Legislature(1997 - 1998)
04/11/1997 08:09 AM House CRA
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
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.
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