Legislature(1995 - 1996)
04/01/1995 10:05 AM House STA
| Audio | Topic |
|---|
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE STATE AFFAIRS STANDING COMMITTEE
April 1, 1995
10:05 a.m.
MEMBERS PRESENT
Representative Jeannette James, Chair
Representative Scott Ogan, Vice-Chair
Representative Ivan
Representative Brian Porter
Representative Caren Robinson
Representative Ed Willis
MEMBERS ABSENT
Representative Joe Green
OTHER LEGISLATORS PRESENT
Representative Kim Elton
COMMITTEE CALENDAR
* HB 270: "An Act relating to retirement incentive programs for
the public employees' retirement system and the
teachers' retirement system; relating to separation
incentives for certain state employees; and providing
for an effective date."
HEARD AND HELD
WITNESS REGISTER
ANNALEE MCCONNELL, Director
Office of Management and Budget
Court Plaza Building, Suite 800
Juneau, AK 99801
Telephone: 465-4660
POSITION STATEMENT: Supported HB 270
CRAIG PERSSON
P.O. Box 82324
Fairbanks, AK 99708
Telephone: 452-4448
POSITION STATEMENT: Supported HB 270
ELWIN LEACH
3110 17th Avenue
Fairbanks, AK 99701
Telephone: 452-4448
POSITION STATEMENT: Supported HB 270
LUCY HOPE
P.O. Box 870887
Wasilla, AK 99687
Telephone: 376-3704
POSITION STATEMENT: Supported HB 270
FRANK SMITH
c/o P.O. Box 830
Barrow, AK 99723
Telephone: 852-7111
POSITION STATEMENT: Supported HB 270
JUDY MURPHY
P.O. Box 307
Barrow, AK 99723
Telephone: 852-7111
POSITION STATEMENT: Supported HB 270
ELDON BROTHEN
257 Stacy Drive
Soldotna, AK 99669
Telephone: 262-9364
POSITION STATEMENT: Supported HB 270
JAMES CHAMBERS
P.O. Box 3386
Soldotna, AK 99669
Telephone: 262-9364
POSITION STATEMENT: Supported HB 270
ALICIA NEWMAN
1710 Commodore Drive
Anchorage, AK 99501
Telephone: 258-8111
POSITION STATEMENT: Supported HB 270
SANDRA STRAUB
c/o P.O. Box 1630
Nome, AK 99762
Telephone: 443-5555
POSITION STATEMENT: Supported HB 270
PETE VELSKO
Box 1205
Nome, AK 99762
Telephone: 443-5555
POSITION STATEMENT: Supported HB 270
VAL KOEBERLEIN, Finance Director
City of Homer
P.O. Box 2137
Homer, AK 99603
Telephone: 235-7878
POSITION STATEMENT: Supported HB 270
BILL MONROE
2950 Maryann Place
Wasilla, AK 99654
Telephone: 376-3704
POSITION STATEMENT: Supported HB 270
LEE FOSTER
P.O. Box 671
Delta Junction, AK 99743
Telephone: 895-4236
POSITION STATEMENT: Supported HB 270
MIKE SARVER
P.O. Box 1014
Delta Junction, AK 99747
Telephone: 895-4236
POSITION STATEMENT: Supported HB 270
ROD CLIFT, Principal
Aniak High School
P.O. Box 49
Telephone: None
Aniak, AK 99557
POSITION STATEMENT: Supported HB 270
DUANE GRIGG
P.O. Box 63
Aniak, AK 99557
Telephone: None
POSITION STATEMENT: Supported HB 270
RUTH ANN RUST
2386 Levitt Loop
Fairbanks, AK 99701
Telephone: 452-4448
POSITION STATEMENT: Supported HB 270
SUSAN VINCENTE
3752 Mariposa Lane
Fairbanks, AK 99701
Telephone: 453-4448
POSITION STATEMENT: Supported HB 270
TOM CHURCH
Box 406
Cordova, AK 99574
Telephone: 424-5461
POSITION STATEMENT: Supported HB 270
ROSE MARY BUSHON
P.O. Box 4142
Soldotna, AK 99669
Telephone: 262-9364
POSITION STATEMENT: Supported HB 270
TRINA RICHARDSON
P.O. Box 2278
Soldotna, AK 99669
Telephone: 262-9364
POSITION STATEMENT: Supported HB 270
CAROL MITCHELL
981 North Tongass
Ketchikan, AK 99901
Telephone: None
POSITION STATEMENT: Supported HB 270
LEW BRANTLEY
P.O. Box 523
Dutch Harbor, AK 99576
Telephone: None
POSITION STATEMENT: Supported HB 270
MIKE WARD
P.O. Box 421
Dutch Harbor, AK 99576
Telephone: None
POSITION STATEMENT: Supported HB 270
