Legislature(1995 - 1996)

04/27/1996 01:20 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 27, 1996                                        
                            1:20 P.M.                                          
                                                                               
  TAPE HFC 96 - 144, Side 1, #000 - end.                                       
  TAPE HFC 96 - 144, Side 2, #000 - end.                                       
  TAPE HFC 96 - 145, Side 1, #000 - end.                                       
  TAPE HFC 96 - 145, Side 2, #000 - #523.                                      
                                                                               
  CALL TO ORDER                                                                
                                                                               
  Co-Chair  Mark  Hanley called  the  House Finance  Committee                 
  meeting to order at 1:20 P.M.                                                
                                                                               
  PRESENT                                                                      
                                                                               
  Co-Chair Hanley               Representative Martin                          
  Co-Chair Foster               Representative Mulder                          
  Representative Brown          Representative Navarre                         
  Representative Grussendorf    Representative Parnell                         
  Representative Kelly          Representative Therriault                      
  Representative Kohring                                                       
                                                                               
  ALSO PRESENT                                                                 
                                                                               
  Representative  Con  Bunde;  Annalee   McConnell,  Director,                 
  Office  of Management & Budget,  Office of the Governor; Tom                 
  Williams, Staff, Senator Steve  Frank; Terry Otness,  Staff,                 
  Senator  Robin Taylor; James  Dieringer III,  Staff, Senator                 
  Steve Frank;  Sheila Peterson, Staff, Senator  Steve Rieger;                 
  Mark  Boyer,  Commissioner,  Department  of  Administration;                 
  James  Baldwin, Assistant  Attorney  General, Department  of                 
  Law;  Wendy  Redman, Vice  President,  University Relations,                 
  University  of  Alaska;  Mary  Rubadeau, Alaska  Council  of                 
  School   Administrators,   Superintendent,   Juneau   School                 
  District, Juneau; Jim Stratton, Director, Division  of Parks                 
  and  Outdoor   Recreation,  Department  of   Revenue;  Diane                 
  Barrans,   Executive   Director,   Postsecondary   Education                 
  Commission, Department of Education; Judy Murphy, (Testified                 
  via teleconference), Barrow; Bill Donaldson, (Testified  via                 
  teleconference),  Kodiak;  Mike   Laundry,  (Testified   via                 
  teleconference),  Sgt.  Kodiak  Police  Department,  Kodiak;                 
  Dennis Oakland,  (Testified  via  teleconference),  City  of                 
  Homer, Homer;  Nick Dudiak, (Testified  via teleconference),                 
  State  Employee,  Homer;  Greg   MacDonald,  (Testified  via                 
  teleconference), Alaska Public Safety  Employee Association,                 
  Alaska  State Fire  Fighters  Association, Anchorage;  Keith                 
  Perin, (Testified via  teleconference), Board of  Directors,                 
  Paternal  Order  of  State Troopers,  Anchorage;  Lucy Hope,                 
  (Testified via teleconference), President,  Mat-Su Education                 
  Association,   Anchorage;   Bill   Bjork,   (Testified   via                 
                                                                               
                                1                                              
                                                                               
                                                                               
  teleconference), President, Fairbanks Education Association,                 
  Fairbanks;  Don  Davis,   (Testified  via   teleconference),                 
  Fairbanks.                                                                   
                                                                               
  SUMMARY                                                                      
                                                                               
  SB 89     An Act relating  to the members  of the board  and                 
            staff of the Alaska Permanent Fund Corporation.                    
                                                                               
            SB   89  was   HELD  in   Committee  for   further                 
            discussion.                                                        
                                                                               
  SB 148    An  Act   relating  to   a  defined   contribution                 
            retirement plan for state employees.                               
                                                                               
            SB   148  was  HELD   in  Committee   for  further                 
            discussion.                                                        
                                                                               
  SB 278    An Act relating to the authority of the Department                 
            of Natural Resources to allow credits against fees                 
            at state historical parks.                                         
                                                                               
            SB 278  was reported out  of Committee with  a "do                 
            pass" recommendation and with a fiscal note by the                 
            Department of Natural Resources dated 2/21/96.                     
                                                                               
  SB 301    An Act relating to postsecondary education.                        
                                                                               
            CS SB 301  (FIN)am was  reported out of  Committee                 
            with "no recommendation" and with fiscal  notes by                 
            the Department  of Revenue  dated 4/19/96,  (2) by                 
            the Alaska Post Secondary Commission dated  4/2/97                 
            and 4/19/96, by the  Department of Education dated                 
            4/19/96 and a zero fiscal note  by the Alaska Post                 
            Secondary Commission.                                              
                                                                               
  SB 303    An  Act  relating  to  management  of  the  budget                 
            reserve fund; and providing for an effective date.                 
                                                                               
            CS SB 303 (FIN) was reported out of Committee with                 
            a "do pass" recommendation and  with a fiscal note                 
            by the Department of Revenue dated 4/23/96.                        
                                                                               
  SB 307    An  Act  authorizing  the  Department  of  Natural                 
            Resources to exchange  with the federal government                 
            state  land  within,  and  adjoining,  Dude  Creek                 
            Critical Habitat Area for federal land adjacent to                 
            Fall Creek; and providing for an effective date.                   
                                                                               
