Legislature(2011 - 2012)SENATE FINANCE 532

03/30/2012 01:00 PM FINANCE


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ SB 121 TEACHERS & PUB EMPLOYEE RETIREMENT PLANS TELECONFERENCED
Heard & Held
+ SB 100 PERS TERMINATION COSTS TELECONFERENCED
Scheduled But Not Heard
+ Bills Previously Heard/Scheduled TELECONFERENCED
+= HB 284 APPROP: OPERATING BUDGET/LOANS/FUNDS TELECONFERENCED
Moved SCS CSHB 284(FIN) Out of Committee
+= HB 285 APPROP: MENTAL HEALTH BUDGET TELECONFERENCED
Moved SCS CSHB 285(FIN) Out of Committee
                    SENATE FINANCE COMMITTEE                                                                                    
                         March 30, 2012                                                                                         
                           1:17 p.m.                                                                                            
                                                                                                                                
                                                                                                                                
1:17:34 PM                                                                                                                    
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair  Stedman   called  the  Senate   Finance  Committee                                                                    
meeting to order at 1:17 p.m.                                                                                                   
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Senator Bert Stedman, Co-Chair                                                                                                  
Senator Lyman Hoffman, Co-Chair                                                                                                 
Senator Lesil McGuire, Vice-Chair                                                                                               
Senator Johnny Ellis                                                                                                            
Senator Dennis Egan                                                                                                             
Senator Donny Olson                                                                                                             
Senator Joe Thomas                                                                                                              
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
None                                                                                                                            
                                                                                                                                
ALSO PRESENT                                                                                                                  
                                                                                                                                
Jessie  Kiehl,  Staff,  Senator   Dennis  Egan;  William  B.                                                                    
Fornia, Pension  Trustee Advisors; Michael  Barnhill, Deputy                                                                    
Commissioner,  Department of  Administration; Marie  Darlin,                                                                    
American  Association   of  Retired  Persons;   Bill  Ernst,                                                                    
Teacher;  Sean  Genson,  Teacher; Jeff  Jones,  Firefighter;                                                                    
Hillary  Seeland, Teacher;  Tim Grussendorf,  Staff, Senator                                                                    
Lyman   Hoffman;   Karen   Rehfeld,  Director,   Office   of                                                                    
Management and  Budget; Senator  Cathy Giessel;  Senator Joe                                                                    
Paskvan; Senator Linda Menard.                                                                                                  
                                                                                                                                
PRESENT VIA TELECONFERENCE                                                                                                    
                                                                                                                                
Holley Dennison,  Self, Sitka;  Kristen Green,  Self, Sitka;                                                                    
Leila Sheffield,  Self, Bethel;  Dorothy Leake,  Acting City                                                                    
Clerk, City of Anderson,  Anderson; Josephine Edwards, Self,                                                                    
Anchorage;   Ladawn   Druce,  President,   Kenai   Peninsula                                                                    
Education  Association,  Kenai;  Ted  Moninski,  Legislative                                                                    
Director, Retired Public Employees of Alaska, Anchorage.                                                                        
                                                                                                                                
SUMMARY                                                                                                                       
                                                                                                                                
SB 121    TEACHERS & PUB EMPLOYEE RETIREMENT PLANS                                                                              
                                                                                                                                
          SB 121 was HEARD and HELD in committee for                                                                            
          further consideration.                                                                                                
                                                                                                                                
SB 100    PERS TERMINATION COSTS                                                                                                
                                                                                                                                
          SB 100 was SCHEDULED but not HEARD.                                                                                   
                                                                                                                                
CSHB 284(FIN) APPROP: OPERATING BUDGET/LOANS/FUNDS                                                                              
                                                                                                                                
          SCS CS HB 284(FIN) was REPORTED out of committee                                                                      
          with a "do pass" recommendation.                                                                                      
                                                                                                                                
CSHB 285(FIN) APPROP: MENTAL HEALTH BUDGET                                                                                      
                                                                                                                                
          SCS CSHB 285(FIN) was REPORTED out of committee                                                                       
          with a "do pass" recommendation.                                                                                      
                                                                                                                                
SENATE BILL NO. 121                                                                                                           
                                                                                                                                
     "An Act  relating to  the public  employees' retirement                                                                    
     system  and   the  teachers'  retirement   system;  and                                                                    
     providing for an effective date."                                                                                          
                                                                                                                                
1:19:30 PM                                                                                                                    
                                                                                                                                
Senator Egan introduced SB 121 and read from the sponsor                                                                        
statement:                                                                                                                      
                                                                                                                                
     SB 121 lets teachers,  Troopers, firefighters and other                                                                    
     public  employees choose  one of  two state  retirement                                                                    
     systems: an individual  defined contribution retirement                                                                    
     account, or earning a defined benefit pension.                                                                             
                                                                                                                                
     A  defined  benefit pension  takes  time  to earn,  but                                                                    
     rewards  a  record  of  public   service  by  paying  a                                                                    
     guaranteed   monthly   benefit   and,   for   long-term                                                                    
     employees,  health  insurance.  An  individual  defined                                                                    
     contribution account  is portable from one  employer to                                                                    
     another, and flexible in how  it can be used, but makes                                                                    
     no  guarantees.  SB  121  keeps  these  smart  reforms,                                                                    
     making Alaska pensions stronger than ever.                                                                                 
                                                                                                                                
     And  the defined  benefit  pensions  for new  employees                                                                    
     under SB 121 will cost  employers less than the pension                                                                    
     tiers  that  came  before, saving  money  for  schools,                                                                    
     cities, and the State of Alaska.                                                                                           
                                                                                                                                
     Alaska teachers and public  employees don't earn Social                                                                    
     Security  benefits  they earned  in  past  jobs. S  for                                                                    
     most,  a defined  benefit  pension  makes sense.  Other                                                                    
     employees will  choose individual  defined contribution                                                                    
     accounts because they  prefer flexibility, portability,                                                                    
     and  control, or  because their  plans  do not  include                                                                    
     long-term  service   in  the  public  sector.   SB  121                                                                    
     maintains   their  option   to  choose   an  individual                                                                    
     account. The  teachers who educate our  children, their                                                                    
     police and  firefighters who  protect our  families and                                                                    
     the  public employees  who serve  our state  and cities                                                                    
     will  be able  to  choose the  benefit  that best  fits                                                                    
     their service.                                                                                                             
                                                                                                                                
1:22:15 PM                                                                                                                    
                                                                                                                                
JESSIE KIEHL, STAFF, SENATOR  DENNIS EGAN, further explained                                                                    
that  SB  121 created  a  new  defined benefit  tier  within                                                                    
Alaska's  pension systems:  the Public  Employees Retirement                                                                    
System (PERS)  and the Teachers Retirement  System (TRS). He                                                                    
communicated  that  a  new-hire   had  a  choice  between  a                                                                    
guaranteed  benefit   and  the  ability  to   control  their                                                                    
retirement  funds. The  choice provided  the state  tools to                                                                    
recruit  and retain  employees. He  cited that  the economic                                                                    
benefit of  defined benefit pensions in  Alaska totaled $1.4                                                                    
billion  and  supported  approximately 9000  private  sector                                                                    
jobs in 2010. He noted  that federal retirement systems were                                                                    
excluded from the estimate.                                                                                                     
                                                                                                                                
Mr. Kiehl mentioned that the  Senate State Affairs Committee                                                                    
received  significant testimony  from Alaska  municipalities                                                                    
expressing  concern  about  turn-over costs.  The  testimony                                                                    
communicated  difficulty  recruiting  and  retaining  public                                                                    
employees in  Alaska. Those municipalities testified  that a                                                                    
choice, such  as the one  proposed in SB 121,  would provide                                                                    
great benefit in both property and sales tax dollars.                                                                           
                                                                                                                                
Mr. Kiehl  noted the  strengths of  the defined  benefit and                                                                    
the  defined contribution  systems.  He  explained that  the                                                                    
defined benefit  system was attractive to  employees because                                                                    
it  ensured   that  an  established  amount   of  money  was                                                                    
available  to the  retired person  each  month. The  defined                                                                    
contribution system  was attractive because  the participant                                                                    
could  make their  own investment  decisions. He  added that                                                                    
the defined contribution system did not provide guarantees.                                                                     
                                                                                                                                
1:25:56 PM                                                                                                                    
                                                                                                                                
Mr. Kiehl  began a PowerPoint  presentation: "SB  121 Alaska                                                                    
Pension" (Copy on  File). He noted that  the graphs included                                                                    
in the  presentation were prepared  by the  state's actuary,                                                                    
Buck  Consultants.  The  graphs intended  to  represent  two                                                                    
different  situations.  He  pointed  out  that  the  pension                                                                    
portion was included in the two charts.                                                                                         
                                                                                                                                
Mr.  Kiehl  reviewed  slide  5,  "Two  PERS  employees"  and                                                                    
pointed out that  until an employee was  vested, the defined                                                                    
benefit  and  the  defined  contribution  were  similar.  He                                                                    
referred  to  slide  6  titled  "Two  TRS  Employees"  which                                                                    
represented a potential monthly  benefit amount. He stressed                                                                    
that  the choice  was significant  and presented  a decision                                                                    
for  the public  employee. He  noted that  once an  employee                                                                    
settled on a plan, the choice was permanent.                                                                                    
                                                                                                                                
