Legislature(2007 - 2008)BELTZ 211

03/18/2008 09:00 AM STATE AFFAIRS


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09:03:54 AM Start
09:04:39 AM SB183
10:45:46 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Recessed to a 03/19/08 9:30 am --
+ SB 183 REPEAL DEFINED CONTRIB RETIREMENT PLANS TELECONFERENCED
Heard & Held
*+ SB 259 EFFECTIVE DATE: MEDICAL ASSISTANCE LAWS TELECONFERENCED
Scheduled But Not Heard
*+ SB 260 2008 REVISOR'S BILL TELECONFERENCED
Scheduled But Not Heard
+ Bills Previously Heard/Scheduled TELECONFERENCED
                    ALASKA STATE LEGISLATURE                                                                                  
            SENATE STATE AFFAIRS STANDING COMMITTEE                                                                           
                         March 18, 2008                                                                                         
                           9:03 a.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Senator Lesil McGuire, Chair                                                                                                    
Senator Gary Stevens, Vice Chair                                                                                                
Senator Hollis French                                                                                                           
Senator Lyda Green                                                                                                              
Senator Con Bunde                                                                                                               
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
All members present                                                                                                             
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
SENATE BILL NO. 183                                                                                                             
"An Act  repealing the defined contribution  retirement plans for                                                               
teachers and for public  employees; making conforming amendments;                                                               
and providing for an effective date."                                                                                           
     HEARD AND HELD                                                                                                             
                                                                                                                                
SENATE BILL NO. 259                                                                                                             
"An  Act repealing  certain provisions  relating to  applications                                                               
for  medical assistance  coverage; making  certain provisions  of                                                               
ch. 96,  SLA 2006, retroactive;  providing for an  effective date                                                               
by  repealing an  effective date  section  in ch.  96, SLA  2006;                                                               
providing for an  effective date for certain sections  of ch. 96,                                                               
SLA 2006; and providing for an effective date."                                                                                 
     SCHEDULED BUT NOT HEARD                                                                                                    
                                                                                                                                
SENATE BILL NO. 260                                                                                                             
"An Act  making corrective amendments  to the Alaska  Statutes as                                                               
recommended  by the  revisor of  statutes; and  providing for  an                                                               
effective date."                                                                                                                
     SCHEDULED BUT NOT HEARD                                                                                                    
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
BILL: SB 183                                                                                                                  
SHORT TITLE: REPEAL DEFINED CONTRIB RETIREMENT PLANS                                                                            
SPONSOR(S): SENATOR(S) ELTON                                                                                                    
                                                                                                                                
05/16/07       (S)       READ THE FIRST TIME - REFERRALS                                                                        
05/16/07       (S)       L&C, STA, JUD, FIN                                                                                     
01/29/08       (S)       L&C AT 1:30 PM BELTZ 211                                                                               
01/29/08       (S)       Heard & Held                                                                                           
01/29/08       (S)       MINUTE(L&C)                                                                                            
02/14/08       (S)       L&C AT 1:30 PM BELTZ 211                                                                               
02/14/08       (S)       Moved SB 183 Out of Committee                                                                          
02/14/08       (S)       MINUTE(L&C)                                                                                            
02/15/08       (S)       L&C RPT  2DP 1DNP 1NR                                                                                  
02/15/08       (S)       DP: ELLIS, DAVIS                                                                                       
02/15/08       (S)       DNP: BUNDE                                                                                             
02/15/08       (S)       NR: HOFFMAN                                                                                            
03/18/08       (S)       STA AT 9:00 AM BELTZ 211                                                                               
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
SENATOR KIM ELTON                                                                                                               
Alaska State Legislature                                                                                                        
Juneau AK                                                                                                                       
POSITION STATEMENT: Presented SB 183 as sponsor.                                                                              
                                                                                                                                
FRANCIS MCLAUGHLIN, Regional Planner                                                                                            
Municipality of Anchorage                                                                                                       
Anchorage AK                                                                                                                    
POSITION STATEMENT: Spoke in favor of SB 183.                                                                                 
                                                                                                                                
SARAH GROSSHUESCH, Public Employee                                                                                              
Anchorage AK                                                                                                                    
POSITION STATEMENT: Spoke in favor of SB 183.                                                                                 
                                                                                                                                
SHANE POWERS, Firefighter/Paramedic                                                                                             
City of Fairbanks                                                                                                               
Fairbanks AK                                                                                                                    
POSITION STATEMENT: Spoke in favor of SB 183.                                                                                 
                                                                                                                                
JIM DUNCAN, Business Manager                                                                                                    
Alaska State Employees Association (ASEA)                                                                                       
Juneau AK                                                                                                                       
POSITION STATEMENT: Spoke in favor of SB 183.                                                                                 
                                                                                                                                
BOB CLAUS, Trooper                                                                                                              
Department of Public Safety                                                                                                     
Klawock AK                                                                                                                      
POSITION STATEMENT: Spoke in favor of SB 183.                                                                                 
                                                                                                                                
JEFF BRIGGS, Senior Fire Captain                                                                                                
Anchorage AK                                                                                                                    
POSITION STATEMENT: Spoke in favor of SB 183.                                                                                 
                                                                                                                                
JEFF THIEDE, Teacher                                                                                                            
Palmer AK                                                                                                                       
POSITION STATEMENT: Spoke in favor of SB 183.                                                                                 
                                                                                                                                
KURT FREDRIKKSON, Retiree                                                                                                       
Juneau AK                                                                                                                       
POSITION STATEMENT: Spoke in favor of SB 183.                                                                                 
                                                                                                                                
PAUL ORTNER, Psychiatric Nurse                                                                                                  
Alaska Psychiatric Institute                                                                                                    
Anchorage AK                                                                                                                    
POSITION STATEMENT: Spoke in favor of SB 183.                                                                                 
                                                                                                                                
RICK FOSTER, Teacher                                                                                                            
Homer AK                                                                                                                        
POSITION STATEMENT: Spoke in favor of SB 183.                                                                                 
                                                                                                                                
KATHY LEA, Retirement Manager                                                                                                   
Division of Retirement and Benefits                                                                                             
Juneau AK                                                                                                                       
POSITION STATEMENT: Answered questions regarding SB 183.                                                                      
                                                                                                                                
PAT SHIER, Director                                                                                                             
Division of Retirement and Benefits                                                                                             
Juneau AK                                                                                                                       
POSITION STATEMENT: Answered questions regarding SB 183.                                                                      
                                                                                                                                
BEN WALKER, Teacher                                                                                                             
Anchorage AK                                                                                                                    
POSITION STATEMENT: Spoke in favor of SB 183.                                                                                 
                                                                                                                                
JAKE TODD, Teacher                                                                                                              
Anchorage AK                                                                                                                    
POSITION STATEMENT: Spoke in favor of SB 183.                                                                                 
                                                                                                                                
SCOTT MCDONALD, Teacher                                                                                                         
Anchorage AK                                                                                                                    
POSITION STATEMENT: Spoke in favor of SB 183.                                                                                 
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
CHAIR  LESIL MCGUIRE  called the  Senate  State Affairs  Standing                                                             
Committee meeting to order at  9:03:54 AM. Senators Bunde, Green,                                                             
Stevens, and McGuire  were present at the call  to order. Senator                                                               
French arrived soon thereafter.                                                                                                 
                                                                                                                                
         SB 183-REPEAL DEFINED CONTRIB RETIREMENT PLANS                                                                       
                                                                                                                                
CHAIR MCGUIRE announced the consideration of SB 183.                                                                            
                                                                                                                                
9:04:39 AM                                                                                                                    
SENATOR KIM  ELTON, Alaska State  Legislature, said SB  183 would                                                               
hire new  employees into  the old  tiers - Tier  III for  PRS and                                                               
Tier II  for TRS -  which will  give employees more  benefits for                                                               
almost  the  same cost  as  the  new defined  contribution  plans                                                               
(DCP).  The  fiscal  note  highballs   some  of  the  costs,  but                                                               
estimates about $5.00  per month per employee.  Studies show that                                                               
401k plans  earn an  average of 1.0  percent less  than pensions,                                                               
and the DCP  has no COLA [Cost of Living  Allowance] to encourage                                                               
retirees to stay in Alaska. Retirees  are a $1.5 billion per year                                                               
industry  in Alaska.  Experts note  that the  retirement accounts                                                               
will often not  last as long as  a retiree. If the  retiree has a                                                               
family as part of the plan, the  health accounts can run out in a                                                               
matter of a few short years.                                                                                                    
                                                                                                                                
