Legislature(1995 - 1996)

04/10/1996 01:36 PM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
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                     HOUSE FINANCE COMMITTEE                                   
                         April 10, 1996                                        
                            1:36 P.M.                                          
                                                                               
  TAPE HFC 96-109, Side 1, #000 - end.                                         
  TAPE HFC 96-109, Side 2, #000 - end.                                         
  TAPE HFC 96-110, Side 1, #000 - end.                                         
  TAPE HFC 96-110, Side 2, #000 - #360.                                        
                                                                               
  CALL TO ORDER                                                                
                                                                               
  Co-Chair  Mark  Hanley called  the  House  Finance Committee                 
  meeting to order at 1:36 p.m.                                                
                                                                               
  PRESENT                                                                      
                                                                               
  Co-Chair Hanley                                                              
  Co-Chair Foster               Representative Martin                          
  Representative Brown          Representative Mulder                          
  Representative Grussendorf    Representative Parnell                         
  Representative Kelly          Representative Therriault                      
  Representative Kohring                                                       
                                                                               
  Representative Navarre was absent from the vote.                             
                                                                               
  ALSO PRESENT                                                                 
                                                                               
  Representative  Jerry  Mackie;  Bill Munroe,  Mat-Su;  David                 
  Means, Ketchikan Greater Borough School District; Lucy Hope,                 
  Mat-Su;   Len   Murray,   Mat-Su;   Richard   Mauer,   Delta                 
  Junction/Greely    School    District;    George    Hronkin,                 
  Administrator   Copper   River   School  District;   Theresa                 
  Stoddard,  Kenai;  Steven  Wright,  Kenai  Peninsula  School                 
  Association;  Keith  Evans,   Dilingham  City  Schools;  Bob                 
  Stalnaker, Director,  Division of  Retirement and  Benefits,                 
  Department of Administration; Carl Rose, Alaska  Association                 
  of School  Boards; Joan Wilkerson,  Alaska Public  Employees                 
  Association;   Larry   Wiget,  Anchorage   School  District;                 
  Kimberly Homme, Special Assistant, Department of Education.                  
                                                                               
  SUMMARY                                                                      
  HB 2      An   Act  allowing   courts  to   require  certain                 
            offenders as  a special condition  of probation to                 
            complete  a  boot  camp program  provided  by  the                 
            Department  of  Corrections; making  prisoners who                 
            complete  the  boot  camp   program  eligible  for                 
            discretionary parole; providing  for incarceration                 
            of  certain  nonviolent  offenders in  boot  camps                 
            operated   by   the  Department   of  Corrections;                 
                                                                               
                                1                                              
                                                                               
                                                                               
            allowing the Department of Corrections to contract                 
            with  a  person  for  an  alternative   boot  camp                 
            program; creating the Boot  Camp Advisory Board in                 
            the Department of  Corrections; and providing  for                 
            an effective date.                                                 
                                                                               
            HB 2 was rescheduled to another time.                              
  HB 354    An Act relating to a retirement  incentive program                 
            for certain  employees of  school districts  under                 
            the  teachers' retirement  system  and the  public                 
            employees' retirement system; and providing for an                 
            effective date."                                                   
                                                                               
            CSHB 354 (FIN) was reported  out of Committee with                 
            "no recommendation" and with a fiscal  impact note                 
            by   the   Department  of   Administration,  dated                 
            3/16/96.                                                           
  SB 226    An  Act relating to biennial registration of motor                 
            vehicles; imposing biennial  registration fees  on                 
            motor   vehicles   and  authorizing   a  scheduled                 
            biennial municipal tax on motor vehicles; relating                 
            to  fees  for   motor  vehicle  emissions  control                 
            programs; and providing for an effective date.                     
                                                                               
            SB 226 was rescheduled to another time.                            
  SB 250    An Act relating to the University of Alaska and to                 
            assets  of the  University of  Alaska; authorizing                 
            the  University  of  Alaska  to select  additional                 
            state public domain land, designating that land as                 
            `university  trust  land,'   and  describing   the                 
            principles  applicable  to the  land's management;                 
            and defining the net income from the University of                 
            Alaska's  endowment  trust  fund   as  `university                 
            receipts'    subject    to    prior    legislative                 
            appropriation.                                                     
                                                                               
            SB 250 was rescheduled to another time.                            
  HOUSE BILL NO. 354                                                           
                                                                               
       "An Act relating to a  retirement incentive program for                 
       certain  employees   of  school  districts   under  the                 
       teachers' retirement system  and the public  employees'                 
       retirement  system;  and  providing  for  an  effective                 
       date."                                                                  
                                                                               
