                                                    
     You  need to  ask  for suggestions  and seek  solutions                                                                    
     from within  - [from]  those that  can best  answer the                                                                    
     questions.    Unfortunately,   the  legislation's  just                                                                    
     moving too quickly  for anyone to really  take the time                                                                    
     to pull  this information together.   I believe there's                                                                    
     consensus  that  we  have a  significant  problem  with                                                                    
     PERS;  I  just  believe  that it  deserves  due  input,                                                                    
     research,  and  analysis  before   a  solution  can  be                                                                    
     proposed.                                                                                                                  
                                                                                                                                
MS.  TANNER   urged  the  committee  to   postpone  any  decision                                                               
regarding  the bill  until  such  time as  that  research can  be                                                               
effectively accomplished.                                                                                                       
                                                                                                                                
6:17:28 PM                                                                                                                    
                                                                                                                                
CONTESSA GOSSETT testified on behalf  of herself in opposition to                                                               
SB 141.   She told the committee  that she is an  employee of the                                                               
State of Alaska, in the  Division of Juvenile Justice, within the                                                               
Department of Health & Social  Services.  She stated concern that                                                               
the proposed  legislation would freeze  the retirement  costs for                                                               
present  employees and  substitute  an inferior  investment-based                                                               
retirement   plan   for  new   employees.      She  offered   her                                                               
understanding that  supporters of the  bill are willing  to trade                                                               
away a  generation of qualified and  professional state employees                                                               
to avoid extending retirement system  benefits, and that the bill                                                               
would  actually transfer  the risk  of investments  and decisions                                                               
from the employer to the employee.                                                                                              
                                                                                                                                
MS. GOSSETT  indicated that it  makes sense for the  employees to                                                               
have a say regarding the members  on the board.  Ms. Gossett also                                                               
expressed concern  that state salaries  have not been  keeping up                                                               
with  inflation, which  will  make it  difficult  to recruit  new                                                               
employees.   She noted that other  states currently participating                                                               
in  defined  contribution  plans  - such  as  West  Virginia  and                                                               
Nebraska -  are returning to  defined benefit plans.   She stated                                                               
another concern  is that passage  of SB 141 would  mean replacing                                                               
the existing  PERS, TRS, and  ASPIB boards with a  9-member board                                                               
that would be appointed by the governor.                                                                                        
                                                                                                                                
6:19:29 PM                                                                                                                    
                                                                                                                                
CHAIR  SEATON  asked  Ms.  Gossett  if  she  is  opposed  to  the                                                               
administrative hearing  procedures.  He clarified  that the state                                                               
has a  series of  administrative hearing  officers -  judges that                                                               
just hear appeals,  and that's who would be  hearing the appeals.                                                               
Currently, those  appeals are  mostly heard by  the PERS  and TRS                                                               
Boards.                                                                                                                         
                                                                                                                                
6:20:18 PM                                                                                                                    
                                                                                                                                
MS. GOSSETT  responded that  she is new  to this  topic; however,                                                               
she shared her  feeling that as a state employee  she would "want                                                               
to have more involvement."                                                                                                      
                                                                                                                                
6:20:38 PM                                                                                                                    
                                                                                                                                
ANDREA ANDREWS  testified on behalf  of herself and  "other state                                                               
employees" in opposition to SB 141.   She told the committee that                                                               
she is a union steward and  a state employee in the Department of                                                               
Health  & Social  Services.   She said  the first  issue she  has                                                               
regarding the bill  is the cost increase to  state employees, and                                                               
the second issue is that the  bill would not make working for the                                                               
state  attractive.   Ms.  Andrews  indicated  that, as  a  single                                                               
mother  trying to  make ends  meet, it's  difficult to  support a                                                               
plan that  would take more money  out of her paycheck.   She said                                                               
she would  like to see  further investigation done to  seek other                                                               
alternatives.   She  applauded Senator  Elton  for his  arguments                                                               
against  the bill.    She said  that  although Senator  Stedman's                                                               
reasoning  for  supporting  the  bill  exists,  there  are  other                                                               
alternatives to consider.                                                                                                       
                                                                                                                                
CHAIR SEATON  asked those testifying  to refrain  from discussing                                                               
what  the   intentions  of  legislators  may   be  regarding  the                                                               
legislation and to focus instead on the legislation itself.                                                                     
                                                                                                                                
6:22:49 PM                                                                                                                    
                                                                                                                                
KEVIN BRENNAN, testifying  on behalf of himself  in opposition to                                                               
SB 141,  revealed that he has  been a public servant  employed by                                                               
the  Alaska Department  of Fish  & Game  for over  20 years.   He                                                               
stated that  he has  given many  uncompensated hours  and forgone                                                               
higher pay in the private sector  because he believes in what the                                                               
state has stood for.  In  return, he receives a stable retirement                                                               
benefit.   He emphasized how much  it bothers him to  see some of                                                               
the  bills being  put forth  [regarding PERS  and TRS]  and "what                                                               
that will do to  the quality of the people that  we have in state                                                               
service."    He  predicted  that  it  would  become  increasingly                                                               
difficult to  hire anyone  who has any  interest in  staying with                                                               
the state  or providing  good service.   He  said the  bill would                                                               
punish  workers who  didn't cause  the problems.   He  stated his                                                               
belief  that  the bill  would  not  do  anything to  resolve  the                                                               
unfunded  problems of  PERS and  TRS.   He  indicated that  state                                                               
salaries  have not  kept up  with inflation  and "this  will only                                                               
make it  more difficult  for us to  do the jobs  that we  need to                                                               
do."                                                                                                                            
                                                                                                                                
6:25:09 PM                                                                                                                    
                                                                                                                                
MR.  BRENNAN,  in  response to  a  question  from  Representative                                                               
Gatto,  said  a study  was  done  that  shows  that there  is  "a                                                               
potential for under funding at a  future date."  He said he would                                                               
like a study done  to see if that's correct.   He would also like                                                               
to  see more  options explored  before a  big step  is made  into                                                               
creating a new tier for the retirement systems.                                                                                 
                                                                                                                                
6:25:47 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GATTO  restated his question to  ascertain whether                                                               
or not  Mr. Brennan feels that  the current system he  enjoys now                                                               
is in jeopardy.                                                                                                                 
                                                                                                                                
6:25:57 PM                                                                                                                    
                                                                                                                                
MR. BRENNAN  answered that he  feels the system  was underfunded,                                                               
but that that was "not a problem of the employees."                                                                             
                                                                                                                                
6:26:01 PM                                                                                                                    
                                                                                                                                
PAT HOLMES  told the committee that  he has been an  Alaskan most                                                               
of his  life and  worked 18  years in the  private sector  and 25                                                               
years with  the state.   He said he  is retired and  suggested it                                                               
could be  said that he  is speaking for  all the retirees  in his                                                               
area.   He agreed  with the former  testifier, Mr.  Brennan, that                                                               
there should be  more information on the  premises made regarding                                                               
the  potential  shortfall,   before  the  legislature  [performs]                                                               
"major surgery."  He suggested  that the legislature hold back on                                                               
the bill  and get a second  opinion.  He expanded  on his surgery                                                               
analogy.                                                                                                                        
                                                                                                                                
MR. HOLMES  said he thinks  having a  single board or  relying on                                                               
administrative  hearings  is "not  in  the  best interest."    He                                                               
asked,  "How   can  you  have   an  administrative   person  that                                                               
understands what  it is to be  a teacher?"  He  stated his strong                                                               
objection to  the concept of having  a government-appointed board                                                               
doing the  management and  review, because  he thinks,  "a person                                                               
should  have some  choice  as  to who  sits  on their  retirement                                                               
board."                                                                                                                         
                                                                                                                                
MR.  HOLMES revealed  that one  of  his last  projects with  "the                                                               
department" was  out in the  Aleutians.  He said,  "Basically you                                                               
get what  you pay for."   He said that, since  his retirement, he                                                               
has seen a  salmon-related area management job  that has remained                                                               
open for more  than two years.   He said when he  started back in                                                               
1973, there would  have been 30 people lined up  to get that job.                                                               
He offered  his understanding  of a  study done  a few  years ago                                                               
"for  the  department" which  showed  that  people who  left  the                                                               
department and went to work  for the federal government earned 15                                                               
percent more, while  those who transferred to  the private sector                                                               
earned 30 percent  more.  He recalled that when  he was active in                                                               
union negotiations,  several times the [pay]  increase was stayed                                                               
in order to maintain benefits over  the long run.  He noted that,                                                               
in 1997,  there were  hearings to reduce  benefits and  wages for                                                               
state employees,  and he invited  the Senate  committee reviewing                                                               
that  issue to  join  him on  his aerial  salmon  surveys in  the                                                               
Aleutians.  He said no one came.                                                                                                
                                                                                                                                
MR. HOLMES  observed that state employees,  particularly the ones                                                               
in the  ADF&G, "give  their heart, their  soul, their  family for                                                               
what they  contracted for."   He  complimented the  committee for                                                               
working after  hours on  the issue, and  he indicated  that there                                                               
are "tough calls"  to be made.  He reiterated  that he would like                                                               
the committee to put aside  a decision until more information and                                                               
other options are found.                                                                                                        
                                                                                                                                
6:30:24 PM                                                                                                                    
                                                                                                                                
CARLENE  AUGE,   testifying  on  behalf  of   herself,  told  the                                                               
committee that she is attending  school part-time while she works                                                               
full-time for the  State of Alaska Pioneer's Home  at a Custodial                                                               
range 1 - an  entry level.  She said she  can no longer recommend                                                               
working  for state  to her  children,  because "we're  constantly                                                               
under attack  from the  administration."  She  said [SB  141] has                                                               
frightened  many people,  including  her coworkers.   She  asked,                                                               
"Why are you  hurting us?  Why are you  constantly trying to find                                                               
ways to  eliminate us,  and get rid  of us, and  cut our  pay and                                                               
benefits?   It's not right.   One of  these days you're  going to                                                               
push people too far and then  we're going to start voting against                                                               
you."                                                                                                                           
                                                                                                                                
6:31:31 PM                                                                                                                    
                                                                                                                                
CHAIR SEATON,  for the  purpose of  clarification, stated  that a                                                               
new tier  would not affect anybody  who is a current  PERS or TRS                                                               
employee.   He said the  benefits of those current  employees are                                                               
guaranteed  constitutionally;  they  are  secured,  paid  at  the                                                               
scheduled rate,  and will not  be diminished.   He added  that he                                                               
doesn't mean  that anyone  who is currently  employed in  PERS or                                                               
TRS  cannot oppose  the bill;  he just  wants them  to know  they                                                               
"don't need  to fear  that their  benefits are  in any  way being                                                               
changed."                                                                                                                       
                                                                                                                                
6:32:23 PM                                                                                                                    
                                                                                                                                
BONNIE SULLIVAN testified on behalf  of herself.  She stated that                                                               
the  labor, trades,  and  crafts members  currently  in PERS  are                                                               
"depending on the  state's retirement to help  them through their                                                               
golden years."   She said the fault of the  unfunded liability is                                                               
not the  fault of current or  future employees.  She  stated that                                                               
SB  141 does  not address  or resolve  the unfunded  liability of                                                               
PERS/TRS.  She  opined that all workers deserve to  know how much                                                               
of a  monthly income they will  be getting when they  retire, and                                                               
SB 141 would not guarantee that for new hires.                                                                                  
                                                                                                                                
MS. SULLIVAN  noted that  there are  states currently  in defined                                                               
contribution  plans that  are returning  back to  defined benefit                                                               
plans.  She  said there is a  reason they are doing  that and she                                                               
doesn't understand  why Alaska's  legislators are  not contacting                                                               
those  states to  find  out why.   She  also  questioned why  the                                                               
legislators  aren't waiting  for the  second analysis,  which she                                                               
said she believes  has been requested and is  in progress, before                                                               
pushing forward  a bill.  She  said the State of  Alaska has been                                                               
committed to  a sound retirement  system since  before statehood,                                                               
and as  a voting member of  District 10, she said  she would like                                                               
to see that system stay in place for current and new employees.                                                                 
                                                                                                                                
6:34:01 PM                                                                                                                    
                                                                                                                                
TIM  VIAVANT,  Employee,  Alaska   Department  of  Fish  &  Game,                                                               
testified in opposition to SB 141.   He urged the legislature not                                                               
to  act to  modify PERS  and create  a new  tier without  further                                                               
research and more  planning.  He said, in relation  to many other                                                               
states'  pension  systems,  Alaska's  PERS  and  TRS  funding  is                                                               
actually in  better shape, and  the shortfall in funding  is more                                                               
related to the  effect of future health care costs  than it is to                                                               
pension payments.  He continued as follows:                                                                                     
                                                                                                                                
     I'd also like  to point out that one of  the ... causes                                                                    
     of the  anticipated shortfall in PERS  is that retirees                                                                    
     in  both   systems  receive   automatic  cost-of-living                                                                    
     adjustments that are based on  the Anchorage CPI, while                                                                    
     existing   wage   earners   have  not   received   wage                                                                    
     adjustments that are  equal to those of  retirees.  So,                                                                    
     obviously,  the pool  of people  paying in  -- rate  of                                                                    
     increase is rising more slowly than those of retirees.                                                                     
                                                                                                                                
     I'd like  to state that, [regarding]  changes in makeup                                                                    
     on the  PERS and TRS  Boards, I fail to  understand how                                                                    
     preventing  members  from  serving  on  the  boards  is                                                                    
     supposed to fix this problem.   And I must state that I                                                                    
     feel  that  this aspect  of  this  bill is  politically                                                                    
     motivated and  has very little  to do with  solving the                                                                    
     problem.                                                                                                                   
                                                                                                                                
MR.  VIAVANT said  creating  a new  tier  and increasing  current                                                               
employees' contributions  will hurt recruitment of  new employees                                                               
and retention of  current employees - particularly  those who are                                                               
not vested  in the system.   He  concluded, "All of  those things                                                               
will contribute to hurting the existing workforce."                                                                             
                                                                                                                                
6:37:04 PM                                                                                                                    
                                                                                                                                
SCOTT LEIGH  testified on behalf  of himself in opposition  to SB
141.  He  noted that he has  been a State of  Alaska employee for                                                               
the past  11 years, and he  is the northern region  chair for the                                                               
APEA AFT  Local 4900  supervisors.  He  said he  understands that                                                               
there is a perceived and  potential problem, but he also believes                                                               
that "this  is a window  of opportunity  to work with  the public                                                               
employees of this state to provide  a win/win scenario."  He said                                                               
that  can only  happen after  all  the facts  - including  second                                                               
opinions - are  known.  He said the current  system has loopholes                                                               
that should be  patched before adding additional  funding "on the                                                               
backs of current and future public employees."                                                                                  
                                                                                                                                
MR. LEIGH said that, as  a professional engineer, State of Alaska                                                               
employee, and a  hiring manager, he finds his  job of recruiting,                                                               
hiring,  training,  and  retaining qualified  employees  becoming                                                               
increasingly  difficult.   He said  in  the years  of bounty  the                                                               
state  reduced   contributions,  to   the  detriment   of  public                                                               
employees.   Now, after some  lean years, the  [public employees]                                                               
are  being  asked  to bear  additional  burden  "with  additional                                                               
charges against  our retirement  system."   Mr. Leigh  stated his                                                               
belief  that  SB  141  begins  to  treat  public  servants  as  a                                                               
liability, rather than  as the resource they are.   He encouraged                                                               
looking into  other options.   He  stated, "Public  employees did                                                               
not cause this problem, but given  the chance I believe that they                                                               
can be  proactive in a solution  that is in the  best interest of                                                               
the State of Alaska."                                                                                                           
                                                                                                                                
6:39:13 PM                                                                                                                    
                                                                                                                                
MARTIN BRANVILLE, testifying  on behalf of himself, said  he is a                                                               
state  employee, a  heavy  equipment operator,  and  is close  to                                                               
retirement.   He said he is  Tier I, so the  proposed legislation                                                               
would  not affect  him; however,  he  stated his  belief that  it                                                               
would affect the  quality of personnel that will  be available to                                                               
recruit "from here on out."   He revealed that his father retired                                                               
after 13  years "out of  Local 302,"  and his retirement  is more                                                               
than Mr. Branville's will be after  25 years.  He also noted that                                                               
a  friend of  his  working in  the private  sector,  who will  be                                                               
retiring  at  about the  same  time,  will receive  a  retirement                                                               
pension of between  $9,000 and $11,000 a month.   He stated, "So,                                                               
I  think  for you  to  keep  cutting  the retirements  of  future                                                               
employees is only  going to hurt the State of  Alaska and cause a                                                               
lot of  problems down the  road that you're  going to have  to go                                                               
back and try  and fix again.   And you'll be in  the same problem                                                               
you are in now, only you're going to be going the other way."                                                                   
                                                                                                                                