SENATOR ELTON  said recruitment and  retention is a big  issue in                                                               
Alaska. In any  other state in the nation a  public employee will                                                               
end up  with a defined  benefit pension  plan (DBP) and  a social                                                               
security  safety  net  that protects  them  in  their  retirement                                                               
years.  The   new  DCP  makes  retention   especially  difficult.                                                               
Employees can come  here, get training, and then  leave the state                                                               
in a  few years to  go to  other public jurisdictions  across the                                                               
nation, taking  with them the money  they and the state  put into                                                               
the retirement  system. It encourages  people to leave.  They can                                                               
leave with  a large  nest egg  and go  somewhere that  gives them                                                               
social  security and  a defined  benefit. "They  can buy  a house                                                               
with the …  money they took from [Alaska's] system."  It is worth                                                               
knowing that the employer dollars do leave.                                                                                     
                                                                                                                                
SENATOR ELTON  said that  has a  cost to the  system. One  of the                                                               
advantages of the  old system is that the forfeitures  add to the                                                               
benefit  for those  who stay.  The bill  also has  an option  for                                                               
those who have been hired into the  DCP to be able to switch, and                                                               
that has a slight cost to  the state. The bill doesn't change the                                                               
mandate  for  a second  actuary  or  the mandate  for  experience                                                               
studies. "Elected  officials are  still out,"  he said.  The 2010                                                               
deadline for buying back time remains.  The bill is fair and will                                                               
help  attract and  keep good  employees.  It adds  back the  COLA                                                               
incentive  for retirees  to stay  in  Alaska, so  they can  spend                                                               
their  money  in  restaurants, grocery  stores,  and  pharmacies,                                                               
which is a $1.5 billion economy.                                                                                                
                                                                                                                                
9:08:54 AM                                                                                                                    
FRANCIS MCLAUGHLIN, Regional  Planner, Municipality of Anchorage,                                                               
said he supports SB 183. He  was born and raised in Fairbanks and                                                               
has worked as  a professional planner outside of  Alaska for five                                                               
years.  He was  hired as  a  regional planner  by Anchorage  last                                                               
year. He is well-qualified, and as  a single person he can choose                                                               
to work anywhere. He is excited to  be back in his home state. If                                                               
he were  older or  married he  would not  be able  to be  a civil                                                               
servant in  Alaska because  there are  too many  disincentives in                                                               
the retirement  system for Tier  IV employees. He has  no defined                                                               
benefits and  his wages are too  low, as compared to  the private                                                               
sector,  to   compensate  him  enough   to  invest  his   way  to                                                               
retirement. If  he works 35 years  as a civil servant  in Alaska,                                                               
he  will not  have guaranteed  health insurance.  He will  have a                                                               
"health reimbursement  account" to  buy health insurance,  "and I                                                               
would  pray that  that would  not be  exhausted before  my future                                                               
wife and  I die." Who knows  how much health insurance  will cost                                                               
in 2043? None of  this is the case for Tier  III employees - they                                                               
have a defined benefit and  health insurance for retirement. This                                                               
is  about being  fair to  public employees.  The state  should be                                                               
trying to  recruit and retain  the best employees. His  friend in                                                               
New York is a planner and  his retirement benefits are similar to                                                               
Alaska's Tier  III. He will  have a pension and  health insurance                                                               
when he retires.                                                                                                                
                                                                                                                                
MR.  MCLAUGHLIN  said he  has  some  incentive  to work  for  the                                                               
municipality because  he is  still young;  he can  get experience                                                               
and  then leave  to work  in the  private sector  or for  another                                                               
state. There  is no incentive to  stay once the job  offers start                                                               
to roll in.  Older, more experienced people have  no incentive to                                                               
be employed  by the municipality -  they will have to  work until                                                               
they are  80 in  order to  afford to  retire. His  director hopes                                                               
that one day he will become  a senior planner or director because                                                               
his  current staff  qualify for  retirement today,  and they  are                                                               
chomping  at the  bit to  retire. But  there is  no one  with the                                                               
knowledge and  experience to replace  them. The only way  he will                                                               
continue to work for the municipality  will be if it is forced to                                                               
hire him  as a contractor.  SB 183 is  good policy and  the right                                                               
thing to do.                                                                                                                    
                                                                                                                                
9:13:07 AM                                                                                                                    
SARAH  GROSSHUESCH, Public  Employee, Anchorage,  said she  was a                                                               
high school  science teacher  for four years  and then  pursued a                                                               
Master's degree  in Public  Health in  Anchorage. She  planned to                                                               
transition from a traditional teaching  position to a combination                                                               
role of health and education. She  has always wanted to remain in                                                               
public service.  After the state  changed its  retirement system,                                                               
she took  a job with  the Municipality  of Anchorage as  a public                                                               
health educator. It  was a perfect fit, except she  lost her four                                                               
years of  previous service in  PERS/TRS. She knows of  many other                                                               
people  who  pursued  teaching   certificates  while  working  as                                                               
teachers' aides who  will now be placed in a  much less desirable                                                               
DCP.  "Not only  have I  lost my  defined benefit  retirement, in                                                               
2010 all  that money wisely  invested by the PERS/TRS  board will                                                               
have to  be removed." What is  the plan for the  system then? How                                                               
much money  that is  propping up retirements  now will  be forced                                                               
out  of the  system? The  changes in  PERS/TRS don't  just affect                                                               
future recruitment,  it impacts  current workers. When  she began                                                               
as  a  public  employee  it   was  with  the  promise  of  secure                                                               
retirement. She  can make more  money in the private  sector. She                                                               
made the  choice to  forgo the  extra money  up front.  She finds                                                               
public  service more  rewarding. She  and her  husband started  a                                                               
family and have been active  members of her community, "but these                                                               
changes in  the retirement system  have caused us to  think about                                                               
whether we can stay  here or if we need to move  to a state which                                                               
provides for  its public  employees and  recognizes them  for the                                                               
service that they provide."                                                                                                     
                                                                                                                                
SENATOR GREEN asked where she first worked.                                                                                     
                                                                                                                                
MS. GROSSHUESCH  said she worked from  2002 to 2006 as  a teacher                                                               
for the  Anchorage School District.  In October - after  the July                                                               
deadline --  she accepted a  position with the  municipality, and                                                               
that  is a  PRS  position. It  used  to be  that  a person  could                                                               
transfer  the TRS  years of  service to  PRS, but  the DCP  won't                                                               
allow it, so she has four years  stuck in the TRS system that she                                                               
cannot add money to.                                                                                                            
                                                                                                                                
9:16:57 AM                                                                                                                    
SHANE POWERS,  Firefighter/Paramedic, City of Fairbanks,  said he                                                               
is representing himself.  He started in June 2006 and  may be one                                                               
of  the  last Tier  III  employees  in  the state.  He  considers                                                               
himself  fortunate.  The  new  DCP  system  is  harmful  to  both                                                               
employees  and government  entities.  Tier  IV employees  receive                                                               
less compensation than their coworkers  and the private sector. A                                                               
Tier IV firefighter  receives the same hourly wage  as a Wal-Mart                                                               
employee, and both  Wal-Mart and the city  contribute to employee                                                               
retirement accounts,  but state  employees are shorted  on social                                                               
security. The  state has created a  system where it is  better to                                                               
wear a blue  vest at Wal-Mart than to save  lives as a paramedic.                                                               
Since he  started, the  Fairbanks Fire  Department has  hired two                                                               
people. One  was previously enrolled  in PERS, and the  other has                                                               
spent his  entire work  with the  department searching  for other                                                               
jobs. His last  day is April 9. The cost  of training this person                                                               
will  be  lost to  another  state.  The department  has  recently                                                               
initiated a hiring process, and  on completion it expects to have                                                               
only half of  the applicants it had when  Mr. Powers participated                                                               
three years  ago. He  has several  friends seeking  employment in                                                               
the fire service, and several  are from Alaska. When they learned                                                               
that Fairbanks  was hiring  they had no  interest because  of the                                                               
retirement system.  Training is expensive, and  local governments                                                               
cannot afford  replacing people, so  costs have shifted  from the                                                               
state to  the local level.  Not only will turnover  increase, but                                                               
with a  reduced number  of applicants,  the quality  of employees                                                               
will  decrease. "Do  you  really  want the  bottom  of the  class                                                               
treating you  in the back of  an ambulance?" This is  a chance to                                                               
fix a horribly broken system. SB 183 is very important.                                                                         
                                                                                                                                