  REPRESENTATIVE JERRY  MACKIE, sponsor  of HB  354, spoke  in                 
  support  of the  legislation.   He    provided members  with                 
  letters of  support and back-up information  (Attachment 1).                 
                                                                               
                                2                                              
                                                                               
                                                                               
  He also provided  members with Amendment  1 and Amendment  2                 
  (Attachments  2 and  3).   Amendment 1  addresses the  equal                 
  protection issue.   Amendment  2 defines  "school district".                 
  He emphasized that  the legislation  only relates to  school                 
  districts, does not have  an adverse affect on the  Teachers                 
  Retirement System  (TRS)  actuarial,  and  is  optional  for                 
  school districts and teachers.                                               
                                                                               
  Representative  Brown  asked   if  municipalities  would  be                 
  fiscally  impacted.    Representative  Mackie  felt  that  a                 
  municipal fiscal note was not needed.   He observed that the                 
  fiscal  note  by  the  Department  of  Administration  would                 
  provide  funding through  general fund program  receipts for                 
  the  program's   administration.      He   emphasized   that                 
  participating  school  districts will  pay  the cost  of the                 
  program.  Each participating teacher will have to contribute                 
  the same amount of money they would have contributed if they                 
  had  remained  working.   He  reiterated  that  there is  no                 
  adverse affect on TRS.                                                       
                                                                               
  Representative Mulder stressed  that school districts cannot                 
  not come  back to the legislature for  additional funding to                 
  defray  their participation in  the program.  Representative                 
  Mackie stressed that it is not the intent of the legislation                 
  that any future  costs be covered by the  legislature.   The                 
  legislation provides that costs involved in the program will                 
  be  taken from savings  that are achieved  by the Retirement                 
  Incentive Program (RIP)  or from  school district's  current                 
  foundation formula amount.                                                   
                                                                               
  Representative  Martin  asked  if other  options  have  been                 
  considered.  He asked if it would be better to repeal the 20                 
  year retirement  period.   Representative Mackie  noted that                 
  the  legislation  does  not  address  the structure  of  the                 
  current teacher's retirement  system.  He stressed  that the                 
  intent  is to  provide an  incentive  for high  end salaried                 
  teachers to retire and be replaced with lower paid teachers.                 
                                                                               
  Representative Martin  noted that out-of-state  teachers can                 
  buy into  TRS  after a  period  of service  in Alaska.    He                 
  expressed concern that the  program will result in the  loss                 
  of qualified teachers.                                                       
                                                                               
  Representative Mackie  noted that 40  to 50  percent of  the                 
  state's teachers are at the high end of the salary schedule.                 
  The  legislation  allows  school  districts  to  address the                 
  problem.                                                                     
                                                                               
  Representative  Martin  questioned  if  superintendents  and                 
  principals    are    covered    under    the    legislation.                 
  Representative  Mackie replied  that the  legislation covers                 
  school districts' PERS and TRS employees.                                    
                                                                               
                                3                                              
                                                                               
                                                                               
  Representative Therriault noted that the legislation  allows                 
  school  districts  to  opt in  to  the  retirement incentive                 
  program.  Once school districts opt in they must participate                 
  for three years.  He questioned  if the legislation could be                 
  amended to allow participation for "up to" three years.                      
                                                                               
  Representative Mackie noted  that the change could  be made,                 
  but was not certain it would be advantageous.                                
                                                                               
  RICHARD  MAUER,  DELTA/GREELY   SCHOOL  BOARD,   LEGISLATIVE                 
  LIAISON testified via the teleconference  network.  He spoke                 
  in support of HB 354.  He noted that  attendance is receding                 
  in the Delta/Greely  School District.   The School  District                 
  cannot reduce tenured teachers and administrators.  There is                 
  a $600.0 thousand  dollar anticipated shortfall.   Without a                 
  retirement  incentive  program  reductions  must  come  from                 
  supplies,  maintenance  and  student  services.    There are                 
  seventeen  teachers that would qualify  for the program.  He                 
  clarified that these teachers are not currently eligible for                 
  retirement.                                                                  
                                                                               
  In  response  to a  question  by Representative  Martin, Mr.                 
  Mauer  stressed that  the  program is  needed  to cover  the                 
  shortfall.  The pupil/teacher ratio is  high.  He maintained                 
  that there are too many teachers for the number of students.                 
  He stated that the shortfall could be covered if in addition                 
  to other reductions,  three or four teachers  took advantage                 
  of the program.                                                              
                                                                               