CORKY MCCORKLE
c/o 112 Mill Bay Road
Kodiak, AK 99615
Telephone: None
POSITION STATEMENT: Supported HB 270
NORMA DUDIAK
640 Southview Avenue
Homer, AK 99603
Telephone: 235-7878
POSITION STATEMENT: Supported HB 270
JUDY SHIFFLER
292 Ranger Drive
Fairbanks, AK 99709
Telephone: 452-4448
POSITION STATEMENT: Supported HB 270
BRENDA MARTIN
2616 Garnett Drive
North Pole, AK 99705
Telephone: 452-4448
POSITION STATEMENT: Supported HB 270
KELLY BROWN
315 Barnette Street
Fairbanks, AK 99709
Telephone: 452-4448
POSITION STATEMENT: Supported HB 270
HAL SMALLEY
105 Lindwood Lane
Kenai, AK 99671
Telephone: 262-9364
POSITION STATEMENT: Supported HB 270
BOB RUTMAN
Box 136
Kiana, AK 99782
Telephone: None
POSITION STATEMENT: Supported HB 270
DALE JUDGE
P.O. Box 273
Glennallen, AK 99588
Telephone: None
POSITION STATEMENT: Supported HB 270
BOB STALNAKER, Director
Division of Retirement and Benefits
Department of Administration
State Office Building, 6th Floor
Juneau, AK 99801
Telephone: 465-4460
POSITION STATEMENT: Supported HB 270
MARILYN NIGRO
651 9th Avenue
Fairbanks, AK 99701
Telephone: 452-4448
POSITION STATEMENT: Supported HB 270
TED DELEON
1023 Gilmore Street
Fairbanks, AK 99701
Telephone: 452-4448
POSITION STATEMENT: Supported HB 270
PAM DARNALL
P.O. Box 55257
North Pole, AK 99257
Telephone: 452-4448
POSITION STATEMENT: Supported HB 270
TERRY MARQUETTE
3032 Supercub Lane
Fairbanks, AK 99701
Telephone: 452-4448
POSITION STATEMENT: Supported HB 270
MARGARET SAMPSON
P.O. Box 80451
Fairbanks, AK 99708
Telephone: None
POSITION STATEMENT: Supported HB 270
VERNON MARSHALL, Executive Director
National Educational Association of Alaska
114 Second Street
Juneau, AK 99801
Telephone: 586-2744
POSITION STATEMENT: Supported HB 270
GARY BADER, Administrative Services Director
Juneau School District
P.O. Box 22304
Juneau, AK 99801
Telephone: 463-1700
POSITION STATEMENT: Supported HB 270
BRUCE LUDWIG, Business Manager
Alaska Public Employees Association
Secretary/Treasurer of the state AFL/CIO
211 4th Street, 306
Juneau, AK 99801
Telephone: 586-2334
POSITION STATEMENT: Supported HB 270
JEFF BUSH
320 W. 8th Street
Juneau, AK 99801
Telephone: 465-2500
POSITION STATEMENT: Supported HB 270
JAMES TEDFORD
9367 Rivercourt Way
Juneau, AK 99801
Telephone: 789-0976
POSITION STATEMENT: Supported HB 270
HERB HOLEMAN
3290 Nowell Avenue
Juneau, AK 99801
Telephone: 465-2060
POSITION STATEMENT: Supported HB 270
PHYLLIS OLSTA
411 7th Street
Juneau, AK 99801
Telephone: None
POSITION STATEMENT: Supported HB 270
DR. GLEN MASSAY, Director
Mat-Su College
c/o 165 E. Parks Highway
Wasilla, AK 99654
Telephone: 376-3704
POSITION STATEMENT: Supported HB 270
MARY ANN CASEY
General Delivery
Aniak, Alaska 99773
Telephone: None
POSITION STATEMENT: Supported HB 270
THOMAS BROCK
General Delivery
Aniak, Alaska 99773
Telephone: None
POSITION STATEMENT: Supported HB 270
PREVIOUS ACTION
BILL: HB 270
SHORT TITLE: RETIREMENT INCENTIVE PROGRAM
SPONSOR(S): RULES BY REQUEST OF THE GOVERNOR
JRN-DATE JRN-PG ACTION
03/20/95 813 (H) READ THE FIRST TIME - REFERRAL(S)
03/20/95 814 (H) STA, L&C, FINANCE
03/20/95 814 (H) 2 FISCAL NOTES (ADM)
03/20/95 814 (H) INDETERMINATE FN (GOV/ALL DEPTS)
03/20/95 814 (H) GOVERNOR'S TRANSMITTAL LETTER
03/30/95 (H) STA AT 08:00 AM CAPITOL 102
04/01/95 (H) STA AT 10:00 AM CAPITOL 102
ACTION NARRATIVE
TAPE 95-40, SIDE A
Number 000
CHAIR JEANNETTE JAMES called the meeting to order at 10:05 a.m. and
announced a quorum was present.