            CS SB 307 (FIN) was reported out of Committee with                 
            a "do pass" recommendation and  with a fiscal note                 
            by the Department of Revenue dated 4/23/96.                        
                                                                               
                                2                                              
                                                                               
                                                                               
  SENATE BILL 303                                                              
                                                                               
       "An Act relating  to management  of the budget  reserve                 
       fund; and providing for an effective date."                             
                                                                               
  TOM  WILLIAMS,  STAFF,  SENATOR  STEVE   FRANK,  provided  a                 
  sectional analysis of  SB 303,  noting that the  legislation                 
  would allow the Governor authority to transfer management of                 
  the  Constitutional  Budget  Reserve   Fund  (CBRF)  to  the                 
  Permanent Fund Corporation.                                                  
                                                                               
  Representative  Grussendorf  asked  if  the plan  considered                 
  current  investment  concepts  used  by  the  Department  of                 
  Revenue (DOR).   Mr. Williams explained that  CBRF currently                 
  is  invested  by DOR's  Treasury Division.   The  bill would                 
  provide  the governor latitude to transfer  all or a portion                 
  of that amount over to the general fund.                                     
                                                                               
  Co-Chair  Foster  MOVED to  report CS  SB  303 (FIN)  out of                 
  Committee  with  individual  recommendations  and  with  the                 
  accompanying fiscal note.  There being NO OBJECTION, it  was                 
  so ordered.                                                                  
                                                                               
  CS  SB 303 (FIN)  was reported out  of Committee with  a "do                 
  pass" recommendation"  and with a  zero fiscal  note by  the                 
  Department of Revenue dated 4/23/96.                                         
  SENATE BILL 307                                                              
                                                                               
       "An Act authorizing the Department of Natural Resources                 
       to  exchange with  the  federal government  state  land                 
       within, and adjoining, Dude Creek Critical Habitat Area                 
       for federal land adjacent to  Fall Creek; and providing                 
       for an effective date."                                                 
                                                                               
  JAMES DIERINGER III,  STAFF, SENATOR  STEVE FRANK, spoke  in                 
  support of SB 307  noting that it would authorize  the State                 
  of Alaska to exchange  a 960 acre parcel near  Gustavus with                 
  the  federal  government  in  order  to  construct  a  mini-                 
  hydroelectric power  plant.    Under  the  legislation,  the                 
  federal  government  would  receive  a   parcel  which  lies                 
  adjacent to Glacier Bay National  Park--land that is already                 
  dedicated as  a critical habitat  area for sand  hill cranes                 
  and other  wetland  wildlife.   The  State would  receive  a                 
  parcel that is  situated near both the existing diesel power                 
  generation  plant and  Fall  Creek.   The  parcel does  have                 
  sufficient water flow to generate hydro-electric power.                      
                                                                               
  Co-Chair  Foster  MOVED to  report CS  SB  307 (FIN)  out of                 
  Committee  with  individual  recommendations  and  with  the                 
  accompanying fiscal note.  There being  NO OBJECTION, it was                 
                                                                               
                                3                                              
                                                                               
                                                                               
  so ordered.                                                                  
                                                                               
  CS  SB 307 (FIN)  was reported out  of Committee with  a "do                 
  pass"  recommendations  and  with  a   fiscal  note  by  the                 
  Department of Natural Resources dated 4/23/96.                               
  SENATE BILL 278                                                              
                                                                               
       "An  Act relating to the authority of the Department of                 
       Natural  Resources to  allow  credits  against fees  at                 
       state historical parks."                                                
                                                                               
  TERRY  OTNESS,  STAFF, SENATOR  ROBIN  TAYLOR, testified  in                 
  support  of  SB 278.   He  stated  that the  legislation was                 
  introduced to address concerns raised  by the Ketchikan area                 
  State Parks Advisory Board and the Ketchikan Gateway Borough                 
  Assembly.  SB  278 would  provide a mechanism  by which  the                 
  Division of Parks  and Outdoor Recreation could  acquire two                 
  small  parcels  of  land  adjacent   to  Totem  Bight  State                 
  Historical Park.                                                             
                                                                               
  SB 278 would allow DNR to offer credits against fees paid by                 
  commercial   tour  operators  for   payments  made   to  the                 
  municipality for  projects which would assist  in mitigating                 
  or alleviating  access, congestion and  parking problems  at                 
  historical parks.                                                            
                                                                               
  In response to  Representative Brown's question, Mr.  Otness                 
  capsulized how the money would be spent.   In the first year                 
  funds generated would be utilized as partial  payment to the                 
  Ketchikan Borough for the land.                                              
                                                                               
  JIM  STRATTON,  DIRECTOR,  DIVISION  OF  PARKS  AND  OUTDOOR                 
  RECREATION, DEPARTMENT  OF NATURAL  RESOURCES (DNR),  added,                 
  the  base amount  received  in 1995  would  not be  "dropped                 
  income terms" made to the State.                                             
                                                                               
  Co-Chair Foster MOVED to report SB 278 out of Committee with                 
  individual recommendations and  with the accompanying fiscal                 
  note.  There being NO OBJECTION, it was so ordered.                          
                                                                               
