Legislature(2001 - 2002)
04/23/2001 01:50 PM House FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE FINANCE COMMITTEE
April 23, 2001
1:50 PM
TAPE HFC 01 - 92, Side A
TAPE HFC 01 - 92, Side B
CALL TO ORDER
Co-Chair Williams called the House Finance Committee meeting
to order at 1:50 PM.
MEMBERS PRESENT
Representative Bill Williams, Co-Chair
Representative Con Bunde, Vice-Chair
Representative Eric Croft
Representative John Davies
Representative Richard Foster
Representative John Harris
Representative Bill Hudson
Representative Ken Lancaster
Representative Carl Moses
Representative Jim Whitaker
MEMBERS ABSENT
Representative Eldon Mulder, Co-Chair
ALSO PRESENT
Janice Adair, Director, Division of Environmental Health,
Department of Environmental Conservation; Devon Mitchell,
Executive Director, Alaska Municipal Bond Bank Authority,
Department of Revenue; Representative Pete Kott, Sponsor;
Alison Elgee, Deputy Commissioner, Department of
Administration; Kathy Lea, Division of Retirement and
Benefits, Department of Administration; Del Smith, Deputy
Commissioner, Department of Public Safety; Bruce Johnson,
Deputy Commissioner, Education, Department of Education and
Early Development; Kevin Brooks, Director, Division of
Administrative Services, Department of Fish and Game; Tim
Rogers, Legislative Program Coordinator, Municipality of
Anchorage; Veron Marshall, NEA-Alaska, Juneau.
PRESENT VIA TELECONFERENCE
SUMMARY
HB 51 "An Act giving notice of and approving the entry
into, and the issuance of certificates of
participation for, a lease-purchase agreement for
a seafood and food safety laboratory facility; and
providing for an effective date."
HB 51 was heard and HELD in Committee for further
consideration.
HB 242 "An Act relating to reemployment of and medical
benefits for retired members of the teachers'
retirement system and public employees' retirement
system; relating to the inclusion of cost-of-
living differentials on compensation and benefits
under the public employees' retirement system; and
providing for an effective date."
CSHB 242 (FIN) was REPORTED out of Committee with
a "do pass" recommendation and with previously
published fiscal impact note (#1) by the
Department of Administration.
HOUSE BILL NO. 51
"An Act giving notice of and approving the entry into,
and the issuance of certificates of participation for,
a lease-purchase agreement for a seafood and food
safety laboratory facility; and providing for an
effective date."
JANICE ADAIR, DIRECTOR, DIVISION OF ENVIRONMENTAL HEALTH,
DEPARTMENT OF ENVIRONMENTAL CONSERVATION testified in
support of HB 51. She noted that the legislation would
authorize certificates of participation to replace the
Palmer seafood and food safety laboratory with a new
facility in Anchorage. She responded to questions raised
during the previous committee hearing (see memorandum dated
4/3/01, copy on file). She explained that she was unable to
obtain a letter from the current building owner indicating
that they were not interested in a 15 percent lease
reduction, which would allow the laboratory to remain in the
current location. However, the landowner did communicate
this information verbally to Ms. Adair. The landowner
indicated that a 15 percent reduction would be below the
cost she would be willing to rent the building. She provided
members with a copy of an email from the Federal Drug
Administration (FDA) explaining that they no longer certify
private laboratories to test for paralytic shellfish
poisoning. She answered the questioned of why the department
could not use the building that currently houses the Alaska
Seafood International Seafood (ASI) processing center in
Anchorage. She contacted Bob Poe, Executive Director, Alaska
Industrial Development and Export Authority (AIDEA), who
confirmed that the facility is not available. The ASI
facility is expected to be in full production by the summer.