  STEVE WRIGHT, KENAI PENINSULA  EDUCATION SUPPORT ASSOCIATION                 
  testified  via the  teleconference  network.   He maintained                 
  that HB 354  is a win/win  situation.  He expressed  concern                 
  that support employees be  included in the legislation.   He                 
  asserted that the legislation is desperately needed.                         
                                                                               
  Representative Mackie clarified that non-certified employees                 
  are covered by the legislation.                                              
                                                                               
  In response to a question by Co-Chair Hanley, Representative                 
  Mackie noted that between 175 and 200 employees are eligible                 
  in the Kenai Peninsula School District.                                      
                                                                               
  Representative Martin reiterated concerns regarding the loss                 
  of qualified teachers.                                                       
                                                                               
  Representative Mackie noted that 72 individuals in the Kenai                 
  Peninsula School District retired under the last RIP program                 
  for an estimated savings of $1.9 million dollars.                            
                                                                               
  KEITH   EVANS,   SUPERINTENDENT,  DILLINGHAM   CITY  SCHOOLS                 
  testified via the  teleconference network.  He  testified in                 
                                                                               
                                4                                              
                                                                               
                                                                               
  support of HB 354.  He noted  that 12 people would qualified                 
  under  the  program.   He  stressed  that savings  could  be                 
  experienced if even 1 or 2 individuals elected to retire.                    
                                                                               
  GEORGE HRONKIN, ADMINISTRATOR, COPPER RIVER SCHOOL  DISTRICT                 
  testified  via  the  teleconference network.    He  spoke in                 
  support of HB 354.  He emphasized that the legislation would                 
  provide an opportunity  to revitalize  staff in addition  to                 
  providing a savings.                                                         
                                                                               
  Representative  Martin  asserted  that  teachers  are  being                 
  bashed.  In response to a question by Representative Martin,                 
  Mr. Hronkin  noted that  8 individuals  participated in  the                 
  last  RIP program.    There are  16  individuals that  could                 
  qualify for the  program.  He  stated that the Copper  River                 
  School  District  paid its  participation  for the  last RIP                 
  program.                                                                     
                                                                               
  DAVID  MEANS,  BUSINESS MANAGER,  KETCHIKAN  SCHOOL DISTRICT                 
  testified  via  the  teleconference network.    He  spoke in                 
  support  of HB 354.   He expressed  concern that replacement                 
  teachers be recruited to replace retiring teachers.                          
                                                                               
  LUCY HOPE,  MAT-SU EDUCATION  ASSOCIATION testified  via the                 
  teleconference network.  She testified in support of HB 354.                 
  She  stressed that school districts need  tools to deal with                 
  the flat funding of education.   She noted that 110 teachers                 
  will be laid off in Mat-Su.  She stressed that it makes more                 
  sense to allow teachers  to retire than to lay  off teachers                 
  who are at  the beginning  of their careers.   She  provided                 
  members  with  testimony  from others  that  support  HB 354                 
  (Attachment 4).                                                              
                                                                               
  BILL  MUNROE,  PRESIDENT,  CLASSIFIED EMPLOYEES  ASSOCIATION                 
  testified  via  the  teleconference network.    He  spoke in                 
  support of the legislation.   He observed that there  are at                 
  least 70 classified employees interested in the program.  He                 
  read testimony in support of HB 354.                                         
                                                                               
  Representative   Martin   questioned   if   the   retirement                 
  requirement should be lowered to 17 years.                                   
                                                                               
  LENARD  MURRAY,  MAT-SU  testified  via  the  teleconference                 
  network.  He spoke in support of HB 354.  He maintained that                 
  the legislation will provide a cost savings.                                 
                                                                               
  JOAN   WILKERSON,   ALASKA   PUBLIC  EMPLOYEES   ASSOCIATION                 
  testified  in  support of  HB 354.    She stressed  that the                 
  legislation will save school districts money.                                
                                                                               
  Representative  Martin asked  if the  retirement requirement                 
  should be lowered to  17 years.  Ms. Wilkerson  stressed the                 
                                                                               
                                5                                              
                                                                               
                                                                               
  need for further  research.  She  emphasized that the  whole                 
  system would have to be restructured.                                        
                                                                               
  Co-Chair  Hanley  pointed  out  that  some  individuals  who                 
  qualify will not participate in the program.                                 
                                                                               
  KIMBERLY HOMME, SPECIAL  ASSISTANT, DEPARTMENT OF  EDUCATION                 
  testified in support of HB 354.  She provided members with a                 
  report by the  Legislative Budget and Audit  Committee, 1991                 
  (copy on file).  She observed that the report concluded that                 
  the 1989 RIP program  resulted in a savings.   She requested                 
  that  state operated schools  be included.   She  noted that                 
  there are three state operated schools.                                      
                                                                               