  SB  278  was reported  out  of  Committee with  a  "do pass"                 
  recommendation and with a zero fiscal note by the Department                 
  of Natural Resources dated 2/21/96.                                          
  SENATE BILL 89                                                               
                                                                               
       "An Act relating to the members  of the board and staff                 
       of the Alaska Permanent Fund Corporation."                              
                                                                               
  SHEILA  PETERSON,  STAFF,  SENATOR  STEVE  RIEGER, spoke  in                 
  support of SB  89.  She pointed  out in the past  two years,                 
                                                                               
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  there has  been a  100% turnover  in top  management of  the                 
  Alaska  Permanent  Fund Corporation.    SB 89  would provide                 
  greater continuity in the management of the fund, creating a                 
  more  careful,  deliberate  financial decision-making  tool.                 
  The legislation  clarifies that removal of a trustee must be                 
  for cause.  The number of  public members would be increased                 
  from  four  to five,  with  staggered  terms.   SB  89 would                 
  clarify that investment policies and staffing decisions must                 
  be made in the best interest of the fund.                                    
                                                                               
  JAMES  BALDWIN, ASSISTANT  ATTORNEY  GENERAL, DEPARTMENT  OF                 
  LAW, spoke to an  amendment made in the House  State Affairs                 
  Committee, addressing the concerns  of keeping commissioners                 
  on the Board of Trustees.  He requested that portion of  the                 
  bill not be changed.                                                         
  Mr. Baldwin spoke  to concerns from  the Department of  Law.                 
  He advised that the legislation  would make dramatic changes                 
  to  the  make-up  of  the  board.    The  Department's  most                 
  significant concern  would be  increasing public  membership                 
  with removal of board  members only for cause.   Mr. Baldwin                 
  reminded members that to remove a board members for cause is                 
  a difficult and expensive exercise.   He urged that the bill                 
  be changed before passage.                                                   
                                                                               
  Mr. Baldwin  referenced Page  1, Lines  13-14, Section  (2),                 
  ".....public  members  of  the board  must  have  recognized                 
  competence  and wide  experience in finance,  investments or                 
  other....".   He advised  that there  are only  a couple  of                 
  people in the State who  could meet proposed qualifications.                 
                                                                               
                                                                               
  Mr. Baldwin  added, Page  3, Section  6,  suggests that  the                 
  corporation staff, serve  at the "pleasure" of  the board of                 
  directors.    The  language  is  too broad.    He  suggested                 
  including language "with investment responsibilities".                       
                                                                               
  He pointed out that language on  Page 3, Section 7(b), would                 
  not permit removal  of the executive director  if a conflict                 
  of personality arose.  That  position would be unreplaceable                 
  regardless of fund performance.                                              
                                                                               
  Representative Mulder believed that Sections 6 and 7 were in                 
  opposition.  Mr. Baldwin  agreed that the language  could be                 
  conflicting.  Representative  Parnell asked  if there was  a                 
  "different" meaning  of cause established in  case opinions.                 
  Mr.  Baldwin responded that the  conviction of a crime could                 
  result  from  something  involving moral  turpitude  and  or                 
  dishonesty, citing AS 16.05.100.                                             
                                                                               
  Representative  Brown referenced  Section  2, and  suggested                 
  deletion  of "and  broad experience";  inserting "recognized                 
  competence".  She  thought that  language would broaden  the                 
                                                                               
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  pool.  Representative Brown referenced  Section 4, asking if                 
  the Administration  had  objected, wanting  to select  their                 
  "own" appointees.   Mr.  Baldwin replied  that existing  law                 
  provides that  the board must be responsive  to the governor                 
  and that the  governor must be  responsive to the voters  of                 
  the State.   In existing law,  the governor can appoint  and                 
  fire  appointees,  which guarantees  that  the board  act in                 
  accordance  with  the  wishes  of  the governor.    Governor                 
  Knowles feels strongly  that the board should  be answerable                 
  to someone.                                                                  
                                                                               
  Co-Chair  Hanley commented  that language  changes could  be                 
  more  consistent.    The  board   members  could  either  be                 
  "accountable"  to  the  governor  or   "influenced"  by  the                 
  governor.  Representative Grussendorf  pointed out that  the                 
  Permanent Fund has never been affected  by the transition of                 
  various governors elected since inception and there has been                 
  no fluctuation in the earnings  of the fund.  He noted  that                 
  he did not support the legislation.                                          
                                                                               
  Representative Brown questioned  how the  language would  be                 
  incorporated.  Representative Mulder  stated that he  viewed                 
  the Permanent Fund similar to other state resources and that                 
  board  should be  treated the  same as  other state  boards.                 
  Members are  appointed and  their terms  should "roll  over"                 
  into  the  term of  the next  Governor.   He  suggested that                 
  action would provide continuity to each board.                               
                                                                               
  SB 89 was HELD in Committee for further consideration.                       
  SENATE BILL 148                                                              
                                                                               
       "An Act  relating to a defined  contribution retirement                 
       plan for state employees."                                              
                                                                               
  MARY  RUBADEAU,  SUPERINTENDENT,  JUNEAU   SCHOOL  DISTRICT,                 
  ALASKA COUNCIL OF SCHOOL ADMINISTRATORS, JUNEAU, stated that                 
  the Alaska Council of School Administrators strongly opposes                 
  SB 148.  She  believed that the legislation would  place the                 
  State  of  Alaska and  the  students  of the  State  at risk                 
  because they would no long be  able to attract the brightest                 
  and best educators to work in Alaska.                                        
                                                                               