She was asked why a RFP was not issued to see if the private
sector could build a facility cheaper. General Services
advised her that they could not go out for a RFP unless
there is an intent to issue a contract. The estimated
development cost for a RFP would be just over $1 million
dollars. Since there was no funding available for the RFP
development and no way to solicit bids a private consultant
was hired to provide professional judgment on the cost
differences between building and leasing. The consultant
concluded that leasing would be far more expensive than
building a state owned laboratory. The per square cost of
the entire 20 year bond repayment term would be $4.87
dollars a square foot. The building would be paid for after
the 20-year term. The state chemistry laboratory located in
Juneau and managed by the Department of Environmental
Conservation costs $4.26 dollars a square foot and is
expected to increase. Laboratories are sized according to
the type of analysis that takes place and the type of
equipment needed. Air handling systems must be located
internally. Laboratories require counter tops, space hoods,
fuel hoods, walk-in coolers and freezers and other big
pieces of equipment that take up room. She compared the
20,500 square foot proposed laboratory to the existing
laboratory. She noted that of 20,500 square feet only 11,890
would be available for use by employees. There would be over
9,000 square feet for ventilation, mechanicals, walls and
hallways. She addressed the question of what part of the
proposed laboratory could be deleted if the bond package was
reduced. She noted that reduced administrative space was
identified for a savings reduction of $200 thousand dollars
[840 square feet]. A conference room and one office would be
eliminated, and the waiting area would be reduced. The non-
bondable costs would be covered by general funds because it
is not qualified for federal funds and Alaska Housing
Finance Corporation (AHFC) funds were already obligated. If
the legislation is not passed, the laboratory can only stay
in their current location as on emergency extension basis.
There is an obligation not to go into emergency procurement.
They would be asked by General Services to go out with a RFP
this summer for a lease facility to have a facility on-line
before their current lease expires. The estimated cost to
develop a RFP exceeds a million dollars. The increased
rental costs would have to come out of their operating
budget. The department does not have funds for either item
and would be "in a world of hurt if the bill doesn't pass."
Representative Harris referred to a memorandum by
Representative Ogan, dated 3/23/01 (copy on file.) He noted
that the memorandum stated that the department was willing
to work toward achieving three goals: move the seafood
testing portion of the laboratory closer to tidewater, leave
functions other than seafood in the valley [Matanuska] and
find a way to obtain a more affordable reasonable sized
facility with a acceptable square foot cost in Anchorage.
Ms. Adair noted that she met with staff from Representative
Ogan's office and responded to questions in a memorandum
dated 4/11/01 (copy on file.) She noted that the laboratory
does about 85 percent seafood work. She reviewed other
activities of the laboratory. The same staff and
laboratories are used to do other activities such as dairy
product testing. She explained that it would not be cost
affective to split functions and only move seafood
activities. The state would have to build two laboratories
in order to leave the other activities in the valley. There
would not be enough work to operate a valley laboratory full
time and hire a full time microbiologist. Functions that
have a historical connection to the valley will remain
there, such as the pesticide program. The dairy sanitarian
(the person that inspects the dairy farms and processors)
and the state veterinarian will remain.
Representative Harris noted that he is concerned with the
removal of the facility from the valley without consultation
with the district's members.
In response to a question by Representative Hudson, Ms.
Adiar noted that seafood samples come from all over the
state. There are federal requirements for smoked fish. A
certain amount of each lot of smoked fish must be tested.
Shellfish and other seafood are also tested. A greater focus
is being given to after testing the processed product.
Smoked fish samples from Southeast [and other areas of the
state] are shipped to Palmar for testing. Shellfish cannot
be sold until they have been tested. The shellfish and
growing waters are tested. The growing waters must be tested
within 30 hours from the time the sample was taken.
Representative Lancaster stressed that the issue is whether
the laboratory is moved. He stated that it would make sense
to move the laboratory to Anchorage and emphasized the time
sensitivity of the lease. He acknowledged that there are
still questions that need to be answered.
Representative Hudson asked if Ms. Adair had made
arrangements to meet with Representative Ogan to look at the
possibility of retaining some aspects in Palmer.
Ms. Adair reiterated that it does not make sense to split
the laboratory. Splitting the function would not reduce the
seafood aspect of the laboratory. Splitting the aspects
would create an additional need in Palmer for the non-
seafood aspect. She stressed that the impact to Palmer would
be minimal. She noted that informal conversations have
indicated that the Palmer employees plan to commute into
Anchorage.
In response to a question by Co-Chair Williams, Ms. Adair
acknowledged the necessarily of reducing the project's cost.
Some equipment purchases could be deferred until the
laboratory is ready to open and purchased in the capital
budget. She estimated that this could reduce the price by $1
million dollars to $11.2 -$11.6 million dollars.
Representative Carl Moses stressed the importance of serving
the needs of the industry and pointed out that the time
delay in shipping can be critical.
Representative Harris questioned how long it would take to
build the facility.