6:41:29 PM                                                                                                                    
                                                                                                                                
JEFF  JABUSCH, Finance  Director, City  of Wrangell,  stated that                                                               
one concern  is the rapid increase  of the employers' share.   He                                                               
said, "Next year, our share will  be about $126,000.  We also got                                                               
word that  our group  insurance is  going up  22 percent,  so for                                                               
another $153,000."   He  said Wrangell  is attempting  to rebound                                                               
its economy.   He  said, "Something  like this  - we  applaud the                                                               
bill in general.   I think we're  on the right path  to help save                                                               
some of  these communities."   Mr. Jabusch warned that  if things                                                               
continue  as they  are without  a funding  mechanism to  at least                                                               
bridge the next  couple years, [the City of  Wrangell] is looking                                                               
at  the possibility  of laying  off close  to 15  percent of  its                                                               
general  work   force,  including  police,  fire,   library,  and                                                               
schools.   He  said  he  doesn't know  how  Wrangell can  survive                                                               
without some  change, and  he said  he thinks  the bill  may need                                                               
some  tweaking, but  in general  is  on the  right track  towards                                                               
"balancing some  of these  budgets."   He recommended,  "Any help                                                               
the  legislature  could  give communities  to  funding  the  PERS                                                               
shortfall here in  the next couple of years ...  would be greatly                                                               
appreciated."   He  mentioned Wrangell's  timber industry-related                                                               
problems.                                                                                                                       
                                                                                                                                
6:44:41 PM                                                                                                                    
                                                                                                                                
BOB PLUNELLA, City Manager, City  of Wrangell, said he hasn't had                                                               
time  to study  the entire  bill, but  indicated his  concurrence                                                               
with the testimony of Mr. Jabusch.                                                                                              
                                                                                                                                
6:45:28 PM                                                                                                                    
                                                                                                                                
CHAIR SEATON  noted that  SB 141 would  allow for  $69.5 million,                                                               
which would basically be for PERS funding in the next few years.                                                                
                                                                                                                                
6:45:44 PM                                                                                                                    
                                                                                                                                
MR. PLUNELLA said that sounds good,  and he told the committee to                                                               
keep up the good work.                                                                                                          
                                                                                                                                
CHAIR SEATON noted  that many people think there has  only been a                                                               
second   opinion  requested;   however,  Legislative   Legal  and                                                               
Research  Services  has  requested  a third  opinion.    He  said                                                               
nothing will  be passing the House  today; the bill still  has to                                                               
be heard by the House Finance Committee.                                                                                        
                                                                                                                                
6:46:51 PM                                                                                                                    
                                                                                                                                
LESLIE SIMMONS, testifying on behalf  of herself and representing                                                               
the southcentral  state supervisors  [APEA AFT-SU],  informed the                                                               
committee  that  she   is  an  employee  of   the  Department  of                                                               
Environmental  Conservation (DEC).    She said  she supports  the                                                               
legislature's attempts to find solutions  for the problems facing                                                               
the  state government;  however, she  believes that  the proposed                                                               
plan is  no solution.   She  said SB  141 will  create additional                                                               
problems  and does  not  resolve  the problems  at  hand.   State                                                               
employees as  a whole are a  benefit to the state,  she said, and                                                               
thus deserve to be regarded as such.                                                                                            
                                                                                                                                
6:47:47 PM                                                                                                                    
                                                                                                                                
PAT LUBY, Advocacy Director, AARP-Alaska,  returned to a question                                                               
by  Representative Gruenberg  earlier  in  the morning  regarding                                                               
whether  someone could  outlive  a  defined contribution  pension                                                               
plan.   He said the answer  is yes.   He noted that PERS  and TRS                                                               
employees  do  not  participate  in  social  security,  which  is                                                               
basically a  defined benefit plan.   He confirmed that  it's true                                                               
many  companies  in  the  private sector  have  switched  from  a                                                               
defined  benefit to  a defined  contribution  plan; however,  the                                                               
private employees  all participate in social  security and retain                                                               
the  defined benefit  provision of  social security.   He  stated                                                               
that  a person  cannot outlive  social security,  but he/she  can                                                               
outlive  a defined  contribution  plan.   Should  Alaska adopt  a                                                               
defined contribution plan  and drop the defined  benefit plan for                                                               
new hires, it should seriously  consider that some of the state's                                                               
future retired educators, municipal  retirees, and state retirees                                                               
may  very   well  outlive  their  defined   contribution  plan  -                                                               
particularly those  in the lower  pay grades.  He  questioned how                                                               
the state would  be able to deal with those  people in the future                                                               
when they have  no social security and have outlived  the PERS or                                                               
TRS contributions.   He said  none of us  knows how long  we will                                                               
live, nor  can we predict  what inflation  will be in  the future                                                               
and the damage it may reek on a defined benefit contribution.                                                                   
                                                                                                                                
MR.  LUBY  emphasized  that changing  the  retirement  system  is                                                               
serious  business  with  serious  consequences.    He  said  AARP                                                               
recommends  that  the  House  State  Affairs  Standing  Committee                                                               
consider delaying  action on SB  141 and all related  bills until                                                               
2006,  and  to hold  hearings  throughout  the state  during  the                                                               
Interim, involving the various  employers and potential employees                                                               
that  may be  impacted.   He said  AARP has  a number  of retired                                                               
educators in  its membership who  remain vitally  concerned about                                                               
the quality  of education  throughout the  state and  worry about                                                               
Alaska not being attractive to  young teachers who can go Outside                                                               
and find  better benefit programs.   He added, "Frankly,  we have                                                               
the  same concern  about  not being  attractive  to young  police                                                               
officers and  fire fighters -  anyone who  might wish to  work in                                                               
municipal  or  state  government."   He  said  he  knows  Senator                                                               
Stedman has indicated that he has  worked on the issue for over a                                                               
year; however, constituents and  AARP members have many questions                                                               
related  to a  bill they  only found  out about  when it  was put                                                               
forward in the last few weeks.                                                                                                  
                                                                                                                                
6:50:47 PM                                                                                                                    
                                                                                                                                
STACY OATES, testifying on behalf  of herself, told the committee                                                               
that she is  an accountant for the Division of  Motor Vehicles, a                                                               
hiring official,  and a  vested PERS  member.   She said  she has                                                               
three basic  issues with the bill.   First, as a  hiring official                                                               
with the state,  it's already a challenge to  get good employees.                                                               
She  remarked  that what  makes  [the  state] marketable  is  its                                                               
benefits,  "since  our  spending  power as  state  employees  has                                                               
decreased  so  dramatically in  the  five  years,  or so."    She                                                               
illustrated that  five years ago  she had 50 applicants  for most                                                               
of her Accounting  Clerk II positions; now she's luck  to get 25.                                                               
Second, Ms.  Oates stated her  concern about changing  the board.                                                               
She posited  that any  board should be  approved by  the affected                                                               
members; retirees and current employees  should have a vote.  She                                                               
specified that  she does  not feel that  board members  should be                                                               
appointed by  one political person.   Third, Ms. Oates  said this                                                               
issue is  too important to  decide quickly; therefore,  she urged                                                               
the legislature  to slow down  and obtain more information.   She                                                               
stated  that the  system is  not in  immediate jeopardy  and more                                                               
deliberation should be done.                                                                                                    
                                                                                                                                
6:52:26 PM                                                                                                                    
                                                                                                                                
STEVE  HOFFMAN,  testifying  on   behalf  of  himself,  told  the                                                               
committee  that he  worked for  the Alaska  Department of  Fish &                                                               
Game  for 28  years,  and for  a  majority of  that  time held  a                                                               
supervisory  position.     He  said  in  the   last  5-10  years,                                                               
recruiting  new  employees  has  become  increasingly  difficult.                                                               
Potential employees are comparing  the state's wages and benefits                                                               
to that  of the federal  government and private sector,  and they                                                               
are "finding more  lucrative opportunities in those  arenas."  He                                                               
stated  that the  development of  a  Tier IV  plan would  further                                                               
erode  the ability  to recruit  long-term, devoted  employees who                                                               
are interested in doing the best job for the State of Alaska.                                                                   
                                                                                                                                
6:53:40 PM                                                                                                                    
                                                                                                                                
CHARLIE ARTEAGA,  testifying on behalf of  himself, revealed that                                                               
he is  a 37-year resident  of Alaska, a retired  former educator,                                                               
and the most  recently retired member of the TRS  Board, which he                                                               
chaired for a  number of years.   He stated that SB  141, HB 238,                                                               
and the initial report brought out  to the PERS and TRS Boards by                                                               
its internal  committee are all  similar.   He said, "They  are a                                                               
piece of  a 'well bill,'  if you will, that  I do not  care for."                                                               
Mr. Arteaga  specified that he  opposes the  defined contribution                                                               
elements  of  all  those  reports  and bills.    He  also  stated                                                               
opposition to  the minimal provisions  of the medical  portion of                                                               
the proposed benefits.  He said:                                                                                                
                                                                                                                                
     We have been  here before:  Back in  the late 70s/early                                                                    
     80s the funding  ratio in TRS was  something like 68-69                                                                    
     percent, and  we got close  to 100 percent by  the year                                                                    
     2000.   The same  with PERS -  they were  actually over                                                                    
     100 percent back  in the year 2000.   The major problem                                                                    
     that we  have encountered  in the  last five  years, of                                                                    
     course, is the decrease in  the market.  And the second                                                                    
     item,  of course,  is a  humungous increase  in medical                                                                    
     insurance  premiums.   That's where  the problem  lies.                                                                    
     To diminish the benefits  of future employees in Alaska                                                                    
     because of  those two reasons,  to me  seems completely                                                                    
     and  totally  out of  line.    If  you're going  to  do                                                                    
     something,  it seems  to  me  that you  need  to do  it                                                                    
     right; I  don't think you  need to be  blackmailed into                                                                    
     poor decisions.  I think you  need to take a look, over                                                                    
     a period  of time, as  to what  is best for  the future                                                                    
     employees of this state.                                                                                                   
                                                                                                                                
MR. ARTEAGA said  he resents when it is stated  that [a change to                                                               
employee benefits]  does not  affect him  because he  is retired.                                                               
He compared that  to the President [of the  United States] saying                                                               
if a  person is over  55 a new  social security would  not affect                                                               
him/her.  He  stated that he has a son  that is currently getting                                                               
ready to become  a teacher, and he speculated that  he might have                                                               
grandchildren who might want to come  to Alaska to teach, and "it                                                               
will definitely  affect them."   He urged the committee  to "take                                                               
your time,  take a long look,  and make the right  decision."  In                                                               
regard to  hearing procedures,  Mr. Arteaga  said he  thinks PERS                                                               
and  TRS  must  have member  representation,  preferably  elected                                                               
versus  appointed.    He  said it's  important  that  active  and                                                               
recently retired  members have a  body that will hear  them, will                                                               
know their  concerns, and are  familiar with the issues  of their                                                               
employment.                                                                                                                     
                                                                                                                                
6:56:59 PM                                                                                                                    
                                                                                                                                
DUANE MORAN, President, Anchorage  Council of Education, which is                                                               
affiliated with  APEA AFT,  testified on  behalf of  the council.                                                               
He said he has  been in Alaska for 27 years, but  only 7 years in                                                               
public  service.    Regarding  the  bill's  potential  impact  to                                                               
current  employees,  he  proffered,  "I know  for  my  bargaining                                                               
group,  for the  next fiscal  year starting  July 1  we have  a 0                                                               
percent increase.   Even [with] a .5 percent  [increase] we would                                                               
be  ...   going  further  behind,  let   alone  anti-inflationary                                                               
impact."   Regarding  the retention  of  qualified employees,  he                                                               
said one of the things that  has always struck him meeting people                                                               
who work  in the  public sector  is that they  tend to  stay when                                                               
there  is an  incentive to  stay, for  example, when  there is  a                                                               
better retirement  the longer an  employee stays.  He  said there                                                               
is a  cost associated with  employee turnover, because  of having                                                               
to  train new  employees.   Changing  to  a defined  contribution                                                               
plan, he  predicted, would  "make the  portability for  people to                                                               
leave  that  much easier."    Mr.  Moran  stated that  it's  been                                                               
reported that  there is a major  problem, which he said  he can't                                                               
dispute;  however, he  equated the  situation with  surgery.   He                                                               
clarified  that  it is  important  to  get  as many  opinions  as                                                               
possible,  in order  to make  the  best decisions  possible.   He                                                               
emphasized   the   appropriateness   of  prudent   steps   during                                                               
deliberation.                                                                                                                   
                                                                                                                                
CHAIR SEATON  reiterated that  the committee  would be  getting a                                                               
third opinion  regarding the  actuarials, and  there would  be an                                                               
additional  opportunity [for  the public  to testify]  before the                                                               
House Finance  Committee, if  SB 141 moves  from the  House State                                                               
Affairs Standing Committee.                                                                                                     
                                                                                                                                
6:59:47 PM                                                                                                                    
                                                                                                                                
SANDRA BESSER,  President, Fairbanks North Star  Borough Employee                                                               
Association,  Local  6125  APEA  AFT,  said  she  is  an  18-year                                                               
employee of  the borough speaking in  opposition to SB 141.   She                                                               
said  the projected  shortfalls  have occurred  for  a number  of                                                               
reasons,  none  of which  are  because  of  the employees.    She                                                               
recommended a thorough  review of all the  options for addressing                                                               
the shortfalls, rather than "just  jumping on one of the easiest,                                                               
which  is passing  it off  to the  employee."   She said,  "We're                                                               
having  an  increasingly   difficult  time  recruiting  qualified                                                               
employees  right  now; we  have  some  positions that  have  been                                                               
vacant for extended periods of time."   She said the effect of SB
141 would  not only  affect employees, but  also consumers.   She                                                               
said, "I  want to look at  the quality of my  child's teacher and                                                               
know that  they have someone that  is qualified and is  more than                                                               
just walking  in and  taking a paycheck  because they  don't make                                                               
enough  to  care."   She  said  she  feels  the same  about  fire                                                               
fighters, policemen, and  "all these people ... who  are out here                                                               
giving our  hearts to the  state."  Ms.  Besser said there  are a                                                               
lot of  jokes circulating about government  on the low bid.   She                                                               
stated  that she  doesn't want  to see  the day  when that's  how                                                               
people look at  public employees.  She indicated  that the reason                                                               
she is  testifying is because,  "as Alaskans, we too  are looking                                                               
at the future  of our state and  those it ... employs  ...."  She                                                               
urged the committee not to pass SB 141.                                                                                         
                                                                                                                                
CHAIR SEATON said the purpose  of listening to all this testimony                                                               
is to hear "the full breadth of comments."                                                                                      
                                                                                                                                
7:02:26 PM                                                                                                                    
                                                                                                                                
BURNS COOPER,  testifying on  behalf of  himself, stated  that he                                                               
has been  an employee of  the University of Alaska  Fairbanks for                                                               
15  years.     He   pointed  out  that   any  plan   that  raises                                                               
contributions is, in fact, a cut  in benefits.  A retirement plan                                                               
for PERS  and TRS members is  two-pronged, he said:   the pension                                                               
plan provides  some basic security,  but it doesn't cover  all of                                                               
an  employee's retirement  expenses.   Employees are  expected to                                                               
put away  as much as possible  into other savings plans,  such as                                                               
[tax-sheltered  annuities (TSAs)].   He  said, "These  plans have                                                               
already been hurt by other  financial forces - rising health care                                                               
premiums are  taking another bite out  - so, our ability  to save                                                               
and be ready for what's going  to happen in retirement is already                                                               
compromised, and taking  more out of our paychecks  is just going                                                               
to make that worse."                                                                                                            
                                                                                                                                
MR. COOPER  emphasized his agreement with  former testifiers that                                                               
this  crisis  was  not  created by  employees,  but  was  created                                                               
primarily   by   bad   management,  persistent   under   funding,                                                               
management transferring  costs from other areas  into the pension                                                               
funds  for things  like early  retirements,  and a  lot of  other                                                               
factors.   He stated  that weakening the  pension system  is just                                                               
going to add  to the already existing problem  of recruitment and                                                               
retention.   He  revealed  that  he has  been  in  on the  hiring                                                               
processes  for  three  different  job  positions  this  year  and                                                               
several  candidates  were  lost  to other  jobs  offering  higher                                                               
salary and  benefits.  He  concluded that the worse  the benefits                                                               
package  gets,  the  harder  it  will  be  [to  find  and  retain                                                               
employees].   In  response to  a question  from Chair  Seaton, he                                                               
said he is a participant of TRS.                                                                                                
                                                                                                                                