  Of the  sixty-nine  retirement systems  compared,  53  plans                 
  allow for some  combination of  a Teacher Retirement  System                 
  (TRS) and Social Security (SS) coverage.                                     
                                                                               
  (Tape Change, HFC 96-144, Side 2).                                           
                                                                               
  Ms.  Rubadeau  continued, SB  148  would reduce  the current                 
  multiplier  of 2% or  2.5% to  1.5%.   Of the  69 retirement                 
  programs studied,  thirty-one pension  plans use  an accrual                 
                                                                               
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  rate equal to  or greater than 2% percent; twenty-four plans                 
  use  an accrual rate between 1.79%  and 1.99%.  Only 7 plans                 
  use  1.5%  or  less  as the  multiplier  for  computation of                 
  retirement  benefits.     If  Alaska  were  to   adopt  1.5%                 
  multiplier, Alaska will be  at the "bottom of the  list" for                 
  attractive retirement system plans.                                          
                                                                               
  She  continued,  the  third tier  retains  the  highest paid                 
  teachers in the system longer, at  a time when districts are                 
  looking for means  to reduce  expenses, suggesting that  the                 
  biggest  budget area  which could  show a  savings would  be                 
  staff salaries.                                                              
                                                                               
  She asserted  that the  benefits for  retaining the  current                 
  retirement system  out weigh  the reasons  for the  proposed                 
  language.    SB 148  would  place  Alaska at  the  bottom of                 
  quality  and value  when  compared with  other states.   Ms.                 
  Rubadeau thought  that Alaska teacher  salaries are becoming                 
  more  in line  with those of  other states.   Alaska  is now                 
  having  difficulty  in  some  districts  retaining   quality                 
  educators under  the  present system.   Adoption  of SB  148                 
  would create more  reasons not to  come to Alaska to  teach.                 
  She urged that the Committee not pass SB 148.                                
                                                                               
  Representative Therriault inquired if the Alaska Council had                 
  voiced blanket opposition to the  legislation.  Ms. Rubadeau                 
  noted that  the TRS system works and is  a good system.  She                 
  believed  it  would make  more  sense to  amend  the current                 
  system as opposed  to adopting the  third tier system.   Ms.                 
  Rubadeau commented on the opposition  to the concept of  the                 
  Tier III.   Representative Therriault  pointed out that  the                 
  legislation could be amended in order to better work for the                 
  groups involved.                                                             
                                                                               
  In response  to  Representative  Therriault's  comment,  Ms.                 
  Rubadeau explained that  the number  of people applying  for                 
  jobs within  the Alaska  school districts  has decreased  by                 
  one-quarter in  the past  year.   Recruitment considerations                 
  are a critical factor for the  school system in Alaska.  She                 
  added,  teaching  is a  taxing  profession; new  people with                 
  energy and vision need  to be given the opportunity  to work                 
  to  keep  up  the challenging  concerns.    Specifically why                 
  school districts  supported the  early retirement  incentive                 
  program.                                                                     
                                                                               
  Representative Parnell asked  if there was a waiting list of                 
  qualified  teaching  positions  in  Juneau.    Ms.  Rubadeau                 
  responded that there have been qualified applicants who have                 
  not been  able to obtain employment because  there have been                 
  no new hires in the past few years.                                          
                                                                               
  Representative Mulder  suggested that the decision  be based                 
                                                                               
                                7                                              
                                                                               
                                                                               
  on "financial reality"  rather than trying to  modify social                 
  behavior in terms  for employment  practices.  He  suggested                 
  that teachers be held to the same level as other professions                 
  in  determining  when they  should  leave their  post.   Ms.                 
  Rubadeau spoke to the realities which face school districts;                 
  once teachers are tenured, they stay in the teaching system,                 
  and  that  many  of their  choices  evolve  around financial                 
  issues regarding the retirement system.                                      
                                                                               
  JUDY MURPHY, (TESTIFIED VIA  TELECONFERENCE), BARROW, stated                 
  that new  retirement proposals would  not encourage teachers                 
  to stay in the system nor would it encourage new students to                 
  pursue  degrees  in  education.    She emphasized  that  the                 
  proposed changes would be  too drastic and urged members  to                 
  vote against the proposed legislation.                                       
                                                                               
  BILL  DONALDSON,  (TESTIFIED  VIA  TELECONFERENCE),  KODIAK,                 
  spoke in favor of the  legislation, specifically the portion                 
  which addressed the Early Retirement Incentive Program (RIP)                 
  for  state  employees.    He agreed  that  it  was  fiscally                 
  responsible to reduce state government.                                      
                                                                               
  MIKE LAUNDRY, (TESTIFIED VIA TELECONFERENCE), KODIAK  POLICE                 
  DEPARTMENT, KODIAK, spoke in support of the legislation.  He                 
  thought that  the bill  would be  of benefit  to the  Kodiak                 
  Police  Department,  pointing  out   that  people  would  be                 
  eligible   for  early  retirement  through  passage  of  the                 
  legislation.  He  thought that could create more options for                 
  entry level employees.                                                       
                                                                               