1:27:37 PM                                                                                                                    
                                                                                                                                
Mr. Kiehl  discussed slide  7 titled  "What Stays  the Same?                                                                    
What's different?"                                                                                                              
                                                                                                                                
     What Stays the Same?                                                                                                       
        · The Defined Contribution systems do not change.                                                                       
        · The 2005 safeguards remain in place                                                                                   
        · DB pension benefits                                                                                                   
        · Health plan coverage                                                                                                  
                                                                                                                                
     What's different?                                                                                                          
        · Most employees pay more into the new tier                                                                             
        · It takes longer to earn retiree health insurance                                                                      
             o Medicare eligibility for most                                                                                    
             o Cost sharing                                                                                                     
             o Risk Sharing                                                                                                     
        · DB retirement eligibility similar to DC tiers.                                                                        
        · DC employees get one chance to switch.                                                                                
                                                                                                                                
1:33:11 PM                                                                                                                    
                                                                                                                                
Mr.  Kiehl  explained   the  slide  on  page   8  titled  "A                                                                    
responsible approach."                                                                                                          
                                                                                                                                
   · SB 121's new tier adjusts so it doesn't cost more than                                                                     
     DC tiers                                                                                                                   
  · SB 121 takes longer to earn retiree health insurance                                                                        
        o Eliminates that most expensive years for most                                                                         
          retirees                                                                                                              
        o Shares the cost                                                                                                       
       o Shares the risk until the employee retires                                                                             
   · Conversions to the new tier at employee's option-and                                                                       
     cost.                                                                                                                      
   · All the 2005 safeguards remain:                                                                                            
        o Review by a second actuary                                                                                            
        o Minimum salaries for elected officials                                                                                
        o Experience studies                                                                                                    
        o ARM Board                                                                                                             
        o No paying less than the cost                                                                                          
        o Refunding DB contributions is permanent                                                                               
                                                                                                                                
1:34:38 PM                                                                                                                    
                                                                                                                                
Mr. Kiehl  explained the  slide on page  9 titled  "More for                                                                    
Alaskans' Money."                                                                                                               
                                                                                                                                
   · Professional managers earn more                                                                                            
   · No added costs- we're already running two systems                                                                          
   · $762 million/year in DB benefits are a shock absorber                                                                      
     for the Alaska economy                                                                                                     
   · Employees who prefer portability and control have a                                                                        
     choice                                                                                                                     
   · Cities, school districts, and the state have excellent                                                                     
     recruiting tools                                                                                                           
                                                                                                                                
1:36:13 PM                                                                                                                    
                                                                                                                                
Mr.  Kiehl  discussed the  slide  on  page 10  titled  "Cost                                                                    
Neutral." He  explained that  the slide  provided a  22 year                                                                    
actuarial projection  for the  new tier  as compared  to the                                                                    
defined contribution  system for  the PERS  system and  a 24                                                                    
year projection for  TRS. The data was  attached as analysis                                                                    
to the indeterminate fiscal note  in the member's packet. He                                                                    
highlighted  that the  chart  provided  the cost  difference                                                                    
between  the  new  defined  benefit  tier  and  the  defined                                                                    
contribution system. He pointed out  that the new tier would                                                                    
cost employers  less than  the defined  contribution system.                                                                    
As  healthcare  costs  were  projected  to  rise,  the  cost                                                                    
savings  would decline.  A cost  increase  was prevented  by                                                                    
cost  and   risk  sharing  with  employees.   If  healthcare                                                                    
inflation costs did not trend  down over time, the employees                                                                    
would pay the difference.                                                                                                       
                                                                                                                                
1:37:46 PM                                                                                                                    
                                                                                                                                
Mr.  Kiehl stated  that  he was  happy  to answer  questions                                                                    
about the bill.                                                                                                                 
                                                                                                                                
1:38:28 PM                                                                                                                    
                                                                                                                                
WILLIAM  B. FORNIA,  PENSION TRUSTEE  ADVISORS, presented  a                                                                    
PowerPoint  presentation   titled  "Alaska   Senate  Finance                                                                    
Hearing of SB 121."                                                                                                             
                                                                                                                                
1:39:34 PM                                                                                                                    
                                                                                                                                
Mr. Fornia discussed the slide  on page 2 titled "William B.                                                                    
Fornia Credentials."  He explained that he  was a practicing                                                                    
actuary  specializing in  public pensions.  He was  hired by                                                                    
the  Alaska  Public  Pension  Coalition  to  help  design  a                                                                    
defined benefit option.  He furthered that he  was an author                                                                    
with  much experience  providing  testimony to  legislatures                                                                    
and city councils.                                                                                                              
                                                                                                                                
1:40:43 PM                                                                                                                    
                                                                                                                                
Mr.  Fornia explained  the slide  on page  3 titled  "Sample                                                                    
Work History."                                                                                                                  
                                                                                                                                
   · Corporate actuary for Boeing 1980-1984                                                                                     
   · Alaska related experience                                                                                                  
       o ARMB first ongoing review actuary 2005-2006                                                                            
        o Audited Alaska PERS/TRS actuarial valuations 2009                                                                     
        o Former leader of Buck Consultants' Denver                                                                             
          retirement practice                                                                                                   
   · Consulting services for 22 statewide retirement                                                                            
     systems in Alaska, Colorado, Missouri, North Dakota,                                                                       
     Oklahoma, Puerto Rico, Utah, Texas, Wyoming and                                                                            
     others.                                                                                                                    
        o Served as system actuary for most of these                                                                            
          (including CO, MO, ND, OK, PR, UT, WY, Houston)                                                                       
        o Currently working on pension reform with Ohio                                                                         
          Retirement Study Council                                                                                              
   · Expert testimony and consulting for pension systems,                                                                       
     governments and labor groups                                                                                               
   · Other clients have included the US Department of                                                                           
     State, Cities of Baltimore, Oakland and Philadelphia,                                                                      
     IBM, US WEST and Ford Motor Company.                                                                                       
                                                                                                                                
Mr. Fornia discussed the slide on page 4 titled "Agenda."                                                                       
                                                                                                                                
   · Overview of SB 121                                                                                                         
   · Advantages of Including defined Benefit Plan Option                                                                        
   · Financial Analysis of Defined Benefit Plan Option                                                                          
   · History of SB 121 Fiscal Notes and responses                                                                               
   · Discussion                                                                                                                 
                                                                                                                                
1:40:59 PM                                                                                                                    
                                                                                                                                
Mr. Fornia addressed the slide on page 5 titled "Findings."                                                                     
                                                                                                                                
   · DB plan option is more economical for Alaska                                                                               
        o DB more efficient delivery of retirement benefits                                                                     
        o Helps keep jobs in Alaska                                                                                             
        o Provides the safety new other have from Social                                                                        
          Security                                                                                                              
   · Have structured DB choice alternative at $9,000,000 FY                                                                     
     2015 savings                                                                                                               
        o Health cost risk shifted to employees                                                                                 
        o Higher employee contributions than current DB                                                                         
        o Employee health cost sharing                                                                                          
                                                                                                                                
1:42:20 PM                                                                                                                    
                                                                                                                                
Mr. Fornia explained that portions of his presentation were                                                                     
previously covered by Mr. Kiehl.                                                                                                
                                                                                                                                
1:42:33 PM                                                                                                                    
                                                                                                                                
Mr. Fornia explained the slide on page 9 titled "Other                                                                          
motives for SB 121."                                                                                                            
                                                                                                                                
  · Alaska public servants not covered by Social Security                                                                       
        o Every state other than Alaska and Michigan offers                                                                     
          Defined Benefit Option                                                                                                
             ƒMichigan    public   servants    get   Social                                                                    
               Security, Alaska Public servants don't                                                                           
        o All private US employers pay at least 6.2 percent                                                                     
          to Social Security; Alaska PERS employers pay                                                                         
          5.22 percent                                                                                                          
        o Soon, Alaska will be largest employer in America                                                                      
          with workers not covered by any safety net DB                                                                         
          plan                                                                                                                  
   · Current DC structure facilitates short service workers                                                                     
     leaving Alaska public service for DB plan after a few                                                                      
     years of service                                                                                                           
   · Retirement in Alaska is good for the State economy                                                                         
                                                                                                                                
1:44:02 PM                                                                                                                    
                                                                                                                                
Mr. Fornia discussed  the slide on page  12 titled "Benefits                                                                    
Available  from DCR  Program  are  Substantially Lower  than                                                                    
from  Latest  DB Tier"  and  the  slide  on page  13  titled                                                                    
"Illustration  of Hypothetical  Teacher  Benefits -  $50,000                                                                    
Final  Average   Salary."  He  explained  that   the  slides                                                                    
exemplified the  benefits received by a  teacher earning $50                                                                    
thousand at the end of her  career with 25 years of service.                                                                    
The  slides examined  the benefits  under  Tier II  (defined                                                                    
benefit plan) and Tier III.  He pointed out that the pension                                                                    
decreased  by one-third.  He stated  that a  Social Security                                                                    
benefit  would provide  an  equal amount.  He  added that  a                                                                    
teacher  in  Alaska  was  not  eligible  to  receive  Social                                                                    
Security  benefits. He  stated that  a defined  benefit plan                                                                    
eliminated the  risk of  destitute former  employee citizens                                                                    
becoming a burden on the state.                                                                                                 
                                                                                                                                