7:05:15 PM                                                                                                                    
                                                                                                                                
GERRY  GUAY,  Chair,  Southcentral  chapter,  state  supervisory,                                                               
[APEA  AFT-SU], testified  on  SB  141.   He  said,  "As a  state                                                               
supervisor, I  think we all  recognize the value of  good workers                                                               
to the  mission of  our respective departments.   We  believe the                                                               
proposed  change in  our retirement  system would  only serve  to                                                               
jeopardize  the quality  of state  workers in  the future."   Mr.                                                               
Guay said workers receive compensation for  the work they do.  He                                                               
said,  "Our total  compensation package  is comprised  of a  base                                                               
pay, a medical  coverage, and a retirement.  And  if we worked in                                                               
industry,  there's  probably  bonuses  and  all  kinds  of  other                                                               
stipends that state workers never get  a chance to see."  He said                                                               
while  many state  workers have  forgone higher  paychecks, which                                                               
would have  enhanced their daily  life, they "except  the promise                                                               
of  a fair  retirement  package that  will  sustain them  through                                                               
their  golden  years."    He   stated  that  SB  141  would  only                                                               
jeopardize that promised  package and make the  hiring of skilled                                                               
replacement workers much more difficult than it currently is.                                                                   
                                                                                                                                
MR.  GUAY  said  he  works in  the  Department  of  Environmental                                                               
Conservation  as a  hiring manager.   He  said he  has difficulty                                                               
finding qualified workers who will  continue to provide the level                                                               
of  service state  workers  currently  provide.   He  said he  is                                                               
currently  attempting to  hire somebody.   Federal  workers in  a                                                               
comparable position  level would make  slightly more than  in the                                                               
level  for the  state;  however,  the federal  worker  gets a  25                                                               
percent nontaxable  Cost of  Living Allowance  (COLA).   He noted                                                               
that in [the private sector] that  level job would provide two to                                                               
three  times  the   amount  of  money  that  he   can  offer  his                                                               
prospective employee.   The private sector employee  is offered a                                                               
401K  plan,  "but  they  get  a  lot of  money  up  front."    He                                                               
concluded, "So, I  guess if you want to keep  good workers in the                                                               
future,  and you  want to  take away  the good  retirement system                                                               
that we  have - which  is a  guaranteed retirement system  - then                                                               
you're  going to  need to  double  our pay  to give  us the  401K                                                               
retirement."                                                                                                                    
                                                                                                                                
7:08:13 PM                                                                                                                    
                                                                                                                                
SANDRA BOATWRIGHT, testifying on  behalf of herself in opposition                                                               
to SB 141, told  the committee that she is a  staff member at the                                                               
University  of  Alaska  Fairbanks.    She  said  she  thinks  the                                                               
legislature should  not consider passing  the bill without  a lot                                                               
more study.   She noted that her own health  care costs increased                                                               
a great  deal last year  and will be raised  again in July.   She                                                               
added,  "And now  it sounds  like my  employee contributions  are                                                               
going to  go up, as  well."  She  said when  she took her  job 12                                                               
years ago, she made her choice  for PERS/TRS based upon the plans                                                               
that were  offered and the contract  that was shown to  her.  She                                                               
said she  has invested her money  based on that plan.   She said,                                                               
"I think  I've lived up to  my part of  the bargain.  I'm  a good                                                               
employee and  I've given all  my work to  this job, and  it's not                                                               
fair for  you to change what  I was promised."   She also pointed                                                               
out, "This just seems to be part  of a trend of pushing costs off                                                               
onto employees,  and I think there  are better ways to  deal with                                                               
this."    She  stated  that she  thinks  the  proposed  governor-                                                               
appointed  board is  a bad  idea, because  that would  completely                                                               
divorce the  stakeholders from the  people who going  to actually                                                               
be managing the money and the benefits.                                                                                         
                                                                                                                                
7:09:46 PM                                                                                                                    
                                                                                                                                
PAULETTE WILLE  testified on behalf  of herself in  opposition to                                                               
SB 141.   She  noted that she  is in agreement  with many  of the                                                               
comments made by  previous speakers.  She stated  her belief that                                                               
SB 141 "sort  of throws the baby  out with the bath  water."  She                                                               
described the bill as "a  Draconian measure" that won't deal with                                                               
the financial problems  currently faced in PERS and  TRS.  [Those                                                               
problems],  she  indicated,   seem  to  be  the   result  of  bad                                                               
investments that  the entire country  has suffered under  for the                                                               
last  few  years,  and  also  poor  management  decisions.    She                                                               
indicated that  she does not  support having the  board populated                                                               
by political  appointees, because stakeholders in  the system who                                                               
vote  for  representatives  on  the  board  have  a  real  vested                                                               
interest in seeing that the board is managed properly.                                                                          
                                                                                                                                
MS. WILLE  revealed that  she has worked  almost 30  years either                                                               
with the  University of  Alaska or, more  recently, the  State of                                                               
Alaska, and  every pay period  she made her contribution  to PERS                                                               
and her employer  made a contribution along with her.   She noted                                                               
that  over time,  as  she made  contributions  to the  retirement                                                               
system  and towards  health insurance,  she has  had increasingly                                                               
less money to contribute to  her personal savings accounts, which                                                               
include  a tax  sheltered  annuity with  the  state and  deferred                                                               
compensation  with  the university.    She  stated her  point  is                                                               
simply  that  she  thinks  plenty  of  state  employees  who  are                                                               
contributing to  the system face  the same situation.   She said,                                                               
unfortunately, there  is a national  and state effort  to devalue                                                               
public employees of all kinds.   She said she is not surprised by                                                               
that effort  in the state,  but she is  disappointed by it.   She                                                               
echoed the sentiments of [Mr.  Arteaga] regarding being concerned                                                               
with more  than just one  generation.  She added,  "I'm concerned                                                               
about the health  of the system as a whole  and the services that                                                               
the State  of Alaska  provides to  itself and  to members  of the                                                               
private  sector."   She  said  she  thinks  the move  to  defined                                                               
contribution  retirement  systems  wouldn't  just  affect  public                                                               
employees, but  also would  affect private  employees.   She said                                                               
she's heard  the issue of  hiring and  retention for years.   She                                                               
said if  people don't think they  can afford to retire  in Alaska                                                               
because benefits  will be reduced,  "they'll go  someplace else."                                                               
She  recommended   "going  slowly   on  this  and   reviewing  it                                                               
carefully" in order to benefit the entire state.                                                                                
                                                                                                                                
7:14:41 PM                                                                                                                    
                                                                                                                                
VIOLA  "VI" JERREL,  Ph.D., testified  in opposition  to SB  141.                                                               
She said she thinks "the  five-year eligibility should be deleted                                                               
for the  ... council  members, assembly  members, and  so forth."                                                               
She indicated  her support  of voting  for board  members, rather                                                               
than  having  them  appointed.    She  said,  "I  read  in  there                                                               
somewhere  a line  about ...  the  state having  ... control,  or                                                               
having prescriptions  ... purchased in  the state, and  so forth.                                                               
I  absolutely object  to that."   She  indicated wanting  to keep                                                               
Aetna insurance.                                                                                                                
                                                                                                                                
DR.  JERREL expressed  appreciation that  there are  a number  of                                                               
attorneys  serving as  legislators.   She  noted  that last  week                                                               
Representative  Gruenberg  was  citing statutes  related  to  the                                                               
legislation  being discussed  and she  appreciated that,  because                                                               
that  allows people  to tell  what  a certain  statute is  before                                                               
making decisions during committee meetings.   She noted that last                                                               
week a  speaker gave potential  reasons and background as  to why                                                               
there is  a shortfall of money  and made the point  that it isn't                                                               
the  fault  of  the  employees.    She  stated  she  thinks  it's                                                               
important to oppose  SB 141 and find a better  way, without using                                                               
a quick fix.                                                                                                                    
                                                                                                                                
7:17:09 PM                                                                                                                    
                                                                                                                                
TIM JESTER  testified on  behalf of himself  in opposition  to SB
141.  He noted that he  is a former elementary teacher, a parent,                                                               
and currently a professor at  the University of Alaska Anchorage.                                                               
He  stated concern  that SB  141 would  undermine the  quality of                                                               
public education in  the state, by making it  much more difficult                                                               
to  attract qualified  individuals to  teach.   As a  result, the                                                               
children of  the state  would not receive  the kind  of education                                                               
they deserve and  [the state] is obligated to provide.   He asked                                                               
the committee  members that,  if they  believe that  issues exist                                                               
related to the retirement system,  they slow down the process and                                                               
thoroughly examine the problems  in a systematic, formal process,                                                               
and  then  make  a  deliberate decision  that  will  improve  the                                                               
state's education system.                                                                                                       
                                                                                                                                
7:18:41 PM                                                                                                                    
                                                                                                                                
LUKE  HOPKINS,  testifying  as  an [employee]  of  the  State  of                                                               
Alaska, after  30 years  of service at  the University  of Alaska                                                               
Fairbanks, asked the committee to  consider holding the bill [and                                                               
related  bills] through  the interim  and  establishing a  review                                                               
committee that  would move  around the  state and  take testimony                                                               
from the  public.   He suggested  the committee  could [research]                                                               
other  states'   actions  in  changing   back  [from   a  defined                                                               
contribution  plan] to  a  defined benefit  plan,  and make  that                                                               
information  available  to  the  public.    He  also  recommended                                                               
establishing an advisory board of  citizens from around the state                                                               
that  could  review the  actions  of  the  current PERS  and  TRS                                                               
Boards.  That  advisory board could then  advise the legislature.                                                               
He stated his personal view  is that [this legislation] is moving                                                               
too fast.                                                                                                                       
                                                                                                                                
MR.  HOPKINS, speaking  now as  a member  of the  Fairbanks North                                                               
Star Borough assembly, stated the following:                                                                                    
                                                                                                                                
     I am concerned ... [about]  the actions that are, in my                                                                    
     view,  holding some  of the  funding that  the governor                                                                    
     set aside in  the passage of these bills,  both for the                                                                    
     school district funding  of PERS and TRS  share - which                                                                    
     in Fairbanks  is about $4  million, I believe,  and for                                                                    
     the  borough administration  it would  be about  almost                                                                    
     $900,000.  And  soon we'll be ... back to  the cycle of                                                                    
     issuing  pink slips.   And  if something  happens where                                                                    
     this money  isn't (indisc. --  coughing) from  the bill                                                                    
     for some  other reason, ...  we're going to have  a ...                                                                    
     major  effect on  jobs, and  therefore  on families  in                                                                    
     this community.                                                                                                            
                                                                                                                                
7:22:47 PM                                                                                                                    
                                                                                                                                
MIKE  DAVIDSON testified  on behalf  of  the Alaska  Professional                                                               
Fire Fighters  Association in  opposition to SB  141.   He stated                                                               
his belief that  the proposed legislation is an  attempt to solve                                                               
a  problem that  has not  been clearly  defined, and  he said  it                                                               
would be  imprudent to  push such legislation  through.   He said                                                               
the proposal is a "radical  reinvention of the state's retirement                                                               
system"   and  raises   concerns  about   both  recruitment   and                                                               
retention.   He reported that  the Anchorage Fire  Department has                                                               
had   great  difficulty   attracting  and   retaining  employees,                                                               
particularly paramedics.  He said  those employees consider their                                                               
retirement  once  they  are  employed and  are  open  to  outside                                                               
offers.    He  indicated  that  portability is  one  of  the  key                                                               
elements being discussed, but that  trait is not desirable in his                                                               
line of  work; once  employers get employees,  they want  to keep                                                               
them.  He mentioned the high  cost of job training.  Mr. Davidson                                                               
said he  thinks the state should  slow down the process  to allow                                                               
for a "thorough vetting of the  problems" and to define the exact                                                               
issues that led to the problems within PERS and TRS.                                                                            
                                                                                                                                
7:25:36 PM                                                                                                                    
                                                                                                                                
BEN STEWART, testifying on behalf  of himself, told the committee                                                               
that as  a 36.5-year, Tier I  state employee, at first  he didn't                                                               
think  the bill  would affect  him;  however, he  thought of  his                                                               
children.   He stated that  the bill is  moving too fast,  and he                                                               
said he  would like the  legislature to  back off, take  a better                                                               
look at the issues, and listen  to the constituents.  He said the                                                               
retirement  system was  good  when he  started  working in  1968.                                                               
Each tier that has been added  has eroded the system a little bit                                                               
more.   Now,  recruitment  of qualified  employees is  difficult.                                                               
When an employee is not up to  the level he/she needs to be, then                                                               
more money  must be spent  towards training.   He pointed  to bad                                                               
management  in  municipalities,  as  well   as  both  a  lack  of                                                               
foresight and procrastination.   He stated that he  would like to                                                               
see  the  PERS/TRS  Boards  remain unchanged.    He  offered  his                                                               
understanding  that,  due to  decisions  made  by the  boards  in                                                               
fiscal year  2004, there was  a nearly  15 percent return  on the                                                               
retirement investment.                                                                                                          
                                                                                                                                
7:28:35 PM                                                                                                                    
                                                                                                                                
MIKE HARBAUGH, testifying  on behalf of himself  in opposition to                                                               
SB 141, revealed that he  works in maintenance for the Department                                                               
of Corrections  and is a  Tier II employee.   He said he  is also                                                               
representing his  wife, children,  and grandchildren.   Regarding                                                               
whether the legislation  would affect him as a  Tier II employee,                                                               
he  answered  yes.    He  explained  that  it  would  affect  the                                                               
contribution  rate and,  thus, would  affect an  employee's take-                                                               
home pay in the future.   Regarding the management board, he said                                                               
he could not  have confidence in a board whose  members he cannot                                                               
vote for.  He said it may be  true that the current board did not                                                               
do  such a  good job  and there  may be  a reason  for eventually                                                               
increasing the amount of the contribution  by a small amount.  He                                                               
said, "I'm  willing to do that  if the state's willing  to do the                                                               
same.   But to  put it all  on us isn't  fair, and  therefore I'm                                                               
against ... SB 141 and any  other attempt right now to change the                                                               
current and future  PERS/TRS retirement benefit."   He stated his                                                               
belief  that  the  legislature should  do  further  research  and                                                               
conduct large meetings with stakeholders  to come up with a solid                                                               
way to fix the current  problem without throwing the system away.                                                               
He continued as follows:                                                                                                        
                                                                                                                                
     I don't  believe you're  getting pertinent  and correct                                                                    
     information on a lot of  the things that you're asking.                                                                    
     I  heard this  morning  there was  a  Senator that  was                                                                    
     testifying  and  the  Director   of  [the  Division  of                                                                    
     Retirement  & Benefits]  was with  him,  and you  asked                                                                    
     them if there was a  current disability included in the                                                                    
     current  Tier II  system, and  they said  there wasn't,                                                                    
     but there  is.  I don't  know if they didn't  know that                                                                    
     or  what the  problem was,  but that  was an  incorrect                                                                    
     answer; you're not getting all the right answers.                                                                          
                                                                                                                                
MR. HARBAUGH reported  that plumbers are getting $5  an hour more                                                               
on the  street than state plumbers  are.  He said  he already has                                                               
difficulty hiring  a plumber, and  he indicated that it  would be                                                               
more difficult to do so if the state benefits are cut further.                                                                  
                                                                                                                                
CHAIR SEATON  clarified that when  the committee talks  about the                                                               
proposed legislation not  affecting those in Tier I,  II, or III,                                                               
it only means that those employees  would not be converted to the                                                               
new tier.                                                                                                                       
                                                                                                                                
7:33:36 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GARDNER clarified  that, under  AS 39.35.095-680,                                                               
there are disability benefits under  current regulations, and she                                                               
doesn't believe that those benefits  would continue under SB 141,                                                               
for anyone hired after July 1, 2005.                                                                                            
                                                                                                                                
CHAIR  SEATON  said  he  would   be  inviting  the  [Division  of                                                               
Retirement & Benefits] to clarify that issue.                                                                                   
                                                                                                                                
7:34:13 PM                                                                                                                    
                                                                                                                                
JOE  DINNOCENZO, testifying  on behalf  of himself,  said he  has                                                               
been  a state  employee within  the Alaska  Department of  Fish &                                                               
Game for 20  years, spread out over  the last 32 years.   He said                                                               
he  has been  listening to  the  prior testimony  and thinks  the                                                               
strongest theme is in relation  to recruitment and retention.  He                                                               
said he  thinks the  legislature has a  strategic choice  to make                                                               
whether  it wants  a state  workforce with  high turnover  versus                                                               
dedicated employees  that are paid  at a  better rate.   He said,                                                               
"Anything you  do at  this point to  devalue the  benefit package                                                               
that is currently being offered  state employees is only going to                                                               
make  the  problem  of  recruitment   and  retention  worse,  and                                                               
probably  make state  government  programs less  efficient."   He                                                               
explained  that  the  changes will  not  affect  his  retirement;                                                               
however, it will  affect state government, which  concerns him as                                                               
a citizen of  the state.  He said he  sympathizes with the plight                                                               
of Wrangell, but said his  family has "those same increased costs                                                               
in insurance,  in fuel, and, on  top of that, [in]  city property                                                               
and sales taxes.   He indicated that  any increased contributions                                                               
required in PERS would be on top of those costs.                                                                                
                                                                                                                                
MR. DINNOCENZO said:                                                                                                            
                                                                                                                                
     The state government  runs ... partly on  the good will                                                                    
     and  devotion of  state employees  to the  mission they                                                                    
     are  assigned to,  and over  my career  I've seen  that                                                                    
     diminish  in  the work  force  that  I  work with.    I                                                                    
      certainly wouldn't like that trend to continue; it's                                                                      
     pretty alarming for me.                                                                                                    
                                                                                                                                
