Legislature(1995 - 1996)

04/12/1995 09:10 AM HES

Audio Topic
* first hearing in first committee of referral
+ 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              
 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            
 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           
 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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