Legislature(2005 - 2006)HOUSE FINANCE 519

04/12/2006 08:30 AM House FINANCE


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Continued from 04/11/06 --
+= HB 390 PROPERTY ASSESSMENT APPEAL FEE TELECONFERENCED
Moved CSHB 390(FIN) Out of Committee
+= HB 475 PUB EMPLOYEE & TEACHER RETIREMENT & SBS TELECONFERENCED
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
                  HOUSE FINANCE COMMITTEE                                                                                       
                       April 12, 2006                                                                                           
                         8:45 A.M.                                                                                              
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair Meyer called the House  Finance Committee meeting to                                                                   
order at 8:45:49 AM.                                                                                                          
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Mike Chenault, Co-Chair                                                                                          
Representative Kevin Meyer, Co-Chair                                                                                            
Representative Bill Stoltze, Vice-Chair                                                                                         
Representative Mike Hawker                                                                                                      
Representative Jim Holm                                                                                                         
Representative Reggie Joule                                                                                                     
Representative Mike Kelly                                                                                                       
Representative Beth Kerttula                                                                                                    
Representative Carl Moses                                                                                                       
Representative Bruce Weyhrauch                                                                                                  
                                                                                                                                
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative Richard Foster                                                                                                   
                                                                                                                                
ALSO PRESENT                                                                                                                  
                                                                                                                                
Representative    Paul   Seaton;    Ben   Mulligan,    Staff,                                                                   
Representative   Bill  Stoltze;   Kathie  Wasserman,   Alaska                                                                   
Municipal League, Juneau; Katie  Shows, Staff, Representative                                                                   
Paul Seaton                                                                                                                     
                                                                                                                                
PRESENT VIA TELECONFERENCE                                                                                                    
                                                                                                                                
Steve  Van  Sant, State  Assessor,  Department  of  Commerce,                                                                   
Community and  Economic Development, Anchorage;  Shane Horan,                                                                   
Kenai Peninsula Borough; Marty  McGee, Assessor, Municipality                                                                   
of Anchorage                                                                                                                    
                                                                                                                                
SUMMARY                                                                                                                       
                                                                                                                                
HB 390    An Act limiting the  amount that a municipality may                                                                   
          charge for an appeal of a residential real                                                                            
          property tax assessment to the municipality's                                                                         
          board of equalization.                                                                                                
                                                                                                                                
          CS HB 390 (FIN) was reported out of Committee with                                                                    
          a "no" recommendation and with zero note #1 by the                                                                    
          Department of Commerce, Community & Economic                                                                          
          Development.                                                                                                          
                                                                                                                                
HB 475    An  Act  describing  contributions  to  the  health                                                                   
          reimbursement   arrangement    plan   for   certain                                                                   
          teachers    and   public   employees;    clarifying                                                                   
          eligibility   for   membership   in   that   health                                                                   
          reimbursement  arrangement  plan;  relating to  the                                                                   
          'administrator'    of    the   Public    Employees'                                                                   
          Retirement  System of Alaska; and providing  for an                                                                   
          effective date.                                                                                                       
                                                                                                                                
          HB 475 was HEARD & HELD in Committee for further                                                                      
          consideration.                                                                                                        
                                                                                                                                
8:46:43 AM                                                                                                                    
HOUSE BILL NO. 390                                                                                                            
                                                                                                                                
     An  Act limiting  the  amount  that a  municipality  may                                                                   
     charge for an appeal of a  residential real property tax                                                                   
     assessment to the municipality's  board of equalization.                                                                   
                                                                                                                                
REPRESENTATIVE  BILL STOLTZE,  SPONSOR, explained that  often                                                                   
times, homeowners feel that the  value of their home has been                                                                   
wrongly assessed.  In order to  challenge that assessment, an                                                                   
appeal  must be  filed  with  their municipality's  board  of                                                                   
equalization.  Currently, municipalities  charge a variety of                                                                   
fees associated with the assessment appeal.                                                                                     
                                                                                                                                
HB 390 would cap  the amount a municipality can  charge for a                                                                   
homeowner  to appeal  the  assessment on  their  home at  $10                                                                   
dollars  if the municipality  has a  population greater  than                                                                   
30,000.   The legislation is  an attempt to allow  homeowners                                                                   
due  process   in  having  their   home  assessed   by  local                                                                   
government.                                                                                                                     
                                                                                                                                