     ...   I  think   fairness  demands   accountability  of                                                                    
     whatever  board governs  decisions about  PERS; whether                                                                    
     it's the  board we  have now,  or some  combined board.                                                                    
     And I  think it's  essential that beneficiaries  have a                                                                    
     way to help select who's on that PERS Board.                                                                               
                                                                                                                                
7:37:51 PM                                                                                                                    
                                                                                                                                
CHAIR SEATON  noted that  the committee  had passed  an amendment                                                               
regarding the selection of the board members.                                                                                   
                                                                                                                                
7:38:24 PM                                                                                                                    
                                                                                                                                
JOHN DICKENSON,  supervisory employee  representative, testifying                                                               
on behalf  of APEA AFT-SU, said  he was born in  the Territory of                                                               
Alaska and was  in the sixth grade when Alaska  was made a state.                                                               
He  has a  degree in  Civil  Engineering from  the University  of                                                               
Alaska.   He offered his work  history.  He  said he is a  Tier I                                                               
employee,  who is  concerned about  the quality  of life  that he                                                               
would enjoy  as a  citizen of the  state.  He  said he  wants his                                                               
state  government  staffed  by competent  people  who  know  what                                                               
they're doing.   He also stated concern for  his fellow employees                                                               
who have less time in service  than he does.  Regarding the issue                                                               
of recruitment  and retention, he  said he thinks  the Department                                                               
of Transportation  & Public  Facilities has  been "a  really good                                                               
place to  work with so far"  for reasons he listed.   However, he                                                               
related  a  difficult  hiring experience.    In  conclusion,  Mr.                                                               
Dinnocenzo  suggested that  the committee  look at  the positions                                                               
that are currently being advertised  through Workplace Alaska and                                                               
consider  the  listed minimum  qualifications  and  how easy  [or                                                               
difficult] it would be to fill those positions.                                                                                 
                                                                                                                                
7:43:07 PM                                                                                                                    
                                                                                                                                
ROSS MARLEY (ph),  testifying on behalf of  himself in opposition                                                               
to SB 141, said he recently spent  a year and many dollars to get                                                               
a teaching  degree, but then decided  to go for a  career path in                                                               
the private  sector instead.  He  said he realized if  he were to                                                               
go into teaching,  he would never have "a financial  leg to stand                                                               
upon."  He  continued, "This is unfortunate,  because teaching is                                                               
an intrinsically  rewarding career  path; I simply  cannot afford                                                               
to choose it.  Passing SB 141  will simply confirm my choice as a                                                               
highly qualified  job candidate to  leave the public  service and                                                               
pursue a career path in the private sector."                                                                                    
                                                                                                                                
7:44:34 PM                                                                                                                    
                                                                                                                                
BARBARA  RICH,   testifying  on  behalf  of   herself,  told  the                                                               
committee that she  is a retired teacher who used  to be a "watch                                                               
dog" in  Juneau for the retirement  system.  She stated  that the                                                               
retirement  system  is "in  better  shape  than most  people  are                                                               
trying  to say  it is."    She said  most of  the problems  exist                                                               
because of high medical costs.  She  noted that when a bill for a                                                               
retirement  incentive  program  (RIP)   was  brought  before  the                                                               
legislature  in the  past, "we  testified wholeheartedly  against                                                               
this"  but  were not  listened  to;  the legislation  was  passed                                                               
quickly.  She  added, "Something similar to SB 141."   She stated                                                               
her hope  that the  legislature would  listen to  testifiers this                                                               
time.   Ms. Rich offered  an example of  the effects of  the RIP,                                                               
illustrating  just  how  much  money   would  have  been  in  the                                                               
retirement system now  if the multiple RIPs had  not taken place.                                                               
She asked that the legislature  does not rip apart the retirement                                                               
program.   She  echoed the  previous  comments of  Ms. Luby  that                                                               
social security  is a safety  net where  it is offered,  but said                                                               
there is no  safety net for teachers, and they  can outlive their                                                               
defined contribution.   She  said the actuaries  are not  doing a                                                               
good job and  there is a need  to find people who will  do a good                                                               
job.  She asked the committee to take its time.                                                                                 
                                                                                                                                
7:47:51 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GARDNER asked Ms. Rich  if she knows of any reason                                                               
that the existing PERS and TRS Boards should be changed.                                                                        
                                                                                                                                
7:48:19 PM                                                                                                                    
                                                                                                                                
MS.  RICH answered  no.    She said  those  boards  have done  an                                                               
excellent  job.   Regarding TRS,  she  noted that  there are  two                                                               
people on  the board who  have done such a  good job that  no one                                                               
runs  against  them.    She  reported  that  40  percent  of  all                                                               
prescription drugs  used now are  generic drugs, because  the TRS                                                               
Board requested  that people take  generic drugs [which  save the                                                               
system money].                                                                                                                  
                                                                                                                                
7:49:36 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GARDNER  noted  that   the  committee  had  heard                                                               
previous testimony that over the past  20 years, the PERS and TRS                                                               
Boards  did not  take the  actuary's advise  in terms  of setting                                                               
rates,  which ended  up benefiting  the  system.   She asked  Ms.                                                               
Rich, "Would you concur with that?"                                                                                             
                                                                                                                                
7:51:24 PM                                                                                                                    
                                                                                                                                
MS. RICH answered no.                                                                                                           
                                                                                                                                
7:51:32 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE RAMRAS  thanked Ms. Rich; he  recollected that she                                                               
was a school counselor.                                                                                                         
                                                                                                                                
7:52:05 PM                                                                                                                    
                                                                                                                                
JIM   DUNCAN,   Business   Manager,   Alaska   State   Employees'                                                               
Association  (ASEA), testified  on  behalf  of the  approximately                                                               
8,000 current  active ASEA members in  opposition to SB 141.   He                                                               
stated  his belief  that the  issue before  the legislature  is a                                                               
complex one that  deserves serious and comprehensive  review.  He                                                               
urged the  legislature to take more  time.  He noted  some of the                                                               
reasons  for  the current  problem  are:    the poor  returns  on                                                               
investments in the  stock market, the rising cost  in health care                                                               
costs, increased  longevity of  retirees, and  the fact  that the                                                               
state actuaries did not recognize  some of these factors and make                                                               
the right assumptions and projections.   None of the problems, he                                                               
said, were,  or will  be caused by  current or  future employees,                                                               
but the bill  asks those employees to  assume the responsibility.                                                               
He stated for the record that he thinks that's wrong.                                                                           
                                                                                                                                
MR.  DUNCAN  reviewed the  ways  that  SB  141 would  make  those                                                               
employees pay:   by increasing the employee  contribution for all                                                               
active employees  by .5 percent per  year until it reaches  a cap                                                               
of 11.75 percent.  He said  that doesn't sound like much, but for                                                               
those working at a  range 8 or lower, any amount  of money out of                                                               
their take-home pay is a lot of money.  He continued as follows:                                                                
                                                                                                                                
     I  believe  strongly  that that's  an  unconstitutional                                                                    
     provision   in  this   bill;  that   to  increase   the                                                                    
     contribution  rate  on  active employees  violates  the                                                                    
     state constitution.   And I would let you  know that if                                                                    
     this legislature  should pass  that, ... my  union will                                                                    
     be  challenging  that  in court,  and  I'm  sure  other                                                                    
     unions will be doing likewise ....                                                                                         
                                                                                                                                
     I  heard  this  morning,  Senator Stedman  -  who  I've                                                                    
     talked  to many  times about  this bill  - say,  "Look,                                                                    
     don't worry too much about  the .5 percent because they                                                                    
     all  have  collective  bargaining  agreements;  they'll                                                                    
     just go back to the  table and recoup that .5 percent."                                                                    
     There's a problem with that:   It's been very difficult                                                                    
     to get  ... cost-of-living  increases at all  for state                                                                    
     employees.  In  fact, my union has gone  for ... almost                                                                    
     three  years without  an increase,  and  this year,  on                                                                    
     July  1, we're  going to  get 1.5  percent, and  the .5                                                                    
     percent's going to go to  the retirement system if this                                                                    
     passes.  ...  The problem is we don't go  back to [the]                                                                    
     table for a new contract  until ... July 1, [2007], ...                                                                    
     so to use an argument to justify this ... is wrong.                                                                        
                                                                                                                                
7:55:27 PM                                                                                                                    
                                                                                                                                
     [Second], you're  asking our ... future  members to pay                                                                    
     for  this  problem by  moving  from  a defined  benefit                                                                    
     system to  a defined contribution system.   What you're                                                                    
     saying is  the state no  longer wants to take  the risk                                                                    
     with the  stock market; you  want the employee  to take                                                                    
     the risk  and have their  benefits hinge on  the return                                                                    
     on  the  investment.    And  that is  not  a  good  ...                                                                    
     scenario for the  members that we represent  or will be                                                                    
     representing   in   the   future.     It   takes   some                                                                    
     sophistication to  have good  investments, and  I'm not                                                                    
     convinced  at all  this  has  that sophistication,  but                                                                    
     you're asking our employees to assume that.                                                                                
                                                                                                                                
     Third, this  defined contribution system does  not have                                                                    
     a provision for disability payments.   It does not even                                                                    
     have a  real good death  benefit, because if  a retiree                                                                    
     should pass  away, the survivor  will only get  a death                                                                    
     benefit  as long  as there's  still money  left in  the                                                                    
     defined contribution  system.  And that  survivor, that                                                                    
     spouse, that wife, may very  well outlive that payment,                                                                    
     and at that point they've got a very serious problem.                                                                      
                                                                                                                                
     ... There  is no safety  here for future  retirees ...,                                                                    
     and in the  State of Alaska, our  state employees don't                                                                    
     even have social security to  fall back on.  Now, other                                                                    
     states have talked about moving  from a defined benefit                                                                    
     to a defined contribution system.   Some have done that                                                                    
     - Nebraska  and West Virginia  - and now  they've moved                                                                    
     back, because  they found  it didn't  work.   One state                                                                    
     was just  recently talking  about that  - the  State of                                                                    
     California.   Governor Schwarzenegger had it  as one of                                                                    
     his major,  major initiatives, and  just a week  ago he                                                                    
     backed off because he also  understood, or the folks he                                                                    
     was  going to  do this  to understood,  that it  wasn't                                                                    
     going to work  for them.  And his plan,  just like this                                                                    
     plan,  didn't  have  a  disability,   or  ...  a  death                                                                    
     benefit.   I think you  need to very carefully  need to                                                                    
     consider what this bill will do to future employees.                                                                       
                                                                                                                                
7:57:35 PM                                                                                                                    
                                                                                                                                
MR. DUNCAN continued as follows:                                                                                                
                                                                                                                                
     There are some  things that I think you  should do, and                                                                    
     you are doing  some of those and I  congratulate you on                                                                    
     that.  Another opinion:   Have another set of actuaries                                                                    
     look at  those assumptions  that were  made and  make a                                                                    
     determination as to  how real this problem  is and what                                                                    
     it's going to look like into the future ....                                                                               
                                                                                                                                
     Secondly, I think  you should ask that  actuary to look                                                                    
     at  what's going  to  be the  impact  on those  current                                                                    
     employees  who  remain in  [PERS].    When you  ...  no                                                                    
     longer  have  a   pool  of  new  folks   coming  in  to                                                                    
     contribute to  [PERS] -  all of a  sudden there  are no                                                                    
     new  additions  -  what  really   does  happen  to  the                                                                    
     valuation of  [PERS] for  those current  employees, and                                                                    
     what  will they  be  required  to do  in  order to  ...                                                                    
     continue to make that system whole?                                                                                        
                                                                                                                                
MR.  DUNCAN  also recommended  that  the  committee consider  the                                                               
impact of the proposed legislation  on recruitment and retention.                                                               
He  said, "As  someone  who ...  was in  the  legislature for  24                                                               
years,  I know  that  the  State of  Alaska  has  a problem  with                                                               
recruitment and retention."  He  indicated he saw that problem as                                                               
a former commissioner  of administration.  He said  he knows that                                                               
when  a  defined   benefits  system  is  changed   to  a  defined                                                               
contribution system,  the hard-to-fill jobs become  impossible to                                                               
fill.  He continued as follows:                                                                                                 
                                                                                                                                
     I heard  ... a  member of  the legislature  testify the                                                                    
     other  day ...:    "Wait a  minute,  don't worry  about                                                                    
     this; we're about  number three in the  nation now with                                                                    
     our retirement system.   This will put us  right in the                                                                    
     middle of the pack, and that's  where we should be."  I                                                                    
     couldn't  disagree more.   We  should never  be in  the                                                                    
     middle of the pack.  We  should always be at the top of                                                                    
     the list, and  not in the middle of the  list.  We have                                                                    
     many other problems  to overcome to get  people to come                                                                    
     to  this state  to work;  ... we  need to  have a  more                                                                    
     attractive system.                                                                                                         
                                                                                                                                
7:59:34 PM                                                                                                                    
                                                                                                                                
MR. DUNCAN encouraged asking the  state to look at what liability                                                               
the actuaries that  made the assumptions over the  past few years                                                               
might have  "in this whole situation."   He said he  thinks there                                                               
should be consideration  whether some of the  under funding could                                                               
be  recovered  from  the  actuarial  firms  who  gave  the  wrong                                                               
assumptions.    He  noted  that   when  he  was  commissioner  of                                                               
administration, the  last valuation  report he received  in March                                                               
2002  did not  indicate a  problem.   When an  audit was  done in                                                               
December 2003, a major problem  was reported.  He stated, "Things                                                               
don't change that quickly."                                                                                                     
                                                                                                                                
MR. DUNCAN  concurred with  those who  testified before  that the                                                               
legislation does  not need to pass  this year.  He  warned, "once                                                               
you  put something  in  place,  it's going  to  be impossible  to                                                               
remove it."                                                                                                                     
                                                                                                                                
8:00:50 PM                                                                                                                    
                                                                                                                                
CHAIR SEATON stated for the  record that there may be conflicting                                                               
legal opinions  regarding raising rates  for benefits.   He asked                                                               
Mr. Duncan  if the questionnaire sent  out by TRS was  filled out                                                               
and returned by ASEA.                                                                                                           
                                                                                                                                
8:01:53 PM                                                                                                                    
                                                                                                                                
MR. DUNCAN  responded that  he has been  the business  manager of                                                               
ASEA  since February  2003, and  he does  not recall  receiving a                                                               
questionnaire from  the board.  He  said if he had  received one,                                                               
he would have participated.                                                                                                     
                                                                                                                                
CHAIR SEATON  offered his understanding  that NEA-Alaska  was the                                                               
only  union  to  respond,  but  he said,  "You  never  know  what                                                               
happened in the mail."   He said he just wanted to  get it on the                                                               
record that there has been requests for information.                                                                            
                                                                                                                                
8:02:40 PM                                                                                                                    
                                                                                                                                
DOUG STARK, DPA [Doctor of  Public Administration], testifying on                                                               
behalf of  himself, noted that he  began work as a  PERS employee                                                               
in the  governor's office in 1968,  and since then has  held 8-10                                                               
public sector jobs around the state.  He continued as follows:                                                                  
                                                                                                                                
     When I went  to work for the City of  Homer three years                                                                    
     ago, I  opted out  of PERS,  because I  felt it  was an                                                                    
     abuse of the ...  system to accumulate additional years                                                                    
     at my pay rate of $50  a month as a councilman.  Having                                                                    
     worked through  three budget cycles,  I found  that the                                                                    
     increase in required contributions  to PERS by the city                                                                    
     is  causing  intolerable burden  on  the  city and  its                                                                    
     citizens.     Defined  contributions   [are]  replacing                                                                    
     defined benefits  on a nationwide basis  because of the                                                                    
     exorbitant  cost   to  employers,   and  a   number  of                                                                    
     employers   have  completely   gotten   rid  of   their                                                                    
     retirement  systems and  sent  it over  to the  federal                                                                    
     pension benefit  corporation - which  is not  good news                                                                    
     for anybody.                                                                                                               
                                                                                                                                
DR. STARK  said SB  141 is  not totally  sufficient to  solve the                                                               
existing  problems, but  it is  necessary in  order to  solve the                                                               
problems in the long term.  He said  work needs to be done in the                                                               
area of health  benefits.  He concluded by stating,  "Your job is                                                               
to  listen  to  and  represent   public  employees,  but  -  most                                                               
important -  to represent all  the citizens of  Alaska, including                                                               
the silent majority, so to speak."                                                                                              
                                                                                                                                
8:04:49 PM                                                                                                                    
                                                                                                                                
MARY GRAHAM, testifying on behalf  of herself in opposition to SB
141, told  the committee that she  has been a state  employee for                                                               
approximately  15  years and  is  a  member  of  APEA AFT.    She                                                               
concurred  with the  statements  made by  former testifiers  that                                                               
employees  did not  create the  existing problems,  but it  seems                                                               
they and  the future employees  are the  ones being made  to pay.                                                               
She directed  attention to  page 5, lines  21-24, as  numbered on                                                               
Amendment 4, which read:                                                                                                        
                                                                                                                                