HSTA - 04/01/95
HB 270 - EARLY RETIREMENT INCENTIVES
ANNALEE MCCONNELL, Director, Office of Management and Budget,
presented HB 270 on behalf of Governor Tony Knowles, stating the
bill will provide management tools to address Alaska's fiscal gap
and to allow downsizing of government. There are significant
differences between this and previous retirement incentive programs
(RIPs): It is not an across-the-board cut, the time in which
savings must be demonstrated has been narrowed to three years, and
it allows local options. Operational plans, including calculations
to prove monetary savings, would have to be approved by her office.
Number 152
MS. MCCONNELL said school districts are a good example of
significant savings because higher paid teachers could be replaced
with new hires. The Department of Corrections could replace prison
guards at half the present cost, and other agencies who provide
24-hour care could see significant savings as well. She said it
was true that long-term savings might not occur as the new hires
later reached a higher pay scale, but savings could be realized now
and in the short-term.
Number 212
MS. MCCONNELL continued HB 270 would help Alaska avoid the chaos of
radical downsizing, such as what happened in 1986. Another new
aspect of this RIP is the provision for separation incentives which
allows lump sum payments to employees who would not qualify for
early retirement.
Number 280
CHAIR JAMES requested testifiers to limit their testimonies to two
minutes, unless they are speaking on behalf of a group of five or
more testifiers.
Number 322
CRAIG PERSSON said via teleconference, HB 270 would allow long-term
state employees to be replaced with entry-level employees, and
would have a positive effect on Alaska's economy because retired
employees would stay in the state and their jobs would be filled by
other qualified Alaskans.
Number 359
ELWIN LEACH, via teleconference, pointed out HB 270 would save
money on health care costs by replacing older employees with
younger, healthier ones. It would also place more Alaskans in
jobs.
Number 390
LUCY HOPE spoke via teleconference on behalf of 20 people who were
present in the Wasilla Legislative Information Office, plus another
16 who had signed a list. She explained new teachers could be
hired at half the salary of retiring ones, and this is a better
choice than increasing class size, laying off teachers, or
eliminating programs to save money.
Number 441
FRANK SMITH pointed out via teleconference, the North Slope Borough
can save a great deal of money with this bill, and this is
important since the oil income is decreasing.
Number 465
JUDY MURPHY stated, via teleconference, the bill is very
cost-effective, and it offers choices of participation. She added
she is at the top of her salary schedule, as are others, and she
could be replaced with a less expensive teacher.
Number 494
ELDON BROTHEN mentioned via teleconference, HB 270 would allow
school districts to save money at a time when drastic budget
reductions and cuts are required without harming employees' or
kids' programs.
Number 523
JAMES CHAMBERS, via teleconference, urged passage of HB 270,
pointing out it provides options for school districts and local
governments and would eliminate economic uncertainty. Without the
bill, layoffs would be required which would harm employees.
Number 565
ALICIA NEWMAN noted via teleconference, HB 270 would allow local
school districts and departments time to reorganize or restructure
to be in line with available revenue.
Number 573
SANDRA STRAUB remarked via teleconference that state employees who
make large amounts of money are also accruing large amounts of
interest and increasing the financial liability of the state.
Number 585
PETE VELSKO said via teleconference, he believed HB 270 should be
open to all eligible employees because it would increase savings by
replacing senior employees with new ones.