8:50:09 AM                                                                                                                    
                                                                                                                                
In response  to Representative Weyhrauch, Vice  Chair Stoltze                                                                   
noted that there  are communities that provide  some built-in                                                                   
safety  valves.   A  municipality would  have  the option  to                                                                   
charge no  fee.   Co-Chair Meyer  pointed out that  Fairbanks                                                                   
does not  have a fee and  that Anchorage has a  sliding scale                                                                   
fee.                                                                                                                            
                                                                                                                                
8:51:40 AM                                                                                                                    
                                                                                                                                
Representative   Holm  asked   if  Representative   Stoltze's                                                                   
district had a sales tax.  Vice  Chair Stoltze responded some                                                                   
sections of his district do and some don't.                                                                                     
                                                                                                                                
Representative  Holm  commented  that he  was  philologically                                                                   
opposed to any property tax.   He was curious why any fee was                                                                   
charged  to  appeal  the  assessment.    Vice  Chair  Stoltze                                                                   
acknowledged   that   was  his   preference,   however,   had                                                                   
compromised, inserting a $10 dollar fee.                                                                                        
                                                                                                                                
Co-Chair Meyer thought that the  Anchorage Assembly would not                                                                   
support the legislation, seeing it as an unfunded mandate.                                                                      
                                                                                                                                
8:55:00 AM                                                                                                                    
                                                                                                                                
PUBLIC TESTIMONY                                                                                                              
                                                                                                                                
KATHIE  WASSERMAN,  ALASKA MUNICIPAL  LEAGUE  (AML),  JUNEAU,                                                                   
explained that AML  opposes HB 390, as such  decisions should                                                                   
be  left  as  a   matter  of  local  control.     Out  of  48                                                                   
municipalities  that have property  taxing authority,  only 3                                                                   
now  charge   a  fee  for   property  tax  appeals.     Those                                                                   
municipalities   are    Ketchikan   Gateway    Borough,   the                                                                   
Municipality of Anchorage  (MOA) and the Kenai  Borough.  The                                                                   
fee  is done  on  a sliding  scale  based on  property  value                                                                   
resulting  in  a fee  from  $30 dollars  to  a  high of  $100                                                                   
dollars.  Older citizens are exempt  from property tax.   She                                                                   
pointed  out  that  appeals  result  in  high  costs  to  the                                                                   
municipalities.                                                                                                                 
                                                                                                                                
Ms. Wasserman disagreed with statements  that the process was                                                                   
"rigged".   The amount  of appeals  has dropped  dramatically                                                                   
with  the imposition  of a  fee.   Anchorage appeals  dropped                                                                   
from  a yearly  average of  2,500 to  700.   The fee  affects                                                                   
                  th                                                                                                            
approximately  1/5  of  the population  and is reimbursed  if                                                                   
the property owner's appeal is successful.                                                                                      
                                                                                                                                
Ms.  Wasserman  said the  Kenai  Borough  is an  entity  with                                                                   
taxing authority  with a population of 50,000.   She wondered                                                                   
if  the  bill  should  be  reworded   to  indicate  only  the                                                                   
Municipality of Anchorage.                                                                                                      
                                                                                                                                
8:58:04 AM                                                                                                                    
                                                                                                                                
Vice  Chair  Stoltze  said  his  constituents  requested  the                                                                   
legislation.   The MatSu  Borough is  now approaching  80,000                                                                   
residents.    He did  not  believe  the  bill was  a  special                                                                   
interest for Anchorage.                                                                                                         
                                                                                                                                
8:58:42 AM                                                                                                                    
                                                                                                                                
SHANE HORAN, (TESTIFIED VIA TELECONFERENCE),  KENAI PENINSULA                                                                   
BOROUGH, stated that the Kenai  Borough Assembly instituted a                                                                   
filing fee  in 2005, mirroring  that of Anchorage with  a $30                                                                   
dollar  fee  for  property  assessed   up  to  $100  thousand                                                                   
dollars;  $100  for  property  assessed  from  $100  to  $500                                                                   
thousand dollars and  a $200 fee for property  assessed up to                                                                   
$2 million dollars.                                                                                                             
                                                                                                                                
According to the  code, if the appeal results  in a reduction                                                                   
from  the  original  assessed  value  or  if  the  appeal  is                                                                   
withdrawn  before  the  evidence  is  due  to  the  Board  of                                                                   
Equalization,    then   the    filing   fee   is    refunded.                                                                   
Additionally,  the appeal fee  may be waived  as a  result of                                                                   
one's annual  income as  provided in  the poverty  guidelines                                                                   
for Alaska.                                                                                                                     
                                                                                                                                