          "Sec. 39.35.870. Retirement. (a) In order to                                                                        
     obtain medical  benefits under  AS 39.35.870  an active                                                                    
     member must  retire directly from  the plan.   A member                                                                    
     is eligible to  retire from the plan if  the member has                                                                    
     been an  active member  for at  least 12  months before                                                                    
     application for retirement and                                                                                           
                                                                                                                                
MS. GRAHAM asked,  "What happens if someone works  10 months into                                                               
the  year that  they're ready  to retire  and, because  of budget                                                               
cuts or  whatever, their job's gone  ... - they get  laid off and                                                               
they're in a  rural part of Alaska where there's  not going to be                                                               
another PERS-type  job for them to  go to?  A  long-term employee                                                               
could lose  their ability  to have health  insurance."   She said                                                               
she doesn't think  that's the intent of the drafter  of the bill.                                                               
She recommended that the committee  slow down and really consider                                                               
"all the consequences of what's going  to happen here."  She said                                                               
her  own  Tier I  plan  was  attractive  to  her for  the  health                                                               
insurance  it gives,  but that  may  not be  available for  other                                                               
[tiers].  She  remarked that she is also a  hiring manager who is                                                               
having a  difficult time filling  positions.  She said,  "I don't                                                               
say anything about retirement and  benefits when I try to attract                                                               
people, because it's  not that attractive.  And it's  going to be                                                               
a  lot less  attractive if  we  go to  this defined  contribution                                                               
system."                                                                                                                        
                                                                                                                                
8:09:17 PM                                                                                                                    
                                                                                                                                
KEVIN  RITCHIE,  Executive   Director,  Alaska  Municipal  League                                                               
(AML),  stated that  63 percent  of the  $5.7 billion  problem is                                                               
"owned  by  municipalities, schools,  and  the  university."   He                                                               
continued as follows:                                                                                                           
                                                                                                                                
     Where PERS rates are rising  is 30 percent of salary or                                                                    
     above, which,  in a normal  city which spends  about 70                                                                    
     percent of  its budget on salary,  can be as much  as a                                                                    
     20 percent overall increase in  total spending for that                                                                    
     community.   Schools  [are] much  higher, because  many                                                                    
     times I  think that  90 percent or  so of  their budget                                                                    
     may go  into salaries.   So,  this is  part of  a long-                                                                    
     range plan.  Municipalities  [have been] working at the                                                                    
     table with  the legislature [and] with  PERS/TRS Boards                                                                    
     for the past year.  We've  been working with a group of                                                                    
     school district  business officials,  municipal finance                                                                    
     officers,     elected     officials,     [and]     some                                                                    
     representatives  from the  university along  every step                                                                    
     of the way.                                                                                                                
                                                                                                                                
MR. RITCHIE  said SB  141 is  similar to  the concepts  that have                                                               
been discussed for the past year  by the PERS and TRS Board [and]                                                               
by  the House  and  the legislative  committees  working on  this                                                               
issue.  He reported  that AML adopted its policy a  year ago.  He                                                               
indicated   that   two  of   the   more   relevant  issues   are:                                                               
stabilization   of   the  cost   of   the   PERS/TRS  system   to                                                               
municipalities   and  help   with   funding  unexpected   massive                                                               
increases in  the cost  of the  PERS/TRS system.   He  said [AML]                                                               
provided a  letter to the  committee on  April 2, which  has more                                                               
detailed comments  [included in the  committee packet].   He said                                                               
PERS  rates of  30  percent are  projected out  for  the next  25                                                               
years,  so  "there's  not  a  relief in  sight."    The  proposed                                                               
legislation "or something similar to  it" provides some hope that                                                               
those rates will go down over time.                                                                                             
                                                                                                                                
MR.  RITCHIE stated  that [AML]  will continue  to work  with the                                                               
legislature on  SB 141.   He mentioned some amendments  that were                                                               
made  earlier  today,  which  seemed  to  make  some  significant                                                               
improvements  on both  access to  health care  and access  to the                                                               
health reimbursement account.  He concluded:                                                                                    
                                                                                                                                
     I  guess we'd  just say  that we're  in support  of the                                                                    
     efforts that  you're making to  bring the  system under                                                                    
     control  for the  long term  in this  effort.   And [I]                                                                    
     just want to emphasize that  providing some help -- the                                                                    
     state  simply  has  more money  than  its  communities.                                                                    
     There's some  communities that are in  fiscal crisis or                                                                    
     are  sliding backwards  in the  fiscal  crisis, and  we                                                                    
     want to just emphasize  the governor's budget amount of                                                                    
     providing at least some funding  for the next few years                                                                    
     to the municipalities  and to have a chance  of kind of                                                                    
     digging themselves out of the hole.                                                                                        
                                                                                                                                
8:13:00 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GATTO  said  Mr.  Ritchie made  a  salient  point                                                               
regarding the school districts.                                                                                                 
                                                                                                                                
8:13:51 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   GARDNER  expressed   her  appreciation   of  Mr.                                                               
Ritchie's   explanation   of   the  percentage   increases   that                                                               
municipalities  are facing.   She  asked Mr.  Ritchie to  confirm                                                               
that SB 141,  in creating a new  tier, would put the  risk on the                                                               
employee, reduce the risk to  the employer, and reduce the amount                                                               
of the  growth of  the shortfall; however,  it would  not address                                                               
the problem  that the  state is already  facing, other  than "the                                                               
one-time direct funding  grant thing."  She asked if  that was an                                                               
accurate summation.                                                                                                             
                                                                                                                                
8:14:36 PM                                                                                                                    
                                                                                                                                
MR. RITCHIE answered yes.  He  said the $5.7 billion shortfall is                                                               
still  there, which  is  the biggest  crux of  the  problem.   He                                                               
added, "However,  when you  look at that  over 25  years, whether                                                               
that  liability goes  up or  those rates  continue to  go up,  or                                                               
those rates stabilize  or continue to go down,  that's a function                                                               
of changes to the system, as well."                                                                                             
                                                                                                                                
8:15:49 PM                                                                                                                    
                                                                                                                                
TOM  BRICE  testified on  behalf  of  the Alaska  State  District                                                               
Council of  Laborers, which  consists of  two private  unions and                                                               
one public  union:  Laborers  Local 341, Laborers Local  942, and                                                               
Public Employees  Local 71,  respectively.   He said  the central                                                               
issue of SB 141 is the  proposed change of the state's retirement                                                               
system  from a  defined benefit  plan to  a defined  contribution                                                               
plan.   He  said that  fundamental change  would not  address the                                                               
issues  that  the  actuaries  pointed   to  regarding  the  under                                                               
funding, and it  would seriously erode the  employees' ability to                                                               
have a  safety net upon  retirement.   He said neither  the House                                                               
State  Affairs Standing  Committee  nor any  other committee  has                                                               
held a  serious discussion  about "how  a defined  program should                                                               
work."  Instead, the focus has  been on the negative aspects of a                                                               
defined benefit plan.   Mr. Brice reported that  the employees he                                                               
represents in the private sector  enjoy a defined benefit program                                                               
that is stable and secure.   He said he thinks the discussion has                                                               
to be  turned away from  defined contribution and focused  on the                                                               
defined benefits programs currently  being enjoyed in the private                                                               
sector.                                                                                                                         
                                                                                                                                
8:18:58 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GARDNER  asked Mr. Brice to  provide the committee                                                               
with a  list of  some of  the [private]  companies that  he feels                                                               
provide stable and solid defined benefit programs.                                                                              
                                                                                                                                
8:19:14 PM                                                                                                                    
                                                                                                                                
MR.  BRICE  offered the  following  names:   Brice,  Inc;  Wilder                                                               
[Construction  Company]; Secon;  and Coogan  [Construction].   He                                                               
added that the list is long  and extensive.  He explained, "Those                                                               
are union  employers.  They know  that if they invest  into their                                                               
employees  and  they're able  to  provide  their employees  safe,                                                               
reliable   retirements,  ...   they'll   get  better   employees.                                                               
Regarding  the  previously  mentioned  surveys sent  out  by  the                                                               
PERS/TRS  Boards, he  said he's  certain those  surveys were  not                                                               
sent to the  private unions or the private retirement  trust.  He                                                               
concluded,  "And  I think  there  could  be  a real  good  lesson                                                               
learned  from the  way those  programs are  administered and  the                                                               
benefits they're able to provide ... our members."                                                                              
                                                                                                                                
8:20:23 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GARDNER said  it is  known that  nationally there                                                               
are  longstanding companies  that have  gotten into  trouble with                                                               
defined benefit  plans.  She  asked, "Do  you have any  idea what                                                               
the common elements are of the  plans that you think are safe and                                                               
secure?"                                                                                                                        
                                                                                                                                
8:20:49 PM                                                                                                                    
                                                                                                                                
MR. BRICE  answered that  one of the  primary common  elements is                                                               
that  they  are  jointly  administered;  representatives  of  the                                                               
employees  have  a say  equal  to  the employers,  regarding  the                                                               
administration  of  the  trust.     Mr.  Brice  also  recommended                                                               
consideration of how many various  employers are "engaged in that                                                               
retirement  trust."    He explained,  "These  programs  that  I'm                                                               
speaking  of ...  have hundreds  of contractors  participating in                                                               
them, so  there's a wide variety  of insights and input  into the                                                               
way that program's administered to  meet the needs of the working                                                               
people."                                                                                                                        
                                                                                                                                
8:21:42 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GARDNER  said there  has been  a lot  of testimony                                                               
that  one of  the  biggest problems  that has  led  to the  under                                                               
funding of the  retirement systems is the  massive and unexpected                                                               
increase  in health  care costs.   She  asked, "Do  you know  how                                                               
these programs have dealt with that,  or do they limit the access                                                               
to health care or the total amount that can be spent?"                                                                          
                                                                                                                                
8:22:00 PM                                                                                                                    
                                                                                                                                
MR. BRICE  noted that under  the Laborers Local 341  and Laborers                                                               
Local  942 programs,  medical care  is not  necessarily a  vested                                                               
benefit; it  is available to  employees if they want  to purchase                                                               
it, but it's not a vested  benefit.  Furthermore, he said members                                                               
have  to  spend  a  certain  amount   of  time  in  the  trade  -                                                               
approximately 20,000 hours  for the laborers -  before being able                                                               
to purchase the health benefit.                                                                                                 
                                                                                                                                
8:22:57 PM                                                                                                                    
                                                                                                                                
CHAIR SEATON  asked Mr. Brice  if he has any  information showing                                                               
that  public sector  employees would  support eliminating  health                                                               
benefits in their retirement plan  and instead be responsible for                                                               
purchasing  their own  benefits.   He  noted that,  based on  the                                                               
surveys he's seen,  employees in the public sector  have said the                                                               
health  benefit  is  the  most  important  part  of  the  benefit                                                               
package.                                                                                                                        
                                                                                                                                
8:23:52 PM                                                                                                                    
                                                                                                                                
MR.  BRICE responded  that  he thinks  "it would  be  a point  of                                                               
conversation to  start."  He  said he  is not the  local business                                                               
manager of  Local 71 and  would defer to that  person's judgment.                                                               
In terms  of the entire  debate, he  said what's been  missing is                                                               
bringing the  organizations that  represent the employees  to the                                                               
table in a meaningful manner and presenting options.                                                                            
                                                                                                                                
8:25:06 PM                                                                                                                    
                                                                                                                                
JIM HORNADAY, Mayor,  City of Homer, testified in  support of the                                                               
provisions in  SB 141 "providing  some $69 million over  the next                                                               
two years,  as the  governor recommended, to  offset the  cost of                                                               
the state-required ... temporary help  ... [to] pay the municipal                                                               
PERS increase for the next two  years."  He said he realizes that                                                               
this is  just a temporary approach,  but the City of  Homer hopes                                                               
to have  increased retail sales "that  should help in this."   If                                                               
the money is  not included in the bill, for  example, the City of                                                               
Homer  will have  to pay  an  additional $245,000  per year,  and                                                               
there may be  decreased city services.  He  remarked, "We're told                                                               
that  Homer now  owes $6  million in  the PERS  situation."   The                                                               
citizens of Homer  recently increased the city sales  tax, and he                                                               
offered  his understanding  that the  Kenai Peninsula  Borough is                                                               
about to  increase its sales tax.   He added, "So,  we do believe                                                               
that the  State of  Alaska should share  in these  increased PERS                                                               
costs."   Mr. Hornaday concluded,  "I certainly  wouldn't predict                                                               
what  the supreme  court  is  going to  do,  but  if you  haven't                                                               
already  included  it  in  your   bill,  you  might  include  the                                                               
provision  that  just because  one  provision  is [stricken],  it                                                               
doesn't strike down the other provisions."                                                                                      
                                                                                                                                
8:26:48 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GARDNER  asked Mr.  Hornaday  if  he would  still                                                               
support  SB 141  if  it didn't  include the  $69  million or  any                                                               
amount of money to help the municipalities.                                                                                     
                                                                                                                                
8:27:21 PM                                                                                                                    
                                                                                                                                
MR. HORNADAY  responded, "That is  on our next agenda;  there's a                                                               
resolution to  that effect, and  we can  tell you that  after the                                                               
council votes  on it  this next  Monday night."   He  offered his                                                               
understanding  that the  Alaska  Municipal League  has taken  the                                                               
position of being in general favor  of the bill; however, he said                                                               
he would rather have AML speak  directly to that.  He stated that                                                               
as a  retired Tier I  state employee and a  person who has  run 5                                                               
small  businesses, he  understands  the  problem and  sympathizes                                                               
with the way in which the legislature is trying to address it.                                                                  
                                                                                                                                
8:28:09 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   GRUENBERG  noted   that  there   is  a   general                                                               
severability clause in Title I "that would apply."                                                                              
                                                                                                                                
8:28:27 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE ELKINS  asked Mr. Hornaday how  many people within                                                               
the  PERS and  TRS retirement  systems come  from school  boards,                                                               
borough councils, and city councils within his area.                                                                            
                                                                                                                                
8:28:53 PM                                                                                                                    
                                                                                                                                
MR.   HORNADAY  estimated   20  people   are  elected   municipal                                                               
officials,  but he  said  he  doesn't know  the  numbers for  the                                                               
school board.                                                                                                                   
                                                                                                                                
8:29:39 PM                                                                                                                    
                                                                                                                                
CHAIR SEATON  asked if the City  of Homer has "looked  at that in                                                               
any detail."   He noted  that "the city's liability  is basically                                                               
yearly proportional  to retirement  and benefits."   He  asked if                                                               
the city has discussed that issue.                                                                                              
                                                                                                                                
8:30:17 PM                                                                                                                    
                                                                                                                                
MR. HORNADAY said the issue will be addressed.                                                                                  
                                                                                                                                
8:30:41 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE ELKINS stated  that there are a lot  of people who                                                               
drew $150 a  month for five or  six years and are  now retired in                                                               
Tier I  and II and  are drawing the  medical benefits.   He said,                                                               
"It's  a  big  burden  on  cities  when  they  didn't  contribute                                                               
anything start with."                                                                                                           
                                                                                                                                
8:31:25 PM                                                                                                                    
                                                                                                                                
TOM HARVEY,  Executive Director,  NEA-Alaska, told  the committee                                                               
that  NEA-Alaska  covers  12,500  public school  employees.    He                                                               
offered   happy  birthday   wishes   to  Representative   Elkins.                                                               
Regarding the composition of a new  board, he said the passage of                                                               
Amendments  5 and  6 this  morning was  appreciated; however,  he                                                               
stated  a preference  that  the  boards be  elected  as the  PERS                                                               
members  are  now,  because  that  is  an  essential  process  of                                                               
ownership of the systems by the  participants, as well as part of                                                               
the democratic process of the country.                                                                                          
                                                                                                                                
8:33:21 PM                                                                                                                    
                                                                                                                                
MR.  HARVEY,  in  response  to   a  question  from  Chair  Seaton                                                               
regarding  how TRS  Board members  are selected,  explained that,                                                               
presently, the  associations that  represent teachers  and public                                                               
school  employees make  nominations, and  the governor  makes the                                                               
appointment.  In  response to a follow-up  question, he clarified                                                               
that the preference is for both  PERS and TRS Board members to be                                                               
elected, [rather than appointed by the governor].                                                                               
                                                                                                                                
8:34:04 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GRUENBERG  noted  that  Mr.  Harvey  included  an                                                               
amendment  idea  in  his testimony  [included  in  the  committee                                                               
packet].                                                                                                                        
                                                                                                                                
8:34:47 PM                                                                                                                    
                                                                                                                                
MR. HARVEY said  the earlier adopted amendment took  care of "the                                                               
numbers  part  of what  we  were  talking  about."   He  directed                                                               
attention to  page 1, line  29, through page  2, line 11,  of his                                                               
handout,  which addresses  "the  election part."    He urged  the                                                               
committee to consider an amendment there.                                                                                       
                                                                                                                                