1:45:44 PM                                                                                                                    
                                                                                                                                
Mr. Fornia discussed  the slide on page 16  titled "Why DB?-                                                                    
More Economically Efficient."                                                                                                   
                                                                                                                                
   · Longevity Risk Pooling                                                                                                     
        o DB plans better manage longevity risk, or the                                                                         
          chance of running out of money in retirement                                                                          
        o DB plans avoid the "over-saving" dilemma and do                                                                       
          more with less                                                                                                        
   · Maintenance of Portfolio Diversification                                                                                   
        o DB plans are able to take advantage of the                                                                            
          enhanced investment returns that come from a                                                                          
          balanced portfolio throughout an individual's                                                                         
          lifetime                                                                                                              
   · Superior Returns                                                                                                           
        o DB plans, which are professionally managed,                                                                           
          achieve greater investment returns versus those                                                                       
          of individual accounts                                                                                                
                                                                                                                                
1:46:26 PM                                                                                                                    
                                                                                                                                
Mr. Fornia  discussed the slide  on page 18 titled  "Under a                                                                    
DC Plan 24%  of Assets Are Not Used for  Retirement - -1,000                                                                    
Sample Teachers."  He opined  that the  purpose of  a public                                                                    
sector retirement  program was  to help workers  retire over                                                                    
their lifetime. The purpose was  not to build life insurance                                                                    
benefits  for  the  workers.  He  mentioned  that  an  older                                                                    
individual   must   become   more  conservative   in   their                                                                    
investments. The  Alaska Management Retirement  Board (ARMB)                                                                    
had a long time horizon  and could invest more aggressively,                                                                    
while  individuals could  not.  He added  that  ARMB was  an                                                                    
efficient and experienced investor.                                                                                             
                                                                                                                                
1:48:23 PM                                                                                                                    
                                                                                                                                
Mr. Fornia spoke to the slide  on page 22 titled "What about                                                                    
Unfunded Liabilities?"                                                                                                          
                                                                                                                                
   · Unfunded Liability has grown by more than $5 billion                                                                       
     since 2005                                                                                                                 
        o "Unfunded Liability" is attributable to prior                                                                         
          benefits, not future benefits                                                                                         
        o SB 141 DC approach was not designed to solve                                                                          
          unfunded liability                                                                                                    
        o Several safeguards have been introduced to manage                                                                     
          unfunded liability                                                                                                    
   · Addition of DB option not anticipated to increase                                                                          
     unfunded liabilities                                                                                                       
        o To the extent that actuarial assumptions'                                                                             
          conservatism is borne out, would actually                                                                             
          decrease unfunded liabilities                                                                                         
   · DB systems are advance funded, not left to future                                                                          
     generations                                                                                                                
                                                                                                                                
1:49:21 PM                                                                                                                    
                                                                                                                                
Mr.   Fornia  explained   the  slide   on  page   26  titled                                                                    
"Contributions   for  Various   Members."  He   stated  that                                                                    
contributions  increased  for  PERS,  while  they  decreased                                                                    
slightly for TRS.                                                                                                               
                                                                                                                                
1:50:01 PM                                                                                                                    
                                                                                                                                
Mr. Fornia  discussed the slide  on Page 27  titled "Retiree                                                                    
Medical Coverage."                                                                                                              
                                                                                                                                
   · Retirees eligible to receive retiree major medical                                                                         
     coverage with subsidized premiums, under the following                                                                     
     conditions:                                                                                                                
        o Retired  teachers are  eligible with  25 years  of                                                                    
          service or at the age of Medicare eligibility                                                                         
          (65) with at least 10 years of service.                                                                               
        o Retired  peace   officers  and   firefighters  are                                                                    
          eligible with 25 years of service or at the age                                                                       
          of Medicare eligibility with at least 10 years of                                                                     
          service                                                                                                               
        o Other PERS retirees are eligible  with 30 years of                                                                    
          service or at the age of Medicare eligibility                                                                         
          with at least 10 years of service                                                                                     
   · Retiree share of premiums range from 10 percent to 30                                                                      
     percent based on service at retirement                                                                                     
        o This  range may  increase  or  decrease in  future                                                                    
          based on experience                                                                                                   
                                                                                                                                
1:50:28 PM                                                                                                                    
                                                                                                                                
Mr.  Fornia explained  the  slide on  page  28 titled  "Cost                                                                    
Comparison  Estimates -  Teachers." The  slide exhibits  the                                                                    
first  year's cost  savings for  teachers. The  idea was  to                                                                    
make  the bill  cost-neutral because  health care  costs had                                                                    
increased drastically.                                                                                                          
                                                                                                                                
1:51:32 PM                                                                                                                    
                                                                                                                                
Mr. Fornia explained the slide on page 33 titled "Summary                                                                       
of Revisions to SB 121."                                                                                                        
                                                                                                                                
   · Initial SB 121 essentially was return to prior tier                                                                        
        o But with choice                                                                                                       
        o Members could  trade DCR accounts to  get prior DB                                                                    
          service                                                                                                               
        o Future pension costs were neutral                                                                                     
        o But some past pension costs due to transition                                                                         
        o And  health   costs  were   not  neutral   due  to                                                                    
          anticipated rapid increase in health care costs.                                                                      
   · Revisions include                                                                                                          
        o DB  prior service  can be  purchased only,  if DCR                                                                    
          accounts not adequate, service limited                                                                                
        o Increased worker contributions                                                                                        
        o Reduced healthcare benefits                                                                                           
             ƒpremium share rather than full premium paid                                                                      
             ƒonly for full career retirees or post-                                                                           
               Medicare                                                                                                         
             ƒif normal costs increase, sharing would be                                                                       
               reduced                                                                                                          
                                                                                                                                
1:51:59 PM                                                                                                                    
                                                                                                                                
MICHAEL   BARNHILL,  DEPUTY   COMMISSIONER,  DEPARTMENT   OF                                                                    
ADMINISTRATION, began  a PowerPoint presentation  titled "SB                                                                    
121: Making  Promises and Keeping Promises"  (copy on file).                                                                    
He expressed  respect for the  good-faith intentions  of the                                                                    
bill sponsors.  The legislation's  intention was  to provide                                                                    
fair   retirement   security   for   public   workers.   The                                                                    
administration expressed similar  intentions. The difference                                                                    
between the  administration and the  sponsor was  the method                                                                    
of providing a fair retirement security for public workers.                                                                     
                                                                                                                                
Mr. Barnhill  discussed the slide  on page 2  titled "Making                                                                    
DB Promises."                                                                                                                   
                                                                                                                                
   · Defined Benefit Plan Promises                                                                                              
       o Pension up to 67 percent of average salary                                                                             
        o Annual cost of living increases                                                                                       
        o System-paid medical premiums                                                                                          
   · Membership: 95,667                                                                                                         
                                                                                                                                
1:53:17 PM                                                                                                                    
                                                                                                                                
Mr. Barnhill explained  the slide on page  3 titled "Current                                                                    
DB Promises Must be Kept."                                                                                                      
                                                                                                                                
   · "Accrued benefits of these (retirement) systems shall                                                                      
     not be diminished or impaired." Alaska Constitution,                                                                       
     Article XII, Section 7                                                                                                     
   · Benefit payments-                                                                                                          
        o at least $1 billion per year from now until 2063                                                                      
        o $3 billion per year from 2027-2046                                                                                    
                                                                                                                                
1:53:41 PM                                                                                                                    
                                                                                                                                
Mr. Barnhill discussed  the slide on page 4  titled "Cost of                                                                    
keeping  existing  PERS  and  TRS."  The  graph  showed  the                                                                    
benefits paid between 2012 and  2080. The benefits cost more                                                                    
than $1  billion per  year in 2012.  He explained  that when                                                                    
the baby boomer  generation retired, the state  would pay in                                                                    
excess of  $3 billion per year,  over the next 20  years. As                                                                    
the  existing members  of the  defined benefit  systems pass                                                                    
away, he  stated that  the amount that  the system  will pay                                                                    
will decrease.                                                                                                                  
                                                                                                                                
Mr.  Barnhill elaborated  that $140  billion  was the  total                                                                    
anticipated cost  of the defined benefit  system. He pointed                                                                    
out  that the  state  had  $15.5 billion  in  the bank.  The                                                                    
actuary suggested  an unfunded  liability of $11  billion in                                                                    
Alaska.  He  noted that  the  slide  demonstrated a  defined                                                                    
benefit   system  that   was  lengthy   and  expensive.   He                                                                    
acknowledged  that the  system had  resources like  employee                                                                    
and employer  contributions until 2032. The  system also had                                                                    
investment  returns  and  the legislature  was  generous  in                                                                    
providing revenue from the general fund.                                                                                        
                                                                                                                                
1:56:04 PM                                                                                                                    
                                                                                                                                
Mr. Barnhill explained the slide  on page 5 titled "How Long                                                                    
Will Keep DB Promises?" He  pointed out that the state would                                                                    
continue to keep defined benefit  promises through 2080, and                                                                    
possibly  longer.  He pointed  out  that  the US  government                                                                    
continued  to pay  pensions  to two  children  of Civil  War                                                                    
veterans from their fathers' service.                                                                                           
                                                                                                                                
