Legislature(2015 - 2016)SENATE FINANCE 532
03/29/2016 01:00 PM FINANCE
Download Mp3. <- Right click and save file as
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
SENATE BILL NO. 207 "An Act relating to increasing employer contributions to the defined benefit plan in the teachers' retirement system." 1:24:15 PM JAMES ARMSTRONG, STAFF, SENATOR PETE KELLY, introduced the legislation: Senate Bill 207 proposes a gradual, multi-year increase in the employer contribution rate for the Teachers Retirement System (TRS) from the current level of 12.56 percent to 19 percent for FY 2017, 20 percent in FY 2018, 21 percent in FY 2019, and a final increase to 22 percent in FY 2020. The TRS was established as a cost sharing plan in which all employers pay one uniform rate and share in the liabilities and the assets of the plan. In 2008, with the passage of Senate Bill 125, the uniform rate was established at 12.56 percent, with the State of Alaska paying the difference in costs between the uniform rate and the actuarial cost, which was determined by the Alaska Retirement Management Board and the actuary consultants to the State of Alaska. This allowed the state to share in the payment of the unfunded liability of the system with the employers. The establishment of the 12.56 percent and the commitment of the state to assist in costs over 12.56 percent was made at a time when oil value was setting not only record price, but generating record state revenue. From FY2008 through FY2016, TRS appropriations ranged from $130 million to $317 million annually. During those nine years, a cumulative total of $1.824 billion was appropriated to the TRS unfunded liability. In addition to the state assistance payments, in FY 2015, an appropriation was made to the TRS Fund in the amount of $2,000,000,000 in order to improve the health of the system and reduce the unfunded liability. In total, state unrestricted general fund assistance has exceeded $3.8 billion over the past nine years. SB 207 is a conservative approach to balancing the state's current fiscal reality and its commitment to assisting TRS employers with the cost and the unfunded liability of the system. 1:26:08 PM Co-Chair Kelly shared that, in 2008, there was an increase in the Base Student Allocation (BSA) to cover the PERS obligations. He stated that the increase was approximately $80 million per year, totaling $220 million to date. He shared that the legislature appropriated $2 billion into the TRS unfunded liability. He queried the current number. Mr. Armstrong replied that it was $228 million. Co-Chair Kelly shared that the $228 million was for TRS. Je remarked that the money was the district's obligation carried by the state. He pointed out that the districts would be obligated to a much healthier system, because of the recent deposits into the unfunded liability. He felt that the state would mitigate the impact on the community, because the state would allocated money to cover the increased cost. He shared that there was concern from the districts, because they wanted time to adjust to the increases. The bill gives the districts five years, which was more than the request for three years. He shared that it was anticipated that the districts would receive $36.5 million to cover the costs of the increases. He wondered whether the state would cover the 10 percent. Mr. Armstrong replied that he could provide the estimates. Co-Chair MacKinnon felt that the better numbers would be available with the Buck Analysis. She stressed that the state was working with local communities. She remarked that the state had "carried" an additional responsibility in a budget surplus time. She felt that the reiterated that the state needed to "bridge" the costs to the cause of the costs. Mr. Armstrong noted that the mitigating funds would be appropriated using the adjusted average daily membership, which increased local need, and allowed for the communities to fund to the education cap. Co-Chair MacKinnon noted the cash infusion to TRS of $2 billion, as an effort to make the system whole. She remarked that there was an additional proposed cash infusion to help communities shoulder the burden Vice-Chair Micciche felt that there should be a discussion about assignment of responsibility. Co-Chair MacKinnon felt that the Department of Administration (DOA) could provide that information. SB 207 was HEARD and HELD in committee for further consideration.