8:36:13 PM                                                                                                                    
                                                                                                                                
MR. HARVEY stated  that NEA-Alaska also believes  that the powers                                                               
and  duties  of  the  Alaska Retirement  Management  (ARM)  Board                                                               
should  include hearings.   He  quoted Richard  Solie, Ph.D.,  as                                                               
follows:                                                                                                                        
                                                                                                                                
     Because the boards act as  a jury of peers, in essence,                                                                    
     I  believe  the  board  approach reduces  the  risk  of                                                                    
     future  litigation  and  gives  the  [beneficiaries]  a                                                                    
     greater sense that their cases have been truly heard.                                                                      
                                                                                                                                
MR. HARVEY  stated, "We would  urge you to consider  an amendment                                                               
that  would   provide  that.     You  could   do  it   through  a                                                               
subcommittee.  It  would not have to be, and  should probably not                                                               
be, the whole board that  would do that particular provision, but                                                               
we  do  believe that  their  function  has  served well  in  that                                                               
capacity."                                                                                                                      
                                                                                                                                
MR.  HARVEY, regarding  the employee/employer  contribution to  a                                                               
defined  benefit plan,  stated  that it  is  disturbing to  [NEA-                                                               
Alaska] that the  contribution of the present  employees would be                                                               
increased at .5  percent a year until it equals  the normal rate,                                                               
divided  in half  between  the  employer and  the  employee.   He                                                               
continued as follows:                                                                                                           
                                                                                                                                
     In fact,  at first it  sounds like a very  small thing.                                                                    
     But if you  look at what happens in  2020, according to                                                                    
     the  actuaries ...  it's going  to require  52 percent.                                                                    
     That  would mean  26 percent  from the  employer, under                                                                    
     this bill,  and 26 percent  from the employee.   That's                                                                    
     how the bill read, I believe.                                                                                              
                                                                                                                                
8:37:14 PM                                                                                                                    
                                                                                                                                
CHAIR SEATON  clarified that  SB 141 only  deals with  the normal                                                               
service cost.  He said, "The  bill that you were talking about is                                                               
the normal and  the past service cost, which was  [HB] 177, which                                                               
we passed  out of  committee so  that Representative  Kelly could                                                               
work  on it,  and  that split  the normal  and  the past  service                                                               
cost."                                                                                                                          
                                                                                                                                
8:37:57 PM                                                                                                                    
                                                                                                                                
MR. HARVEY  suggested that  - "even  at the  split of  the normal                                                               
service cost, as being presently  projected" - a present employee                                                               
is going to end up paying  a lot more than he/she currently does.                                                               
He said, "What you're really going to  do is allow them to have a                                                               
decision to leave the system."   He clarified that employees will                                                               
be faced with a choice of  paying more for the same benefits they                                                               
are presently receiving,  or retire now and get  the benefits for                                                               
a  longer  period of  time,  which  he  said  will "add  to  that                                                               
liability situation that  you're talking about."   He said that's                                                               
a serious flaw in [SB 141].                                                                                                     
                                                                                                                                
MR.   HARVEY,   again   regarding   increasing   the   employees'                                                               
contribution  without  increasing   the  corresponding  benefits,                                                               
said, "This  is clearly  charting a  course through  the troubled                                                               
legal  waters  through  the Alaska  [State]  Constitution."    He                                                               
continued as follows:                                                                                                           
                                                                                                                                
     And I've heard  your comment earlier.  I  think I would                                                                    
     say to  you, sir, that we  have a legal opinion  from a                                                                    
     former  member   of  this  body  who   has  been  quite                                                                    
     successful  at enforcing  the rights  of the  employees                                                                    
     and their  retirement benefits.   But  I would  just as                                                                    
     much say  you need  to look at  what Dr.  Richard Solie                                                                    
     said,  who  is also  being  counseled.   They  did  not                                                                    
     consider this  approach, because  of the  concern about                                                                    
     the response  of the  judiciary.   I think  the numbers                                                                    
     are pretty clear  at this point in time.   If anything,                                                                    
     if you  don't think that  that's true, I  would suggest                                                                    
     that you look at another  avenue to get a legal opinion                                                                    
     -  maybe  even  a   referral  to  the  House  Judiciary                                                                    
     [Standing Committee] -  same as you did  with [HB] 177.                                                                    
     That would be able to take care of the matter.                                                                             
                                                                                                                                
MR.  HARVEY offered  his understanding  that  Amendment 1  failed                                                               
this morning.  He said it's  clear to [NEA-Alaska] that 8 percent                                                               
and 4.5 percent, equaling a total  of 12.5 percent, is not enough                                                               
for a  person to have  invested so that they  can end up  with an                                                               
annuity  that they  can retire  with  dignity.   He said,  "We've                                                               
worked  the numbers;  12.5 percent  doesn't  get you  there.   We                                                               
would  suggest to  you  that ...  the rate  should  be closer  to                                                               
19.25.   We would  suggest that  the ...  employers' contribution                                                               
should  be 14  percent total,  of which  a portion  of that  8.25                                                               
[percent]  would  go to  the  pension,  and that  the  employees'                                                               
contribution  at 11  percent -  as  in another  bill before  this                                                               
committee - ... would  in fact get you to at least  a 19.25."  He                                                               
stated  that the  defined  contribution plans  with  which he  is                                                               
familiar  require  about 20  percent  minimum  in order  for  the                                                               
employee pension to be one that they can retire on.                                                                             
                                                                                                                                
MR.  HARVEY said  SB 141  asks employees  to provide  more, which                                                               
would be wonderful if the  employees were compensated at a higher                                                               
rate; however, as public employees, they are not.                                                                               
                                                                                                                                
CHAIR SEATON  let Mr. Harvey  know that  time was limited  and he                                                               
indicated that he would like to move to committee questions.                                                                    
                                                                                                                                
8:41:44 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  RAMRAS  asked  Mr.  Harvey if  he  could  name  a                                                               
private sector employer offering 19 percent.                                                                                    
                                                                                                                                
8:42:03 PM                                                                                                                    
                                                                                                                                
MR.  HARVEY  answered  that  NEA-Alaska   is  as  private  sector                                                               
employer that offers 20 percent.                                                                                                
                                                                                                                                
8:42:18 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GARDNER  opined that  since Mr.  Harvey represents                                                               
12,500 people, it  is appropriate to allow him more  time than is                                                               
given other testifiers who represent themselves.                                                                                
                                                                                                                                
CHAIR SEATON said he has been attempting to do that.                                                                            
                                                                                                                                
8:42:47 PM                                                                                                                    
                                                                                                                                
MR. HARVEY noted the amount of  time spent on bill discussion and                                                               
amendments and  said he thinks  the 2-plus hours given  to public                                                               
testimony on a 109-page complex bill is insufficient.                                                                           
                                                                                                                                
8:44:27 PM                                                                                                                    
                                                                                                                                
MR. HARVEY said the previously  adopted Amendments 8, 10, and 12-                                                               
14 are appreciated.  He  thanked Chair Seaton and Senator Stedman                                                               
for the hours spent with  NEA-Alaska regarding [SB 141]; however,                                                               
he  stated  that that  time  cannot  serve  as a  substitute  for                                                               
meetings of all  the stakeholders to provide  a complete analysis                                                               
of the legislation and its effects on public servants.                                                                          
                                                                                                                                
MR. HARVEY directed  attention to the second page  of his written                                                               
testimony - the  last paragraph, which read  as follows [original                                                               
punctuation provided, with some formatting changed]:                                                                            
                                                                                                                                
     If a  teacher starts their  career in Sitka  this fall,                                                                    
     they will have  a salary of $35,571  (SEE ATTACHMENT 2A                                                                    
     &  B).   After a  thirty-year  career (That  is 3  more                                                                    
     years than the present  average), the teacher will have                                                                    
     $800,129 in  their account.   That assumes a  return on                                                                    
     investment  of  8.3%,  which is  2.3%  higher  than  an                                                                    
     individual averages  presently and is more  the rate of                                                                    
     return by  ASPIB.   They will also  have ...  [a health                                                                    
     reimbursement  account  (HRA)]   of  $131,772.    Their                                                                    
     access to major medical  insurance will cost $96,602 in                                                                    
     the  first  year  (given  an  8%  annual  inflation  of                                                                    
     medical  costs).   At age  62 the  public servant  will                                                                    
     have no  medical coverage  or be  in debt  by $141,897.                                                                    
     This is not retirement with dignity.                                                                                     
                                                                                                                              
MR. HARVEY added, "That's retirement  eating cat food, and eating                                                               
it outside,  because they lost their  house."  He stated  that SB
141 is  not a good bill;  however, he said he  believes there are                                                               
improvements  that  can be  made  with  cooperation between  NEA-                                                               
Alaska, and  the legislature.   He concluded,  "I believe  we can                                                               
find a  good retirement  system that is  better than  the present                                                               
TRS [Tier] II and  PERS [Tiers] II and III, but  we need a little                                                               
time."                                                                                                                          
                                                                                                                                
8:47:22 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  RAMRAS,  regarding the  issue  of  time given  to                                                               
testimony, recognized Mr. Harvey's  dissatisfaction, but said the                                                               
committee has been addressing the  PERS/TRS issue since February.                                                               
He  complimented  Chair  Seaton  for  his  efforts  to  create  a                                                               
constructive environment  and address  "the broader issue  of how                                                               
we're going to integrate a better solution for PERS and TRS."                                                                   
                                                                                                                                
8:48:09 PM                                                                                                                    
                                                                                                                                
MR. HARVEY agreed  that the committee has spent a  lot of time on                                                               
this issue and he recognized  the excellent job Chair Seaton [and                                                               
his staff] have  done on research towards the  House's version of                                                               
PERS/TRS legislation.   However, he said, "Instead  of taking the                                                               
best of two products, we've  apparently made a decision [at] some                                                               
point to rush to judgment."                                                                                                     
                                                                                                                                
8:48:58 PM                                                                                                                    
                                                                                                                                
RON KING,  testifying on  behalf of  himself, told  the committee                                                               
that  he is  both a  state  employee and  a hiring  manager.   He                                                               
indicated  that  he  could tell  many  stories  illustrating  the                                                               
difficulty in hiring  employees.  He made the  comparison that 15                                                               
years  ago  there were  10-15  highly  qualified job  applicants,                                                               
whereas  today  [hiring  managers  are] lucky  to  get  one,  and                                                               
sometimes it  takes months of  waiting to find a  good candidate.                                                               
He told of  a bright employee being urged by  a private entity to                                                               
take a  job at  twice the  price.  That  employee chose  to serve                                                               
Alaska and return to the state "something that it gave to him."                                                                 
                                                                                                                                
8:50:41 PM                                                                                                                    
                                                                                                                                
MR. KING  said when his  son graduated with honors  from college,                                                               
the Department of Administration's  Division of Personnel offered                                                               
him a  chance to  come back  to Alaska to  work, and  his student                                                               
loans  would  be  forgiven.    His  son  opted  to  continue  his                                                               
education to get his Masters  degree in computer sciences, and he                                                               
received more  as an intern  in college  than the state  paid the                                                               
analyst programmers at that time.   He continued working for [the                                                               
computer  company  for which  he  interned].    He said  his  son                                                               
doesn't have a  defined benefit plan, but basically  has a "stock                                                               
profit-sharing  plan."   Mr. King  noted that  his son's  medical                                                               
benefits  are the  same  as  his own,  but  after  nine years  of                                                               
working, his  son can retire with  a net worth of  4-5 times what                                                               
Mr. King  has in PERS,  SBS, and deferred  compensation combined.                                                               
He revealed that  his son listed two reasons a  person would work                                                               
for government:  One is because  a person believes in what he/she                                                               
does, and thus  is willing to work  for less in order  to try and                                                               
make a  difference.  The other  reason is for the  benefits.  Mr.                                                               
King   said  the   benefit  packages   have  been   significantly                                                               
decreasing.  He  expressed his appreciation for the  tough job of                                                               
the state, borough, and city officials.                                                                                         
                                                                                                                                
8:53:08 PM                                                                                                                    
                                                                                                                                
MR. KING  asked the committee  not to  rush into a  decision that                                                               
may be regretted in the future.   He said the problems may or may                                                               
not  have been  entirely the  responsibility of  the legislature,                                                               
local governments, and  the actuarials, but he  indicated that he                                                               
does not want  the legislature to rush through  decisions of such                                                               
magnitude, even  with the extensive  discussions and  debate that                                                               
has taken  place since  February.   He said,  "Our future  is the                                                               
generations  we leave  behind us,  the services  we want  them to                                                               
enjoy, and the life we want."  He  said he will never see his son                                                               
back in  Alaska, but hopefully  the beauty  of the state  and the                                                               
benefits  provided [in  public  jobs] will  still  attract a  few                                                               
people.  He predicted that  if the benefits diminish further, "we                                                               
probably will not see that kind of migration again."                                                                            
                                                                                                                                
8:55:04 PM                                                                                                                    
                                                                                                                                
CHAIR SEATON said  he has heard from several people  in the human                                                               
resources business  that the current retirement  package does not                                                               
attract people,  and he asked  Mr. King  if he thinks  a portable                                                               
system will attract people if it is at a high enough rate.                                                                      
                                                                                                                                
MR. KING responded that there are  two competing factors:  one is                                                               
the benefit  package.  He  indicated that  when those who  are in                                                               
Tier III  realize what their  benefits are, "they're  not exactly                                                               
enthused."    He  said,  "The legislature,  I  think,  made  some                                                               
changes here that if they stayed  for an extended period of time,                                                               
[et  cetera],  they  might  be  able to  ...  buy  their  medical                                                               
benefits."   He said there  are options  like that he  thinks the                                                               
unions would be open to discuss,  or at least he would be willing                                                               
to look at  some adjustments.  He  said he is not  happy with the                                                               
company presently handling insurance claims.   He stated that one                                                               
of the  biggest problems is  the salaries.   He said,  "You could                                                               
probably do  some things with  the benefit  package if you  had a                                                               
salary  commensurate  to  what my  counterparts  are  in  private                                                               
industry:   50-70 percent  more than what  I'm making  right now.                                                               
He said  he just lost an  engineer at the department  who went to                                                               
work for  a private company  for 1.7 times  his salary.   He said                                                               
the state  will hire people  right out  of college and  cover the                                                               
expense  of training  them, and  he has  seen those  people leave                                                               
after between  3-7 years to  work in  the private sector  at many                                                               
times the salary.                                                                                                               
                                                                                                                                
8:58:11 PM                                                                                                                    
                                                                                                                                
MR. KING revealed that he is a  range 22, is in longevity, and he                                                               
estimated that  he has one  more merit step.   He noted  that the                                                               
last  small increase  that was  given did  not set  his operating                                                               
costs.    When  that  type   of  situation  exists,  people  make                                                               
decisions.   He said  he is  at the  end of  his career  and made                                                               
choices to  turn down offers  outside Alaska.  He  said employees                                                               
are the single most valuable asset.                                                                                             
                                                                                                                                
8:59:20 PM                                                                                                                    
                                                                                                                                
BETH WYTHE  testified on behalf  of herself.  She  explained that                                                               
although she is  on the Homer City Council, that  council has not                                                               
yet given a decision on the issue.   She said the bill, in and of                                                               
itself, is  not a  bad idea; however,  there are  valid concerns.                                                               
One concern is  people outliving the existence  of their benefit.                                                               
She  said she  was glad  to  see the  removal of  the option  for                                                               
employees not to have any  opportunity to direct their investment                                                               
if they are going to have  a defined contribution.  She said most                                                               
employees feel better  if they have the ability "to  say where it                                                               
goes," and having the option of  advice given to the employees as                                                               
to how to invest conservatively  or aggressively is helpful.  Ms.                                                               
Wythe revealed  that she  works in the  field of  human resources                                                               
and helps  employees with  their 401K and  pension benefits  on a                                                               
regular basis,  which is why she  said she has a  concept of what                                                               
employees think when putting money into a fund.                                                                                 
                                                                                                                                
MS. WYTHE said she had been in  Juneau less than 24 hours and had                                                               
already heard  three different  variations regarding  the problem                                                               
with  the  PERS/TRS  issue.    She said  the  only  one  that  is                                                               
consistent is  that the majority  of the problem arises  from the                                                               
escalating health  insurance benefits.   She said she  heard that                                                               
the actuarial evaluation currently being  used is based on a 12.5                                                               
percent increase for  two years, which then would drop  back to a                                                               
5 percent increase.   She said, "Having the luxury  of looking at                                                               
our benefit on  an annual basis, ... [they]  have been escalating                                                               
between 15-25  percent for  ten years.   So, presuming  that it's                                                               
going down  to something  less than  15 percent  any time  soon I                                                               
think would be a short-sighted actuarial evaluation."                                                                           
                                                                                                                                