9:19:33 AM                                                                                                                    
JIM DUNCAN, Business Manager,  Alaska State Employees Association                                                               
(ASEA),  Juneau,  said  he  represents   about  8,500  state  and                                                               
municipal employees.  He is also  representing the  Alaska Public                                                               
Pension  Coalition. The  APPC  is  a group  of  unions and  other                                                               
organizations that have come together  to help repeal the defined                                                               
contribution plan.  They include the Anchorage  Police Department                                                               
Employees  Association,   Alaska  State   Employees  Association,                                                               
Alaska  AFL-CIO,  Alaska Professional  Firefighters  Association,                                                               
Public   Safety   Employees   Association,   National   Education                                                               
Association of Alaska, Retired Public  Employees of Alaska, AARP-                                                               
Alaska, and others.                                                                                                             
                                                                                                                                
MR. DUNCAN  said there  are four  reasons this  coalition opposes                                                               
the  DCP.  First,  it  does  not  provide  a  secure  pension  on                                                               
retirement; second,  it provides inadequate medical  coverage for                                                               
retirees;  third, there  is an  inability to  recruit and  retain                                                               
public employees;  and fourth,  there is  no overall  cost saving                                                               
from the previous plans.                                                                                                        
                                                                                                                                
MR.  DUNCAN  said  national  studies  by  the  Horton  School  of                                                               
Business show that more than  two thirds of DCP participants cash                                                               
out their account when terminating  employment, leaving them with                                                               
little or  no funds for  retirement. Another study by  the Center                                                               
for Retirement Research in 2006  showed that the median 401k fund                                                               
balance for households headed by 55  to 64 year olds was $60,000.                                                               
That means  they will have a  $400 per month annuity  income over                                                               
their lifetime, which is not sufficient.                                                                                        
                                                                                                                                
9:22:50 AM                                                                                                                    
MR. DUNCAN  said there is  no post-retirement  pension adjustment                                                               
to help keep  up with inflation. The return on  investment of the                                                               
DCP is less than it is with  a DBP. TRS and PERS financial report                                                               
verifies this and  shows the DCP return was 11.5  percent and the                                                               
return from the  DBP was 18.9 percent. That occurs  for a variety                                                               
of  reasons,  but  clearly professionals  can  invest  with  more                                                               
people. He  said it is important  to note that teachers  and most                                                               
public  employees in  the DCP,  unlike private  sector employees,                                                               
will not  receive social security  and will  have no DBP  at all.                                                               
The DCP  provides inadequate medical coverage  for retirees. They                                                               
will not  have a good plan  to cover medical expenses.  They must                                                               
retire  directly  from  state  service   to  access  the  medical                                                               
benefit, and that often doesn't happen.  They will have to have a                                                               
minimum of  ten years  of service to  access medical  coverage at                                                               
Medicare-eligible age,  or if they  work long enough,  they could                                                               
access it at any time with 25  years of service if they are peace                                                               
officers and firefighters.  But all other employees  have to have                                                               
30  years of  service.  "So the  access to  the  medical plan  is                                                               
severely restricted."  They have  a health  reimbursement account                                                               
under the DCP and may use that  to pay premiums, but once that is                                                               
gone,  the  retiree  must  self-pay. The  estimate  is  that  the                                                               
account may last two to three  years, and then retirees will have                                                               
to pay the premium.                                                                                                             
                                                                                                                                
9:25:17 AM                                                                                                                    
MR. DUNCAN said retirees must pay  100 percent of the premiums of                                                               
the  plan until  eligible  for Medicare.  Upon reaching  Medicare                                                               
eligibility the  retiree must  pay ten to  thirty percent  of the                                                               
premiums depending on their years  of service, but they must work                                                               
thirty years to  pay just 10 percent. "This one  is a real zinger                                                               
in my  mind: the state  may terminate  a retiree medical  plan at                                                               
any time  - or change  it." Retirees under  the DCP will  have no                                                               
decent medical benefit, if they have any at all.                                                                                
                                                                                                                                
9:26:05 AM                                                                                                                    
MR. DUNCAN said there is  the increasing inability to recruit and                                                               
retain public  employees. The DCP encourages  public employees to                                                               
move on to  other employers. Even the Division  of Retirement and                                                               
Benefits encourages  this, he said,  with a website  promotion of                                                               
the DCP.  It says, "Get it  to go, your savings  move right along                                                               
with you as  you blaze your career trail." "We  have made the new                                                               
retirement  plan   just  as  modern   and  mobile  as   our  most                                                               
adventurous  Alaskan employees;  when  you're ready  to move  on,                                                               
just take  your savings  with you."  "When you  change employers,                                                               
move your  savings and take  your money with you."  Those clearly                                                               
are  statements that  encourage people  to come  and then  leave.                                                               
There  is an  annual report  by  the personnel  division, and  it                                                               
said: there  have been noticeable  changes in  employee movements                                                               
since  the  2005 report;  the  turnover  rate has  increased  and                                                               
continues to  be higher than the  hire rate by three  percent. He                                                               
said  the turnover  rate in  2005 was  24 percent,  exceeding the                                                               
hire  rate of  22 percent.  The DCP  came into  place on  July 1,                                                               
2006,  and  the  turnover  rate   increased  by  5  percent.  The                                                               
corollary seems  clear. The department with  the highest turnover                                                               
rate is public  safety at 40 percent. He did  a separate analysis                                                               
of just the  general government unit union, and it  shows that in                                                               
2007 the  turnover rate for employees  with less than 2  years of                                                               
service is  30 percent. After  that it  drops to 23  percent, but                                                               
when people first come, they leave very quickly.                                                                                
                                                                                                                                
9:28:51 AM                                                                                                                    
SENATOR  GREEN asked  if the  executive branch  turnover rate  is                                                               
unusual since it was an election year.                                                                                          
                                                                                                                                
MR. DUNCAN  said there  is some  turnover with  the change  in an                                                               
administration, but  not more than  5 percent. The  turnover rate                                                               
for  his  members,  who  aren't   political  appointees,  was  30                                                               
percent. There  have not  been exit interviews,  but he  sees the                                                               
jump in turnover rate due to the DCP.                                                                                           
                                                                                                                                
SENATOR  GREEN  said the  highest  turnover  rate is  the  public                                                               
safety staff,  and that seems  to be  an ongoing problem.  In the                                                               
last  three to  five  years there  is the  "aging  out of  public                                                               
safety members." The  turnover rate is high but it  would be nice                                                               
to see a chart on the trends  and if it's attributable to the DCP                                                               
or "if it's just the 20 or 25 and out."                                                                                         
                                                                                                                                
9:30:54 AM                                                                                                                    
MR. DUNCAN said  his unit had a 20 percent  turnover rate and now                                                               
there is a 30 percent turnover rate.                                                                                            
                                                                                                                                
CHAIR MCGUIRE asked about a survey for departing employees.                                                                     
                                                                                                                                
MR.  DUNCAN said  he has  recommended that  to the  Department of                                                               
Administration to determine why employees are leaving.                                                                          
                                                                                                                                
9:31:57 AM                                                                                                                    
CHAIR MCGUIRE  said there has  been some reduction in  the number                                                               
of  state  employees since  she  has  been  here. Alaska  is  not                                                               
decreasing  the  number  of  public   employees,  but  it's  more                                                               
inefficient  because   of  the   constant  cycle   of  retraining                                                               
individuals. A lot of time is  spent training people only to have                                                               
them pick up and leave. It is a morale and inefficiency issue.                                                                  
                                                                                                                                
