Legislature(1995 - 1996)
04/12/1995 09:10 AM Senate HES
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SB 137 RETIREMENT INCENTIVE PROGRAM
Number 366
CHAIRMAN GREEN introduced SB 137 as the next order of business
before the committee.
SENATOR SALO noted that a good portion of SB 137 was in SB 132,
therefore, it might be more appropriate to focus on the portions of
SB 137 that are not in SB 132. The portion of SB 137 that was not
present in SB 132 is the state employees participation in the
program. CHAIRMAN GREEN agreed.
SENATOR SALO felt that those who wanted to testify would possibly
forego their opportunity to testify if they knew that the committee
intended to pass the bill out of committee.
SENATOR MILLER said that he had an amendment which would authorize
the court system to include the executive director in the
retirement incentives program (RIP). This provision was in last
year's bill, although it is not in the governor's bill this year.
He understood that it was the intention of the Chair to move the
bill today. Senator Miller moved that Amendment 1 be adopted.
Hearing no objection, Amendment 1 was adopted.
SENATOR SALO reiterated that SB 132 was passed out of HESS last
week which included all the school district employees. SB 137 is
essentially the same process of early retirement. Perhaps, the
discussion today should focus on the state employees included in SB
137. She noted that the only conflict with SB 137 would be
regarding the possibility of the state saving money.
Number 321
ANNALEE MCCONNELL, Director of the Office of Management & Budget
(OMB), emphasized that this retirement incentive program had been
developed differently than past RIPs in order to ensure saving
money and helping with the needed downsizing and restructuring.
One difference in this RIP is that it is not an across the board
program. This RIP is only available if a department has determined
that its plans for restructuring, downsizing, and saving money can
be accomplished by using the RIP. She explained that RIP would be
used in a strategic area with very stringent savings calculations.
The calculations would include employer costs, training costs, and
specialized equipment costs.
Ms. McConnell differentiated between the two scenarios in which RIP
would be used. The first scenario would involve a vacant position
due to downsizing. She expected that type situation to utilize RIP
the most. The savings in that case would be in eliminating the
position all together. She clarified that OMB would eliminate the
vacant position in the following budget cycle. Another scenario
would involve the replacement of a position, but the level of
scrutiny would be extremely high in order to ensure real savings.
She ensured everyone that the costs taken into account would be
very comprehensive in order to have a true savings. Another change
to tighten up the savings was to demonstrate the savings in a three
year period after the position was replaced versus the five year
period of past programs. Ms. McConnell also pointed out that the
budget environment currently is very different than the budget
environment of prior RIP bills. Furthermore, the need for
management tools to accomplish downsizing has changed as well.
CHAIRMAN GREEN asked if there were many positions in state
government that allow the range of the Department of Corrections in
which a position could start at a 11A range and move up to a 15J
range; are there some positions that simply begin at a certain
range that cannot be changed. ANNALEE MCCONNELL did not know the
number of situations with the wide range in pay ranges.
Number 234
BOB STALNAKER, Director of the Division of Retirement & Benefits
for the Department of Administration, explained that the majority
of state positions begin at a 15A going through the longevity step.
There are a lot of positions such as a Retirement Specialists who
begin as a Retirement Specialist 1 and moves up to a Retirement
Specialist 3. He noted that moving up to Retirement Specialist 3
was gained by years of learning the systems and counseling. There
are a lot of such positions which seem to be common to many
departments in state government. He stated that there was some
value to not tying the RIP to the elimination of a position, but
replacing the position with a lower paid person.
SENATOR SALO agreed and explained that school districts save money
by replacing positions with a lower paid person. She noted that
eventually, the new hire would move up to the higher range anyway.
Senator Salo pointed out that the scrutiny provision was missing
from the last bill. She felt that the scrutiny provision improved
the bill.
SENATOR LEMAN commented that he had voted for a RIP bill in 1989,
after which he was not convinced that this program saved money.
This RIP is much better and will work if the commitment is honored.
He emphasized that the key to the success of the program is the
commitment to the program. If a program can be designed and there
is commitment to it, then the program could work. Senator Leman
would then support such a program.
ANNALEE MCCONNELL informed Senator Leman that with regards to her
commitment, she has had experience in saying "No". She informed
the committee that she was the Director of Management & Budget in
Anchorage when the RIP bill came up in the late 1980s. At that
time, Anchorage elected not to participate in the RIP. She
emphasized that she would not hesitate in saying no if a
department's plan does not save money or the savings were too
speculative. She explained that since the majority of positions
would be eliminated under this RIP, the uncertainty is not so close
or speculative.
Number 171
SENATOR LEMAN inquired as to the up front costs of RIPs which would
pose a concern. BOB STALNAKER pointed out that SB 137 provides
that the employer must demonstrate savings. The employer pays the
cost by virtue of that savings. Mr. Stalnaker explained that if an
employer can show a savings over three years by utilizing RIP, then
those costs can be paid over the same three years. There is no
front loading; the agencies must maintain within the approved
budget. The agencies must take a portion of their savings to pay
the RIP costs before the person qualifies.
CHAIRMAN GREEN stated that she intended to move SB 137 out of
committee today. Those who are not in support of the bill and wish
to testify should come forward. Chairman Green informed everyone
who had signed up to testify that they would be shown in support of
SB 137, unless they wished to speak in opposition to the bill. She
proceeded to ask if any of the sites on teleconference wanted to
testify.
CAROLYN FLOYD, Mayor of the City of Kodiak, informed the committee
that Kodiak is facing a real dollar reduction in their budget and
they are looking for additional savings. She noted that the
committee should have a letter from Kodiak in support of SB 137.
She emphasized the need for an amendment that would make
eligibility for three years begin July 1, 1995 or not later than
October 1, 1995. She explained that this earlier opening date with
an extended length of eligibility was due to the increased turnover
caused with this program. Under the proposed program, the City of
Kodiak would have to hire and train 25 percent of their entire work
force, 16 employees would be eligible for early retirement. Many
of these positions are a more experienced and knowledgeable level.
Furthermore, a longer period would allow the counsel and management
the opportunity to evaluate personnel resources and restructure the
city's operations. She noted that the reduced hours of vacation
had not been calculated which would also affect Kodiak's budget.
CHAIRMAN GREEN asked if those comments were included in her letter.
CAROLYN FLOYD replied yes. CHAIRMAN GREEN said that suggestion
would be passed on to the Finance Committee, the next committee of
referral.
BOB STALNAKER stated that this concern of Ms. Floyd is an issue for
many employers. He pointed out that another difference between SB
132 and SB 137 is that SB 137 includes political subdivisions not
just school districts. The delayed process is present in order to
provide the most efficient staffing needs so as not to delay
retirement or the employers ability to enter necessary contracts.
The staffing needs could be reviewed to allow the political
subdivisions the same amount of time as the state.
Number 072
VAL KOEBERLEIN, the Finance Director for the City of Homer, agreed
with Kodiak's comments. The extended time would afford the city
the opportunity to restructure. He informed the committee that if
Homer had to fill 11 positions all at once, they would still save
$370,000 over three years. With the extended time in which some of
the positions would be eliminated, the savings would increase to
approximately $700,000.
SENATOR SALO moved that CS SB 137(HES) be reported out of committee
with individual recommendations.
SENATOR LEMAN objected in order to point out that the last line on
page 1 is repeated on the top of page 2. He recommended that
technical problem be noted for clean up. Senator Leman removed his
objection.
CHAIRMAN GREEN asked if there was further objection. Hearing no
further objection, CS SB 137(HES) was moved out of committee with
individual recommendations.
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