9:02:22 PM                                                                                                                    
                                                                                                                                
MS.  WYTHE  offered her  understanding  that  a two-year  funding                                                               
amount of  $37.5 million,  to be used  by municipalities  to "get                                                               
through  the initial  phases of  transfer" and  new tier  related                                                               
alterations, has  been removed  from the budget  and tied  to the                                                               
passage  of [SB  141].   She said,  "Whether the  bill passes  or                                                               
doesn't  pass, I  think that  portion of  it really  needs to  be                                                               
looked at  ...."  Ms.  Wythe reported that  the City of  Homer is                                                               
facing  a $250,000  increase  per year,  for  three years,  which                                                               
means paying $750,000 in three  years, in addition to the regular                                                               
increase in the expense of the  PERS program.  She indicated that                                                               
the increased costs would stretch  through approximately 20 years                                                               
before it would "drop back."   Furthermore, Ms. Wythe noted that,                                                               
over  the last  few  years,  the City  of  Homer has  experienced                                                               
"reduced revenue  sharing to  the tune of  about $800,000."   The                                                               
basic costs of  running the city equal "a  staggering barrier ...                                                               
to  get across."    She said,  "We  did have  a  1 percent  sales                                                               
increase this year, which, if  we absolutely change nothing about                                                               
the way  we run our city,  will be exhausted just  paying for the                                                               
increase of  insurance in the  next two  [to] three years."   Ms.                                                               
Wythe said the  City of Homer has one of  the highest sales taxes                                                               
in the state,  at 6.5 percent; therefore, "it's  not like raising                                                               
our sales tax is going to resolve this issue."                                                                                  
                                                                                                                                
MS.  WYTHE  stated  that  she   understands  and  recognizes  the                                                               
concerns regarding recruitment.   She said municipalities are not                                                               
high-paying employers, but they have  always been able to offer a                                                               
good benefit package.   She said she hears employees  of the City                                                               
of Homer  saying that  that benefit package  is getting  worse by                                                               
the  year, "and  they're not  even talking  about the  retirement                                                               
portion, particularly."                                                                                                         
                                                                                                                                
9:04:35 PM                                                                                                                    
                                                                                                                                
MS. WYTHE continued as follows:                                                                                                 
                                                                                                                                
     I  would like  to see,  at  a minimum,  that the  state                                                                    
     would -  as they  walk through this  process -  come up                                                                    
     with  a   mechanism  for  funding  that   8.25  percent                                                                    
     interest that is on that  $5.7 million bill, which, ...                                                                    
     in  and of  itself, is  a staggering  amount of  money.                                                                    
     I've heard comments that they  were considering maybe a                                                                    
     bond issue,  or something,  that would  be able  to ...                                                                    
     pay it  down and bring it  in at a lower  interest rate                                                                    
     that would help people with that.                                                                                          
                                                                                                                                
MS. WYTHE said  SB 141 is not  a bad idea and  the legislature is                                                               
on a  good track;  however, she stated  her belief  that spending                                                               
more  time on  the issue  and  hearing public  comment [would  be                                                               
beneficial].   She  said  it  has been  interesting  to hear  the                                                               
testimony and "the state side of  it."  She said under funding is                                                               
essentially the problem  of management.  She  echoed the question                                                               
of  a previous  testifier by  asking, "Is  there money  out there                                                               
that  could be  somehow  recaptured as  an  errors and  omissions                                                               
funding  opportunity,   and  have   we  really   exhausted  those                                                               
options?"   She stated  that a  better future  evaluation process                                                               
with more  regular reviews  is needed  to avoid  a repeat  of the                                                               
current situation;  however, requiring  current employees  to pay                                                               
for  something that's  already happened  is  not necessarily  the                                                               
right mechanism.                                                                                                                
                                                                                                                                
9:06:05 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GRUENBERG  asked  Ms.  Wythe to  expound  on  her                                                               
comment regarding errors and omissions.                                                                                         
                                                                                                                                
MS. WYTHE explained:                                                                                                            
                                                                                                                                
     In our  business, we buy our  retirement insurance from                                                                    
     a  corporation, and  if they  should  fail to  properly                                                                    
     assess  us, so  that we  fell  back to  this point,  we                                                                    
     would be going back to  them and accessing their errors                                                                    
     and omissions.   They made  an error in  your actuarial                                                                    
     evaluation  somewhere.    Have we  explored  thoroughly                                                                    
     whether  there  is a  fund  out  there that  should  be                                                                    
     helping  recapture  these  funds?     That's  what  I'm                                                                    
     asking.                                                                                                                    
                                                                                                                                
REPRESENTATIVE GRUENBERG said he  has asked related questions and                                                               
is "not totally satisfied with the answer."                                                                                     
                                                                                                                                
9:07:19 PM                                                                                                                    
                                                                                                                                
MS. WYTHE, in  response to a question  from Representative Gatto,                                                               
said  the City  of Homer  currently has  a position  open for  an                                                               
equipment  operator  that it  will  have  trouble filling.    She                                                               
explained that that job in the  private sector pays $40 per hour,                                                               
while the city's position will pay  $20 per hour.  In response to                                                               
a  follow-up question  from Representative  Gatto,  she said  she                                                               
doesn't work  with the city,  thus she  doesn't know if  the city                                                               
ever asks  an applicant  why he/she  turned down  a job  offer in                                                               
order to know if  they can "sweeten the pot."   She said a review                                                               
of salary  rates is done every  five years, but the  city doesn't                                                               
have a means  by which to offer more during  an interview process                                                               
to entice  the applicant  to accept  the offer.   She  also noted                                                               
that  the  hiring  competition  is  not  between  the  state  and                                                               
municipality,  but between  those  two entities  and the  private                                                               
sector.                                                                                                                         
                                                                                                                                
CHAIR SEATON noted  that part of the bill deals  with the subject                                                               
of having more frequent actuarials.                                                                                             
                                                                                                                                
The committee took an at-ease from 9:09:54 PM to 9:23:56 PM.                                                                
                                                                                                                                
MELANIE  MILLHORN responded  to a  request from  Chair Seaton  to                                                               
answer   previously  asked   questions.      She  recalled   that                                                               
Representative  Gardner had  asked a  question about  disability.                                                               
She  said  Representative  Gruenberg   had  observed  to  Senator                                                               
Stedman that  SB 141  does not  include disability  benefits, and                                                               
Senator Stedman confirmed that is  accurate.  She explained that,                                                               
under  SB 141,  employees  would have  disability benefits  under                                                               
workers'   compensation   and,   additionally,   could   purchase                                                               
disability benefits  "to supplement  that particular area."   She                                                               
noted  that Representative  Gardner had  observed that  there are                                                               
disability  benefits  under  AS   39.35.410,  under  the  defined                                                               
benefit plan, which she said is accurate.                                                                                       
                                                                                                                                
9:28:05 PM                                                                                                                    
                                                                                                                                
MS. MILLHORN, in  response to a question from  Chair Seaton, said                                                               
[under  the current  defined benefit  plan] active  employees who                                                               
are injured on the job  have benefits for that particular on-the-                                                               
job  injury,  in addition  to  workers'  [compensation], and  are                                                               
covered  for  non-occupational  disability  benefits  after  they                                                               
vest.                                                                                                                           
                                                                                                                                
9:29:34 PM                                                                                                                    
                                                                                                                                
MS.  MILLHORN,  in response  to  a  question from  Representative                                                               
Gruenberg,  explained that  there  are  two distinctly  different                                                               
disability     benefits     available    for     non-occupational                                                               
circumstances:  "One  would be after you're vested  and you would                                                               
have that  benefit through PERS or  TRS," and the other  would be                                                               
the additional short- and long-term  disability benefits that can                                                               
be  chosen during  the Select  Benefits  open enrollment  period,                                                               
including optional  life insurance.   In  response to  a question                                                               
from  Representative Gruenberg,  she  clarified  that short-  and                                                               
long-term disability addresses income replacement.                                                                              
                                                                                                                                
9:30:24 PM                                                                                                                    
                                                                                                                                
MS.  MILLHORN,  in  response  to  questions  from  Representative                                                               
Gruenberg, stated  that for non-occupational disability  under SB
141, a member  can, through a premium, purchase  short- and long-                                                               
term  disability benefits.   Under  the current  [defined benefit                                                               
system,  the employee  pays  a premium  for  that short-term  and                                                               
long-term disability under Select Benefits Supplemental.                                                                        
                                                                                                                                
REPRESENTATIVE  GRUENBERG   expressed  confusion  over   what  is                                                               
covered versus what is optional in PERS and TRS.                                                                                
                                                                                                                                
9:31:47 PM                                                                                                                    
                                                                                                                                
CHAIR SEATON clarified as follows:                                                                                              
                                                                                                                                
     Under  active  employment   -  ...  under  supplemental                                                                    
     benefits -  you can  purchase long-term  and short-term                                                                    
     disability.   There's  also  disability benefits  under                                                                    
     the  current defined  benefit  plan.   And  so, in  the                                                                    
     future  the employees  will be  able to  purchase long-                                                                    
     term  or short-term  under the  active or  supplemental                                                                    
     benefits, but  the defined  contribution plan  does not                                                                    
     ... incorporate  a disability death benefit  under [SB]                                                                    
     141.                                                                                                                       
                                                                                                                                
MS. MILLHORN responded, "That is absolutely correct."                                                                           
                                                                                                                                
REPRESENTATIVE  GRUENBERG said,  "But  we  weren't talking  about                                                               
death benefits."                                                                                                                
                                                                                                                                
CHAIR SEATON explained that it's the same thing.                                                                                
                                                                                                                                
REPRESENTATIVE  GRUENBERG asked  Ms.  Millhorn  what exactly  the                                                               
employees will lose that they currently have.                                                                                   
                                                                                                                                
MS. MILLHORN said  what would not be there  would be occupational                                                               
and non-occupational  disability.  She  said, "They have  to vest                                                               
in order  to be  eligible for  non-occupational disability."   In                                                               
response  to follow-up  questions from  Representative Gruenberg,                                                               
she said  new members  would be able  to purchase  short-term and                                                               
long-term  disability benefits  by paying  the premium  for those                                                               
benefits.   In  order to  be more  specific about  the change  to                                                               
current  benefits,  Ms. Millhorn  said  she  would need  to  look                                                               
through a  booklet.  She  offered to provide that  information in                                                               
writing to the committee.                                                                                                       
                                                                                                                                
9:34:11 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GARDNER   mentioned  a   press  release   by  the                                                               
administration, dated April 26, 2004.   She said she doesn't have                                                               
a copy of it,  but that the last sentence said  that PERS and TRS                                                               
compare  favorably   to  other  pension  plans   and  are  "well-                                                               
positioned to weather  the current pension storm."   She asked if                                                               
that is still the position of the administration.                                                                               
                                                                                                                                
9:35:19 PM                                                                                                                    
                                                                                                                                
KEVIN BROOKS,  Deputy Commissioner,  Office of  the Commissioner,                                                               
Department  of  Administration,  testifying   on  behalf  of  the                                                               
administration, indicated that that  statement was not inaccurate                                                               
a year ago  but should be put into context  of all the discussion                                                               
and debate that  has occurred since that time.   He mentioned the                                                               
$5.7 billion dollar problem that needs  to be addressed.  He said                                                               
he thinks plans  across the country are facing  the same problems                                                               
that Alaska is  facing.  He stated  his belief that SB  141 is "a                                                               
responsible  approach to  trying  to address  a very  significant                                                               
problem."      In  response   to   a   follow-up  question   from                                                               
Representative Gardner,  he clarified  that he doesn't  think the                                                               
press release  statement is accurate  any longer, given  all that                                                               
has transpired.                                                                                                                 
                                                                                                                                
9:37:31 PM                                                                                                                    
                                                                                                                                
CHAIR  SEATON remarked  that the  full  faith and  credit of  the                                                               
state  is  pledged  behind  its  pension system.    He  said  the                                                               
permanent fund  can weather the storm,  but it's a choice  of how                                                               
much of  the revenue  stream should be  dedicated to  solving the                                                               
problem.                                                                                                                        
                                                                                                                                
9:38:13 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GARDNER  said that's  accurate, but  she explained                                                               
that the  context of the  previously mentioned press  release was                                                               
that  there wasn't  really a  huge  problem, which  she said  she                                                               
doesn't  think is  accurate,  and  she just  wanted  to hear  the                                                               
administration's current official position.                                                                                     
                                                                                                                                
9:38:39 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GARDNER  mentioned a  $1  million  or $2  million                                                               
lifetime cap  on medical expenses  and $4 million if  the retiree                                                               
is married.   She asked if that  is part of the new  plan and, if                                                               
so, what effect having a cap would actually have on the system.                                                                 
                                                                                                                                
9:40:58 PM                                                                                                                    
                                                                                                                                
MS. MILLHORN responded that in  1999 there were some plan changes                                                               
that  were made  to  the retiree  health plan,  and  one of  them                                                               
included  changing  a $1  million  lifetime  cap to  $2  million.                                                               
There were eight or nine changes  that occurred, and out of those                                                               
changes were  increases and corresponding decreases  in benefits.                                                               
She said, "The  design was to ... offset one  another so it would                                                               
be neutral to the system."   Those changes were challenged by the                                                               
Retired  Public Employees  of Alaska  (RPEA) and  NEA-Alaska; the                                                               
State  of Alaska  was  sued  for those  changes.    The case  was                                                               
remanded back to the superior court.   In response to a follow-up                                                               
question  from   Representative  Gardner,  she  noted   that  the                                                               
argument that  went forward  was that the  framers of  the Alaska                                                               
State Constitution  could not possibly have  included health care                                                               
benefits,  because health  care  benefits were  not available  to                                                               
members until 1970.   The court did not agree  with that position                                                               
and remanded  the case back  to the  Alaska Superior Court  to do                                                               
further  analyses of  the approximately  nine  changes that  took                                                               
place  back in  1999,  in  order to  consider  the increases  and                                                               
decreases.                                                                                                                      
                                                                                                                                
9:42:10 PM                                                                                                                    
                                                                                                                                
MS.  MILLHORN,  in response  to  a  question from  Representative                                                               
Gatto, said  the cap is  not often reached; however,  she related                                                               
one case that  was $3.8 million.  In response  to a question from                                                               
Representative  Gardner,  she confirmed  that  she  has made  the                                                               
request  of Aetna  to  send  a report  showing  what the  average                                                               
medical cost is.                                                                                                                
                                                                                                                                
9:42:54 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GARDNER  said the  committee has  repeatedly heard                                                               
that a  huge part of the  problem is medical costs,  and she said                                                               
she  thinks the  legislature  should seriously  consider ways  to                                                               
control medical  costs.   In order  to do that,  she said,  it is                                                               
imperative  to know  what the  average person  spends on  medical                                                               
costs.                                                                                                                          
                                                                                                                                
CHAIR SEATON noted  that the actual figures show  that 38 percent                                                               
of the unfunded liability comes from medical costs.                                                                             
                                                                                                                                
MS. MILLHORN confirmed that is correct.                                                                                         
                                                                                                                                
CHAIR  SEATON noted  that 11  percent of  the unfunded  liability                                                               
came  from  investment;  "the  rest  is  retirement."    He  said                                                               
although  [38]  percent  is a  significant  portion,  people  are                                                               
overlooking that  it's less than half  of the problem.   He said,                                                               
"It's the combination  of two that are really kicking  us ... and                                                               
causing the problem that we're trying to solve."                                                                                
                                                                                                                                
9:44:16 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GARDNER  asked if the actuaries  have been queried                                                               
regarding the possible effect of  a new defined contribution plan                                                               
in terms of loss of input to the system.                                                                                        
                                                                                                                                
MS.  MILLHORN   replied  that  there  was   significant  analysis                                                               
performed  that looked  at  modeling and  introduction  of a  new                                                               
tier.  She said, "It  doesn't provide immediate relief, but after                                                               
a number  of years  it pulls  down the line,  and then  there's a                                                               
period of time when ... it  goes down below the contribution rate                                                               
that would be  in existence had a new introduction  of a new tier                                                               
not taken place."  She  reminded Representative Gardner that "all                                                               
of that  modeling is  available and is  in the  tier presentation                                                               
information."                                                                                                                   
                                                                                                                                
9:45:21 PM                                                                                                                    
                                                                                                                                
CHAIR SEATON  asked Representative  Gardner to remember  that the                                                               
modeling rates are "going to  be across the employer's total wage                                                               
base ...,  so, the past  service cost is  going to be  charged on                                                               
the  entire wage  base."   However,  if a  decision  was made  to                                                               
extend under a  defined benefit program, it would  be possible to                                                               
create  new, unfunded  liabilities under  that program,  as well,                                                               
such as the  adoption of the 2002 mortality table.   Staying with                                                               
a defined benefit  program would "create a new  past service cost                                                               
with that."                                                                                                                     
                                                                                                                                