MR. DUNCAN said  there is no overall cost savings  in moving from                                                               
the  defined  benefit  plan  to  DCP.  Buck  Consultants  did  an                                                               
analysis in  February 2008 that shows  that the TRS Tier  II plan                                                               
cost 3  percent less  than the  Tier III DCP.  The PERS  Tier III                                                               
defined benefit plan  cost slightly more: 0.75  percent more than                                                               
the Tier IV  plan, but there is no overall  cost savings. The DCP                                                               
did not reduce overall costs.                                                                                                   
                                                                                                                                
9:33:44 AM                                                                                                                    
SENATOR BUNDE said  he has heard that, but it  is a snapshot that                                                               
is not indicative  of the long-term impacts of the  DBPs. "We can                                                               
all find statistics  - 100 percent of people that  ate pickles in                                                               
1880 are now dead, but I don't know that pickles cause death."                                                                  
                                                                                                                                
CHAIR MCGUIRE said that is the  point of the hearing -- to figure                                                               
out  if the  actions  taken  in 2006  were  the  right ones.  The                                                               
statistics should  show the impacts, financially  and with regard                                                               
to retention and recruitment. There  are some indicators, and the                                                               
goal is to get  to the bottom of it. If  there are consultants or                                                               
individuals that can  add to the dialogue, she would  be happy to                                                               
hear their testimony.                                                                                                           
                                                                                                                                
MR.  DUNCAN   said  he  has   presented  the  analysis   by  Buck                                                               
Consultants to  the Division of  Retirement and Benefits,  and he                                                               
can only  assume that it is  factual. The DCP is  not working for                                                               
the state or its employees. It  does not provide a secure pension                                                               
at retirement.  It has inadequate medical  coverage for retirees.                                                               
The  figures show  an increase  in the  inability to  recruit and                                                               
retain public  employees. There  is no  overall cost  savings. On                                                               
the other hand,  a define benefit plan works best.  It provides a                                                               
stable pension  that will enable  retirees to stay in  Alaska. It                                                               
has  a medical  plan  that  will enable  retirees  to meet  their                                                               
medical  needs. It  encourages public  employees  to make  public                                                               
service in  Alaska a career  - ant that's  what we should  be all                                                               
about. A  DBP does all this  at a lower  cost. He said SB  183 is                                                               
the right approach.                                                                                                             
                                                                                                                                
9:36:54 AM                                                                                                                    
SENATOR FRENCH said he is  impressed at the people coming forward                                                               
on  this, because  they won't  benefit  personally. Mr.  Duncan's                                                               
retirement won't change.                                                                                                        
                                                                                                                                
SENATOR GREEN said, "We should all be so lucky."                                                                                
                                                                                                                                
SENATOR FRENCH said there are  people here today who passionately                                                               
believe that  the DCP  is bad policy,  and whose  retirements are                                                               
set by  the constitution  and won't  benefit by  the bill.  It is                                                               
well-meaning people who are on the  ground and see the effects of                                                               
this policy and are very,  very concerned of having a substandard                                                               
workforce executing important government functions.                                                                             
                                                                                                                                
9:37:53 AM                                                                                                                    
SENATOR BUNDE  said he  is sure Senator  French didn't  mean that                                                               
anyone hired recently is substandard.  There are different points                                                               
of view  on personal benefits.  Unions thrive on numbers,  and if                                                               
they  can recruit  more  numbers, it  strengthens  the union.  It                                                               
isn't just a matter of  their own personal retirement; it's their                                                               
political influence in the state.                                                                                               
                                                                                                                                
MR. DUNCAN said  the union's prime goal is to  ensure that people                                                               
who  work  in  the  public  sector have  a  good  wage  and  good                                                               
benefits, and  when they retire, they  can stay in Alaska  with a                                                               
stable pension so  they can continue to contribute  to the state.                                                               
Many of his members were hired  before July 1, 2006, but the goal                                                               
is to  be sure that those  individuals that are coming  along now                                                               
will  have a  pension  and medical  plan. The  other  goal is  to                                                               
provide a  service to the  citizens of Alaska through  the public                                                               
employees. That is done by hiring  people who want to make public                                                               
employment a  career, and  they will  need to  see that  they can                                                               
retire, support themselves  and their spouse, take  care of their                                                               
medical needs, and remain in Alaska as active citizens.                                                                         
                                                                                                                                
9:39:44 AM                                                                                                                    
CHAIR MCGUIRE said  she will not be affected by  the DCP, and she                                                               
can  see  both sides.  At  her  age, she  wants  to  look to  the                                                               
teachers,  firefighters,  and  employees managing  Alaska's  vast                                                               
natural resources,  and "we have  already decided that  these are                                                               
state  functions and  that we're  going to  have state  employees                                                               
doing those jobs, and we want  the best people to do them." Minds                                                               
can differ  in opinion, but  we are  looking at the  impacts. She                                                               
would hate to see Alaska get so  far down the line that the state                                                               
is not  attracting and retaining  qualified people in  areas that                                                               
are important. If not, maybe someone else should do those jobs.                                                                 
                                                                                                                                
9:41:19 AM                                                                                                                    
BOB  CLAUS, Trooper,  Klawock AK,  said  SB 183  is an  important                                                               
bill. He has  worked proudly as a trooper all  over the state for                                                               
22 years. He has been in Klawock  for the past 14 years and plans                                                               
to  retire  in May  under  the  defined  benefits system.  He  is                                                               
training a new 22-year-old recruit,  who was hired under the DCP.                                                               
Defined benefits  were an essential  part of the  state's ability                                                               
to recruit  and retain it  valuable workforce. It  takes hundreds                                                               
of thousands of dollars and several  years to train a new trooper                                                               
in rural Alaska.  Why would a person want to  take a trooper job?                                                               
They face the harshest working  conditions of any law enforcement                                                               
job  in  America.  It  is   physically  dangerous,  and  constant                                                               
transfers make  it economically risky for  trooper families. When                                                               
deciding to become  a trooper, he was a Marine  Corps veteran and                                                               
recent college graduate from an  elite university, and his father                                                               
had just retired  after 20 years as  a firefighter/paramedic. For                                                               
perhaps  the first  time in  his  life he  followed his  father's                                                               
advice to seek  public employment with a solid  pension plan. The                                                               
DBP  was a  huge factor  in his  decision to  apply. His  brother                                                               
chose  not  to  take  that  advice.  He  is  working  in  private                                                               
industry; he  changes jobs  every few years  and takes  his money                                                               
with him. He  makes $300,000 per year. "I really  don't think the                                                               
state wants to get in that kind of bidding war."                                                                                
                                                                                                                                
MR. CLAUS asked why someone would  stay in a trooper job, where a                                                               
person has  more than their fair  share of bad days.  There are a                                                               
number of  agencies willing to  hire well-trained officers.  As a                                                               
22-year  trooper, he  has  had frustrations  over  the years  and                                                               
considered  leaving, but  with  a  DBP, it  never  made sense  to                                                               
leave.  He  is training  a  22-year  old  from Michigan;  he  has                                                               
family,  a   girlfriend,  his  friends,  and   some  property  in                                                               
Michigan. He was  attracted to the troopers for  the adventure of                                                               
Alaska and the  fun of being a  cop. But when the  romance of the                                                               
work wears thin  and the work gets hard, this  DCP will allow him                                                               
to take his money, training, and  skills and go back to Michigan.                                                               
The  Michigan police  have a  similar pay  package, and  there is                                                               
nothing holding  him here.  This personal  story is  more typical                                                               
than not. He asked the committee to support SB 183.                                                                             
                                                                                                                                
9:45:46 AM                                                                                                                    
SENATOR BUNDE said  this is one of the problems  he sees. "You're                                                               
frustrated,  you're unhappy  with your  job, but  you're sticking                                                               
around for the  retirement." There is a downside to  that as well                                                               
as  an  encouragement to  keep  people  in state  employment.  He                                                               
taught for  a long  time, and  he knows  teachers that  teach for                                                               
four reasons: June,  July, August, and early  retirement. That is                                                               
unfortunate  that we  have people  who hang  around just  for the                                                               
retirement. He said he understands  the other point of view, "but                                                               
there is an opposite to that as well."                                                                                          
                                                                                                                                