  Ms. Homme noted  that the  legislation on page  2, line  14,                 
  requires the commissioner of the  Department of Education to                 
  certify that  each school district's  plan will result  in a                 
  savings.    She  emphasized  the  difficulty  of  certifying                 
  savings.   She maintained that  the purpose of the provision                 
  is  to  obtain  additional  information  regarding  the  RIP                 
  program.                                                                     
                                                                               
  Representative  Martin asked if  the Department of Education                 
  is involved  in contract  negotiations of  individual school                 
  districts.  Ms.  Homme was not  aware of involvement by  the                 
  Department of Education  in school district contracts.   She                 
  noted that HB  398 would allow  school districts to lay  off                 
  teachers due to declines in revenues.                                        
                                                                               
  Representative Parnell  stressed that school  districts need                 
  to be  able to  find savings  if flat  funding of  education                 
  remains.    He  emphasized that  school  districts  will not                 
  implement the program if a savings is not anticipated.                       
                                                                               
  Co-Chair Hanley observed that if  school districts attempted                 
  to  pass on  increased costs  to  the State  the legislature                 
  would not be  supportive.   He noted that  if the  actuarial                 
  soundness is threatened  that school districts will  look to                 
  the State.                                                                   
                                                                               
  (Tape Change, HFC 96-109, Side 1)                                            
                                                                               
  Representative  Mackie  noted  that   the  Anchorage  School                 
  District  and  others  have  offered  cash   incentives  for                 
  retirements.   These programs  are only  available to  those                 
  that are qualified  for 20 year retirement.  The legislation                 
  will  allow individuals  that  have less  than  20 years  to                 
  qualify.    He  emphasized that  school  districts  will not                 
  implement the  program unless a savings is  anticipated.  He                 
  noted that a plan is required to demonstrate a savings.  The                 
  local school board has  to agree that the plan  represents a                 
  savings to the  district before it  can be implemented.   He                 
                                                                               
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  spoke in support of certification by the commissioner of the                 
  Department of Education.  He  observed that the commissioner                 
  would not be  held responsible for a savings.   There are no                 
  additional state funds to cover mistakes.                                    
                                                                               
  Representative  Therriault noted  that the 1989  RIP program                 
  required that a  savings be  demonstrated.   He stated  that                 
  savings  would be  defined  by the  cost difference  for the                 
  replacement position.                                                        
                                                                               
  LARRY  WIGET, DIRECTOR  OF  GOVERNMENT RELATIONS,  ANCHORAGE                 
  SCHOOL  DISTRICT  testified  in  support  of  HB  354.    He                 
  recognized   that  other  districts  may  benefit  from  the                 
  program.  He emphasized that the intent is not to get rid of                 
  highly qualified teachers.   He stressed  that in a time  of                 
  declining resources the  program provides a means  to reduce                 
  costs.                                                                       
                                                                               
  In  response  to a  question  by Representative  Martin, Mr.                 
  Wiget noted that the Anchorage School District has offered a                 
  retirement incentive program.                                                
                                                                               
  Representative Martin restated the question of  dropping the                 
  retirement qualification to  17 years.   Mr. Wiget  stressed                 
  that the issue  will need to be analyzed.   He observed that                 
  not all teachers retire after 20  years.  He maintained that                 
  a  number  of  highly qualified  teachers  will  continue to                 
  teach.                                                                       
                                                                               
  Representative Martin asked, "just because they  are getting                 
  paid  too much, we have got to motivate them to quit early?"                 
                                                                               
                                                                               
  Mr. Wiget emphasized that the program appears to be a way in                 
  which school districts can help reduce costs.                                
                                                                               
  Representative Martin  asked if  the retirement  requirement                 
  should be reduced  to 17 years.   He stated that he  did not                 
  want to have teachers paid more to leave.  Mr. Wiget did not                 
  think the retirement requirement should be lowered.                          
                                                                               
  In response  to a  question by  Representative Parnell,  Mr.                 
  Wiget discussed the Anchorage School District's RIP program.                 
  He noted that $10.0 thousand dollar incentive is  offered to                 
  individuals that  have completed  20 or more  years and  are                 
  full-time employees to  retire.  The $10.0  thousand dollars                 
  is paid as a compensation increase for the school year.  The                 
  incentive would increase the employee's three highest years.                 
                                                                               
  Representative Kelly  stressed that  the intent  is to  give                 
  districts  flexibility  to use  the  program where  it would                 
  produce  savings.    He  added  that a  17  year  retirement                 
                                                                               
