Legislature(1997 - 1998)

04/11/1997 08:09 AM House CRA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
              HOUSE COMMUNITY AND REGIONAL AFFAIRS                             
                       STANDING COMMITTEE                                      
                         April 11, 1997                                        
                           8:09 a.m.                                           
                                                                               
 MEMBERS PRESENT                                                               
                                                                               
 Representative Ivan Ivan, Chairman                                            
 Representative Fred Dyson                                                     
 Representative Scott Ogan                                                     
 Representative Joe Ryan                                                       
 Representative Jerry Sanders                                                  
 Representative Al Kookesh                                                     
 Representative Reggie Joule                                                   
                                                                               
 MEMBERS ABSENT                                                                
                                                                               
 All Members Present                                                           
                                                                               
 COMMITTEE CALENDAR                                                            
                                                                               
 SPONSOR SUBSTITUTE FOR HOUSE BILL NO. 164                                     
 "An Act providing that employment as a legislator or with the                 
 National Education Association is not credited service under the              
 teachers' retirement system; prohibiting membership in the                    
 teachers' retirement system for holders of limited certificates;              
 removing teachers holding limited certificates to teach Alaska                
 Native language or culture from membership in the teachers'                   
 retirement system; and repealing a provision permitting members of            
 the teachers' retirement system to count unused sick leave credit             
 as credited service."                                                         
                                                                               
  - MOVED CSSSHB 164(CRA) OUT OF COMMITTEE                                     
                                                                               
 (* First public hearing)                                                      
                                                                               
 PREVIOUS ACTION                                                               
                                                                               
 BILL:  HB 164                                                               
 SHORT TITLE: TEACHERS RETIREMENT: ELIGIB. & SICK LEAVE                        
 BILL VERSION: SSHB 164                                                        
 SPONSOR(S): REPRESENTATIVE(S) VEZEY                                           
                                                                               
 JRN-DATE      JRN-PG         ACTION                                           
 02/27/97       510    (H)   READ THE FIRST TIME - REFERRAL(S)                 
 02/27/97       510    (H)   CRA, HES, STATE AFFAIRS                           
 03/10/97       607    (H)   SPONSOR SUBSTITUTE INTRODUCED-REFERRALS           
 03/10/97       607    (H)   CRA, HES, STATE AFFAIRS                           
 03/12/97              (H)   CRA AT  8:00 AM CAPITOL 124                       
 03/12/97              (H)   MINUTE(CRA)                                       
 03/19/97              (H)   CRA AT  8:00 AM CAPITOL 124                       
 03/19/97              (H)   MINUTE(CRA)                                       
 04/02/97              (H)   CRA AT  8:00 AM CAPITOL 124                       
 04/02/97              (H)   MINUTE(CRA)                                       
 04/07/97              (H)   CRA AT  8:00 AM CAPITOL 124                       
 04/07/97              (H)   MINUTE(CRA)                                       
 04/09/97              (H)   CRA AT  8:00 AM CAPITOL 124                       
 04/09/97              (H)   MINUTE(CRA)                                       
 04/11/97              (H)   CRA AT  8:00 AM CAPITOL 124                       
                                                                               
 WITNESS REGISTER                                                              
                                                                               
 BILL CHURCH, Retirement Supervisor                                            
 Division of Retirement                                                        
   and Benefits                                                                
 Department of Administration                                                  
 P.O. Box 110203                                                               
 Juneau, Alaska  99811-0203                                                    
 Telephone:  (907) 465-4460                                                    
 POSITION STATEMENT:  Testified on SSHB 164                                    
                                                                               
 JOSEPH EASAW, Legislative Administrative Assistant                            
 to Representative Al Vezey                                                    
 Alaska State Legislature                                                      
 State Capitol, Room 13                                                        
 Juneau, Alaska  99801                                                         
 Telephone:  (907) 465-3719                                                    
 POSITION STATEMENT:  Testified on SSHB 164                                    
                                                                               