  DENNIS  OAKLAND,  (TESTIFIED  VIA  TELECONFERENCE), CITY  OF                 
  HOMER,  HOMER, commented  that the  City of Homer  is facing                 
  declining   city   revenues,    forcing   down-sizing    and                 
  restructuring of the city  work force.  SB 148,  RIP portion                 
  of the  bill would allow  the city to reduce  the work force                 
  and  bring  on  new  employees   at  lower  costs,  creating                 
  substantial  savings.    He  concluded,  the City  of  Homer                 
  supports  SB  148  and urges  the  Committee's  approval and                 
  passage.                                                                     
                                                                               
  NICK  DUDIAK, (TESTIFIED  VIA  TELECONFERENCE), SELF,  STATE                 
  EMPLOYEE, HOMER, testified in favor  of SB 148, echoing that                 
  savings would be  provided to the  State through passage  of                 
  the legislation.  He pointed out that without passage of the                 
  bill, many lower  paid recruitment  positions would be  laid                 
  off resulting from the proposed budget plan.                                 
                                                                               
  GREG  MACDONALD,  (TESTIFIED  VIA   TELECONFERENCE),  PUBLIC                 
  SAFETY  EMPLOYEE  ASSOCIATION,  ALASKA  STATE FIRE  FIGHTERS                 
  ASSOCIATION,   ANCHORAGE,  stated   that   members  of   the                 
  associations which he represents strongly urge the Committee                 
  to separate the  RIP and Tier  III sections of the  proposed                 
                                                                               
                                8                                              
                                                                               
                                                                               
  legislation.   Each should  stand on  their own  merit.   He                 
  pointed out that there was broad support for the RIP portion                 
  of  the  bill, although,  citizens  felt strongly  about the                 
  "Tier III"  portion and  would not  support the  legislation                 
  with that included.                                                          
                                                                               
  He pointed out  that SB 148  would cut spouse and  dependent                 
  health care for the police and  fire workers.  Mr. MacDonald                 
  stressed that these employees have stressful work lives.  If                 
  they have to remain in service longer, that increases family                 
  stress and will make it "tough" to recruit quality people.                   
                                                                               
  KEITH  PERIN,  (TESTIFIED  VIA   TELECONFERENCE),  BOARD  OF                 
  DIRECTORS, PATERNAL  ORDER  OF  STATE  TROOPERS,  ANCHORAGE,                 
  advised that  the Tier  III retirement  portion of  the bill                 
  would be detrimental  to all  State troopers.   In order  to                 
  maintain the  quality work force  in the  State, changes  as                 
  proposed in Tier  III would not  be advisable.  The  current                 
  plan in Alaska  is considered to  be in the  "middle of  the                 
  road" compared  to other  states.   Mr Perin  commented that                 
  Tier III  will put  Alaska at  the "bottom  of the  barrel".                 
  California and Delaware have superior plans.  He urged  that                 
  the two portions of the bill be separated.                                   
                                                                               
  LUCY HOPE, (TESTIFIED VIA TELECONFERENCE), PRESIDENT, MAT-SU                 
  EDUCATION ASSOCIATION, ANCHORAGE, spoke  in opposition to SB
  148.  She pointed  out that the Mat-Su School District has a                 
  difficult time recruiting  specialty teachers; the  proposed                 
  legislation would make it more difficult.                                    
                                                                               
  Representative   Therriault   commented  on   the  actuarial                 
  soundness referenced by  Ms. Hope, suggesting that  fear was                 
  ungrounded.    Representative   Therriault  noted  that  the                 
  different tiers are individually funded and by adding a Tier                 
  III would not jeopardize other employees retirement.                         
                                                                               
  BILL  BJORK,  (TESTIFIED  VIA   TELECONFERENCE),  PRESIDENT,                 
  FAIRBANKS   EDUCATION   ASSOCIATION,  FAIRBANKS,   spoke  in                 
  opposition  to  SB  148 because  it  will  negatively impact                 
  Alaska's  ability  to  retain teachers  and  to  attract new                 
  teachers  throughout  the   State.     He  added  that   the                 
  association is concerned about the  bills negative influence                 
  on TRS participants.  Teacher shortages still exist in rural                 
  Alaska.  If  SB 148 becomes law, teachers will  be forced to                 
  moon-light after school  and during  the summers to  qualify                 
  for a modest social security annuity.                                        
                                                                               
  Representative Martin noted that he did not favor the RIP or                 
  the Tier III program.  He thought that neither would provide                 
  a cost savings.                                                              
                                                                               
  Representative Kelly  inquired if  University of  Alaska was                 
                                                                               
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  able to supply  the number  of needed replacement  teachers.                 
  Mr. Bjork  replied that  the University  can not  supply the                 
  number  of graduates  necessary especially  in the  "special                 
  needs" area.                                                                 
                                                                               
  DON DAVIS, (TESTIFIED  VIA TELECONFERENCE), FAIRBANKS, spoke                 
  against  SB 148.   He stated that it  was an additional step                 
  made  by  the  Legislature  to   punish  the  working  class                 
  individual.    Without  a  retirement  incentive, one  would                 
  assume that a stable work force  would be less available for                 
  state employment.  He pointed out, the Legislature had voted                 
  an additional raise for themselves while funds were depleted                 
  taken from  the working  class.   Co-Chair Foster  indicated                 
  that the proposed legislation was the Governor's bill.                       
                                                                               