1:56:33 PM                                                                                                                    
                                                                                                                                
Mr. Barnhill discussed  the slide on page  6 titled "Lessons                                                                    
Learned: DB Pensions Need Revenue Backstops"                                                                                    
                                                                                                                                
   · Alaska's experience from the 2000s                                                                                         
   · Unfunded liabilities arise for a variety of reasons,                                                                       
     negligent and non-negligent                                                                                                
        o Rising medical costs                                                                                                  
        o Longer life spans                                                                                                     
        o Actuarial negligence                                                                                                  
        o Investment loss                                                                                                       
   · When unfunded liabilities have developed in Alaska, by                                                                     
     and large the GF has provided the solution.                                                                                
                                                                                                                                
1:57:47 PM                                                                                                                    
                                                                                                                                
Mr. Barnhill spoke  to the slide on page  7 titled "Breaking                                                                    
Promises."                                                                                                                      
                                                                                                                                
   · Retirement promises have been broken elsewhere                                                                             
   · Private employer retirement plan defaults prompted                                                                         
     federal passage of ERISA in 1974                                                                                           
   · Current threat of public pension defaults across the                                                                       
     country (Jefferson County, AL; Vallejo, CA; Central                                                                        
     Falls, RI; Harrisburg, PA)                                                                                                 
                                                                                                                                
1:58:41 PM                                                                                                                    
                                                                                                                                
Mr. Barnhill addressed  the slide on page  8 titled "Reduced                                                                    
Post-Retirement Benefit  Increases Enacted in 2010  and 2011                                                                    
(NCSL)."  He  exthat  18   states  have  cut  cost-of-living                                                                    
adjustment benefits.  He stated that  six of the  states cut                                                                    
the  benefits  for active  retirees.  He  stressed that  the                                                                    
administration  did  not  want   to  place  Alaska  in  that                                                                    
position.                                                                                                                       
                                                                                                                                
1:59:06 PM                                                                                                                    
                                                                                                                                
Mr. Barnhill discussed  the slide on page  9 titled "Pension                                                                    
Headlines."  He  explained  that other  states  had  limited                                                                    
resources  to   allocate  fairly  between   priorities  like                                                                    
education, public safety, roads.  Benefits were cut in Rhode                                                                    
Island, New York and New Jersey.                                                                                                
                                                                                                                                
1:59:48 PM                                                                                                                    
                                                                                                                                
Mr. Barnhill explained the slide  on page 10 titled "SB 121:                                                                    
Making New DB Promises."                                                                                                        
                                                                                                                                
   · SB 121 makes new DB retirement promises to the next                                                                        
     generation of state employees                                                                                              
   · The State will need to keep those promises until at                                                                        
     least 2080-2090                                                                                                            
   · $3 billion in current annual DB payment obligations                                                                        
     will extend beyond 2047                                                                                                    
   · Where is the GF income in the future to backstop these                                                                     
     new DB retirement promises in 2070, 2080, 2090…?                                                                           
                                                                                                                                
2:00:08 PM                                                                                                                    
                                                                                                                                
Mr. Barnhill  referred back  to the slide  on page  4 titled                                                                    
"Cost  of keeping  existing PERS  and TRS."  He queried  the                                                                    
source of revenue if new unfunded liabilities developed.                                                                        
                                                                                                                                
2:00:57 PM                                                                                                                    
                                                                                                                                
Mr. Barnhill discussed  the slide on page 11  titled what is                                                                    
the  Long-Term Future  of GF  Revenues?" He  highlighted the                                                                    
fact of  declining oil production  since 1989. He  hoped for                                                                    
an Alaska gas pipeline to extend the state's revenue.                                                                           
                                                                                                                                
2:01:39 PM                                                                                                                    
                                                                                                                                
Mr.  Barnhill   pointed  out  that   the  fiscal   note  was                                                                    
indeterminate. The actuary projected  that SB 121 would save                                                                    
money.                                                                                                                          
                                                                                                                                
Mr. Barnhill  looked at the  slide on  page 12 "Will  SB 121                                                                    
Save Money?"                                                                                                                    
                                                                                                                                
   · SB 121 will cost employers the same or less than the                                                                       
     current DCR plan if all of the ARMB adopted actuarial                                                                      
     assumptions remain true indefinitely                                                                                       
        o Inflation                                                                                                             
        o Mortality                                                                                                             
        o Retirement date                                                                                                       
        o Investment return                                                                                                     
                                                                                                                                
2:02:44 PM                                                                                                                    
                                                                                                                                
Mr.  Barnhill   discussed  the  slide  on   page  13  titled                                                                    
"PERS/TRS Annualized  Returns." He stated that  the PERS and                                                                    
TRS  investment returns  were volatile.  He  noted that  the                                                                    
ARMB board's actuarial assumption  for investment return was                                                                    
8  percent. The  bill was  balanced on  an 8  percent return                                                                    
assumption.                                                                                                                     
                                                                                                                                
2:03:10 PM                                                                                                                    
                                                                                                                                
Mr. Barnhill looked at the slide  on page 14 titled "What is                                                                    
the appropriate rate of return?"  If returns come in at less                                                                    
than 8  percent, an  unfunded liability  would exist  at the                                                                    
outset.  He  noted  the  national  debate  regarding  the  8                                                                    
percent return assumption, which  resulted in public pension                                                                    
plans reducing  their rate of  return. He  mentioned various                                                                    
states'  decisions  to  reduce  their rates  of  return.  He                                                                    
opined that the state  would face further unfunded liability                                                                    
with a rate of return that was less than 8 percent.                                                                             
                                                                                                                                
2:04:58 PM                                                                                                                    
                                                                                                                                
Mr. Barnhill discussed  the slide on page  15 titled "Impact                                                                    
of   Defined   Contribution   Retirement   (DCR)   Plan   on                                                                    
Retention." He stated that the  DCR plan had a positive rate                                                                    
of  retention. Fewer  people were  leaving state  service in                                                                    
2012 than in 2005.                                                                                                              
                                                                                                                                
2:05:37 PM                                                                                                                    
                                                                                                                                
Mr. Barnhill  reviewed slide 16 titled  "Retirement security                                                                    
is important."  He stated  that the  administration believed                                                                    
in    the   importance    of   retirement    security.   The                                                                    
administration  also  believed  that  the  existing  defined                                                                    
contribution  plan  allowed   retirement  with  dignity.  He                                                                    
opined that  Alaska's defined contribution  plan was  one of                                                                    
the most generous in the country.                                                                                               
                                                                                                                                
2:07:06 PM                                                                                                                    
                                                                                                                                
Mr.  Barnhill   discussed  the  slide  on   page  17  titled                                                                    
"Administration Position re SB 121."                                                                                            
                                                                                                                                
   · Keep the retirement promises we have made to date                                                                          
   · Don't make the problem worse                                                                                               
   · Don't make new DB retirement promises that we are not                                                                      
     sure we can keep                                                                                                           
   · A revenue backstop is necessary to ensure new promises                                                                     
     are kept; until Alaska's long term fiscal situation is                                                                     
     solved this discussion is premature                                                                                        
                                                                                                                                
2:07:57 PM                                                                                                                    
                                                                                                                                
Mr. Barnhill looked  at the slide on page 18  titled "SB 121                                                                    
Actuarial Fiscal Note Timeline."                                                                                                
                                                                                                                                
        · AS 24.08.036:                                                                                                         
          Before a bill which would have an effect on the                                                                       
          retirement systems of the state is reported to                                                                        
          the rules committee, there shall be attached to                                                                       
          the bill an analysis of the long-term and short-                                                                      
          term costs to the state if the bill is adopted,                                                                       
         as well as the impact of the bill on the                                                                               
          actuarial soundness of the fund. The analysis is                                                                      
          in addition to the fiscal note requirements of AS                                                                     
          24.08.035.                                                                                                            
                                                                                                                                
        · 04/07/2011: SB 121 introduced (version I)                                                                             
                                                                                                                                
        · 04/14/2011: Hearing Senate State Affairs                                                                              
                                                                                                                                
        · 04/17/2011: Regular session adjourns                                                                                  
                                                                                                                                
        · 08/04/2011: Governor's legislative office                                                                             
          transmits actuarial fiscal note (version I) to                                                                        
          sponsor and Senate State Affairs                                                                                      
                                                                                                                                
        · 09/07/2011: Kiehl asks DRB whether actuary (Buck)                                                                     
          correctly understands bill                                                                                            
                                                                                                                                
        · 09/15/2011: Hearing Senate State Affairs; DOA                                                                         
          acknowledges actuarial fiscal note in error                                                                           
                                                                                                                                
       · 10/07/2011: DOA transmits revised actuarial                                                                            
          fiscal note (version I) to sponsor and Senate                                                                         
          State Affairs                                                                                                         
                                                                                                                                
        · 10/13/2011: Hearing in Senate State Affairs;                                                                          
          revised actuarial fiscal note discussed; actuary                                                                      
          explains why the actuarial note is positive; DOA                                                                      
          agrees to make actuary available to achieve                                                                           
          neutral actuarial note                                                                                                
                                                                                                                                
        · 01/26/2012: Hearing in Senate State Affairs;                                                                          
          version R. introduced                                                                                                 
                                                                                                                                