 ACTION NARRATIVE                                                              
                                                                               
 TAPE 97-17, SIDE A                                                            
 Number 016                                                                    
                                                                               
 CHAIRMAN IVAN IVAN called the House Community and Regional Affairs            
 Standing Committee meeting to order at 8:09 a.m.  Members present             
 at the call to order were Representatives Dyson, Sanders and Joule.           
 Representatives Ryan, Ogan and Kookesh arrived at their respective            
 times: 8:10 a.m.; 8:11 a.m.; and 8:15 a.m.                                    
                                                                               
 HB 164 - TEACHERS RETIREMENT: ELIGIB. & SICK LEAVE                          
                                                                               
 Number 025                                                                    
                                                                               
 CHAIRMAN IVAN indicated that the committee would consider HB 164,             
 "An Act providing that employment as a legislator or with the                 
 National Education Association is not credited service under the              
 teachers' retirement system; prohibiting membership in the                    
 teachers' retirement system for holders of limited certificates;              
 removing teachers holding limited certificates to teach Alaska                
 Native language or culture from membership in the teachers'                   
 retirement system; and repealing a provision permitting members of            
 the teachers' retirement system to count unused sick leave credit             
 as credited service."  He added that the committee had adopted a              
 committee substitute to this legislation, 0-LS0636/L, dated April             
 7, 1997, and an amendment, L0S06363/L.2, dated April 8, was moved             
 and objected to.  This amendment is still before the committee.  He           
 invited Representative Ryan, the sponsor of this amendment to                 
 discuss it further.                                                           
                                                                               
 Number 195                                                                    
                                                                               
 REPRESENTATIVE JOE RYAN outlined that the amendment he proposed was           
 to version "L" of this legislation.  He asked the committee to look           
 at page 2, line 1, of the proposed CS.  "'Teacher contributions may           
 not be required for credited unused sick leave.'  The second...line           
 three of the amendment starts out a, a section which says, starting           
 with the passage of the bill, new people coming in.  'School                  
 districts shall compensate a teacher who first began                          
 employment...in effective date of the Act, either by retirement or            
 otherwise for accrued sick leave for which a teacher does not elect           
 to receive credited service.'  That gives a teacher the option of             
 something you don't have now which is a cash out.  If a teacher               
 takes, works eight or ten years, has sick leave accrued, and I                
 think if I remember correctly, Mr. Church established the fact that           
 sick leave was a benefit by statute.  You can change a statute to             
 say new teachers won't get sick leave if you choose, but teachers             
 who have it now, it's an earned benefit and you can't take it away            
 from them without compensating for them or you'll be sued and                 
 you're going to lose."                                                        
                                                                               
 REPRESENTATIVE RYAN continued to note the cash out for sick leave             
 feature in this amendment.  Employees can also use their sick leave           
 for credited service for retirement purposes but they have to make            
 a contribution that would normally be made by the employee toward             
 their retirement at 6.85 percent.  The benefit is set, the employee           
 contribution is set and the only variable would be the employer               
 contribution.  If the 6.85 percent is not paid then the employer              
 will have to pay it.  If an individual wants to gain a benefit by             
 using sick leave to add to their retirement it's only equitable               
 that they make this contribution.  He understood that the NEA did             
 not have a problem with this amendment.                                       
                                                                               
 Number 521                                                                    
                                                                               
 REPRESENTATIVE FRED DYSON stated that he didn't understand how they           
 could get sued under House Bill 164 because he understood that it             
 only applies to teachers joining the system after the effective               
 date of this legislation.                                                     
                                                                               
 REPRESENTATIVE RYAN responded that it was his understanding, and              
 according to Mr. Church, that sick leave is a benefit as defined in           
 statute and unless this is changed new employees are entitled to              
 sick leave.                                                                   
                                                                               