                                                                               
  ANNALEE  MCCONNELL,  DIRECTOR,  OFFICE  OF  MANAGEMENT   AND                 
  BUDGET, OFFICE OF THE GOVERNOR,  commented that the proposal                 
  prepared last year  by the Governor differs in many respects                 
  from current retirement incentive suggestion.                                
                                                                               
  (Tape Change, HFC 96-145, Side 1).                                           
                                                                               
  Ms.  McConnell  reported  that  the  legislation  would  not                 
  provide an automatic age in which to be able to retire,  but                 
  rather it would  be used at the  Administration's discretion                 
  to determine which work units could achieve savings to allow                 
  employees to retire  early.  The program would calculate how                 
  much savings would occur by  either eliminating the position                 
  or  by replacing  the employee at  a lower  pay range.   The                 
  other calculated portion would be the employers contribution                 
  toward retirement, an amount  paid by the Department over  a                 
  three year period.                                                           
                                                                               
  Representative Martin voiced concern with the fiscal impact.                 
  He  maintained that the  retirement program would  be at the                 
  expense of new employees, who would need to provide personal                 
  savings three times greater than current employees.                          
                                                                               
  Ms. McConnell explained  that the initial bill  submitted by                 
  the Administration  was a "straight-forward"  retirement and                 
  separation incentive.  It did not include any adjustments to                 
  retirement.  In  the Senate, that  bill was combined with  a                 
  bill  prepared  by  Senator  Rieger  addressing   retirement                 
  benefits.  The  Administration stated that this was  not the                 
  preferred approach and then suggested alternatives.                          
                                                                               
  MARK  BOYER,  COMMISSIONER,  DEPARTMENT  OF  ADMINISTRATION,                 
  commented  that  the assumption  is  that wages  which drive                 
  retirement will  continue to  rise with  the consumer  price                 
  index (CPI).   These will  have increased benefits  added so                 
  that the future  retiree should have  a base which has  kept                 
                                                                               
                               10                                              
                                                                               
                                                                               
  pace with retirement costs.   Commissioner Boyer pointed out                 
  that a 4% gross factor was  used to determine the retirement                 
  reduction from the employee.                                                 
                                                                               
  Representative Martin asked  if that  was determined by  the                 
  1.5%  contribution  added  per  year.    Commissioner  Boyer                 
  replied  that  the 1.5%  is  a broad  base  private industry                 
  standard.  Base adjustments are still  assumed at the 4% per                 
  year increase.   He agreed  that the 1.5%  was low and  will                 
  result in a lower retirement piece.                                          
                                                                               
  Representative Martin asked if the fiscal note submitted had                 
  been calculated at  the 1.5%.  Commissioner  Boyer explained                 
  that Tier III savings was built upon blending the Tier I and                 
  Tier II employees, eventually being replaced by the Tier III                 
  employee.                                                                    
                                                                               
  Representative Therriault asked if going to a Tier III would                 
  jeopardize  the  benefit paid  to  the  Tier I  and  Tier II                 
  employees.  Commissioner  Boyer advised  that the tiers  are                 
  distinctively  different  and  the  contributions  paid  are                 
  separate  pools of  retirement  resources.    The  actuarial                 
  assumptions which provide  the contribution is based  on the                 
  individual employees placement.  There  will be no reduction                 
  to  the  Tier I  or  Tier  II level  employee  benefits from                 
  implementing an additional tier.                                             
                                                                               
  Representative Therriault asked how the money would be saved                 
  from the RIP program.  He understood that  it was the intent                 
  of  the  Administration  to  use   RIP  savings  to  address                 
  department  budget reductions.    Ms.  McConnell offered  to                 
  provide the Committee with a handout explaining the plan and                 
  the impact.   Representative Therriault reiterated  that the                 
  budget  reductions  should not  effect  an employee  who had                 
  already RIP'ed out.                                                          
                                                                               
  Representative Brown referenced  the outdated fiscal  notes.                 
  She asked  if they  reflected savings  expected through  the                 
  Tier III proposal.   Commissioner  Boyer explained that  the                 
  Department  would  provide  a  new   fiscal  note  based  on                 
  Committee action.   The  budget anticipates  a $30  thousand                 
  dollar savings in FY97 associated with the implementation of                 
  Tier III, based on  turnover assumptions.  Tier  III savings                 
  will accrue at a small rate over a period of time.                           
                                                                               
  Representative Brown asked if there was any part of the Tier                 
  III which  the Administration supported and  considered good                 
  policy.   Commissioner Boyer advised that the Administration                 
  does  not support  the Tier  III portion  of the  bill.   He                 
  suggested  that  the  defined   contribution  needs  to   be                 
  substituted with the defined benefit approach.                               
                                                                               