DEVON MITCHELL, EXECUTIVE DIRECTOR, ALASKA MUNICIPAL BOND
BANK AUTHORITY, DEPARTMENT OF REVENUE explained that there
are restrictions on the time of the bond issuance. There has
to be a reasonable expectation that proceeds would be
expended within 3 years. The Department of Transportation
and Public Facilities has done an initial analysis on the
project that showed a final 5 percent of the piece occurring
in year four. This would have to be shifted into year three.
He acknowledged that reasonable expectations do not always
play out in reality.
Co-Chair Williams questioned options for reducing financing
costs. Mr. Devon observed that net funding could be used to
decrease the bond size. Assumptions on cash flow and
investment earnings are made during the construction period
to reduce the bond sizing.
HB 51 was heard and HELD in Committee for further
consideration.
HOUSE BILL NO. 242
"An Act relating to reemployment of and medical
benefits for retired members of the teachers'
retirement system and public employees' retirement
system; relating to the inclusion of cost-of-living
differentials on compensation and benefits under the
public employees' retirement system; and providing for
an effective date."
REPRESENTATIVE PETE KOTT, SPONSOR testified in support of HB
242. He noted that the workforce is reduced as the baby
boomer generation retires. By the year 2008 - 2009 a brain
drain is expected. The legislation would provide a tool to
bring retired employees back into the workforce and
encourage employees to remain.
Section 1 adds an incentive for a retired teacher to return
to full time teaching for a Teacher Retirement System (TRS)
employer. With this change, a retired teacher who took
normal retirement may elect a new option when reemployed.
The new option allows the teacher to elect continuation of
retirement benefit payments during reemployment; would stop
additional retirement benefit accrual; must be selected
within 30 days of reemployment; and is not available to RIP
participants. If the retired teacher does not make the
election, the current method would apply. Sections 4 and 5
provide the same provisions of Public Employees' Retirement
System (PERS) employees.
Section 3 adds an incentive for teachers to stay in TRS.
Currently Tier II retirees are not eligible for the medical
coverage until age 60, at which time the retirement system
pays 1/2 the medical premium and the retiree is responsible
for the other half, regardless of how many years the teacher
taught in TRS.
With this change a teacher who stays an additional five
years beyond the normal retirement service requirement of
twenty years will be eligible for full system paid medical
coverage. In addition, all retired teachers will be provided
full system paid medical coverage at age 60.
Section 6 adds an incentive for public employees to stay in
PERS through 30 years of service. Currently a Tier II
retiree is not eligible for system provided medical coverage
until age 60, at which time the retirement system pays 1/2
the medical premium and the retiree is responsible for the
other 1/2, regardless of how many years the person is in
PERS.
With this change a public employee who stays in PERS
employment a total of 30 years will be eligible for full
system paid medical coverage. In addition, all retired
public employees will be provided full system paid medical
coverage at age 60.
Section 7 addresses the geographic differential. This
section attempts to clarify language that has created
problems for the Division of Retirement and Benefits.
Representative Kott maintained that the cost to the state of
Alaska is minimal: $96 thousand dollars the first year and
$66 thousand dollars for subsequent years. He reiterated
that the legislation will help attract and retain state
workers and teachers.
In response to a question by Vice-Chair Bunde,
Representative Kott noted that the legislation does not
include RIP employees. Representative John Davies pointed
out that the RIP employees would not want to take advantage
of the bill because they would have to repay retirement
credit.
ALISON ELGEE, DEPUTY COMMISSIONER, DEPARTMENT OF
ADMINISTRATION spoke in support of the legislation. The
Teachers Retirement System Board and the Public Employees
System Board have reviewed the legislation. Both Boards
support elements contained in the legislation.
Vice-Chair Bunde observed that teachers and other
administrators requested early retirement bills because they
could not afford [the salaries] of "old-timers". He
questioned if there is an inconsistency in the principle of
the legislation.
Ms. Elgee acknowledged the questioned and noted that "times
change". She stressed that the problem is to be able to
staff jobs in the public environment. Persons who have taken
an early-retirement are not eligible.
Representative Whitaker asked the rate of reemployment. Ms.
Elgee noted that there is no quota of returned retirees. The
retirees would return without accruing additional retirement
services, which would provide some reduced employer and out-
of-pocket employee costs. The employer would have to
indicate the need. She emphasized the benefit on projects
with a limited duration.
Representative Whitaker summarized that there is no
proscribed reentry level. Representative Davies questioned
if bargaining units would be involved. Ms. Elgee clarified
that retirement is not subject to collective bargaining.