 Number 650                                                                    
                                                                               
 REPRESENTATIVE SCOTT OGAN asked what the fiscal ramifications of              
 this amendment would be if they are required to compensate pay outs           
 of sick leave.                                                                
                                                                               
 REPRESENTATIVE RYAN responded that a teacher can use accrued sick             
 leave for retirement purposes or they can take the sick leave and             
 the district must arrangement for a substitute.  This doubles the             
 cost.  The fiscal implications are that employees use this as a               
 retirement benefit and the state pays for it.  The fiscal impact is           
 that a person has the option of cashing this time out.  If a                  
 teacher decided to use all their sick leave at once a substitute              
 would have to be hired and this would be expensive.                           
                                                                               
 Number 839                                                                    
                                                                               
 BILL CHURCH, Retirement Supervisor, Division of Retirement and                
 Benefits, Department of Administration, came forward to testify on            
 HB 164.  He noted that benefits could not be reduced to present               
 members because of the Alaska Constitution which states that                  
 benefits vest upon hiring and not upon eligibility.  The ability to           
 accrue sick leave came about before statehood through regulation.             
 In 1977, the ability to claim unused sick leave and add it to                 
 retirement benefits was enacted by the legislature.  At this time             
 it became a benefit of the Teachers Retirement System (TRS).                  
 Making a change to the statute would be prospective in nature and             
 would not affect those who are presently employed or who have been            
 employed prior to the change in the law.                                      
                                                                               
 MR. CHURCH continued that the funding for the unused sick leave is            
 calculated as far as the overall costs to provide benefits to                 
 members of the retirement plan.  The cost is borne in part by the             
 members whose contribution rate is 8.65.  The rest of the cost is             
 borne by the employer.  This is spread out over the years.  In                
 Section 1 of the amendment where it discusses the ability to                  
 receive an amount equally to the credit for the sick leave, he did            
 some calculations.  Last year the average salary was a little over            
 $50,000 for a teacher.  If the average school year is calculated at           
 188 days, this would be a daily per diem rate of $266 a day.  If              
 someone had ninety days of unused sick leave, the district would              
 have to compensate this person $23,940 upon termination.  The                 
 district would have to come up with this hard cash right away and             
 this would be a large, sudden impact to the school districts                  
 financially.  Under the present system, this is an accrually                  
 determined cost.                                                              
                                                                               
 MR. CHURCH asked about Section 1 and the use of a teacher's average           
 base salary to calculate the compensation.  Since this is a term              
 used in the retirement statute, not in an education statute, he               
 wasn't sure that this is defined for those purposes.                          
                                                                               
 Number 1079                                                                   
                                                                               
 REPRESENTATIVE RYAN gave an example of a teacher who comes into the           
 system at entry level earning $30,000 per year and building sick              
 time.  At retirement they're making $55,000 to $60,000.  If the               
 sick leave were credited at the salary of which they retire they              
 would be getting an extra benefit because they earned part of it at           
 a much lower wage.  If this is averaged over the average base                 
 salary this makes it more equitable for what this person earned               
 when they were making low wages combined with what they made for              
 higher wages.  The financial impact is spread across this time and            
 it's less of a financial impact.  It's more fair and reflects an              
 amount over the period of time they've been paid.  Otherwise, a               
 person works for a long time at low wages but all of a sudden they            
 cash it all out at the highest range.  He didn't think this was               
 equitable.                                                                    
                                                                               
 MR. CHURCH asked if he was indicating that they use the average               
 salary as compensated in the TRS.  This is where there is a direct            
 formula.  Average base salary is calculated based on the three high           
 years.                                                                        
                                                                               
 Number 1136                                                                   
                                                                               
 REPRESENTATIVE RYAN thought the three high years would defeat the             
 purpose.  He understood this to be the average salary across from             
 the time of employment from where it was earned.  He noted that               
 perhaps he hadn't made this clear enough or that the drafter didn't           
 understand what he meant.                                                     
                                                                               