Mr. Horan  pointed out  that the filing  fee has  reduced the                                                                   
number  of appeals  and has  helped that  office become  more                                                                   
efficient.   The Alaska Statutes  note that the burden  is on                                                                   
the  property  owner  to  prove  that  their  assessment  was                                                                   
unequal  or over-valued.   Their  office, as  a policy,  must                                                                   
inspect every  appeal property, address the  owners concerns,                                                                   
prepare  presentations  to  the Board  of  Equalization,  and                                                                   
often find the property owner's  absent or not the presenting                                                                   
testimony.  The fee, as instituted,  gives the property owner                                                                   
more ownership in the appeal process.   The fee is reimbursed                                                                   
to anyone that wins the appeal,  which makes for a reasonable                                                                   
accommodation for the property owners.                                                                                          
                                                                                                                                
Mr.  Horan  noted  that  the   Borough  does  offer,  through                                                                   
ordinance,  the opportunity  for anyone  an informal  meeting                                                                   
with the  assessor regarding  their assessment.   The  action                                                                   
has been  successful in  many of the  appeals in  an informal                                                                   
format.    He  stated  that  the  $10  fee  would  not  be  a                                                                   
sufficient deterrent  for frivolous appeals.   In 2004, there                                                                   
were well  over 600 appeals and  with the institution  of the                                                                   
appeal-filing fee for 2005, there were only 280 appeals.                                                                        
                                                                                                                                
Mr. Horan  noted that  the last  population estimate  for the                                                                   
entire Kenai Borough was 51,250 residents.                                                                                      
                                                                                                                                
Vice Chair  Stoltze commended  the City of  Kenai for  a more                                                                   
"enlightened" appeal process.   He objected to the use of the                                                                   
term "frivolous", when speaking to someone's property tax.                                                                      
                                                                                                                                
9:03:47 AM                                                                                                                    
                                                                                                                                
Co-Chair  Meyer  understood  that it  cost  the  municipality                                                                   
about  $100 dollars  per appeal.    Mr. Horan  said that  was                                                                   
conservatively correct,  as they would spend  approximately 4                                                                   
hours  on each appeal.   Co-Chair  Meyer agreed  that no  one                                                                   
likes to  pay property tax  and if the  fee was free  or even                                                                   
$10 dollars,  it could be detrimental  to the boroughs.   Mr.                                                                   
Horan reiterated  that the fee  is returned if  the homeowner                                                                   
wins the appeal.   Last year, the Borough  made approximately                                                                   
$2,300 dollars total from collection of fees.                                                                                   
                                                                                                                                
9:06:19 AM                                                                                                                    
                                                                                                                                
STEVE  VAN   SANT,  (TESTIFIED  VIA  TELECONFERENCE),   STATE                                                                   
ASSESSOR,  DEPARTMENT  OF COMMERCE,  COMMUNITY  AND  ECONOMIC                                                                   
DEVELOPMENT,  ANCHORGE, clarified that  the beginning  fee in                                                                   
Anchorage  starts at  $30  dollars for  property  up to  $100                                                                   
thousand dollars,  and is  refundable if  the owner  wins the                                                                   
appeal.   He  noted there  is an  "informal review"  process,                                                                   
where the unhappy taxpayer can  speak with the assessor about                                                                   
their assessment.   Mr. Van Sant  stated that there  are many                                                                   
people  bypassing  the  assessor's   office  and  not  taking                                                                   
advantage  of the  informal appeal;  the  fee encourages  the                                                                   
informal review process.   He acknowledged that  no one likes                                                                   
to be taxed.   Mr. Van Sant  hoped that the assessor  & staff                                                                   
make  good   judgment;  sometimes,  however,  they   do  make                                                                   
mistakes.  They  are experts in their field  and the majority                                                                   
of time, are correct, as they  know what they are doing given                                                                   
their training.                                                                                                                 
                                                                                                                                
9:10:00 AM                                                                                                                    
                                                                                                                                
Representative   Weyhrauch   commented   on   the   increased                                                                   
assessment  of   his  own  home,  pointing  out   that  after                                                                   
contacting the local assessor's  office that office was quite                                                                   
helpful and not adversarial and an agreement was made.                                                                          
                                                                                                                                