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  requirement would not necessarily realize a savings.                         
                                                                               
  Representative Mackie  pointed out  that the  legislation is                 
  designed to address existing law.                                            
                                                                               
  Representative  Therriault  noted   that  the  pressure  for                 
  instituting RIP programs is increasing.   He maintained that                 
  RIP  should  only  be  applied  when  problems  need  to  be                 
  addressed.  He asked the District's expense to buy out three                 
  years under the legislation.                                                 
                                                                               
  Mr.  Wiget  could  not  answer  Representative  Therriault's                 
  question.  He  observed that 600  employees could apply  for                 
  the  program.     Representative  Mackie   noted  that   306                 
  individuals in the Anchorage School District participated in                 
  the last RIP program for a savings of $2.8 million dollars.                  
                                                                               
  Representative  Therriault  asked  if the  Anchorage  School                 
  District would need to  participate for 3 years.   Mr. Wiget                 
  did not know how many years would be needed.  He agreed that                 
  an  option  for  up  to  three  years   would  provide  more                 
  flexibility.                                                                 
                                                                               
  Co-Chair Hanley noted that a  flexible program would allow a                 
  district to withdraw when their goals are met.                               
                                                                               
  Representative Martin discussed  out-of-state teachers  that                 
  buy into TRS.   Mr. Wiget  noted that out-of-state  teachers                 
  must pay for  their service plus  7 percent interest on  the                 
  service.  He emphasized that it is costly to buy service.                    
                                                                               
  CLAUDIA DOUGLAS, PRESIDENT, NEALASKA spoke  in support of HB
  354.     She   provided  members   with  written   testimony                 
  (Attachment 5).  She asserted that RIP is cost effective and                 
  fair.    She  maintained  that  RIP offers  school  district                 
  administrators an opportunity to reduce staff at the top end                 
  of the salary  schedule and replace those with employees who                 
  could be hired at the lower end of the salary scale.                         
  Absent RIP school  districts will be  forced to lay off  the                 
  less experienced employees.                                                  
                                                                               
  In response to a question  by Representative Therriault, Ms.                 
  Douglas stated that  an option of up to three years would be                 
  acceptable.                                                                  
                                                                               
  Representative  Therriault asserted  that  there will  be no                 
  personnel cost  savings.  Ms.  Douglas pointed out  that the                 
  plan  has to demonstrate savings.  Representative Therriault                 
  noted that savings can be used to hire additional  teachers.                 
  He  maintained that  the overall  amount of money  spent can                 
  remain the same.                                                             
                                                                               
                                                                               
                                8                                              
                                                                               
                                                                               
  Representative  Mackie  reiterated  that a  savings  must be                 
  demonstrated.  He acknowledged that  the savings can be used                 
  to fund programs that would have been deleted.                               
                                                                               
  Representative  Therriault reiterated  his  belief that  the                 
  overall  amount  of money  spent will  not  be reduced.   He                 
  stressed   that   funding   will   be   spent   differently.                 
  Representative Mackie noted that  some districts are  facing                 
  shortfalls and will have to realize a savings.                               
                                                                               
  In  response  to a  question  by Representative  Martin, Ms.                 
  Douglas stressed that the legislation  is not an attempt  to                 
  dismiss highly  qualified teachers.  She did  not think that                 
  teachers or  school districts are  trying to implement  a 17                 
  year retirement system.  She emphasized that the legislation                 
  is a way for school districts to save money.                                 
                                                                               
  Co-Chair Hanley pointed out that a 17 year retirement system                 
  would not necessary result in a cost savings.                                
                                                                               
  Representative  Therriault  asked  how  long  it  takes  the                 
  average teacher to reach their maximum salary.  Ms.  Douglas                 
  noted that teachers reach  the top of their salary  scale at                 
  approximately  12 years.    Top  salaries are  approximately                 
  $58.0   thousand   dollars   and   beginning  salaries   are                 
  approximately $30.0 thousand dollars.                                        
                                                                               
  Representative Therriault noted  that TRS is  built on a  20                 
  year actuarial.  The  system would be undermined if  it were                 
  changed to 17 years.  He  emphasized that some teachers that                 
  are not eligible  for this  RIP will lobby  for another  RIP                 
  when they become eligible.                                                   
                                                                               
  Representative Mackie  emphasized that  the legislation  was                 
  introduced on behalf of school districts and administrators.                 
                                                                               