CHAIR MCGUIRE  asked if  there was discussion  in the  past about                                                               
people who  collect retirement and  voluntarily put it  back into                                                               
the system to  help offset financial concerns.  "When the overall                                                               
look  was  made  at  eliminating  the  DB  plan,  was  there  any                                                               
consideration  for  those of  the  different  generation who  are                                                               
already collecting  their retirement checks, sort  of voluntarily                                                               
giving those defined benefits up?"                                                                                              
                                                                                                                                
SENATOR BUNDE  said that  will be after  people volunteer  to pay                                                               
income tax.                                                                                                                     
                                                                                                                                
9:47:40 AM                                                                                                                    
CHAIR  MCGUIRE said  it is  interesting where  the responsibility                                                               
shifted. Many  people are secure  and collecting  retirement, and                                                               
there was  a concern  that the system  was broken  and "therefore                                                               
we're   going  to   shift  that   responsibility   to  the   next                                                               
generation."                                                                                                                    
                                                                                                                                
SENATOR BUNDE said, "I think your  comments are aimed at me." Oil                                                               
development began shortly after he  began teaching, and the state                                                               
could not afford  to match those oil wages. "I  could have easily                                                               
left teaching and  at least tripled, if not  quadrupled, my wages                                                               
on the  pipeline." He  didn't because  he preferred  teaching and                                                               
didn't  like what  the pipeline  was doing  to Alaska.  The state                                                               
offered  substantial benefits,  but it  was a  saddler's mattress                                                               
ranch --  buy now and  no payments  until 2006. The  payments are                                                               
due. The state  was using its best judgment, but  it was creating                                                               
an unfunded mandate. "That was then,  this is now, and we have to                                                               
make some changes."                                                                                                             
                                                                                                                                
9:49:22 AM                                                                                                                    
CHAIR MCGUIRE  asked if [the  benefits] had an impact  on staying                                                               
in teaching.                                                                                                                    
                                                                                                                                
SENATOR  BUNDE recollected  that  wages were  far more  important                                                               
than retirement.                                                                                                                
                                                                                                                                
CHAIR  MCGUIRE said  maybe it  was the  time and  place, but  she                                                               
finds   that  young   teachers  in   her  district   want  secure                                                               
retirement. They  love teaching and  would love to stay,  but the                                                               
low wages and benefits is such a great sacrifice.                                                                               
                                                                                                                                
SENATOR  BUNDE  said conditions  change.  His  salary started  at                                                               
$12,000 per  year. If wages were  $30,000, like they are  now, he                                                               
may have  looked at it  differently. Every dollar that  went into                                                               
retirement was  a dollar that  didn't go  into his wages,  and he                                                               
was far more concerned with wages.                                                                                              
                                                                                                                                
SENATOR  GREEN  said  it  is  quizzical that  TRS  would  be  the                                                               
responsibility of the district that  employs them, and "if I were                                                               
doing labor  contracts for  school districts  … I  would probably                                                               
hold back  on the  request for  higher wages  and request  a plan                                                               
that the  district participates  in." The state  is not  going to                                                               
step  in and  take over  the teacher's  district's responsibility                                                               
for offering  that employment package. "I  haven't noticed anyone                                                               
doing that yet." The  state is not going to pay  that plan; it is                                                               
up to the  district, and that may be where  some of the shortfall                                                               
comes in. "When we were  doing the research and comparing states,                                                               
counties,  boroughs,  municipalities,  school districts  and  all                                                               
units of government,  the Alaska plan for - in  most areas -- was                                                               
probably within  the top  90-95 percent  of plans."  In "admin's"                                                               
comparison of  the features  of the  tiers, the  more significant                                                               
changes came  in Tier II  to Tier III, not  Tier III to  Tier IV.                                                               
"As the  bill was being written,  we were trying to  find offsets                                                               
in  supplemental." She  was concerned  with  retirees paying  for                                                               
medical coverage,  but in Tier  III, employees with less  then 10                                                               
years and their  survivors must pay the full premiums  as long as                                                               
they wish to continue medical coverage.  That is the same as Tier                                                               
II, but  employees must accrue a  minimum of 10 years  of service                                                               
to  have  system-paid  coverage  at  age 60.  Then  there  is  an                                                               
infusion   of  the   health  reimbursement   arrangement  and   a                                                               
percentage based on  years of employment. She  can't imagine that                                                               
anyone  thinks that  "if you'd  only been  with the  state a  few                                                               
years that  there should be a  fully-paid health plan at  the end                                                               
of those  few years."  That is  where a balance  was sought  - an                                                               
employer-paid reimbursement account. It  was not punitive; it was                                                               
trying to "balance out how we  get things paid for." The irony is                                                               
that at 65, a person is in the Medicare track anyway.                                                                           
                                                                                                                                
9:54:21 AM                                                                                                                    
CHAIR MCGUIRE said Senator Bunde is  one of the few people in the                                                               
building that have  good retirement, and it is humane  to come to                                                               
the  end of  your life  and  have a  secure retirement.  It is  a                                                               
quality-of-life issue.  People are proud of  teaching and serving                                                               
the state,  and that reflects  the quality of people  that Alaska                                                               
has been  able to attract. The  only reason for this  dialogue is                                                               
that she wants there to be open  minds. It may be that the change                                                               
didn't  need to  be  as drastic  as  a DCP,  but  rather just  to                                                               
continue to ratchet down on health costs and years of service.                                                                  
                                                                                                                                
SENATOR BUNDE  said the day  after he retired he  started another                                                               
job.  Because of  his personal  experience, he  thinks wages  are                                                               
more  important  for  recruiting  young  people  than  a  distant                                                               
retirement plan.  He hoped  that money saved  would be  placed in                                                               
salaries. If the state is not  saving money, that is a challenge.                                                               
"We may not save money but your … children may save money."                                                                     
                                                                                                                                
9:56:55 AM                                                                                                                    
CHAIR MCGUIRE said  it is a good point and  asked about salaries.                                                               
That was  the trade  off -  the portability  and attraction  of a                                                               
higher wage, but she doesn't know if that is occurring.                                                                         
                                                                                                                                
SENATOR GREEN  said in Alaska  there is  no ability to  look back                                                               
and change the system, unless an  offset is done that is equal or                                                               
better.  The unfunded  liability was  the "genesis  of trying  to                                                               
find a solution, and that solution  had to do with the sharing in                                                               
the future."  The state was  no longer able  to keep up  with the                                                               
unfunded  liability  created  by  the DBP.  "That  would  be  the                                                               
difference as you/we had earlier,  that the defined benefits plan                                                               
costs less than  the defined contribution plan, but  I would also                                                               
like to see what's happening  to the indebtedness for the future,                                                               
and  if  we've  made  any  kind of  headway  into  changing  that                                                               
scenario."  It has  been the  legislature's desire  to invest  in                                                               
that plan to  make sure it is well funded.  Alaska, by prefunding                                                               
the  health  benefits, which  often  skewed  the statistics,  was                                                               
ahead of  the curve because now  all entities are required  to do                                                               
that.  The   federal  government   has  come   out  with   a  new                                                               
requirement,  so "we're  a little  ahead of  the curve  - perhaps                                                               
unknowingly." "I  think those things  entered into it  because we                                                               
had tried  for several years to  get -- when Senator  Bunde and I                                                               
were  on  finance,  we  asked   questions  about  the  condition.                                                               
Information  was  not  particularly forthcoming."  She  said  she                                                               
asked for  suggestions, and "after  no response, we said  we have                                                               
to do  something or the unfunded  liability is just going  to get                                                               
out of hand."                                                                                                                   
                                                                                                                                
9:59:36 AM                                                                                                                    
SENATOR  FRENCH said,  "We  are not  of a  uniform  view on  this                                                               
topic." He  said the unfunded  liability did prompt this,  but it                                                               
wasn't the  fault of  the plan.  It wasn't  giving some  people a                                                               
defined benefit plan  that created an unfunded  liability. It was                                                               
the financial decisions over the  years. It wasn't the workers or                                                               
the  promise they  were given.  It was  the way  that the  people                                                               
above them handled that obligation.  It is unfair to ascribe that                                                               
to the  misplaced promise made to  a trooper or a  teacher. There                                                               
were bad stock market performances  and bad projections on health                                                               
care  costs.   Those  were   exacerbated  by   certain  financial                                                               
decisions made inside this building  about contribution rates and                                                               
how well to fund that program over the years.                                                                                   
                                                                                                                                