9:11:07 AM                                                                                                                    
                                                                                                                                
MARTY  MCGEE,   (TESTIFIED  VIA  TELECONFERENCE),   ASSESSOR,                                                                   
MUNICIPALITY  OF ANCHORAGE, advised  that the appeal  process                                                                   
is designed to  addresses issues of value.  That  is the only                                                                   
thing  that the  Board of  Equalization is  empowered to  do.                                                                   
Frivolous concerns  result when taxpayers attempt  to address                                                                   
concerns in a way that it is not designed.                                                                                      
                                                                                                                                
Mr. McGee  pointed out that Anchorage  had a system  that was                                                                   
"badly broken"  and sued by the  taxpayers.  The  Courts gave                                                                   
the  Municipality  a  one-year  time period  to  determine  a                                                                   
system that  works to  address appeals.   He stated  that the                                                                   
tax was  implemented to address  the appeals and that  it has                                                                   
been successful.   The taxpayers  have not been  working with                                                                   
the  appraisal staff  to resolve  those issues  and that  the                                                                   
filing fee is an essential component  making the system work.                                                                   
Over 76%  of the fees  have been  refunded to the  taxpayers.                                                                   
He pointed out  that an assessor does not have  the authority                                                                   
to go inside a property being appraised.                                                                                        
                                                                                                                                
9:14:09 AM                                                                                                                    
                                                                                                                                
Co-Chair  Meyer  asked  the  cost   to  the  Municipality  of                                                                   
Anchorage (MOA) to  process an appeal.  Mr.  McGee thought it                                                                   
was higher than $100 dollars,  indicating they deal with many                                                                   
types of properties.   For a home  appeal, it is more  in the                                                                   
neighborhood of $200  dollars per appeal.  He  estimated that                                                                   
their  Office was  saving the  Anchorage  taxpayers about  $1                                                                   
million  dollars per year  by offering  the informal  process                                                                   
and fee ladder.                                                                                                                 
                                                                                                                                
Co-Chair  Meyer inquired  the year  that the  fee was put  in                                                                   
place.   Mr. McGee replied  there was  no fee in  place until                                                                   
2004.   Once the fee was  implemented, the appeals  decreased                                                                   
significantly.  He added that  no fee is charged for property                                                                   
review.                                                                                                                         
                                                                                                                                
Vice Chair Stoltze  noted his frustration in  his attempts to                                                                   
get the MOA to indicate a position on the bill.                                                                                 
                                                                                                                                
Mr.  Van Sant  stated  that because  the  number of  informal                                                                   
appeals  decreased does  not mean  that the  total number  of                                                                   
reviews has  decreased.  In  2004, they reviewed  about 2,800                                                                   
parcels; in  2005, the  number of  appeals was 667;  however,                                                                   
there was  4,100 informal  reviews.   The process has  forced                                                                   
people  to  use the  40-day  review  period.   In  the  past,                                                                   
because the taxpayer waited until  the last minute, they were                                                                   
forced to  file a  formal appeal, bringing  it into  the cost                                                                   
mode.                                                                                                                           
                                                                                                                                
PUBLIC TESTIMONY CLOSED                                                                                                       
                                                                                                                                
9:18:48 AM                                                                                                                    
                                                                                                                                
Vice Chair Stoltze claimed he  had limited the legislation to                                                                   
residential  appeal   fees  and  thought  it   was  a  modest                                                                   
proposal.                                                                                                                       
                                                                                                                                
Co-Chair  Meyer MOVED  to  ADOPT Amendment  #1.   Vice  Chair                                                                   
Stoltze OBJECTED.                                                                                                               
                                                                                                                                
Co-Chair Meyer  pointed out that  currently, a  sliding scale                                                                   
exists in Anchorage.  The amendment  would change the current                                                                   
scale to:                                                                                                                       
                                                                                                                                
   · $25 as a fee for property assessed to $99,999                                                                              
   · $50 as a fee for property assessed to $100,000-$499,999                                                                    
   · $100 as a fee for property assessed to $500,000-                                                                           
     $1,999,999                                                                                                                 
   · $200 as a fee for property assessed over $2,000,000                                                                        
                                                                                                                                