                                                                               
                               11                                              
                                                                               
                                                                               
  In response  to Representative  Brown's query,  Commissioner                 
  Boyer  replied  that  the  Administration  would support  an                 
  element of  the  Tier III  system,  seeking changes  to  the                 
  health benefit provision and the multiplier.  Representative                 
  Brown  asked if  those  two items  were  changed, would  the                 
  remainder of  the bill  be acceptable.   Commissioner  Boyer                 
  stated  that  the  Administration  did   not  have  a  final                 
  consensus regarding SB 148.  Representative Brown emphasized                 
  that there is  "high" interest  understanding the "range  of                 
  changes" proposed by  the Administration.  She  asked access                 
  to the information currently available.                                      
                                                                               
  Representative  Parnell  asked  if  the  Administration  had                 
  calculated  the  savings.   Commissioner Boyer  replied that                 
  health benefits  had been  cost-out for  a twenty-five  year                 
  period, and those  numbers were  available.   He added,  the                 
  system needs to  be able to  attract and retain good  public                 
  employees.  The goal is to decrease employer contribution to                 
  6% range.                                                                    
                                                                               
  Representative  Therriault  interjected  that  the  effected                 
  groups would of course  want to continue the status  quo; he                 
  intended  to  a  change  that  system.   Commissioner  Boyer                 
  reminded  members  that  savings accrue  over  time  and are                 
  incremental; for administrational  ease, the blended  number                 
  would be 13.8% employer contribution.                                        
  Representative  Therriault  pointed   out  that  the  social                 
  security  contribution was 6.2%.   He stressed that the PERS                 
  contribution was too "rich".   Commissioner Boyer  disagreed                 
  with  that  characterization.   He  stated that  the private                 
  sector often had  other retirement plans available  to their                 
  employees.                                                                   
                                                                               
  Representative   Therriault   asked   the   Administration's                 
  objection  to  a defined  contribution  plan.   Commissioner                 
  Boyer replied that plan tends to be of less benefit to large                 
  public  employers  than   it  is  for  the   private  sector                 
  employers.  He agreed that it was attractive, although, felt                 
  that  the defined  benefits  arrangement would  provide more                 
  certainty to public employees.  People are awarded for their                 
  longevity   as  opposed  to  a  defined  contribution  plan.                 
  Representative  Therriault  agreed   that  the  bill  needed                 
  adjustments, although recognized the need  for change to our                 
  current  situation.   He  stressed that  it would  always be                 
  opposed by the private sector.                                               
                                                                               
  (Tape Change, HFC 96-145, Side 2).                                           
                                                                               
  Discussion  followed  between   Representative  Martin   and                 
  Commissioner Boyer regarding the information requested  from                 
  the Administration highlighting options and cost analysis.                   
                                                                               
                                                                               
                               12                                              
                                                                               
                                                                               
  Representative Therriault asked how  the Administration felt                 
  about  including  Tier  III  and   RIP  in  the  same  bill.                 
  Commissioner Boyer clarified that language was inconsistent,                 
  encouraging  employees  to "leave  early"  while and  on the                 
  other  hand developing  a system  to encourage them  to stay                 
  longer.  Representative Therriault pointed out that the time                 
  scenarios  differed.    He stressed  that  employees  have a                 
  personal  obligation for  providing  for  their  own  future                 
  outside  of  the  retirement  accrued  through  their  jobs.                 
  Representative Martin agreed.                                                
                                                                               
  SB 148 was HELD in Committee for further discussion.                         
  SENATE BILL 301                                                              
                                                                               
       "An Act relating to postsecondary education."                           
                                                                               
  DIANE BARRANS, EXECUTIVE  DIRECTOR, POSTSECONDARY  EDUCATION                 
  COMMISSION,  DEPARTMENT OF  EDUCATION, spoke  to the  fiscal                 
  note attached to the Executive  Order (EO) which indicates a                 
  reduction  in  costs   because  the   Commission  would   be                 
  eliminated.  What  was not included  in the Executive  Order                 
  was information that the Department of Education (DOE) has a                 
  pending  RSA for  $40  thousand dollars.    DOE backed  that                 
  amount out of their proposed FY97 budget and the fiscal note                 
  provided  by  the  Department  of  Revenue  represents  that                 
  amount.                                                                      
                                                                               
  Representative  Brown   MOVED  to  adopt  Amendment  #1,  9-                 
  LS1749\K.2, Ford, 4/26/96.   Ms. Barrans explained  that the                 
  amendment would eliminate the Commission  and would move the                 
  regulation  of  the  post  secondary  institutions  to   the                 
  Department of Education  as a department function  and would                 
  also  provide  the   needed  technical  corrections.     She                 
  reiterated that the amendment would eliminate the separation                 
  of  power issue, which was of concern to the Administration.                 
                                                                               
                                                                               
  Representative  Mulder  asked  if  Amendment  #1  would   be                 
  comparable to the  Executive Order.   Ms. Barrans stated  it                 
  would.  Representative Mulder OBJECTED to Amendment #1.                      
                                                                               
  A roll call was taken on the MOTION.                                         
                                                                               
       IN FAVOR:      Brown.                                                   
       OPPOSED:       Kelly, Kohring, Martin, Mulder, Parnell,                 
                      Therriault.                                              
                                                                               
  Representative Grussendorf, Navarre, Hanley  and Foster were                 
  not present for the vote.                                                    
                                                                               
  The MOTION FAILED (1-6).                                                     
                                                                               