  CARL ROSE, EXECUTIVE DIRECTOR, ASSOCIATION OF  ALASKA SCHOOL                 
  BOARDS testified on  behalf of the legislation.   He pointed                 
  out that school boards are  governed by legislative statutes                 
  and Department of Education regulations.  Funding is largely                 
  through the  legislature.  He maintained that the ability of                 
  school boards to fix their own  problems is dependent on the                 
  State and legislature.   He  noted that  education has  been                 
  flat funded  at a  2 percent  increase.   At the  same time,                 
  there have  been increased mandates from  local communities.                 
  The  local authority  to raise  money is  restricted.   Many                 
  school districts  are restricted  by the  cap.   There is  a                 
  statutory  obligation to negotiate.  He emphasized political                 
  and  economic pressure  from  the  "right  to strike".    He                 
  stressed  that  HB  354  is  fair  and  comprehensive.    He                 
  expressed  concern  that the  legislation  must be  acted on                 
  quickly to allow school districts to utilize it as a tool.                   
                                                                               
                                9                                              
                                                                               
                                                                               
  Representative Martin maintained that Alaska  has one of the                 
  lowest  teacher/pupil  ratios.   Mr.  Rose  stated  that the                 
  statistics  of teacher/student  ratio  are misleading.    He                 
  noted that  there are  many large  classes.   He added  that                 
  special  education  teachers  make the  pupil/teacher  ratio                 
  lower.  He stressed  that pupil/teacher ratio is  of concern                 
  to  many parents.    He questioned  the State's  interest in                 
  providing  public  education   and  its  responsibility  for                 
  funding.  He  asked the responsibility and interest of local                 
  governments.  He maintained that it  is in the best interest                 
  of  the State to  provide a quality  education and recognize                 
  the cost.                                                                    
                                                                               
  Mr.  Rose  noted  that  funding  have  been  kept  constant.                 
  Expectations and real  costs have increased.   He emphasized                 
  that the program provides incentives  for high end employees                 
  to retire and make room for low end employees.                               
                                                                               
  (Tape Change, HFC 96-110, Side 1)                                            
                                                                               
  BOB  STALNAKER,   DIRECTOR,  DIVISION   OF  RETIREMENT   AND                 
  BENEFITS,  DEPARTMENT  OF  ADMINISTRATION  noted  that   the                 
  Administration  strongly supports  HB 354  as an  additional                 
  tool for school districts and any public employer.                           
                                                                               
  In  response  to a  question  by Representative  Martin, Mr.                 
  Stalnaker stressed that  RIP programs have not  impacted the                 
  actuarial soundness of  TRS.   No employers are  delinquent.                 
  Funding  volatility and fluctuation  was due  to legislation                 
  passed in 1991 which provided for guaranteed cost of  living                 
  increases.  The funding ratio of TRS is above 91 percent and                 
  is increasing.   He  reiterated that  RIP programs  have not                 
  detrimentally affected the soundness of TRS.  Employers must                 
  pay the  cost to the  system for  benefits and  the cost  to                 
  administer the program within three years.  This is included                 
  in calculations of savings.                                                  
                                                                               
  In  response  to a  question  by Representative  Martin, Mr.                 
  Stalnaker  noted  that COLA  is  prefunded.   Employers must                 
  include COLA costs in their estimated savings.                               
                                                                               
  Representative Martin referred to  superintendent contracts.                 
  Mr. Stalnaker noted  that increases  in salary are  factored                 
  into the benefit payment.                                                    
                                                                               
  In response to a question  by Representative Therriault, Mr.                 
  Stalnaker   explained  that  only  30  percent  of  eligible                 
  teachers participate in RIP programs.  He pointed out that a                 
  sliding scale program would incur more administrative costs.                 
  The actuarial will have to compensate for different options.                 
                                                                               
                                                                               
                               10                                              
                                                                               
                                                                               
  Mr. Stalnaker agreed that timing is critical.  He noted that                 
  the bill will  not be enacted until  the middle of May.   He                 
  emphasized  that  the  more complex  the  program  that more                 
  difficult it will  be to  utilize it for  the coming  school                 
  year.  He  explained that different people  will be effected                 
  by the different years offered as an incentive.  There could                 
  be a whole array of projected  costs depending on 1, 2 or  3                 
  years.  The actuarial will have to be run for each option.                   
                                                                               
  Representative Therriault noted that employees receive  more                 
  than they pay in to the program.  Mr. Stalnaker acknowledged                 
  that the employee contribution is  rarely sufficient to fund                 
  their benefit.   Interest  to the  fund provides  additional                 
  revenues  to  offset the  employer's  cost.   Most actuarial                 
  methods assume that there will be growth in the system.  The                 
  State targets 95 percent funding.                                            
                                                                               