Co-Chair  Meyer noted  his time  on  the Anchorage  Assembly,                                                                   
realizing  it costs  the Municipality  to  do the  assessment                                                                   
work;  if no  fee is  charged,  people will  file.   Co-Chair                                                                   
Meyer acknowledged  the steep jump  MOA made in 2005  and did                                                                   
not want to see  the appraisal ability as a  money raiser for                                                                   
the cities.                                                                                                                     
                                                                                                                                
Vice Chair  Stoltze respected  the comments made  by Co-Chair                                                                   
Meyer, understanding various local  challenges but maintained                                                                   
his objection.                                                                                                                  
                                                                                                                                
Representative  Kerttula  asked if  any  other  place in  the                                                                   
State  had a $200  dollar  fee at this  time.   Mr. Van  Sant                                                                   
replied that the  fee is based on the value  of the property;                                                                   
typically that amount would be a commercial property.                                                                           
                                                                                                                                
9:23:19 AM                                                                                                                    
                                                                                                                                
Representative  Holm was  confused about  the proposal  as it                                                                   
takes away  local control.   Co-Chair Meyer pointed  out that                                                                   
the amendment  does not  state that  the municipality  "must"                                                                   
charge but  rather "may"  charge.   Fairbanks would  have the                                                                   
option either way.                                                                                                              
                                                                                                                                
9:25:51 AM                                                                                                                    
                                                                                                                                
Vice Chair  Stoltze WITHDREW his  OBJECTION to  Amendment #1.                                                                   
Representative Kelly OBJECTED.                                                                                                  
                                                                                                                                
A roll call vote  was taken on the motion to  adopt Amendment                                                                   
#1.                                                                                                                             
                                                                                                                                
IN FAVOR:      Joule, Kerttula, Moses, Weyhrauch, Hawker,                                                                       
               Meyer                                                                                                            
OPPOSED:       Holm, Kelly, Stoltze, Chenault                                                                                   
                                                                                                                                
Representative Foster was not present for the vote.                                                                             
                                                                                                                                
The MOTION PASSED (6-4).                                                                                                        
                                                                                                                                
9:26:59 AM                                                                                                                    
                                                                                                                                
Representative Joule  stated that he supported  the amendment                                                                   
in payback to  Representative Kelly, indicating  he would not                                                                   
object to the bill moving from  Committee but maintained that                                                                   
these concerns should be addressed at the local level.                                                                          
                                                                                                                                
Representative  Hawker commented  that the State  Legislature                                                                   
has the authority to interfere  with local issues and matters                                                                   
when local  authority  is abusing the  citizenry.   Following                                                                   
the  weight of  testimony  from  the municipalities,  it  has                                                                   
become clear  that there  are safe  guards already  in place.                                                                   
He agreed  that having a fee  for the formal  process diverts                                                                   
many claims.   Based  on testimony,  he airs  on the  side of                                                                   
support for the municipalities  & local control.  He noted he                                                                   
does not support the bill.                                                                                                      
                                                                                                                                
9:29:42 AM                                                                                                                    
                                                                                                                                
Co-Chair Meyer  agreed with  Representative Hawker,  however,                                                                   
suggested that the process does  not always work in that way.                                                                   
He  noted the  public's frustration  and  hoped that  appeals                                                                   
were  done  correctly  the  first  time.    Providing  a  fee                                                                   
schedule gets the State closer to that intent.                                                                                  
                                                                                                                                
Representative  Kelly  suggested that  the  type of  pressure                                                                   
recommended by the bill keeps the assessor on track.                                                                            
                                                                                                                                
Vice Chair Stoltze  interjected that he respected  the debate                                                                   
of the Committee & the points  raised.  He stated that he had                                                                   
mixed  emotion  regarding  "taking  the bill"  to  the  House                                                                   
Floor.   He apologized to  the Municipality of  Anchorage and                                                                   
noted he would respect the decision  of the Committee whether                                                                   
to table the bill.                                                                                                              
                                                                                                                                
Co-Chair Meyer noted  the issue is of enough  concern that he                                                                   
would support moving it from Committee.                                                                                         
                                                                                                                                
9:33:04 AM                                                                                                                    
                                                                                                                                
Representative Hawker MOVED to  REPORT CS HB 390 (FIN) out of                                                                   
Committee  with  individual  recommendations   and  with  the                                                                   
accompanying fiscal  note.  There being NO  OBJECTION, it was                                                                   
so ordered.                                                                                                                     
                                                                                                                                
CS HB  390 (FIN) was  reported out of  Committee with  a "no"                                                                   
recommendation  and with zero  note #1  by the Department  of                                                                   
Commerce, Community & Economic Development.                                                                                     
                                                                                                                                