        · 02/07/2012: DOA provides Buck 30 year actuarial                                                                       
          analysis on version R to sponsor and Senate State                                                                     
          Affairs; analysis shows that note will remain                                                                         
          positive; DOA offers to refrain from filing a                                                                         
          second positive fiscal note pending amendment to                                                                      
          version R.                                                                                                            
                                                                                                                                
       · 02/9/2012: Hearing in Senate State Affairs;                                                                            
          amendment R.2 introduced                                                                                              
                                                                                                                                
        · 02/16/2012: Hearing in Senate State Affairs;                                                                          
         version R, amended, moved from committee                                                                               
                                                                                                                                
        · 03/09/2012: Governor's legislative office                                                                             
          transmits indeterminate actuarial fiscal note                                                                         
          (version R, amended) to sponsor and Senate                                                                            
          Finance                                                                                                               
18                                                                                                                            
2:08:14 PM                                                                                                                    
                                                                                                                                
Co-Chair Stedman  wondered about available risk  analysis on                                                                    
the proposed 8 percent target.                                                                                                  
                                                                                                                                
Mr.  Barnhill responded  that the  department had  not asked                                                                    
the actuary  to run  analysis using different  return rates,                                                                    
although  he  agreed  to  provide  the  information  to  the                                                                    
committee upon  request. He noted  the priority  of refining                                                                    
the fiscal  note attached  to the  legislation prior  to the                                                                    
hearing.                                                                                                                        
                                                                                                                                
2:08:54 PM                                                                                                                    
                                                                                                                                
Senator Thomas recalled  earlier conversations regarding the                                                                    
actuarial  assumption   of  8  percent.  He   recalled  that                                                                    
decreasing  the  actuarial  assumption  would  increase  the                                                                    
unfunded liability.                                                                                                             
                                                                                                                                
Mr. Barnhill  replied that more  money would be  required to                                                                    
pay the  benefits if the actuarial  assumption was decreased                                                                    
to 7 percent. He stated that  the structure of the bill kept                                                                    
employer costs lower than  the defined contribution employer                                                                    
costs.                                                                                                                          
                                                                                                                                
2:09:44 PM                                                                                                                    
                                                                                                                                
Senator Thomas  proposed the idea  of an  average, long-term                                                                    
actuarial assumption.                                                                                                           
                                                                                                                                
Mr.  Barnhill  spoke of  the  ongoing  debate regarding  the                                                                    
precise   actuarial  assumption.   He  offered   to  provide                                                                    
testimony from the actuaries and  economists involved in the                                                                    
debate, if desired  by the committee. He  furthered that the                                                                    
bill  initiated  a  new defined  benefit  tier  without  any                                                                    
unfunded  liability for  the  future  generations of  public                                                                    
employees. He  argued that the  legislature should  make the                                                                    
decision regarding the initial assumptions.                                                                                     
                                                                                                                                
2:11:39 PM                                                                                                                    
                                                                                                                                
Co-Chair   Stedman  highlighted   the  three   fiscal  notes                                                                    
attached to  SB 121 including one  indeterminate fiscal note                                                                    
from Department  of Administration, another for  $769,700 in                                                                    
general funds  for FY 13  from DOA  and the third  note from                                                                    
the Department of Revenue (DOR)  for management fees costing                                                                    
$593  thousand annually  beginning  in FY  14  for the  ARMB                                                                    
additional management fees.                                                                                                     
                                                                                                                                
2:13:07 PM                                                                                                                    
                                                                                                                                
MARIE  DARLIN,  AMERICAN  ASSOCIATION  OF  RETIRED  PERSONS,                                                                    
testified  in  support  of  SB   121.  She  understood  that                                                                    
considerable  discussion  was  warranted, but  the  American                                                                    
Association  of  Retired  Persons  (AARP) was  in  favor  of                                                                    
providing retirement options for public employees.                                                                              
                                                                                                                                
2:13:40 PM                                                                                                                    
                                                                                                                                
BILL  ERNST,  TEACHER,  expressed  support  of  SB  121  and                                                                    
relayed a personal story of  his family's journey to Alaska.                                                                    
He pointed out  that Alaska attracted his  family because it                                                                    
was  a land  of opportunity  and adventure.  He shared  that                                                                    
both of  his daughters were  raised and educated  in Alaska,                                                                    
but that  they had chosen not  to work in the  state because                                                                    
of  the lack  of  a defined  benefit  retirement system.  He                                                                    
reported additional acquaintances  whose grown children left                                                                    
the state  for economic opportunities outside  of Alaska. He                                                                    
wished  to  see his  state  value  its public  employees  by                                                                    
encouraging them to  remain in Alaska. He  believed that the                                                                    
changes  proposed in  SB 121  would make  Alaska competitive                                                                    
and encourage retention in the workplace.                                                                                       
                                                                                                                                
2:16:53 PM                                                                                                                    
                                                                                                                                
SEAN GENSON,  TEACHER, testified  in support  if SB  121 and                                                                    
relayed  that  he  was uncertain  about  his  retirement  in                                                                    
Alaska. He shared  that he did not  feel comfortable relying                                                                    
on the state's  retirement plan. He pointed  out that Alaska                                                                    
should be  a leader in  attracting and maintaining  a viable                                                                    
workforce.  He  observed  that  the  bill  provided  a  good                                                                    
economic option for the state.                                                                                                  
                                                                                                                                
2:19:18 PM                                                                                                                    
                                                                                                                                
JEFF  JONES, FIREFIGHTER,  spoke in  support of  SB 121  and                                                                    
stated  that  he   was  a  firefighter  with   the  city  of                                                                    
Ketchikan. He  noted that his defined  contribution plan had                                                                    
$40  thousand. He  admitted that  he  was not  an expert  in                                                                    
money  management and  expertise was  necessary to  make the                                                                    
best decisions  with his investment.  He had  coworkers with                                                                    
defined  benefit  plans   controlled  by  world-class  money                                                                    
managers.                                                                                                                       
                                                                                                                                
2:22:06 PM                                                                                                                    
                                                                                                                                
HILLARY SEELAND,  TEACHER, spoke in  support of SB  121. She                                                                    
reported to the committee that  she taught at a small school                                                                    
in  Sitka.  She  expressed   trepidation  about  her  future                                                                    
retirement  in Alaska.  She  pointed out  the  high cost  of                                                                    
living in  Sitka, and without  a secure retirement  plan her                                                                    
future felt uncertain. She wished  to see Alaska as a leader                                                                    
in education. She supported the  option of a defined benefit                                                                    
retirement plan for Alaska's public employees.                                                                                  
                                                                                                                                
2:25:20 PM                                                                                                                    
                                                                                                                                
HOLLEY   DENNISON,   SELF,   SITKA   (via   teleconference),                                                                    
testified in support of SB 121  and stated that she spoke in                                                                    
representation of  five other employees with  the Department                                                                    
of Fish  and Game (DFG).  She stated  that she was  born and                                                                    
raised in Sitka  and had worked for DFG for  four years. She                                                                    
enjoyed her job  and loved living in Sitka.  She expressed a                                                                    
lack  of  confidence in  her  current  retirement plan.  She                                                                    
stated  that the  Tier IV  defined  contribution plan  might                                                                    
prove sufficient for short-term employees.                                                                                      
                                                                                                                                
2:27:47 PM                                                                                                                    
                                                                                                                                
KRISTEN GREEN,  SELF, SITKA  (via teleconference),  spoke in                                                                    
support  of SB  121 and  relayed concerns  about her  future                                                                    
with the state's defined contribution  plan. She expressed a                                                                    
lack of  security that might  affect her decision  to remain                                                                    
in  the  state throughout  the  course  of her  career.  She                                                                    
advocated  for  a  Tier V  system  for  employees  currently                                                                    
enrolled in a defined contribution plan.                                                                                        
                                                                                                                                
2:30:13 PM                                                                                                                    
                                                                                                                                
LEILA   SHEFFIELD,   SELF,   BETHEL   (via   teleconference)                                                                    
testified in support  of SB 121. She believed  that a public                                                                    
servant provided  an honorable  profession. She  pointed out                                                                    
that  state  employees lose  the  majority  of their  Social                                                                    
Security benefits.                                                                                                              
                                                                                                                                
2:33:46 PM                                                                                                                    
                                                                                                                                
JOSEPHINE  EDWARDS,  SELF, ANCHORAGE  (via  teleconference),                                                                    
expressed her support  of SB 121 and shared that  she was an                                                                    
Alaskan high  school and college graduate.  She was employed                                                                    
as  a  program manager  for  the  Anchorage School  District                                                                    
within the  Title VII Indian  Education Program.  She stated                                                                    
that  she was  a  Tier IV  employee.  She expressed  concern                                                                    
about her future.                                                                                                               
                                                                                                                                
2:35:22 PM                                                                                                                    
                                                                                                                                
LADAWN   DRUCE,   PRESIDENT,   KENAI   PENINSULA   EDUCATION                                                                    
ASSOCIATION,  KENAI   (via  teleconference),   testified  in                                                                    
support of  SB 121  and related that  she had  transmitted a                                                                    
letter  to  the committee  regarding  the  resignation of  a                                                                    
teaching  couple   in  her   district.  She   expressed  the                                                                    
difficulty filling  the position in the  village school. She                                                                    
stated  that the  couple  did enjoy  their  post, but  would                                                                    
leave the state  because of the lack of  a secure retirement                                                                    
plan.                                                                                                                           
                                                                                                                                