  Representative Therriault asked if there will be instability                 
  in the system  due to  retirements from growth  years.   Mr.                 
  Stalnaker explained that the average age of the TRS and PERS                 
  populations are  growing. This  trend is  considered in  the                 
  actuarial.  The last RIP program  was originally for 3 years                 
  and was expanded to 5 years.  The longer the period  to show                 
  a savings,  the more  likelihood that  greater numbers  will                 
  qualify.   The  longer the program  the easier it  is for an                 
  employer to demonstrate a savings.                                           
                                                                               
  Representative Therriault  provided  members  with  a  graph                 
  (Attachment 6).   He asked if  savings are being shifted  to                 
  the future.   Mr. Stalnaker  clarified that there  is a  two                 
  tier  system in  TRS.   Tier II  employees cost less.   Most                 
  teachers retiring are  under Tier I.   He stressed that  the                 
  average teacher works in access of 20 years.                                 
                                                                               
  Representative  Therriault noted  that the  Fairbanks School                 
  District retires an average of 25 to 30 teachers a year.  He                 
  pointed out that the number of teachers participating in RIP                 
  will  include teachers that  would have retired  anyway.  He                 
  stated that the program can be  limited to teachers that are                 
  between 17  and 20  years.   Mr. Stalnaker  agreed that  the                 
  program   can   be  based   on   defined   criteria  without                 
  discriminating.                                                              
                                                                               
  Mr.  Stalnaker noted that  the state of  Alaska prefunds its                 
  health  insurance.  If the  health insurance is excluded the                 
  State's actuarial  is above  100 percent.   With  the health                 
  insurance funded the actuarial was 85 percent for June 1994.                 
  The funding level  in TRS  as of June  1995, is 91  percent.                 
  The  value of  assets for  TRS is approximately  2.5 billion                 
  dollars.   The  unfunded liability  is approximately  $200.0                 
  million dollars.                                                             
                                                                               
                               11                                              
                                                                               
                                                                               
  Representative  Grussendorf noted  that  many teachers  keep                 
  working past their  20 years of  service.  He stressed  that                 
  the incentive has to be big  enough to encourage teachers to                 
  participate.                                                                 
                                                                               
  Co-Chair  Hanley  asked the  cost  per person  to  buy their                 
  participation.   Mr. Stalnaker explained that the employee's                 
  cost  is approximately 25 percent of their annual salary for                 
  the  three  years,  $15.0  thousand  dollars.    The  school                 
  district pays the remainder of the cost.  Savings have to be                 
  shown to  overcome  the cost.   School  districts would  pay                 
  approximately twice as  much, $30.0  thousand dollars.   The                 
  employer would pay  the additional  cost of  administration.                 
  Employee's retirement is raised  by approximately 2  percent                 
  for each additional year of participation.                                   
                                                                               
  Mr.  Stalnaker explained that if an employee retires with 17                 
  years of  service they  retire with  a benefit  based on  17                 
  years of  service.   Their benefit  does not  increase by  2                 
  percent for each of the additional  3 years.  The additional                 
  3 years is used to meet the 20 year requirement.  They would                 
  receive 3 additional years of benefit at 17 years of service                 
  that they would not have received.                                           
                                                                               
  Co-Chair Hanley pointed  out that  if an employee  is at  20                 
  years of service and buys out an additional three years they                 
  will  actually  receive   their  retirement  based  on   the                 
  additional 3 years.  The person that is  over 20 years would                 
  pay off their cost to buy out three additional years after 4                 
  years of benefits.                                                           
                                                                               
  In response to a question  by Co-Chair Hanley, Mr. Stalnaker                 
  reiterated  that  there   will  be  additional   savings  by                 
  replacing Tier I employees with Tier II employees.                           
                                                                               
  Representative Brown asked  how difficult it will be for the                 
  commissioner of the  Department of Education to  certify the                 
  plans.  Mr.  Stalnaker noted that the plans will  have to go                 
  through the Department of Education before they are sent  to                 
  the   Department  of  Administration  and  reviewed  by  the                 
  Division  of Retirement  and Benefits.   He  noted that  the                 
  Division accepts the school district's calculations.                         
                                                                               
  Representative Brown questioned the lack of a fiscal note by                 
  the Department of  Education.   Mr. Stalnaker observed  that                 
  the Department of Education would  prefer not to certify the                 
  plans.                                                                       
                                                                               
  Representative  Mackie noted  that the  House  State Affairs                 
   Committee added the  provision to  have the commissioner  of                
  Department of Education certify  the plans.  He  stated that                 
                                                                               
                               12                                              
                                                                               
                                                                               
  he would  have no  objection to  allowing the Department  of                 
  Administration to certify the plans.                                         
                                                                               