9:33:58 AM                                                                                                                    
                                                                                                                                
HOUSE BILL NO. 475                                                                                                            
                                                                                                                                
     An   Act   describing  contributions   to   the   health                                                                   
     reimbursement arrangement  plan for certain teachers and                                                                   
     public employees; clarifying  eligibility for membership                                                                   
     in that health reimbursement  arrangement plan; relating                                                                   
     to  the   'administrator'   of  the  Public   Employees'                                                                   
     Retirement  System  of  Alaska;  and  providing  for  an                                                                   
     effective date.                                                                                                            
                                                                                                                                
Co-Chair  Chenault MOVED  to ADOPT  work draft  #24-LS1685\S,                                                                   
Wayne, 4/11/06,  as the version  of the committee  substitute                                                                   
before  the Committee.    There being  NO  OBJECTION, it  was                                                                   
adopted.                                                                                                                        
                                                                                                                                
9:34:32 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  PAUL   SEATON,  SPONSOR,  updated   Committee                                                                   
members on the process to date.   He stated that HB 475 was a                                                                   
clean up bill to the Retirement  Security Act (SB 141) passed                                                                   
in 2005.   Due to the length  of SB 141, a handful  of errors                                                                   
and oversights  were  made that  need to be  changed for  the                                                                   
transition  to Tier  IV.   HB  475 is  a  technical bill  and                                                                   
intended to include any policy change.                                                                                          
                                                                                                                                
Revisions encompassed in HB 475:                                                                                                
                                                                                                                                
   · Clarifies the procedure for an appeal to the Office of                                                                     
     Administrative Hearings                                                                                                    
   · Requires employer to contribute at least the normal                                                                        
     cost rate starting in 2008                                                                                                 
   · Changes the requirements to receive a conditional                                                                          
     service benefit                                                                                                            
   · Clarifies   provisions  regarding  Personnel   Employees                                                                   
     Retirement System (PERS) and Teachers Retirement System                                                                    
     (TRS) death and disability benefits including how those                                                                    
     benefits would be funded:                                                                                                  
          Funding death and disability                                                                                          
          The structure of death and disability benefits                                                                        
          The survivor benefit                                                                                                  
   · Clarifies  the  eligibility   requirements  for  medical                                                                   
     benefits                                                                                                                   
   · Clarifies  requirements for non-vested  Tier II  or Tier                                                                   
     III employees who wish to transfer to Tier IV                                                                              
   · Clarifies   the    basis   for   calculating    employer                                                                   
     contribution rates                                                                                                         
   · Gives regulatory authority to the appropriate party                                                                        
   · Changes   the  basis   for   calculating  HRA   employer                                                                   
     contributions to meet the Internal Revenue Service                                                                         
     (IRS) tax qualifications                                                                                                   
   · Definitions                                                                                                                
   · Disallows    employment    with    National    Education                                                                   
     Association (NEA) as counting towards Tier IV                                                                              
     retirement eligibility                                                                                                     
   · Establishes  provisions   for  employer  termination  of                                                                   
     participation in the plan                                                                                                  
   · Clarifies  defined  benefit   and  defined  contribution                                                                   
     components of the plan                                                                                                     
   · Establishes adherence to IRS limitations                                                                                   
                                                                                                                                
The changes are not absolutely  necessary for Tier IV to come                                                                   
on line July 1, 2006.  The revisions  clarify many aspects of                                                                   
the  statutes,  providing a  benefit  both  to the  plan  and                                                                   
members.   If changes  are not  made, many crucial  decisions                                                                   
would  be  left to  the  Administrator  of the  plan  without                                                                   
proper guidance from the Legislature.                                                                                           
                                                                                                                                
9:42:19 AM                                                                                                                    
                                                                                                                                
Representative  Weyhrauch noted  that  the sponsor  statement                                                                   
was written  to version  \L and that  the Committee  had just                                                                   
adopted  version\S.   Representative  Seaton  noted the  only                                                                   
substantive  change  to  version\S  is located  on  Page  33,                                                                   
Sections  73 &  77,  the contribution  amount  for death  and                                                                   
disability.  The amount that employers  would have to provide                                                                   
was recalculated; it found that  Mercer had not calculated in                                                                   
the Cost-of-Living-Allowance  (COLA) over  time for  those in                                                                   
Tier III.                                                                                                                       
                                                                                                                                