2:36:37 PM                                                                                                                    
                                                                                                                                
TED   MONINSKI,   LEGISLATIVE   DIRECTOR,   RETIRED   PUBLIC                                                                    
EMPLOYEES OF  ALASKA, ANCHORAGE (via  teleconference), spoke                                                                    
in  support  of  SB  121 and  shared  that  the  legislation                                                                    
provided  good public  policy. He  explained that  a defined                                                                    
benefits option  would enhance the  public workforce  and he                                                                    
advocated  for  the  reinstatement of  the  defined  benefit                                                                    
retirement program.                                                                                                             
                                                                                                                                
SB  121  was  HEARD  and   HELD  in  committee  for  further                                                                    
consideration.                                                                                                                  
                                                                                                                                
2:39:47 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
CS FOR HOUSE BILL NO. 284(FIN)                                                                                                
                                                                                                                                
     "An  Act making  appropriations for  the operating  and                                                                    
     loan  program  expenses  of state  government  and  for                                                                    
     certain   programs,    capitalizing   funds,   amending                                                                    
     appropriations,   and   making  reappropriations;   and                                                                    
     providing for an effective date."                                                                                          
                                                                                                                                
CS FOR HOUSE BILL NO. 285(FIN)                                                                                                
                                                                                                                                
     "An  Act making  appropriations for  the operating  and                                                                    
     capital    expenses   of    the   state's    integrated                                                                    
     comprehensive mental health  program; and providing for                                                                    
     an effective date."                                                                                                        
                                                                                                                                
2:42:10 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
2:42:25 PM                                                                                                                    
                                                                                                                                
Co-Chair Stedman moved to ADOPT Amendment number 1.                                                                             
                                                                                                                                
Co-Chair Hoffman OBJECTED for purpose of discussion.                                                                            
                                                                                                                                
2:42:49 PM                                                                                                                    
                                                                                                                                
AT EASE                                                                                                                         
                                                                                                                                
2:43:26 PM                                                                                                                    
                                                                                                                                
RECONVENED                                                                                                                      
                                                                                                                                
2:43:30 PM                                                                                                                    
                                                                                                                                
Co-Chair Hoffman clarified that the working document before                                                                     
the committee SCS CSHB 284(FIN), version O.                                                                                     
                                                                                                                                
2:43:38 PM                                                                                                                    
                                                                                                                                
Co-Chair Stedman MOVED to ADOPT Amendment number 1 for                                                                          
version O.                                                                                                                      
                                                                                                                                
Co-Chair Hoffman OBJECTED for the purpose of discussion.                                                                        
                                                                                                                                
2:43:47 PM                                                                                                                    
                                                                                                                                
TIM GRUSSENDORF, STAFF, SENATOR LYMAN HOFFMAN, discussed                                                                        
the new amendment:                                                                                                              
                                                                                                                                
          AMENDMENT #1                                                                                                          
                                                                                                                                
     FY13 OPERATING BUDGET AMENDMENT                                                                                            
                                                                                                                                
     OFFERED IN:  The Senate Finance Committee                                                                                  
     TO: HB 284/HB 285                                                                                                          
     OFFERED BY: Senator Hoffman                                                                                                
                                                                                                                                
     Part A                                                                                                                     
                                                                                                                                
    Add the following subsection to the FUND TRANSFERS                                                                          
     section after (d):                                                                                                         
     The sum of $50,000,000 is appropriated from the                                                                            
     general fund to the Alaska marine highway vessel                                                                           
     replacement fund (AS 37.05.550).                                                                                           
                                                                                                                                
     Effective Date 6/30/12 (FY12)                                                                                              
                                                                                                                                
     Part B                                                                                                                     
                                                                                                                                
     Add the following subsections to BUDGET RESERVE FUND                                                                       
     section.                                                                                                                   
                                                                                                                                
     (a) The sum of $1,750,000,000 is appropriated from the                                                                     
     general fund to the statutory budget reserve fund (AS                                                                      
     37.05.540).                                                                                                                
                                                                                                                                
     Effective Date 6/30/12 (FY12)                                                                                              
                                                                                                                                
     (b) The sum of $250,000,000 is appropriated from the                                                                       
     general fund to the statutory budget reserve fund (AS                                                                      
     3 7.05.540).                                                                                                               
                                                                                                                                
     Effective Date 7/1/12 (FY13)                                                                                               
                                                                                                                                
     Part C                                                                                                                     
                                                                                                                                
     Add subsections to section 26. RETIREMENT SYSTEM                                                                           
     FUNDING.                                                                                                                   
                                                                                                                                
     (d) The sum of $500,000,000 is appropriated from the                                                                       
     general fund to the Department of Administration for                                                                       
    deposit in the defined benefit plan account in the                                                                          
     public employees' retirement trust fund for payment of                                                                     
     public employees' retirement system unfunded                                                                               
     liability.                                                                                                                 
                                                                                                                                
     (e) The sum of $500,000,000 is appropriated from the                                                                       
     general fund to the Department of Administration for                                                                       
    deposit in the defined benefit plan account in the                                                                          
     teachers' retirement trust fund for payment of                                                                             
     teachers' retirement system unfunded liability.                                                                            
                                                                                                                                
    (f) The sum of $50,000,000 is appropriated from the                                                                         
     general fund to the judicial retirement trust fund (AS                                                                     
     22.25.048) for payment of the judicial retirement                                                                          
     system unfunded liability.                                                                                                 
                                                                                                                                
     Effective Date for Part C is 6/30/12 (FY12)                                                                                
                                                                                                                                
     PART B                                                                                                                     
                                                                                                                                
     DEPARTMENT: Commerce, Community and Economic                                                                               
     Development                                                                                                                
                                                                                                                                
     APPROPRIATION: Community and Regional Affairs                                                                              
                                                                                                                                
     ALLOCATION: Community and Regional Affairs                                                                                 
                                                                                                                                
     ADD: $200,000 General Fund Match, 1003                                                                                     
                                                                                                                                
     EXPLANATION: This amendment adds funding to the                                                                            
     Division of Community and Regional Affairs for a Named                                                                     
    Recipient Grant to Kawerak, Inc. The grant will be                                                                          
     used to cover administration and 50% match to the                                                                          
     federal Essential Air Service program for the city of                                                                      
     Diomede.                                                                                                                   
                                                                                                                                
     PART E                                                                                                                     
                                                                                                                                
     DEPARTMENT: Commerce, Community and Economic                                                                               
     Development                                                                                                                
                                                                                                                                
     APPROPRIATION: Corporations, Business & Professional                                                                       
     Licensing                                                                                                                  
                                                                                                                                
     ALLOCATION: Professional Licensing                                                                                         
                                                                                                                                
     DELETE Intent Language:                                                                                                    
                                                                                                                                
     It is the intent of the legislature that the                                                                               
     Department of Commerce, Community and Economic                                                                             
    Development set license fees approximately equal to                                                                         
     the cost of regulation per AS 08.01.065(c). Further,                                                                       
     it is the intent of the legislature that the                                                                               
     Department of Commerce, Community and Economic                                                                             
     Development submit a six year report annually to the                                                                       
     legislature that includes at least the following                                                                           
    information for each licensing board: revenues from                                                                         
     license fees; revenues from other sources;                                                                                 
     expenditures broken out by direct expenditures, RSAs                                                                       
     for investigations, RSAs for other services,                                                                               
     interdepartmental cost allocation plans, departmental                                                                      
     cost allocation plans and internal cost sharing plans;                                                                     
     number of licensees; carry forward balance and                                                                             
     proposed license fee increase/decrease.                                                                                    
                                                                                                                                
     ADD Intent Language:                                                                                                       
                                                                                                                                
     It is the intent of the legislature that the                                                                               
     Department of Commerce, Community and Economic                                                                             
    Development set license fees approximately equal to                                                                         
     the cost of regulation per AS 08.01.065(c). Further,                                                                       
     it is the intent of the legislature that the                                                                               
     Department of Commerce, Community and Economic                                                                             
     Development submit a six year report annually to the                                                                       
     legislature that includes at least the following                                                                           
    information for each licensing board: revenues from                                                                         
     license fees; revenues from other sources;                                                                                 
     expenditures by line item, including separate                                                                              
     reporting for investigative costs, administrative                                                                          
     costs, departmental and other cost allocation plans;                                                                       
     number of licensees; carryforward balance; and                                                                             
    potential license fee changes based on statistical                                                                          
     analysis.                                                                                                                  
                                                                                                                                
     EXPLANATION: This amendment clarifies intent language                                                                      
    that was added by the Senate Finance Subcommittee.                                                                          
                                                                                                                                
     PART F                                                                                                                     
                                                                                                                                
     DEPARTMENT: Education & Early Development                                                                                  
                                                                                                                                
     APPROPRIATION: Teaching & Learning Support                                                                                 
                                                                                                                                
     ALLOCATION: Early Learning Coordination                                                                                    
                                                                                                                                
     ADD: $250,000 GF (1004)                                                                                                    
                                                                                                                                