CHAIR MCGUIRE said it was easier to contribute less.                                                                            
                                                                                                                                
SENATOR  FRENCH  said the  testimony  from  Trooper Claus  really                                                               
illustrates  something to  the contrary  of  Senator Bunde.  What                                                               
prompted that  trooper to take  that job was his  father's advice                                                               
to  pursue a  secure  retirement. "There  are  plenty of  fathers                                                               
across  the country  that  tell their  young sons  to  give up  a                                                               
little bit  on income  but get a  secure retirement,  because you                                                               
don't  know what's  going to  happen in  the future."  Many state                                                               
workers may tell themselves that  their job doesn't pay the best,                                                               
but there  is a  pot of  gold at the  end of  the rainbow  - "and                                                               
that's me  not living  in peonage  somewhere without  any medical                                                               
care." State workers  hired today do not get  social security. "I                                                               
can't say  that often enough." The  only thing they have  is what                                                               
they accumulate in  their 401ks, and 401ks don't  perform as well                                                               
as DBPs on a case by case basis.  It is important to keep in mind                                                               
that  there are  strong reasons  for going  back to  the previous                                                               
state plan. There are reasons why other states have gone back.                                                                  
                                                                                                                                
10:02:23 AM                                                                                                                   
CHAIR MCGUIRE  said Alaska is the  only state in the  nation with                                                               
the  plan.  The  premise  is  that  people  will  be  experts  in                                                               
investing, and their 401ks will perform as well as a DBP.                                                                       
                                                                                                                                
SENATOR  BUNDE said  he has  another  meeting. He  added that  he                                                               
ignored his father's advice to stay  in the military to retire in                                                               
20 years. "But vegetating for 20 years was not worth the price."                                                                
                                                                                                                                
CHAIR  MCGUIRE  said it  is  in  Alaska's  best interest  for  an                                                               
individual to stay  in a job. In teaching  and other professions,                                                               
the  longer someone  stays the  more  institutional knowledge  is                                                               
gainedm and Alaska benefits from  that -- instead of using Alaska                                                               
as  a  training  ground  and  then packing  up  their  money  and                                                               
leaving.                                                                                                                        
                                                                                                                                
10:04:03 AM                                                                                                                   
JEFF  BRIGGS,  Senior  Fire  Captain, Anchorage,  said  he  is  a                                                               
lifelong Alaskan. Firefighting is  dangerous, and when responding                                                               
to  an emergency  he must  weigh the  risks. One  of his  biggest                                                               
fears is having  a new recruit, who was hired  under the DCP, get                                                               
a  permanent  occupational   disability.  That  firefighter  will                                                               
receive 40 percent of his or  her salary. "I can't imagine having                                                               
to raise  a family and  save for retirement  on 40 percent  of my                                                               
wage."  An article  said that  one in  four 401ks  has less  than                                                               
$7,000 in  it. In 2002, Moody  v. Delta Western Inc.,  the Alaska                                                               
Supreme Court ruled that firefighters  and police are not allowed                                                               
to sue third parties to  recover damages that stem from negligent                                                               
acts.  The  rule  states  that   police  and  fire  fighters  are                                                               
compensated with  salaries and enhanced  benefits. "I  can't name                                                               
any enhancements  that these new  firefighters have."  Since they                                                               
have no enhanced benefits, passage of  this bill is a step in the                                                               
right  direction.  The  Anchorage  fire  department  has  trouble                                                               
recruiting and  retaining paramedic firefighters, and  he expects                                                               
that to get  worse. He also expects that by  the fourth year, new                                                               
hires will be searching for  new jobs with defined benefits. They                                                               
will  take  their nest  egg  with  them,  and  Alaska will  be  a                                                               
training ground for fire departments across the nation.                                                                         
                                                                                                                                
Mr. BRIGGS said he did the  same thing. The company he worked for                                                               
had a 401k with matching contributions,  and he decided to take a                                                               
chance  at  being  a  firefighter, which  had  a  more  realistic                                                               
retirement plan  than what he had.  He cashed out his  401k, paid                                                               
the  penalty, and  enrolled in  a firefighter  academy. He  feels                                                               
fortunate to be  in Tier II. "I certainly would  not have quit my                                                               
higher-paying  private-sector  job  to become  a  firefighter  in                                                               
Alaska today." Anchorage  has a fire academy with  32 recruits. A                                                               
few of  them are working on  their second careers, and  they were                                                               
shocked  to find  out that  they would  be losing  most of  their                                                               
social security benefits  when they retire. "As  you can probably                                                               
guess, none are happy with  the current retirement plan that they                                                               
have." Traditional  retirement adds  30 percent  to the  value of                                                               
one's  salary,   so  they  are   working  for  30   percent  less                                                               
compensation  than  others in  the  same  job.  The DCP  plan  is                                                               
perfect for  short-term employees. It  allows them to  take their                                                               
money when they leave to start  their careers. It has been proven                                                               
over  and over  how  employees are  not able  to  save enough  to                                                               
survive  on if  it is  left  to them.  Most aren't  even able  to                                                               
afford health insurance  for more than a couple  of years. Alaska                                                               
is the only  state in the nation that  mandates that firefighters                                                               
be  in a  DCP. The  other  states that  offer DCPs  also offer  a                                                               
choice  of a  DBP, and  they also  allow the  firefighters to  be                                                               
eligible  to  receive  social  security  benefits.  Alaskans  are                                                               
dismayed when they  learn this. He believes  most residents would                                                               
agree with him  that public safety employees who  put their lives                                                               
on the  line for the welfare  of others deserve to  have security                                                               
in their retirement.                                                                                                            
                                                                                                                                
10:08:27 AM                                                                                                                   
JEFF THIEDE,  Teacher, Palmer, said  he is the  athletic director                                                               
at Palmer High  School and a former Marine. He  recently moved to                                                               
Alaska with his wife, who  is a fifth-generation Alaskan. He left                                                               
Nevada in  2006 for a $12,000  increase in salary. He  arrived 15                                                               
days too  late for  Tier II,  so his income  is really  only $300                                                               
more,  which  is drastically  different  than  what he  expected.                                                               
Nevada  has a  DBP and  he can  move back  within five  years and                                                               
regain  his  eligibility.  "I  left  three  years  of  retirement                                                               
there." His wife  has seven years. One major problem  is the lack                                                               
of ability  of people with  children and mortgages  to contribute                                                               
to  another retirement  plan. It's  almost  paycheck to  paycheck                                                               
with no benefits  in sight. His long-range plan was  to retire in                                                               
Alaska, but  at this  point moving back  to Nevada  almost sounds                                                               
more lucrative than  staying. The cost of living  is cheaper, and                                                               
he and his wife will be in  a retirement system that has the gold                                                               
at the  end of  the rainbow.  Teachers will  leave. He  has heard                                                               
from other teachers  telling him that. Other  states offer better                                                               
plans.                                                                                                                          
                                                                                                                                
10:12:24 AM                                                                                                                   
KURT FREDRIKKSON, Retiree, (Former  DEC Commissioner), said he is                                                               
here on  behalf of the  Retired Public Employees of  Alaska (RPA)                                                               
in support  of SB  183. RPA  is a  voluntary organization  and is                                                               
made up 2,300  retirees. He volunteers his time  on the executive                                                               
board.  RPA believes  Alaska should  support Alaska  families who                                                               
have  built careers.  Leaders should  encourage Alaskans  to stay                                                               
active  members of  their  communities  after retiring.  Retirees                                                               
should not have to go to a state  with a lower cost of living. SB                                                               
183 will  restore the incentives  to stay.  There are few  if any                                                               
incentives for employees under the  DCP to stay and contribute to                                                               
Alaska  after  they  retire.  There  are  18,000  retired  public                                                               
employees living  in Alaska, and  23 percent of  retired Alaskans                                                               
are public employee  retirees. They all brought  in $1.46 billion                                                               
into the  state, and that  is equal  to what Alaska  fishers were                                                               
paid  for their  catch  or the  value of  zinc,  gold, and  other                                                               
metals  mined   in  Alaska  in  2004.   Alaska's  retired  public                                                               
employees make  a significant  contribution to  Alaska's economy.                                                               
In   addition   to   the  financial   benefit,   they   volunteer                                                               
significantly.  He said  he receives  the Alaska  cost of  living                                                               
allowance that  was established  in 1966  to assist  retirees who                                                               
elect  to  stay  in  Alaska.  That is  10  percent  of  the  base                                                               
retirement benefit  or a minimum  of $50  per month. This  is not                                                               
provided  under the  DCP.  As  a retiree,  he  also  gets a  post                                                               
retirement pension  adjustment based  on increases in  the annual                                                               
consumer price index  for Anchorage. That is not  provided by the                                                               
DCP. He  also receives health care  coverage until he is  65, and                                                               
then  the   state's  coverage  becomes  secondary   to  Medicare.                                                               
"Unfortunately  public   employees  covered  under   the  defined                                                               
contribution  program   run  a  much  greater   risk  of  finding                                                               
themselves with far less coverage  for health insurance when they                                                               
retire."                                                                                                                        
                                                                                                                                