  (Tape Change, HFC 96-110, Side 2)                                            
                                                                               
  In  response  to a  question  by Representative  Martin, Mr.                 
  Stalnaker explained that the statutes include only two tiers                 
  in the retirement system.  He noted that only 30  percent of                 
  those eligible participate.  The legislation is elective for                 
  employees and employers.                                                     
                                                                               
  Co-Chair Hanley asked  if the legislation allows  savings to                 
  be used to hire more teachers in addition to the replacement                 
  teachers.  Mr.  Stalnaker stated  that the legislation  does                 
  not speak to  how the savings can  be used.  He  pointed out                 
  that some school districts are facing deficits.                              
                                                                               
  Mr.  Rose  noted that  not  all  retiring  teachers will  be                 
  replaced.   He added that savings may  be used to reduce the                 
  pupil/teacher ratio.  The pupil/teacher ratio is critical in                 
  some areas.                                                                  
                                                                               
  In response to a question by Co-Chair Hanley, Representative                 
  Mackie noted that  the Anchorage School District  saved $2.8                 
  million  dollars  from the  previous  RIP.   Co-Chair Hanley                 
  summarized that the money will be available for reallocation                 
  to the school district's highest priority.                                   
                                                                               
  In response to a question  by Representative Therriault, Mr.                 
  Stalnaker noted that the yearly health insurance premium for                 
  a retiree is $330 dollars a month.                                           
                                                                               
  Representative  Mackie reiterated  that two  amendments were                 
  provided  the  Committee.    He  addressed Amendment  1,  9-                 
  LS0634\G.2,  dated  4/9/96.   He  noted  that  the amendment                 
  provides  the criteria that a school district must follow to                 
  maintain  equal  protection.    Mr.  Stalnaker  stated  that                 
  Amendment 1 is  consistent in  current practices and  advise                 
  from the Office of Attorney General.                                         
                                                                               
  Representative Parnell MOVED  to adopt  Amendment 1.   There                 
  being NO OBJECTION, it was so ordered.                                       
                                                                               
  Representative  Mackie  explained  that  Amendment  2  would                 
  define  "school  district"  as  a  city  or  borough  school                 
  district  or  a regional  educational  attendance area.   He                 
  stated that the bill was drafted to include school districts                 
  with a locally elected school board.                                         
                                                                               
  Representative Parnell MOVED  to adopt  Amendment 2.   There                 
  being NO OBJECTION, it was so ordered.                                       
                                                                               
                                                                               
                               13                                              
                                                                               
                                                                               
  Representative  Brown  MOVED  to adopt  Amendment  3, delete                 
  "education" and insert  "administration" on page 2,  lines 4                 
  and 18; delete page 2, lines 15 - 17; and insert on  page 2,                 
  line  17 after  "shall"  "review  the  plan and  advise  the                 
  commissioner whether  it complies  with the  requirements of                 
  this section.   The administrator  shall..."  She  explained                 
  that  the  amendment  would  transfer certification  to  the                 
  Department of Administration.  There  being NO OBJECTION, it                 
  was so ordered.                                                              
                                                                               
  Representative Mulder MOVED to report  CSHB 354 (FIN) out of                 
  Committee  with  individual  recommendations  and  with  the                 
  accompanying fiscal note.    Representative  Mulder WITHDREW                 
  his motion to allow further amendments.                                      
                                                                               
  Representative  Therriault  discussed reducing  the  time in                 
  which savings must  be demonstrated from 5 to 3  years.  Mr.                 
  Stalnaker noted  that previous RIP  programs allowed savings                 
  to be demonstrated in 5 years.   He noted that the five year                 
  allowance would be an advantage to the employer.                             
                                                                               
  Co-Chair Hanley noted that  school districts must  reimburse                 
  the system within  three years after  the end of the  fiscal                 
  year from  which the  employee is  appointed to  retirement.                 
  Representative Mackie  explained that the  savings would  be                 
  eliminated if the debt had to be paid off in the first year.                 
                                                                               
                                                                               
  Representative Mulder MOVED to report  CSHB 354 (FIN) out of                 
  Committee  with  individual  recommendations  and  with  the                 
  accompanying fiscal note.  There being NO OBJECTION, it  was                 
  so ordered.                                                                  
                                                                               
  CSHB  354  (FIN)  was reported  out  of  Committee with  "no                 
  recommendation"  and  with  a  fiscal  impact  note  by  the                 
  Department of Administration, dated 3/16/96.                                 
  ADJOURNMENT                                                                  
                                                                               
  The meeting adjourned at 4:20 p.m.                                           
                                                                               
                                                                               
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