     EXPLANATION: The funding added to the grants line for                                                                      
     the Parents as Teachers program is to support pre-                                                                         
    kindergarten, parent-based programs throughout the                                                                          
     state. The House added $250,000 UGF as one-time                                                                            
     funding. The Governor did not request additional                                                                           
    funding for the program but $300,000 is included in                                                                         
     the base budget for the Parents as Teachers program.                                                                       
                                                                                                                                
     PART G                                                                                                                     
                                                                                                                                
     DEPARTMENT: Education & Early Development                                                                                  
                                                                                                                                
     APPROPRIATION: Teaching & Learning Support                                                                                 
                                                                                                                                
     ALLOCATION: Early Learning Coordination                                                                                    
                                                                                                                                
     ADD: $400,000 GF (1004)                                                                                                    
     EXPLANATION: The funding added to the grants line for                                                                      
     the Best Beginnings program is to strengthen and                                                                           
     expand early learning partnerships, expand the                                                                             
     Imagination Libraries, and provide additional parent                                                                       
     resources to increase public engagement in early                                                                           
     literacy and learning.                                                                                                     
                                                                                                                                
    The House added $250,000 UGF. No additional funding                                                                         
     was included in the Governor's Amended budget for Best                                                                     
     Beginnings but $612,500 is included in the base budget                                                                     
     for this program.                                                                                                          
                                                                                                                                
     PART H                                                                                                                     
                                                                                                                                
     DEPARTMENT: Fish and Game                                                                                                  
                                                                                                                                
     APPROPRIATION: Commercial Fisheries                                                                                        
                                                                                                                                
     ALLOCATION: Headquarters Fisheries Management                                                                              
                                                                                                                                
     ADD: $300,000 General Fund (1004)                                                                                          
                                                                                                                                
    Explanation: This project will provide for genetic-                                                                         
    based stock composition estimates of sockeye salmon                                                                         
     harvested in Chatham Strait, Icy Strait, and District                                                                      
     15 fisheries.                                                                                                              
                                                                                                                                
     $300,000 annually is needed for four years. The                                                                            
    sockeye stock composition data from the commercial                                                                          
     fisheries would, in conjunction with existing                                                                              
     escapement monitoring projects, provide for more                                                                           
     complete run reconstruction for the stocks.                                                                                
                                                                                                                                
     The six reporting groups identified as being important                                                                     
     in this study include Chilkat River, Chilkoot River,                                                                       
     Taku River, northern Chatham Strait (conglomerate of                                                                       
     several small stocks), Port Snettisham (Crescent                                                                           
     Lake/Speel Lake/Snettisham Hatchery), and "Other"                                                                          
     (sockeye salmon not included in any of the other                                                                           
     reporting groups). Mixed stock fishery samples will be                                                                     
    collected from selected purse seine harvests (e.g.,                                                                         
     statistical area 112-16 Hawk Inlet shoreline, 112-                                                                         
    14/114-27 Augusta/Whitestone shoreline, and 112-17                                                                          
     west Admiralty shoreline), the District 15 drift                                                                           
     gillnet fishery, and other area fisheries harvesting                                                                       
     sockeye salmon. Fishery harvests will be sampled to                                                                        
     achieve levels of precision and accuracy sufficient                                                                        
     for fishery management. Approximately 9,600 samples                                                                        
     are expected to be used annually for mixed stock                                                                           
     analysis.                                                                                                                  
                                                                                                                                
     In addition to mixed stock fishery samples the                                                                             
    Department will attempt to obtain baseline genetic                                                                          
     samples from several (Hasselborg, Gut, Lake Eva,                                                                           
     Sitkoh, Kutlaku, and Pavlof small sockeye systems in                                                                       
     Chatham Strait. These populations are not yet                                                                              
     adequately represented in the sockeye salmon genetic                                                                       
     baseline.                                                                                                                  
                                                                                                                                
     PART I                                                                                                                     
                                                                                                                                
     DEPARTMENT: Office of the Governor                                                                                         
                                                                                                                                
     APPROPRIATION: Office of Management and Budget                                                                             
                                                                                                                                
     Insert Intent Language:                                                                                                    
                                                                                                                                
     It is the intent of the legislature that the office of                                                                     
    management and budget develop a plan to address the                                                                         
     declining balance of the oil and hazardous substance                                                                       
     release prevention and response fund. The plan should                                                                      
    include an analysis of prior expenditures from the                                                                          
     fund for the remediation of state owned contaminated                                                                       
     sites and a proposal to expeditiously remediate state                                                                      
     owned contaminated sites.                                                                                                  
                                                                                                                                
     PART J                                                                                                                     
                                                                                                                                
     DEPARTMENT: Health and Social Services                                                                                     
                                                                                                                                
     APPROPRIATION: Office of Children's Services                                                                               
                                                                                                                                
     ALLOCATION: Children's Services Management                                                                                 
                                                                                                                                
     ADD: It is the intent of the legislature that $200,000                                                                     
                                                                                                                                
     GF be used for the Education and Training Voucher                                                                          
     program within the Independent Living Program.                                                                             
                                                                                                                                
     Explanation: The House added the above intent language                                                                     
     and $200,000 UGF for the Education and Training                                                                            
     Voucher program within the Independent Living Program.                                                                     
     The Senate Subcommittee added the funding but not the                                                                      
     intent language.                                                                                                           
                                                                                                                                
     PART K                                                                                                                     
                                                                                                                                
     Add a subsection to Sec. 14. DEPARTMENT OF HEALTH AND                                                                      
     SOCIAL SERVICES.                                                                                                           
                                                                                                                                
    (b) The sum of $5,000,000 is appropriated from the                                                                          
    general fund to the Department of Health and Social                                                                         
     Services, public assistance, energy assistance                                                                             
     program, for the purpose of making payments under AS                                                                       
     47.25.621 - 47.25.626, for the fiscal year ending June                                                                     
     30, 2013.                                                                                                                  
                                                                                                                                
     Explanation: This amendment appropriates $5 million of                                                                     
     UGF for the Energy Assistance program. This funding is                                                                     
    in excess of the statutory formula and exceeds the                                                                          
    amount required to fully fund all applications for                                                                          
     assistance for Alaska affordable heating payments                                                                          
     under AS 47.25.621 - 47.25.626, and will be                                                                                
     distributed according to AS 47.25.623(d)(2).                                                                               
                                                                                                                                
     PART L                                                                                                                     
                                                                                                                                
     DEPARTMENT: Health & Social Services                                                                                       
                                                                                                                                
     APPROPRIATION: Human Services Community Matching Grant                                                                     
                                                                                                                                
    ALLOCATION: Human Services Community Matching Grant                                                                         
                                                                                                                                
     ADD: $200,000 GF 1004                                                                                                      
                                                                                                                                
     EXPLANATION: Increase funding by $200,000 (from                                                                            
     $1,685,300 to $1,885,300) to keep pace with increasing                                                                     
     costs and need.                                                                                                            
                                                                                                                                
     PART M                                                                                                                     
                                                                                                                                
     DEPARTMENT: Health & Social Services                                                                                       
                                                                                                                                
    APPROPRIATION: Community Initiative Matching Grants                                                                         
                                                                                                                                
     ALLOCATION: Community Initiative Matching Grants                                                                           
                                                                                                                                
     ADD: $150,000 UGF 1004                                                                                                     
                                                                                                                                
     EXPLANATION: This amendment increases UGF in this                                                                          
     component by $150,000 (from $744,300 to $894,300) to                                                                       
     keep pace with increasing costs and need.                                                                                  
                                                                                                                                
     PART N                                                                                                                     
                                                                                                                                
     DEPARTMENT: Transportation and Public Facilities                                                                           
                                                                                                                                
     APPROPRIATION: Highways, Aviation and Facilities                                                                           
                                                                                                                                
     ALLOCATION: Central Region Highways and Aviation                                                                           
                                                                                                                                
     DELETE: $897,400 of Unrestricted General Funds (Fund                                                                       
     Code 1004)                                                                                                                 
                                                                                                                                
     ADD: $897,400 of Vehicle Rental Tax Receipts                                                                               
     (Designated General Funds -Fund Code 1200).                                                                                
                                                                                                                                
     EXPLANATION: The House budget utilized Vehicle Rental                                                                      
     Tax Receipts (derived from car rentals) in the amount                                                                      
    of $850,000 for maintenance of roads in the Central                                                                         
    Region. This amendment matches the House level and                                                                          
    adds the remaining available receipts ($47,400) for                                                                         
     road maintenance in FY13.                                                                                                  
                                                                                                                                
     PART 0                                                                                                                     
                                                                                                                                
     LTC and TEAME bargaining unit agreements:                                                                                  
                                                                                                                                
     FY2013 OPERATING BUDGET AMENDMENT                                                                                          
                                                                                                                                
     OFFERED IN: The Senate Finance Committee                                                                                   
                                                                                                                                
     TO: CSHB 284(FIN)                                                                                                          
                                                                                                                                
     CSHB 285(FIN)                                                                                                              
                                                                                                                                
     OFFERED BY:                                                                                                                
                                                                                                                                
     ADD: Amend the SALARY AND BENEFIT ADJUSTMENTS section                                                                      
     as follows:                                                                                                                
                                                                                                                                