10:16:31 AM                                                                                                                   
MR. FREDRIKKSON said  Alaskans reaching 65 often  have to prepare                                                               
financially for  a long retirement.  He said 29 percent  of women                                                               
and 18 percent of  men who are 65 will also reach  the age of 90.                                                               
With the very  limited medical benefits under the  DCP, RPA fears                                                               
the exodus  of retirees from  Alaska will increase  and seriously                                                               
affect Alaska's  economy and  jobs. When he  began his  career 30                                                               
years ago, he was promised  health care coverage and a retirement                                                               
pension based  on a  fair percentage of  his working  salary that                                                               
includes reasonable  cost of living  adjustments while  living in                                                               
Alaska, which is denied to new employees.                                                                                       
                                                                                                                                
10:18:02 AM                                                                                                                   
PAUL  ORTNER, Psychiatric  Nurse,  Alaska Psychiatric  Institute,                                                               
Anchorage, said  he has a  defined contribution  retirement plan,                                                               
and  he is  approaching  20  years of  service.  "As someone  who                                                               
already has a  defined benefit, you may ask what  horse I have in                                                               
this race." It is the ongoing  viability of the hospital he works                                                               
at. Wages have never been what  draw people to jobs like his. The                                                               
promise of  a secure retirement  has allowed  him to grow  in his                                                               
career and develop  an attachment with the facility  he works in.                                                               
Despite perceptions  that public service  is overpaid, it  is not                                                               
true. The  facility is losing  long-term employees in  roles that                                                               
are best  served by  experienced people.  Direct care  to acutely                                                               
ill  patients  is very  difficult,  and  the facility  is  mainly                                                               
attracting  new  graduates  to fill  direct-care  vacancies,  and                                                               
after a  couple of years  of developing the experience  needed to                                                               
serve this population, they will likely  move out of state to the                                                               
greener  pastures  of  the private  sector.  It  is  increasingly                                                               
difficult   to   move   employees  into   roles   of   increasing                                                               
responsibility internally because new  employees see no advantage                                                               
of ongoing state employment.                                                                                                    
                                                                                                                                
MR. ORTNER said quality applicants  from outside the hospital are                                                               
few or not  there. When qualified persons are  found, it requires                                                               
advanced-step hiring to  get them, and holding  them is unlikely.                                                               
"The  defined  contribution  retirement  plan  provides  positive                                                               
incentives  for  employees  to  stay  with  API  and  grow  their                                                               
careers."  API provides  comprehensive,  sophisticated care  that                                                               
requires a distinct set of  skills that develops with experience.                                                               
It becomes challenging  to provide safe and  capable care without                                                               
a  stable population  of experienced  employees. Positions,  like                                                               
his, are  best served by  people with experience, who  have risen                                                               
up  through the  ranks  of the  hospital  and have  institutional                                                               
knowledge. The  possibility of  that has  been removed  by making                                                               
the  state  workforce  a  transient  workforce.  This  is  not  a                                                               
phenomenon  exclusive to  API nurses.  A medical  records manager                                                               
left after 25  years, and it was a blow  for the hospital because                                                               
having a well-run  records department is crucial  to patient care                                                               
and helps  protect the hospital  from litigation. Her job  had to                                                               
be downgraded  to find  someone. The hospital  was lucky  to have                                                               
found  a bright,  young, and  capable  person, but  once she  has                                                               
experience,  her  opportunities  outside   of  the  API  will  be                                                               
considerable, and  it is unlikely she  will stay for more  than a                                                               
few years.  This is  occurring in each  department, he  said. The                                                               
negative impact on the level of  service API can provide is real.                                                               
"We are constantly  trying to orientate a workforce  to this very                                                               
specialized  care  only  to  see   them  leave."  API  has  shown                                                               
improvement  and has  been very  responsive to  the needs  of the                                                               
entire state.  It provides innovative  care, but it will  have to                                                               
shift resources to training and  recruitment, which will decrease                                                               
API's ability  to meet its  mission, and it exposes  the hospital                                                               
to increased risk and liability.                                                                                                
                                                                                                                                
10:22:48 AM                                                                                                                   
RICK FOSTER, Teacher,  Homer, said he is a  first-year teacher in                                                               
a village  at the head  of Kachemak  Bay. He teaches  history and                                                               
biology, after  he worked  many years  for resource  agencies. He                                                               
has  a PhD  in resource  ecology and  has worked  in the  private                                                               
sector  in Alaska  and has  taught in  California and  Nevada. He                                                               
also taught at  the University of Alaska. Recently  he worked for                                                               
the Alaska  Department of Fish  and Game as a  habitat biologist.                                                               
He is  vested in  PERS III and  just 32 months  short of  the ten                                                               
years needed to  get his medical coverage. That is  the part that                                                               
frightens him.  "As I understand  it … state employees  will have                                                               
no certainty when  we retire from the  defined contribution plan,                                                               
and the whole social security."  He paid into social security but                                                               
he  is not  sure how  that works.  He thought  he could  link his                                                               
seven years  with PERS to  his current retirement system.  But he                                                               
can't do  it with the  DCP. It  is important to  have experienced                                                               
teachers  with  numerous  skills.  Alaska will  not  be  able  to                                                               
attract  teachers from  outside  with  the DCP.  He  feels it  is                                                               
desirable for  teachers to  come from the  other jobs,  public or                                                               
private,  before teaching.  Alaska will  not be  able to  attract                                                               
topnotch resource  scientists - not  with the salaries  the state                                                               
pays unless there  are defined benefits. He loves  teaching so he                                                               
will have  to leave  the state or  he could go  back to  the PERS                                                               
system. Friends from Homer work  for the legislature to get their                                                               
additional three years. He could  also get a non-certified job in                                                               
his school. "I  could actually clean up the classroom  and get my                                                               
PERS time." SB 183 is positive for Alaskans and its children.                                                                   
                                                                                                                                
10:27:24 AM                                                                                                                   
SENATOR STEVENS said  a person used to be able  to go between TRS                                                               
and PERS. He  is surprised to learn that it  is not possible now.                                                               
How did that come about, and where does it say it?                                                                              
                                                                                                                                
MR. FOSTER  said a specialist told  him he couldn't link  the two                                                               
systems. "My choice  was to either leave the state  because I was                                                               
not going to be able to  collect those additional three years, or                                                               
… go back into the PERS system through another job."                                                                            
                                                                                                                                
SENATOR STEVENS said, "As I  recall from prior retirement systems                                                               
in the  state, you can take  PERS service into TRS  together, and                                                               
use  them together  for one  single retirement."  It sounds  like                                                               
that can't be done now.                                                                                                         
                                                                                                                                
10:28:47 AM                                                                                                                   
                                                                                                                                
KATHY  LEA,  Retirement  Manager,   Division  of  Retirement  and                                                               
Benefits, said  that is correct.  There is no  connection between                                                               
the defined  contribution plans.  "In the defined  benefit plans,                                                               
there are two different ways --  if you have service in both PERS                                                               
and TRS  -- that you  can obtain a  benefit. If you're  vested in                                                               
one system and you have at least  two years in the other, you can                                                               
have what's called a conditional  service benefit. So you can get                                                               
a benefit from  both plans. If you are not  vested in either, but                                                               
you have at least three years  in PERS, you can transfer your TRS                                                               
service to  PERS. And if  you have at  least five years,  you can                                                               
qualify for a  public service benefit." So there are  two ways in                                                               
the DBPs to  use the years you  have in both systems,  but in the                                                               
DCP, there  are no connections.  "So if you  do start in  one and                                                               
move to the other, the service does not combine."                                                                               
                                                                                                                                