                               13                                              
                                                                               
                                                                               
  Representative  Parnell  MOVED  to  adopt  Amendment #2,  9-                 
  LS1749\K.1,  Ford,  4/25/96,  for  purposes  of  discussion.                 
  Representative Brown OBJECTED.   Ms. Barrans noted  that the                 
  Commission has  been supportive of the WAMI program and that                 
  the amendment would reinstate  it.  She pointed out  that it                 
  was a low cost program to administer.                                        
                                                                               
  WENDY   REDMAN,   VICE   PRESIDENT,  UNIVERSITY   RELATIONS,                 
  UNIVERSITY  OF  ALASKA,  understood  Representative  Bunde's                 
  intent in  the amendment to move  the WAMI program to  a new                 
  base.  She acknowledged that  the University was willing  to                 
  work with him on that concern.                                               
                                                                               
  Ms. Redman advised that  the WAMI program is a  major public                 
  policy question that the State of Alaska needs to deal with.                 
  It is an expensive program, although, it is not an expensive                 
  program as an alternative to medical school.  The University                 
  of Washington sets aside ten seats for Alaskans.  The policy                 
  issue  needs to  be  determined by  the  Legislature if  the                 
  intent is to provide for rural doctors.                                      
                                                                               
  She recommended establishing an interim committee  to pursue                 
  the  concerns.   Ms.  Redman  objected  to Amendment  #2  as                 
  proposed.  It  would place into  the University budget,  the                 
  money for the years 2, 3 and 4 as part of the program.   She                 
  pointed out  that this  was not  part of  the University  of                 
  Alaska's  program;  it is  a  straight pass  through  to the                 
  University of Washington.   It would inflate  the University                 
  of Alaska's budget.                                                          
                                                                               
  Representative  Brown asked  where  the first  year  funding                 
  would come from.  Ms. Redman  replied all first year funding                 
  is contained in the UAA budget.  The students attend UAA for                 
  the first year and  then go to the University  of Washington                 
  for the next three years.                                                    
                                                                               
  Representative  Therriault  asked  some  ideas  which  could                 
  attract  students to rural  Alaska.  Ms.  Redman stated that                 
  there  are  some states  which pay  a  flat amount  of money                 
  enticing doctors  into rural areas.   Other states  pay back                 
  the  student  loans.   These systems  do  work and  would be                 
  cheaper than the  current system  used in  Alaska under  the                 
  WAMI program.                                                                
                                                                               
  REPRESENTATIVE CON  BUNDE commented that  the driving  force                 
  behind the WAMI program was UAA.  They want the program.  He                 
  thought it  would be  advisable to  consolidate the  funding                 
  into one entity.   Representative Martin  noted that he  did                 
  not believe  that anyone  from the University  "desperately"                 
  wanted this program.                                                         
                                                                               
                                                                               
                               14                                              
                                                                               
                                                                               
  Ms.  Redman  corrected  that Representative  Bunde  had been                 
  referring to the maintenance of the first year budget at the                 
  University  of  Alaska.   She  added  that this  was  a high                 
  priority for  UAA.   The residency  program currently  being                 
  implemented at  the Anchorage hospital would not exist if it                 
  were not for the WAMI program participation.  The University                 
  does not want the funding responsibility  for years 2, 3 and                 
  4.                                                                           
                                                                               
  In response  to Representative Brown's question,  Ms. Redman                 
  noted that forty students per  year are participating in the                 
  WAMI program.  Ten from each class.  The cost is  $2 million                 
  dollars; emphasizing that  it is  a very expensive  program.                 
  Representative Brown suggested adding a  Letter of Intent to                 
  attach to the legislation.                                                   
                                                                               
  Representative Kohring voiced his  support of the amendment.                 
  Representative Bunde  thought that  since years 2,  3 and  4                 
  were  at the  University of  Washington, that  would  be the                 
  ideal place to have the funding located.                                     
                                                                               
  A roll call was taken on the MOTION.                                         
                                                                               
       IN FAVOR:      Kohring, Kelly.                                          
       OPPOSED:       Martin,  Mulder,  Parnell,   Therriault,                 
                      Brown.                                                   
                                                                               
  Representatives Navarre, Grussendorf, Hanley and Foster were                 
  not present for the vote.                                                    
                                                                               
  The MOTION FAILED (2-7).                                                     
                                                                               
  Representative  Mulder  noted  that  it  was his  intent  to                 
  support  the  Letter   of  Intent  to   further  investigate                 
  alternatives.                                                                
                                                                               
  Representative Martin MOVED  to report CS SB 301 (FIN)am out                 
  of Committee  with individual  recommendations and  with the                 
  attached fiscal notes.  There being  NO OBJECTION, it was so                 
  ordered.                                                                     
                                                                               
  CS SB 301  (FIN)am was  reported out of  Committee with  "no                 
  recommendation" and with  fiscal notes by the  Department of                 
  Revenue dated 4/19/96,  two from  the Alaska Post  Secondary                 
  Commission  dated  4/02/96  and  4/19/96   and  two  by  the                 
  Department of Education dated 4/19/96 and a zero fiscal note                 
  by the Alaska Postsecondary Commission.                                      
  ADJOURNMENT                                                                  
                                                                               
  The meeting adjourned at 4:00 P.M.                                           
                                                                               
                                                                               
                               15                                              

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