     SALARY AND BENEFIT ADJUSTMENTS. (a) The operating                                                                          
     budget appropriations made in sec. 1 of this Act                                                                           
     include amounts for salary and benefit adjustments for                                                                     
     public officials, officers, and employees of the                                                                           
     executive branch, Alaska Court System employees,                                                                           
     employees of the legislature, and legislators and to                                                                       
    implement the terms for the fiscal year ending June                                                                         
     30, 2013, of the following ongoing collective                                                                              
     bargaining agreements:                                                                                                     
                                                                                                                                
     (1) Alaska Public Employees Association, for the                                                                           
     confidential unit;                                                                                                         
                                                                                                                                
     (2) Alaska State Employees Association, for the                                                                            
     general government unit;                                                                                                   
                                                                                                                                
     (3) Alaska Public Employees Association, for the                                                                           
     supervisory unit;                                                                                                          
                                                                                                                                
     (4) Alaska Vocational Technical Center Teachers'                                                                           
     Association, National Education Association,                                                                               
    representing the employees of the Alaska Vocational                                                                         
     Technical Center;                                                                                                          
                                                                                                                                
     (5) International Organization of Masters, Mates, and                                                                      
     Pilots, for the masters, mates, and pilots unit;                                                                           
                                                                                                                                
     (6) Inlandboatmen's Union of the Pacific, Alaska                                                                           
     Region, for the unlicensed marine unit;                                                                                    
                                                                                                                                
     (7) Marine Engineers Beneficial Association;                                                                               
                                                                                                                                
     (8) Public Safety Employees Association, representing                                                                      
     the regularly public safety officers unit;                                                                                 
                                                                                                                                
     (9) Public Employees Local 71, for the labor, trades,                                                                      
     and crafts unit;                                                                                                           
                                                                                                                                
     (10) Teachers' Education Association of Mt. Edgecumbe.                                                                     
                                                                                                                                
    (b) The operating budget appropriations made to the                                                                         
    University of Alaska in sec. 1 of this Act include                                                                          
    amounts for salary and benefit adjustments for the                                                                          
     fiscal year ending June 30, 2013, for university                                                                           
     employees who are not members of a collective                                                                              
     bargaining unit and for the terms of the current                                                                           
     agreements for the fiscal year ending June 30, 2013,                                                                       
     providing for the staff benefits for university                                                                            
     employees represented by the following entities:                                                                           
                                                                                                                                
     (1) Alaska Higher Education Crafts and Trades                                                                              
     Employees, Local 6070,                                                                                                     
     APEA/AFT (AFL-CIO);                                                                                                        
                                                                                                                                
     (2) University of Alaska Federation of Teachers;                                                                           
                                                                                                                                
     (3) United Academics-AAUP/AFT;                                                                                             
                                                                                                                                
     (4) United Academics-Adjuncts;                                                                                             
                                                                                                                                
    (5) Fairbanks Firefighters Association, IAFF Local                                                                          
     1324.                                                                                                                      
                                                                                                                                
    (c) If a collective bargaining agreement listed, in                                                                         
     (a) of this section is not ratified by the membership                                                                      
     of the respective collective bargaining unit, the                                                                          
     appropriations made by this Act applicable to the                                                                          
    collective bargaining unit's agreement are reduced                                                                          
     proportionately by the amount for the collective                                                                           
    bargaining agreement, and the corresponding funding                                                                         
     source amounts are reduced accordingly                                                                                     
                                                                                                                                
     (d) If a collective bargaining agreement listed in (b)                                                                     
     of this section is not ratified by the membership of                                                                       
     the respective collective bargaining unit and approved                                                                     
     by the Board of Regents of the University of Alaska,                                                                       
     the appropriations made by this Act applicable to the                                                                      
    collective bargaining unit's agreement are reduced                                                                          
     proportionately by the amount for the collective                                                                           
    bargaining agreement, and the corresponding funding                                                                         
     source amounts are reduced accordingly.                                                                                    
                                                                                                                                
     EXPLANATION:                                                                                                               
                                                                                                                                
     The State of Alaska has reached agreement on                                                                               
     bargaining unit terms with the Public Employees                                                                            
     Local 71, for the labor, trades, and crafts unit, and                                                                      
     the Teachers' Education Association of Mt. Edgecombe.                                                                      
                                                                                                                                
2:49:23 PM                                                                                                                    
                                                                                                                                
KAREN  REHFELD, DIRECTOR,  OFFICE OF  MANAGEMENT AND  BUDGET                                                                    
appreciated  the inclusion  of  the  amendment's items.  She                                                                    
hoped to  continue working with the  legislature on refining                                                                    
the two versions of the bill.                                                                                                   
                                                                                                                                
2:49:52 PM                                                                                                                    
                                                                                                                                
Co-Chair Hoffman removed his OBJECTION.                                                                                         
                                                                                                                                
There  being NO  FURTHER OBJECTION,  Amendment number  1 for                                                                    
version O was ADOPTED.                                                                                                          
                                                                                                                                
2:50:04 PM                                                                                                                    
                                                                                                                                
Co-Chair Stedman  MOVED to report  SCS CSHB 284(FIN)  out of                                                                    
committee with individual recommendations.                                                                                      
                                                                                                                                
There  being no  OBJECTION, SCS  CSHB 284(FIN)  was REPORTED                                                                    
out of committee with a "do pass" recommendation.                                                                               
                                                                                                                                
2:50:25 PM                                                                                                                    
                                                                                                                                
Co-Chair Stedman  MOVED to report  SCS CSHB 285(FIN)  out of                                                                    
committee with individual recommendations.                                                                                      
                                                                                                                                
There  being NO  OBJECTION, SCS  CSHB 285(FIN)  was REPORTED                                                                    
out of committee with a "do pass" recommendation.                                                                               
                                                                                                                                
2:50:46 PM                                                                                                                    
                                                                                                                                
Co-Chair Stedman  MOVED that authorization  be given  to the                                                                    
Legislative Finance Division  and Legislative Legal Services                                                                    
to make  any necessary  technical and/or  conforming changes                                                                    
to SCS CS HB 284(FIN) and SCS CS HB 285(FIN).                                                                                   
                                                                                                                                
2:51:06 PM                                                                                                                    
                                                                                                                                
There  being NO  OBJECTION, authorization  was given  to the                                                                    
Legislative Finance Division  and Legislative Legal Services                                                                    
to make  any necessary  technical and/or  conforming changes                                                                    
to SCS CS HB 284(FIN) and SCS CS HB 285(FIN).                                                                                   
                                                                                                                                
2:51:08 PM                                                                                                                    
                                                                                                                                
AT EASE                                                                                                                         
                                                                                                                                
2:51:23 PM                                                                                                                    
                                                                                                                                
RECONVENED                                                                                                                      
                                                                                                                                
2:51:29 PM                                                                                                                    
                                                                                                                                
Co-Chair Hoffman expressed  appreciation for the Legislative                                                                    
Finance   Division   and    the   Senate   Secretaries   and                                                                    
acknowledged the  savings of  $2 billion,  which exemplified                                                                    
fiscal  responsibility.  He  pointed   out  the  $1  billion                                                                    
allocated toward  the unfunded  liabilities in the  PERS and                                                                    
TRS  system. He  expressed concern  about the  absence of  a                                                                    
solution to  the long-term needs  of education. He  hoped to                                                                    
include  additional  funding  for education  through  fiscal                                                                    
notes for legislation heard in the House.                                                                                       
                                                                                                                                
ADJOURNMENT                                                                                                                     
                                                                                                                                
2:53:47 PM                                                                                                                    
                                                                                                                                
The meeting was adjourned at 2:53 PM.                                                                                           

Document Name Date/Time Subjects
SB 121 2012-02-20 Following the Changes in SB 121.pdf SFIN 3/30/2012 1:00:00 PM
SB 121
SB 121 DOA-SB 121 SFin (March30-2012).pdf SFIN 3/30/2012 1:00:00 PM
SB 121
SB 121 2012-03-30 Kiehl.pdf SFIN 3/30/2012 1:00:00 PM
SB 121
SB 121 AlaskaSenateFinance-Mar302012-WFornia (2).pdf SFIN 3/30/2012 1:00:00 PM
SB 121
SB 100 - City of Kenai Support Resolution 040911.pdf SFIN 3/30/2012 1:00:00 PM
SB 100
SB 100_Back-Up_DOA Bill Analysis.pdf SFIN 3/30/2012 1:00:00 PM
SB 100
SB 100_Back-Up_Employers Affected by Salary Floor Bills.pdf SFIN 3/30/2012 1:00:00 PM
SB 100
SB 100_Back-Up_Larry Semmens 2-16-2011 Termination Study Comments To DRB.pdf SFIN 3/30/2012 1:00:00 PM
SB 100
SB 100_Back-Up_PERS III The Termination Studies Issues_Michael Lamb.pdf SFIN 3/30/2012 1:00:00 PM
SB 100
SB 100_Back-Up_Resolutions and Letters of Support.pdf SFIN 3/30/2012 1:00:00 PM
SB 100
SB 100_Letter from AML to Gov Parnell_03-14-2012.pdf SFIN 3/30/2012 1:00:00 PM
SB 100
SB 100_Sponsor Statement.pdf SFIN 3/30/2012 1:00:00 PM
SB 100
HB 284 - HB 285 Super Amendment Packet.pdf SFIN 3/30/2012 1:00:00 PM
HB 284
HB 285