9:47:04 PM                                                                                                                    
                                                                                                                                
SENATOR STEDMAN, in  response to an invitation  from Chair Seaton                                                               
to offer closing remarks, stated  that it's the obligation of the                                                               
current  generation  to take  care  of  the current  generation's                                                               
liabilities, and  it's not in the  best interest of the  state to                                                               
pass  the $5.7  billion past  service liability  off to  the next                                                               
generation.   He  said,  "So, the  quicker we  get  at the  final                                                               
solution here, the  better off we are."  He  said $5.7 billion is                                                               
19  percent of  the permanent  fund;  "it's $26,000  an hour,  24                                                               
hours a  day, seven  days a  week, for  25 years."   He  said the                                                               
Senate Finance  Committee respectfully  disagrees with  those who                                                               
testified before  it saying that  it isn't  a problem.   She said                                                               
the  problem  needs  to  be   dealt  with  in  a  methodical  and                                                               
thoughtful way.                                                                                                                 
                                                                                                                                
9:50:59 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GARDNER asked if there is a sectional analysis.                                                                  
                                                                                                                                
SENATOR STEDMAN responded  that there is "a  walk-through and ...                                                               
multiple levels  of detail,  depending on what  you want  to read                                                               
between now and  8:00 a.m."  He  said he has data  in his office.                                                               
[Later  he   related  that  a  40-page   sectional  analysis  was                                                               
available  in the  committee packet,  but suggested  his one-page                                                               
summary sheet may be more beneficial.]                                                                                          
                                                                                                                                
REPRESENTATIVE GARDNER noted that the  bill is 109 pages long and                                                               
has  not been  available until  recently.   She  said she  thinks                                                               
having  a  sectional analysis  is  not  only standard,  but  also                                                               
helpful, and  she feels the  lack of  it in trying  to understand                                                               
the bill.                                                                                                                       
                                                                                                                                
SENATOR STEDMAN  responded, "That's what we've  been explaining -                                                               
what  it  really  does."    He  said there  has  been  a  lot  of                                                               
misinformation  and  misinterpretation.   For  example,  he  said                                                               
tonight comments  were made that  the employees would  be funding                                                               
the past service cost, which is not  the case at all.  He said he                                                               
has tried  to very careful  and concise in  what SB 141  does and                                                               
doesn't do.   He added, "But there are other  bills in the system                                                               
that do different things, and it's very easy to confuse them."                                                                  
                                                                                                                                
9:53:31 PM                                                                                                                    
                                                                                                                                
CHAIR SEATON closed public testimony.                                                                                           
                                                                                                                                
REPRESENTATIVE  RAMRAS  [moved  to  adopt]  Conceptual  Amendment                                                               
[15], as follows:                                                                                                               
                                                                                                                                
     On page 7, line 30:                                                                                                        
                                                                                                                                
     Between "annually" and "."                                                                                                 
     Insert "and may not exceed ten percent"                                                                                    
                                                                                                                                
     On page 69, line 13:                                                                                                       
                                                                                                                                
     Between "annually" and "."                                                                                                 
     Insert "and may not exceed ten percent"                                                                                    
                                                                                                                                
REPRESENTATIVE  RAMRAS  noted  that  in  Mr.  Harvey's  [written]                                                               
testimony, he  indicates that  NEA-Alaska recommends  an increase                                                               
in the  employers' contribution rate  to 8.25 percent and  in the                                                               
employees' contribution rate  to 11 percent.  He  said 10 percent                                                               
would be  a full  point below,  but it  is a  tithing rate  and a                                                               
reasonable savings rate.                                                                                                        
                                                                                                                                
9:55:35 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GRUENBERG calculated that the  total may not be 10                                                               
percent.                                                                                                                        
                                                                                                                                
REPRESENTATIVE RAMRAS answered yes.                                                                                             
                                                                                                                                
9:56:35 PM                                                                                                                    
                                                                                                                                
CHAIR SEATON objected to Conceptual Amendment 15.                                                                               
                                                                                                                                
SENATOR STEDMAN said  he thinks that a 10 percent  limit would be                                                               
reasonable if the committee wishes to  make that change.  He said                                                               
a normal service  cost is roughly 20 percent.   He added, "If you                                                               
go  to a  50-50  split between  employees  and employers,  that's                                                               
roughly 10 percent."                                                                                                            
                                                                                                                                
9:58:06 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GATTO  asked if Conceptual Amendment  15 refers to                                                               
20 times  .5 percent increases,  or "when  it hits 10  percent it                                                               
stops."                                                                                                                         
                                                                                                                                
CHAIR  SEATON  said  it's  a  cap [at  10  percent].    He  asked                                                               
Representative  Ramras  if  he   would  accept  an  amendment  to                                                               
Conceptual Amendment 15, to change  the language to be added from                                                               
"and  may not  exceed 10  percent"  to "and  the employees'  rate                                                               
cannot exceed  10 percent".   He reminded  everyone that it  is a                                                               
conceptual amendment, so Legislative  Legal and Research Services                                                               
will draft it.   He also said there may be  other areas that need                                                               
that   language   added,   but    that   his   understanding   of                                                               
Representative  Ramras' goal  is that,  wherever applicable,  the                                                               
language  should read  that the  employee contribution  rate will                                                               
not exceed 10 percent.                                                                                                          
                                                                                                                                
CHAIR  SEATON removed  his objection  to Conceptual  Amendment 15                                                               
[as amended].   He asked  if there  was any further  objection to                                                               
Conceptual  Amendment  15  [as   amended].    There  being  none,                                                               
[Conceptual] Amendment 15 [as amended] was adopted.                                                                             
                                                                                                                                
REPRESENTATIVE  LYNN moved  that the  committee adopt  Conceptual                                                               
Amendment 16.                                                                                                                   
                                                                                                                                
10:01:35 PM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  LYNN  clarified   [Conceptual  Amendment  16]  as                                                               
follows:                                                                                                                        
                                                                                                                                
     On [page 46, lines 29-30  and page 47, lines 6-7] where                                                                    
     this occurs, I would insert:   "These two PERS trustees                                                                    
     shall  be elected  by PERS  membership" and  "These two                                                                    
     [TRS] trustees  shall be elected by  [TRS] membership".                                                                    
     And then  I was going to  add two sentences:   "At each                                                                    
     election,  the candidate  who receives  the most  votes                                                                    
     cast in  the election is  elected to the seat,  and the                                                                    
     governor shall fill a vacancy  in the unexpired elected                                                                    
     term by appointment  of a member of the  system for the                                                                    
     period  remaining before  the next  regularly scheduled                                                                    
     election held under this subsection."                                                                                      
                                                                                                                                
REPRESENTATIVE LYNN, in response  to Chair Seaton, clarified that                                                               
the language would be added to relate to both TRS and PERS.                                                                     
                                                                                                                                
REPRESENTATIVE  GRUENBERG  objected.     He  moved  to  adopt  an                                                               
amendment  to Conceptual  Amendment 16,  to replace  the language                                                               
suggested by Representative  Lynn with "the language  that was in                                                               
an earlier version of this bill."  He continued as follows:                                                                     
                                                                                                                                
     And this is language I passed  out.  It's at the bottom                                                                    
     of  page 46,  starting on  line 29,  and going  through                                                                    
     line  11  on page  47.    This  was the  language  that                                                                    
     [Legislative  Legal and  Research Services]  drafted to                                                                    
     do just what  Representative Lynn wants to do.   ... In                                                                    
     case  it  has to  be  tweaked,  I'll  offer that  as  a                                                                    
     conceptual amendment [to  Conceptual Amendment 16], but                                                                    
     I believe this is the proper drafting.                                                                                     
                                                                                                                                
[The  following  is  the  language  as  Representative  Gruenberg                                                               
referred to  it, with original  punctuation provided from  a two-                                                               
page handout included  in the committee packet -  an excerpt from                                                               
Mr. Harvey's written  testimony - which shows  the added language                                                               
in bold, underlined type, inserted  at the end of subsection (b),                                                               
after paragraph (3):]                                                                                                           
                                                                                                                                
     Two trustees shall be members  of the Public Employees'                                                                
     Retirement  System  elected  by   the  members  of  the                                                                
     system.   Elections  shall be  conducted by  the board.                                                                
     The two members shall have  overlapping terms.  At each                                                                
     election,  the candidate  who receives  the most  votes                                                                
     cast  in the  election is  elected  to the  seat.   The                                                                
     governor shall fill a vacancy  in an unexpired elective                                                                
     term by appointment  of a member of the  system for the                                                                
     period  remaining before  the next  regularly scheduled                                                                
     election held under this subsection.                                                                                   
     Two  trustees   shall  be  members  of   the  Teachers'                                                                
     Retirement  System  elected  by   the  members  of  the                                                                
     system.   Elections  shall be  conducted by  the board.                                                                
     The two members shall have  overlapping terms.  At each                                                                
     election,  the candidate  who receives  the most  votes                                                                
     cast  in the  election is  elected  to the  seat.   The                                                                
     governor shall fill a vacancy  in an unexpired elective                                                                
     term by appointment  of a member of the  system for the                                                                
     period  remaining before  the next  regularly scheduled                                                                
     election held under this subsection.                                                                                   
                                                                                                                                
REPRESENTATIVE  LYNN  responded,  "I  have  no  objection  if  it                                                               
accomplishes the same purpose."                                                                                                 
                                                                                                                                
REPRESENTATIVE GRUENBERG answered, "It does."                                                                                   
                                                                                                                                
[The  committee treated  Representative Gruenberg's  amendment to                                                               
Conceptual Amendment 16 as adopted.]                                                                                            
                                                                                                                                
CHAIR SEATON  objected to [Conceptual  Amendment 16,  as amended]                                                               
for discussion purposes.                                                                                                        
                                                                                                                                
REPRESENTATIVE LYNN  stated that he  thinks it is  important that                                                               
the general  membership of PERS and  TRS be able to  buy into any                                                               
new  system that  might be  put forward.   He  said the  language                                                               
would give  the membership a  direct voice; when people  are part                                                               
of the process, they are more likely to support board decisions.                                                                
                                                                                                                                
10:05:55 PM                                                                                                                   
                                                                                                                                
CHAIR SEATON  maintained his objection.   He explained,  "We have                                                               
set  forward  a  way  in  which the  bargaining  unit  for  these                                                               
employees can nominate members for  selection.  The testimony has                                                               
been that  the PERS  election costs  about $80,000  a year."   He                                                               
said that  with staggered terms,  that means there would  be four                                                               
$80,000  elections to  accomplish the  same thing  that could  be                                                               
accomplished through  a nominee  process by the  bargaining unit.                                                               
Furthermore, he  said the bargaining  units are large  and spread                                                               
across  the  state,  including  many  municipalities  and  school                                                               
districts, and the chance that  people will have knowledge of the                                                               
candidates  is  slim.   He  indicated  that the  bargaining  unit                                                               
system  making nominations  will  ensure that  the employees  are                                                               
well represented.                                                                                                               
                                                                                                                                
REPRESENTATIVE  GRUENBERG offered  his  understanding that  Chair                                                               
Seaton's argument is regarding cost  and lack of knowledge [about                                                               
the  candidates].   Regarding the  cost,  he said  the board  can                                                               
conduct  the vote  by e-mail,  which would  be virtually  without                                                               
cost.    Furthermore, the  nominating  process  would take  place                                                               
without the amendment being discussed,  and that could involve an                                                               
election, which  would also have a  cost.  Regarding the  lack of                                                               
knowledge, he  said the candidate's biography,  telephone number,                                                               
and   e-mail  address   are  provided   and  the   electorate  is                                                               
knowledgeable.  He  indicated that if the  committee members have                                                               
previously chosen to give people  a choice of investments, and if                                                               
people can make  that choice, they certainly ought to  be able to                                                               
elect the members of the board.                                                                                                 
                                                                                                                                
10:09:32 PM                                                                                                                   
                                                                                                                                
CHAIR SEATON said  there are guidelines that  [the board members]                                                               
must meet, which are simple for the bargaining unit to ensure.                                                                  
                                                                                                                                
CHAIR  SEATON,  in response  to  a  question from  Representative                                                               
Gruenberg, stated  that the amendment to  Conceptual Amendment 16                                                               
had been adopted.                                                                                                               
                                                                                                                                
A  roll  call vote  was  taken.   Representatives  Elkins,  Lynn,                                                               
Gardner,  and Gruenberg  voted in  favor of  Conceptual Amendment                                                               
16,  [as amended].   Representatives  Gatto,  Ramras, and  Seaton                                                               
voted  against  it.   Therefore,  Conceptual  Amendment  16,  [as                                                               
amended], passed by a vote of 4-3.                                                                                              
                                                                                                                                
10:12:52 PM                                                                                                                   
                                                                                                                                
REPRESENTATIVE GRUENBERG  [moved to adopt] Amendment  17, labeled                                                               
24-LS0637\L.12, Craver, 4/19/05, which  read as follows [original                                                               
punctuation provided]:                                                                                                          
                                                                                                                                
     Page 7, lines 9 - 30:                                                                                                      
          Delete all material.                                                                                                  
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
     Page 8, lines 9 - 10:                                                                                                      
          Delete "calculated under AS 14.25.052,"                                                                               
                                                                                                                                
     Page 68, line 15, through page 69, line 13:                                                                                
          Delete all material.                                                                                                  
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
     Page 72, lines 5 - 6:                                                                                                      
          Delete "calculated under AS 39.35.162,"                                                                               
                                                                                                                                
     Page 105, line 23:                                                                                                         
          Delete "sec. 59"                                                                                                      
          Insert "sec. 57"                                                                                                      
                                                                                                                                
     Page 108, line 21, following "14.25.047,":                                                                                 
          Insert "14.25.050(a),"                                                                                                
                                                                                                                                
     Page 109, line 19:                                                                                                         
          Delete "SECTIONS 139 AND 140"                                                                                         
          Insert "SECTIONS 135 AND 136"                                                                                         
                                                                                                                                
     Page 109, line 20:                                                                                                         
          Delete "secs. 139 and 140"                                                                                            
          Insert "secs. 135 and 136"                                                                                            
                                                                                                                                
     Page 109, lines 21 - 22:                                                                                                   
          Delete "secs. 139 and 140"                                                                                            
          Insert "secs. 135 and 136"                                                                                            
                                                                                                                                
     Page 109, line 23:                                                                                                         
          Delete "Sections 11, 12, 14, 15, 20, 89 - 94,                                                                         
     107, 114, and 131"                                                                                                         
          Insert "Sections 6, 10, 12, 13, 18, 85 - 90, 103,                                                                     
     110, and 127"                                                                                                              
                                                                                                                                
     Page 109, line 25:                                                                                                         
          Delete "Section 141"                                                                                                  
          Insert "Section 137"                                                                                                  
                                                                                                                                
     Page 109, line 26:                                                                                                         
          Delete "secs. 142 and 143"                                                                                            
          Insert "secs. 138 and 139"                                                                                            
                                                                                                                                
REPRESENTATIVE GRUENBERG  stated that  all existing TRS  and PERS                                                               
members  were hired  with the  reasonable expectation  that their                                                               
contribution rates were fixed at  a contractual rate.  Sections 7                                                               
and 8 currently  provide for "increases to  the contribution rate                                                               
paid by the  existing tiers of TRS members," and  Sections 87 and                                                               
88  provide  for "increases  to  the  contribution rate  paid  by                                                               
existing tiers for PERS members."   The current cap, amended this                                                               
morning, is  11.75 percent for  PERS employees and  13.65 percent                                                               
for TRS  employees.   He added, "The  bill language  is uncapped,                                                               
though it  calls for up  to one half the  normal rate."   He said                                                               
that is  a change from what  is currently 6.75 percent  of salary                                                               
for 30  years for  PERS employees and  something similar  for TRS                                                               
employees.   The proposed amendment  would allow  the legislature                                                               
and committee to  "address the current employees  in a deliberate                                                               
fashion, without  the specter of  a constitutional lawsuit."   He                                                               
reminded  the  committee  that  Article 12,  Section  7,  says  a                                                               
contractual relationship  exists and,  "under the  language here,                                                               
it's probably unconstitutional."                                                                                                
                                                                                                                                
REPRESENTATIVE LYNN  requested that Amendment 17  be tabled until                                                               
the committee meets again the following morning.                                                                                
                                                                                                                                
REPRESENTATIVE GRUENBERG responded that he would accept that.                                                                   
                                                                                                                                
CHAIR SEATON  said there is a  motion to table Amendment  17.  He                                                               
asked if the committee wanted to vote on it.                                                                                    
                                                                                                                                
REPRESENTATIVE GATTO said, "I object."                                                                                          
                                                                                                                                
REPRESENTATIVE GRUENBERG said he  is withdrawing Amendment 17 and                                                               
said, "I'll just serve notice that I will offer it again."                                                                      
                                                                                                                                
[SB 141 was held over.]                                                                                                         
                                                                                                                                
                                                                                                                                
The committee took an at-ease from 10:15:20 PM to 10:16:44 PM                                                               
ADJOURNMENT                                                                                                                   
                                                                                                                                
The meeting was recessed at  10:17:17 PM.  The meeting reconvened                                                             
April 20, 2005.                                                                                                                 

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