Hiring terms would be subject to collective bargaining.
Representative Hudson noted that persons over 65 years of
age can receive social security and continue to work. He
stressed that it is a powerful incentive to continued
working. He asked how many retirees would be affected.
Ms. Elgee responded that there is no way to anticipate how
many retirees would elect to return to work.
TAPE HFC 01 - 92, Side B
Ms. Elgee observed that teachers often reach retirement in
their mid 40's. The department anticipates 2,660 retired
teachers between the age of 50 and 54 in the year 2005.
There would be another 5,600 teachers between 55 and 60
years of age. This pool of teachers could be utilized for
the workforce.
Vice-Chair Bunde referred to the fiscal note.
Ms. Elgee noted that there would be no impact to the
retirement section. No additional retirement credit would be
accrued. The fiscal note would request one additional person
for counseling and some data processing. Enhanced medical
benefits would result in a slight increase of .17 percent in
both the TRS and PERS systems. The change to the
geographical differential has no impact.
Representative Whitaker asked if thought had been given on
the affect on the entry-level workforce. He noted that new
graduates could lose in the choice between experience-
retired teachers.
Representative John Davies echoed concerns of Representative
Whitaker and noted that he would propose a 3-year sunset to
allow assessment of unintended consequences (copy on file).
Representative Hudson asked why the additional cost to the
employer was necessary when PERS and TRS funds generate
through investment in excess of a hundred percent of the
actual cost. He noted that these funds are two of the
healthiest funds in the nation. He observed that the medical
benefits were reduced in Tier II due to costs.
Ms. Elgee acknowledged that the funds are healthy. She
clarified that the actuary looks at changes in isolation.
There would not necessarily be an increase as a result of
the change due to a variety of offsetting factors such as
the investment rate of return, which would negate any
increased cost as a result of the legislature. She added
that none of the effects would be immediate. Changes in the
rates would not be reflected until 2005. The department is
not requesting funding for the change, but is estimating the
impact.
DEL SMITH, DEPUTY COMMISSIONER, DEPARTMENT OF PUBLIC SAFETY
spoke in support. He noted that it is difficult to get young
people to go to remote areas of the state and spoke in
support of the change to the geographical differential. He
noted there are talented individuals that could add to law
enforcement that are precluded from doing so because they
can go on to other careers and still draw their retirement.
BRUCE JOHNSON, DEPUTY COMMISSIONER, EDUCATION, DEPARTMENT OF
EDUCATION AND EARLY DEVELOPMENT spoke in support of the
legislation. The legislation adds to the capacity of the
school districts in terms of encouraging individuals to stay
within the system. Reemployment of retired teachers is a
good tool. He pointed out that there is no guarantee that
they would be rehired in the same or another school
district. He stressed that Alaska is only producing 20 - 30
percent of the teachers needed to fill its teaching
positions. He maintained that the questioned is whether it
would be better to employ someone from out of state or a
retired teacher. Districts currently compete against each
other. He stressed that the systems are better off with some
new and some old blood. He pointed out that recruiters out
numbered applicants at the recent Anchorage job fair (150
applicants).
Vice-Chair Bunde observed that teaching is a stressful job.
He asked if there had been discussion with retired teachers.
Mr. Johnson noted that there have not been any formal
discussions. He recounted personal discussions with retirees
noted that teachers may want to rehire after being refreshed
by time off. He added that the RIP bill's intent was to make
ends meet within their budget.
Vice-Chair Bunde acknowledged that teaching is a stressful
job. He asked how much discussion has occurred with retired
teachers to assess their desire to return to work. Mr.
Johnson responded that there has not been a coordinated
effort to interact with retired teachers. He emphasized that
the early retirement (RIP) effort was a resource issue of
trying to make budgets balance.
Representative Croft questioned what salary retired teachers
would be returned at their same salary. Mr. Johnson stated
that it would be up to the individual school district. He
observed that it could be a negotiated item. Teachers could
be paid on the salary schedule but without the benefit
package.
Representative Hudson observed that the teachers that took
early retired would be excluded. He noted that the RIP was
an attempt to retire higher paid, longer tenured teachers.
He questioned if it would be the best policy to exclude
these qualified employees.
Mr. Johnson observed that it would create a larger pool if
teachers that took early retirement were included. He
acknowledged the challenge of accommodating the rules under
which teachers who took early retirement operated. He added
that the rip program resulted in a brain drain.