9:44:32 AM                                                                                                                    
                                                                                                                                
In  response  to  Representative   Weyhrauch  regarding  over                                                                   
funding,   Representative   Seaton   explained   it   was   a                                                                   
retroactive date listed  on Page 33.  The amount  was backed-                                                                   
out and  given  two years  to catch  up.  He  added that  the                                                                   
Division of  Retirement and Benefits  had assured  his office                                                                   
that  under no  circumstance would  they  allow drawing  from                                                                   
over-funded to under-funded status.                                                                                             
                                                                                                                                
9:47:49 AM                                                                                                                    
                                                                                                                                
Representative  Holm observed  the clause  that a "period  of                                                                   
death"  counts  toward  retirement,   questioning  what  that                                                                   
meant.      Representative   Seaton  replied   that   it   is                                                                   
occupational  death  and  disability  and  if  a  member  was                                                                   
working  for a PERS  or TRS  employer and  died, their  heirs                                                                   
would receive the survivor's benefit.                                                                                           
                                                                                                                                
9:49:22 AM                                                                                                                    
                                                                                                                                
Representative  Seaton observed  that the  bill would  change                                                                   
the requirement to receive a conditional  death benefit until                                                                   
2010, clarifying that the employee could buy-back years.                                                                        
                                                                                                                                
Representative  Kerttula asked  the  explanation of  refunded                                                                   
contributions  being   creditable.    Representative   Seaton                                                                   
clarified  that after  2010, a  member  who was  in PERS  and                                                                   
withdrew their funds and then  returns, they would be able to                                                                   
fully  buy-back the  funds  and be  eligible  for a  deferred                                                                   
compensation (DC)  plan.  They would  not be able to  do that                                                                   
after 2010.   The employee  would need the employers  consent                                                                   
to  buy into  a DC  plan.   If  the employee  was a  Deferred                                                                   
Benefit (DB) employee, they would  still be able to buy-back.                                                                   
                                                                                                                                
KATIE  SHOWS, STAFF,  REPRESENTATIVE  SEATON, explained  that                                                                   
there are  a number  of sections  that deal with  conditional                                                                   
service benefits.  The first one  clarifies that the employee                                                                   
has until 2010 to payback service  to be where they left off,                                                                   
which represents  a large unfunded  liability to  the system.                                                                   
The  intent of  SB  141 made  that  change;  HB 475  provides                                                                   
further clarification.  The transfer is a separate section.                                                                     
                                                                                                                                
Representative Kerttula concluded  that a member could refund                                                                   
their  service until  2010.   Ms.  Shows  clarified that  the                                                                   
employee could  still do it until  2010.  If the  service was                                                                   
not refunded,  the employee  could do  it at  any time.   The                                                                   
buy-back must be initiated before  2010 in order to return to                                                                   
their previous  retirement plan if  they are reemployed  on a                                                                   
PERS or TRS plan.                                                                                                               
                                                                                                                                
9:56:07 AM                                                                                                                    
                                                                                                                                
Representative  Seaton  reviewed  the  death  and  disability                                                                   
aspect,  which looks at  funding, structure  of the  benefits                                                                   
and  the survivor  benefits.   The  bill  also clarifies  the                                                                   
eligibility for medical  benefits.  The member  does not have                                                                   
to be continuously insured for their eligibility.                                                                               
                                                                                                                                
Representative   Kerttula   questioned    current   practice.                                                                   
Representative  Seaton observed  that the provision  pertains                                                                   
to early retirement.   He noted that under the  new plan, the                                                                   
medical  benefits apply  at the  age of retirement.   If  the                                                                   
member returns  to work,  and shows  that they were  eligible                                                                   
during  that   period  of  unemployment,  they   would  still                                                                   
qualify.                                                                                                                        
                                                                                                                                
Representative Kerttula  mentioned the "letter  of coverage".                                                                   
Currently,  if the person  retires early,  they receive  full                                                                   
medical  benefits.    Representative  Seaton  responded  that                                                                   
currently, the medical benefits  start at retirement age.  He                                                                   
added  that 75%  of  all medical  expenses  are happening  on                                                                   
early retirees not on the very elderly.                                                                                         
                                                                                                                                
HB 475 was HELD in Committee for further consideration.                                                                         
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
The meeting was adjourned at 10:00 A.M.                                                                                         
                                                                                                                                
                                                                                                                                

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