 CHAIRMAN IVAN stated that he respected Representative Ryan's                  
 efforts to introduce this amendment.  He said his bottom line                 
 position was to give the responsibility of compensating sick leave            
 to the school districts which is reflected in current statute.  He            
 said that if they mandated this amendment there would be some costs           
 passed onto the school districts of which they don't know the                 
 impact of at this time.                                                       
                                                                               
 Number 1212                                                                   
                                                                               
 REPRESENTATIVE OGAN asked Mr. Church if this amendment would                  
 increase costs to the school districts.                                       
                                                                               
 MR. CHURCH responded that he thought it would.  This will be a cost           
 that they will not be able to pre-fund in a sense, to be put in as            
 part of what they need each year.  They will have to make                     
 assumptions about how many teachers will terminate, what the                  
 average amount of sick accrued will be and other compensation                 
 involved.  They would have to pre-figure this amount and have it on           
 hand in the event someone does terminate.                                     
                                                                               
 Number 1251                                                                   
 REPRESENTATIVE DYSON stated that the sponsor of this bill says that           
 it returns the decision making of what to do with sick leave to the           
 individual district and their bargaining unit negotiations.  He               
 asked if this was Mr. Church's understanding as well.                         
                                                                               
 MR. CHURCH responded that since the granting of unused sick leave             
 is a function of the Department of Education he said he was not as            
 well versed in this area as he should be.  He didn't have a direct            
 answer.  He wasn't sure if this was a bargainable item or a benefit           
 granted under statute.  He was inclined to think it was the latter.           
                                                                               
 Number 1334                                                                   
                                                                               
 REPRESENTATIVE DYSON understood that this bill removes this sick              
 leave issue from statute and then automatically becomes a                     
 bargainable unit if the districts and bargaining units choose to.             
                                                                               
                                                                               
 MR. CHURCH believed this to be accurate.                                      
                                                                               
 Number 1355                                                                   
                                                                               
 REPRESENTATIVE DYSON noted that from an expert labor management               
 perspective he asked what served the state and the people of the              
 state's best interest.  Is it to have many items in a contract                
 defined in state law or is it to allow this to be bargained for, to           
 decentralize that decision making.                                            
                                                                               
 MR. CHURCH responded that the nature of a retirement plan and the             
 associated benefits are geared to attract and retain qualified                
 individuals.  He added that this is balanced against the other side           
 of contract negotiations.  Are the benefits that we afford to                 
 teachers of the state of Alaska enough to attract and retain the              
 qualified people?                                                             
                                                                               
 Number 1408                                                                   
                                                                               
 REPRESENTATIVE DYSON asked if a teacher's contract should be                  
 debated by legislators or should it be made by the local districts            
 in negotiations with a bargaining unit.                                       
                                                                               
 MR. CHURCH responded that he could only respond to this question              
 with his own personal opinion.  He believed it was a combination of           
 both.  The legislature should set the standards as guides and the             
 rest is up to negotiations with the districts.                                
                                                                               
 Number 1505                                                                   
                                                                               
 CHAIRMAN IVAN noted that an objection still remained regarding this           
 amendment.  He requested a roll call.  Representative Ryan and                
 Sanders voted in favor of the amendment.  Representatives Kookesh,            
 Joule, Dyson, Ogan and Ivan voted against the amendment.  The                 
 amendment, L0S06363/L.2, failed.                                              
                                                                               
 REPRESENTATIVE DYSON noted that the author of the bill said this              
 legislation would have the net affect of encouraging teachers to              
 run for the legislature in that their retirement under TRS would be           
 continued.                                                                    
                                                                               
 Number 1555                                                                   
                                                                               
 MR. CHURCH responded that a member of the TRS, if they elect to run           
 for the legislature and are successful, they may elect to continue            
 coverage under the TRS.  This is not mandatory that they do, but it           
 is an option.  Historically, they haven't had a great amount of               
 teachers who have run for office.                                             
                                                                               