Vice-Chair Bunde pointed out that the agencies requested the
rip bill. He questioned what would prevent retired teachers
from coming back to work at the same wage with the addition
of their retirement. Mr. Johnson responded that these
teachers are currently taking teaching jobs in other states.
Some of these people might stay in the state and serve
Alaskan children. Rehiring retired teachers would become
part of collective bargaining to prevent misuses. He did not
know if the best public policy would be to rehire on the
current salary schedule and negotiate the 30 percent benefit
package in some other way in order to allow school districts
to achieve a savings.
KEVIN BROOKS, DIRECTOR, DIVISION OF ADMINISTRATIVE SERVICES,
DEPARTMENT OF FISH AND GAME testified in support of the
legislation. He observed that the agency has lost 25
biologists in their commercial fish division in the last 6
months to jobs with the federal government. The legislation
would allow the department to keep some of these employees.
He noted that that department anticipates federal funding
for marine mammal research. The best candidates for these
projects would be retired marine mammal biologists. He
stressed that rehired retired employees would not maintain
their longevity, which would allow a savings to the
department.
Vice-Chair Bunde questioned if discussions have occurred
with retired employees. He noted that he has received emails
requesting early retirement. Mr. Brooks stressed that there
are recruitment and retention issues along with fairness and
equity issue. He maintained that there isn't any one tool to
address every need.
Representative Lancaster questioned if the legislation would
allow double dipping. Mr. Brooks reiterated that the state
of Alaska is losing personnel to other states and the
federal government. He stressed that nothing will change. He
acknowledged that retired employees would still receive
retirement while drawing a paycheck, but emphasized that an
asset would be preserved while getting the job done for the
state.
Representative John Davies pointed out that employees would
not earn additional retirement.
TIM ROGERS, LEGISLATIVE PROGRAM COORDINATOR, MUNICIPALITY OF
ANCHORAGE testified in support. He observed that the
municipality is experiencing a brain drain as employees
leave the municipality. He maintained that the legislation
would help resolve their problems. He noted that 25 percent
of the police officers in Anchorage are eligible for
retirement. He noted that the issue is how to encourage
these employees to retire and come back or not retire at
all. The Anchorage police department employees went into
PERS in 1994 so the legislation would not solve that problem
for a number of years.
VERON MARSHALL, EXECUTIVE DIRECTOR, NEA-ALASKA, JUNEAU,
spoke in support of the legislation. He stressed that the 25
and out provision would help retain teachers in the
classroom. He maintained that the qualifying factor of major
medical after 25 years would encourage a number of teachers
to stay in the state. The legislation would provide another
tool to enhance the pool of qualified teachers to reenter.
He noted that most collected bargaining agreements allow
teachers to be hired from out of district. He stressed that
a retired teacher would be viewed as a break of service and
come under the experienced credit variable and would be
subject to scrutiny.
Vice-Chair Bunde noted that there is a limitation of how
much service can be brought back. Salaries would be reduced.
Representative John Davies MOVED to ADOPT Amendment 1. He
reiterated that the amendment would provide a 3-year sunset.
He expressed support for the legislation but felt that it
would be good legislative policy to review the change.
Representative Kott did not object to the sunset provision.
He acknowledged that the sunset would require the
legislature to review the issue, but felt that any problems
would be discovered in the next few years.
Ms. Elgee testified that the amendment would not have an
adverse affect but questioned if 3 years would be sufficient
time to review the program.
Representative John Davies stated that he would not object
to a longer period.
Co-Chair Williams questioned if a five-year period would be
too long.
Representative Kott observed that the sunset would fall
before the increase in retiring teachers that is expected in
the year 2005. He suggested the time be expanded.
Vice-Chair Bunde reiterated that actuarial impact would not
be felt until 2005.
Representative John Davies stated that he would entertain a
motion to change the date to 2006.
Vice-Chair Bunde Moved to Amend Amendment 1 by changing the
sunset date to the year 2005. There being NO OBJECTION, it
was so ordered.
There being NO OBJECTION, Amendment 1 was adopted.
Representative Foster MOVED to report CSHB 242 (FIN) out of
Committee with the accompanying fiscal note. There being NO
OBJECTION, it was so ordered.
CSHB 242 (FIN) was REPORTED out of Committee with a "do
pass" recommendation and with previously published fiscal
impact note (#1) by the Department of Administration.
ADJOURNMENT
The meeting was adjourned at 3:28 p.m.
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