SENATOR FRENCH said those changes came from SB 141.                                                                             
                                                                                                                                
MS. LEA said yes.                                                                                                               
                                                                                                                                
SENATOR  STEVENS asked  the cost  of combining  the two.  "It's a                                                               
good system  to allow  people to  take years  from PERS  and take                                                               
years from  TRS and combine  them together,  but I assume  it's a                                                               
matter  of  cost."  He  asked about  changing  "that  one  little                                                               
section."                                                                                                                       
                                                                                                                                
10:31:54 AM                                                                                                                   
PAT SHIER,  Director, Division of Retirement  and Benefits, asked                                                               
if  he means  combining  the service  credit  for qualifying  for                                                               
vesting.                                                                                                                        
                                                                                                                                
SENATOR STEVENS said maybe not  just for vesting. "Prior to this,                                                               
you could retire, say, in TRS,  and if you had some PERS service,                                                               
that would combine  for one retirement package -  isn't that true                                                               
- say ten years ago?"                                                                                                           
                                                                                                                                
MS. LEA said not  quite; it is one check, but  it is two separate                                                               
benefits with  separate health eligibilities. People  with a PERS                                                               
benefit  and a  conditional  TRS benefit  would  have two  health                                                               
plans that  would coordinate together.  Under the DCPs,  a person                                                               
would have to  determine how she or he wanted  to combine the two                                                               
plans. There  is also a requirement  under the DCP that  a person                                                               
terminate from active employment in order to access the medical.                                                                
                                                                                                                                
SENATOR STEVENS said he is not prepared to ask this question.                                                                   
                                                                                                                                
10:33:25 AM                                                                                                                   
CHAIR MCGUIRE said  Senator Stevens is probably  asking about the                                                               
vesting.  She  noted that  his  constituent,  Mr. Foster,  was  a                                                               
biologist  with excellent  training  who now  wants  to teach  in                                                               
Homer.  He brings  his experience  to teaching.  And prior  to SB                                                               
141,  he could  have combined  his  time in  the teaching  system                                                               
toward his  overall vesting  term of  service. SB  141 eliminated                                                               
that, and she  thinks Senator Stevens wants to know  the costs of                                                               
fixing that part of what happened in SB 141.                                                                                    
                                                                                                                                
SENATOR STEVENS said that is what he would have asked.                                                                          
                                                                                                                                
10:34:25 AM                                                                                                                   
BEN WALKER,  Teacher, Anchorage,  said he  works in  Romig Middle                                                               
School and grew up in  Ketchikan and Anchorage. He taught English                                                               
in South America. His mom was a  teacher, and he found it to be a                                                               
good profession.  While in the  master's program at UAA  in 2005,                                                               
the benefits package changed. Romig  hired him before July 1, but                                                               
due  to the  processing, he  didn't sign  a contract  until after                                                               
that, so he  is under the new plan. He  was given a questionnaire                                                               
when he  became part of the  plan, which put him  in a particular                                                               
level of money management. For the  last quarter of 2007, he lost                                                               
$154.00 and had to pay $12.00  to do that. In the private sector,                                                               
it was similar,  but the employer picked up  the management fees.                                                               
"So if  I did lose money  I didn't have  to pay to do  it." Since                                                               
being in the plan,  he has put in $8,400 and  now has $8,500. For                                                               
almost two  years he has earned  0.9 percent. If he  could put it                                                               
in  a savings  account, that  would be  nice. "It's  actually not                                                               
going to be  a very decent retirement." He is  engaged to another                                                               
teacher,  and they  will have  to face  a choice  of one  of them                                                               
stopping teaching or moving to another state.                                                                                   
                                                                                                                                
10:37:38 AM                                                                                                                   
CHAIR MCGUIRE said  he is a teacher, not a  financial manager. On                                                               
top of sacrificing  on salary, "we're trying  to become financial                                                               
experts as well."                                                                                                               
                                                                                                                                
10:38:28 AM                                                                                                                   
JAKE  TODD,  Teacher,  Anchorage,  said he  is  not  a  financial                                                               
planner  and doesn't  care to  be. He  teaches at  the same  high                                                               
school he  graduated from, and  it is  the same school  where his                                                               
parents taught. "I  am a fourth generation educator  and a second                                                               
generation  Alaskan."  His  parents taught  Senator  Bunde's  and                                                               
Senator Green's  kids. He left Alaska  to go to college  and came                                                               
home. He  wants to spend his  life here. It was  at great expense                                                               
to return to Alaska. He didn't have  to move a family, but it was                                                               
still difficult, and  it is an expensive place to  live. "And now                                                               
I'm leaving. I'm quitting my job  because I cannot make it here."                                                               
What police  officers, teachers, and  firefighters need is  to be                                                               
able  to  retire  with  dignity and  security.  The  DCP  doesn't                                                               
provide  either. The  other 49  states do,  and they  are looking                                                               
nice now. It cost the  Anchorage school district $12,000 to train                                                               
him this  year, and  now he  is walking away.  He knows  of three                                                               
other  first-year teachers  who are  also quitting.  He said  the                                                               
previous  retirement system  wasn't  broken, "you  guys just  got                                                               
some  bad advice."  "Way  to throw  the baby  out  with the  bath                                                               
water, because  you threw out my  retirement plan with it  and my                                                               
dreams of  coming back  to being  an Alaskan for  the rest  of my                                                               
life." He is not eligible for  social security - "all my eggs are                                                               
in  the  basket  of  the  market, which  is  facing  the  largest                                                               
recession in recent  memory." It doesn't help him  sleep at night                                                               
to see the Fed lowering  interest rates again. "Anybody who truly                                                               
believes this retirement plan is worth  it, put it up. Trade me."                                                               
He noted that  the people he really wanted to  address today left                                                               
the meeting.  "I don't  think that  I deserve  any less  than Con                                                               
Bunde for doing  the same service to the state  of Alaska -- just                                                               
in  different  time periods."  So  during  this lapse  in  common                                                               
sense, he has volunteered to serve  his county in the Middle East                                                               
for  the next  two  years.  When he  comes  back,  he wants  this                                                               
problem solved, or else Alaska  will lose a homegrown teacher. "I                                                               
want to teach  school; I don't want anything else,  and right now                                                               
I'm unable to do that."                                                                                                         
                                                                                                                                
10:42:56 AM                                                                                                                   
SCOTT  MCDONALD, Teacher,  Anchorage,  said his  testimony is  on                                                               
behalf on many people who couldn't  be here. He has chosen public                                                               
service  and teaches  at an  elementary school.  He was  born and                                                               
educated in  Alaska. He has  a tough class with  English language                                                               
learners and homeless students, but  he has the education to deal                                                               
with  it. "I  work  hard." He  is  35 years  old  and cannot  see                                                               
himself retiring  until at least  65. His  father told him  to do                                                               
what  he was  passionate about  but to  make sure  he can  make a                                                               
living. He is  passionate about teaching, and he  doesn't want to                                                               
be  a financial  planner.  "I don't  know  about the  correlation                                                               
between pickles and  death in 1880 as Mr. Bunde  pointed out." He                                                               
will be vested in three years  and hopes he can retire in Alaska,                                                               
but he is  shopping around. Other states are  looking good. There                                                               
are  other states  with mountains  and ski  slopes, but  it is  a                                                               
foreign land to him, but he might have to join it.                                                                              
                                                                                                                                
10:45:32 AM                                                                                                                   
CHAIR MCGUIRE said she will make sure this the testimony will be                                                                
distributed to the members in the committee who missed it.                                                                      
                                                                                                                                
10:45:46 AM                                                                                                                   
CHAIR MCGUIRE recessed the meeting to the call of the chair. [SB                                                                
183 was heard again the following day when the meeting                                                                          
continued.]                                                                                                                     

Document Name Date/Time Subjects