 REPRESENTATIVE DYSON asked if the passage of this bill would change           
 this situation.                                                               
                                                                               
 Number 1589                                                                   
                                                                               
 MR. CHURCH stated, "Yes, it would."  The net affect of this                   
 legislation is that a teacher would not be able to continue their             
 coverage under the TRS.                                                       
                                                                               
 REPRESENTATIVE KOOKESH noted that he had no objection of teachers             
 running for the state house and continuing in this program.  He               
 didn't see that there was anything wrong with it.                             
                                                                               
 Number 1610                                                                   
                                                                               
 REPRESENTATIVE JOULE stated that he also saw nothing wrong with it            
 but wondered about a teacher who ran for the legislature and if               
 their participation in TRS was terminated.  He asked if they would            
 be able to take this TRS and transfer it to the Public Employees              
 Retirement System (PERS)?                                                     
                                                                               
 MR. CHURCH responded that this wasn't possible.  There are                    
 provisions in statute that allow someone who is vested in one                 
 system to be able to receive a conditional service retirement                 
 benefit if they have a minimum of two years in the other system.              
 This person would be subject to the rules of the latter.  If                  
 someone started out in TRS and then they entered the PERS they are            
 subject to the latter's rules.                                                
                                                                               
 Number 1695                                                                   
                                                                               
 REPRESENTATIVE KOOKESH added that he had not heard any complaints             
 about teachers being a disservice to the state by being a member of           
 the legislature.  He took issue with eliminating something that was           
 not a problem.  He also knew that a starting teacher's salary is              
 probably a lot more than what a legislator makes.  He didn't know             
 how this would impact the retirement system.                                  
 REPRESENTATIVE RYAN noted that Alaska has a statute that allows               
 someone to be a member of a borough assembly while being a teacher            
 and there's no conflict of interest even though this person might             
 be voting on the local contribution to the school district.                   
 "Anybody that can tell me straight up and down that there's no                
 conflict when you're voting for your own wages is a little                    
 difficult."  He compared this situation to a legislator who votes             
 for education funding, retirement issues, etc.  He thought this               
 situation had good potential for a conflict of interest.                      
                                                                               
 Number 1758                                                                   
                                                                               
 REPRESENTATIVE DYSON stated that he wanted to clear up what he                
 thought were contradictory statements.  He noted his understanding            
 about this bill is that it would make it easier for a teacher to              
 carry forward their retirement benefits into the same system that             
 the legislators are under without a net loss of benefits and is an            
 encouragement for retired teachers or active teachers to serve in             
 the legislature.  This legislation would improve a teacher's                  
 financial situation.  Mr. Church seems to think the contrary.                 
                                                                               
 Number 1870                                                                   
                                                                               
 JOSEPH EASAW, Legislative Administrative Assistant, Representative            
 Al Vezey, came forward to testify on SSHB 164.  He stated that he             
 had not been privy to the conversation between Representatives                
 Vezey and Dyson regarding the above scenario but he understood the            
 bill to disallow a teacher to continue their accumulation of                  
 benefits under the TRS as they serve as a member of the                       
 legislature.  Under the current law this is allowed, the individual           
 teacher can elect to either continue under the TRS or to elect                
 membership under the PERS.  This legislation removes the ability of           
 a teacher to continue accumulation under TRS as they perform their            
 services for the legislature.                                                 
                                                                               
 Number 1937                                                                   
                                                                               
 REPRESENTATIVE OGAN moved and asked unanimous consent to move                 
 CSSSHB 164 (CRA) out of committee with individual recommendations             
 and accompanying zero fiscal note.  Hearing no objection, CSSSHB
 164 (CRA) was moved out of the House Community and Regional Affairs           
 Committee.                                                                    
 ADJOURNMENT                                                                   
                                                                               
 CHAIRMAN IVAN adjourned the House Community and Regional Affairs              
 Committee at 8:42 a.m.                                                        
                                                                               
                                                                               

Document Name Date/Time Subjects