Number 596
VAL KOEBERLEIN thanked Representative James via teleconference for
the opportunity to speak on this issue, which is very important to
the city of Homer and could save the city $370,000 in three years.
He suggested extending the eligibility period. He was speaking for
nine other testifiers.
Number 618
BILL MONROE spoke via teleconference on behalf of 15 other people
who could not attend. This RIP could save the school district
$400,000 in a three-year period. This money is desperately needed;
even if the district is fully funded, they are facing severe cuts.
Number 648
LEE FOSTER, via teleconference, said HB 270 is a cost effective
bill, but he would like to address the overriding social issues.
Delta Junction could lose half its teaching staff and other state
offices as a result of the military cutback. Retiring senior
employees could ease the financial stress and uncertainty by being
replaced with younger employees.
Number 664
MIKE SARVER said via teleconference, HB 270 would provide real
incentive for teachers to retire. Approximately 49 percent of the
teaching staff will be nonretained as a result of the Army leaving
Fort Greely. This bill would allow teachers at the top of the pay
scale to retire.
Number 685
ROD CLIFT testified via teleconference, there are 11 employees in
his school district who would choose to retire if HB 270 passes.
Number 706
DUANE GRIGG said via teleconference he has watched the school's
programs decline over the years, and would like to maintain the
existing programs. They are almost at the point of desperation and
he feels HB 270 offers a solution.
TAPE 95-40, SIDE B
Number 000
RUTH ANN RUST said via teleconference her school district would
save an average of $15,000 per retiree by replacing them with
highly qualified, but beginning teachers. She stressed HB 270
would not be a reward for burned out educators or a giveaway
program.
Number 074
SUSAN VINCENTE declared via teleconference, HB 270 is one of the
better RIPs that has been offered. She likes the flexibility and
the local discretion, and feels the bill would allow salary cuts
without cutting services.
Number 105
TOM CHURCH stated via teleconference he had taught in Cordova for
over 28 years. Approximately 18 teachers there would qualify for
the RIP program this year. It is a win-win situation. However, he
would recommend extending the eligibility period for school
employees to match the one for university and state employees.
Number 132
ROSE MARY BUSHON spoke via teleconference as an educator and as a
parent. Her concern was maintaining the present teacher-pupil
ratio, which has reached the absolute maximum. The RIP is the only
way to do this while meeting required budget cuts. There is no
other responsible choice.
Number 163
TRINA RICHARDSON mentioned via teleconference her school district
is planning next year to charge each student a $30 fee just to walk
through the door. That is how critical their situation is. The
RIP would give them a way to deal with their economic problems.
Many teachers are already at the top of the salary scale but have
less than the currently required number of years for retirement.
Number 198
CAROL MITCHELL said via teleconference, approximately 40 educators
in Ketchikan are eligible for retirement. Including a benefit
package, they could save between $67,000 and $85,000 per teacher
over the next three years by retiring experienced teachers and
hiring new ones. This bill would force teachers to seriously
consider retirement.
Number 241
LEW BRANTLEY said via teleconference he could not understand how
anyone would fail to see what a savings HB 270 offers. He added
the lower income employees would also earn lower benefits.
Number 260
MIKE WARD said via teleconference most of his comments have already
been covered by other testifiers. However, he added Fish and Game
could save money by replacing long-term employees who are covered
under the Peace Officer Retirement System with lower-paid employees
who would no longer receive that benefit.
REPRESENTATIVE BRIAN PORTER asked Mr. Ward what classification was
changed out of the PERS retirement.
MR. WARD replied Fish and Game employees were formerly covered
under the Peace Officer Retirement System, and it was changed about
ten years ago. Employees then were "grandfathered in" but
replacements would not be covered.
REPRESENTATIVE PORTER asked if this pertained to Fish and Game as
opposed to Fish and Wildlife.
MR. WARD said that was correct.
Number 292
CORKY MCCORKLE stated via teleconference, the City of Kodiak
administration is in favor of HB 270 and SB 136, but he did not
understand the difference in effective dates for municipal
employees versus state employees. He suggested an amendment to
make everyone eligible at the earlier date.
Number 331
NORMA DUDIAK, via teleconference, noted she and her husband are
both Fish and Game employees, and they endorse HB 270. They do not
want to see employees laid off and she asked for an unbiased
cost-savings analysis of the bill. She was concerned the
requirements of the bill are so complicated it would require hiring
more people to administer it. She requested the legislature not to
stall on this bill, to be sure it comes up for a vote this year.
Number 352
JUDY SHIFFLER stated via teleconference HB 270 makes a lot of
economic sense in these times of budgetary concerns. She spoke to
another concern: The future employability of our children.
Younger teachers would be better trained than the older teachers to
supply students with up-to-date computer skills and knowledge.
Number 389
BRENDA MARTIN pointed out via teleconference the last RIP bill
saved Fairbanks $1,554,000. Replacing a retiring teacher with a
new one saves $15,000. Two retiring teachers save $30,000, which
is the cost of hiring a new teacher. She asked the legislators not
to play partisan politics with this bill, but to pass it quickly
out of committee.
Number 402
KELLY BROWN spoke via teleconference on behalf of the 8,000 ASEA
members. HB 270 would avoid layoffs, reduce the number and cost of
state employees, and would be a win-win situation.
Number 435
HAL SMALLEY spoke via teleconference as a city councilman and a 25
year Alaskan teacher, stating the city of Kenai could save half a
million dollars with HB 270. He suggested extending the program
from July 1995 to July 1998. Without a RIP, local governments will
be forced to layoff less expensive employees at the bottom of the
seniority scale and keep expensive employees, which also increases
medical costs. He spoke on behalf of 16 other testifiers.
Number 476
BOB RUTMAN said via teleconference, HB 270 would help with Alaska's
financial crisis and reduce financial problems in his school
district.
Number 488
DALE JUDGE asked via teleconference, whether a person could combine
years worked under the public employees retirement system with
those worked in the teachers retirement system to be eligible under
the RIP.
Number 498
BOB STALNAKER, Director of the Division of Retirement and Benefits,
Department of Administration, replied no, service could not be
combined under the retirement systems to meet minimum eligibility.
A person who had worked under both systems would still have to be
of an age to meet eligibility requirements.
Number 507
MARILYN NIGRO said via teleconference, she had been at the top of
her teacher salary schedule since the 1980s, and a beginning
teacher would make approximately half her salary. As they face a
crisis and need to make drastic cuts in their budget, retirement
should be encouraged for those at the top of the salary schedule.
Number 520
TED DELEON said via teleconference, he agreed with previous
testifiers, but did not understand why there were different windows
and felt they should be the same for municipalities, state
employees, and the university. He added most of the funds will not
come from the state but from the retirement fund, and it does not
belong to the legislature or the state; it belongs to the
employees.
Number 538
PAM DARNALL noted via teleconference, the Fairbanks North Star
Borough has worked hard to keep class size down, and she feared
class size would rise unless they can lower some costs. HB 270
would also open jobs for our new local teachers who would otherwise
have to leave the state to seek employment.
Number 551
TERRY MARQUETTE, via teleconference, supported HB 270. As a high
school building manager, he has seen a lot of valuable programs for
kids lost because of budget cuts. This bill would save programs.
Number 558
MARGARET SAMPSON said via teleconference she has been at the top of
the salary scale for several years. HB 270 would allow such
teachers to be replaced with new and highly qualified university
graduates at a much lower salary.
Number 579
REPRESENTATIVE CAREN ROBINSON asked for an explanation of the
"window" question several people had raised.
MS. MCCONNELL responded the reason there were different window
periods and start dates for state and local governments and school
districts was the enormous administrative requirement to be sure
everything gets processed properly for the employees. If it hit
all at once, the system could break down. She suggested the
Administration could canvas the local governments and school
districts to get a sense of how many employees would be taking
advantage of the program and what timing would work best for them.
This would allow them to do some workload planning and possibly
accommodate different dates.
Number 609
CHAIR JAMES read statements for the record:
The Anchorage Council of Education had called in support of HB 270
as written.
Creekside Park School in Anchorage had FAXed a list of names in
support of HB 270.
Two individuals had called in support of the bill, and many other
supporting FAXes had arrived.
Number 626
VERNON MARSHALL, Executive Director of the National Education
Association of Alaska, thanked the Governor for submitting the bill
and thanked Chair James for scheduling it for hearing. He asked
for a good nonpartisan effort to pass HB 270, and said the bill is
actuarily sound. It would not create a "brain drain" and it would
reduce class sizes.
Number 656
GARY BADER, Administrative Services Director for the Juneau School
District, said he likes the fact that HB 270 is not a mandate but
permits local school districts to decide. He believes it would
save his school district a minimum of $1.8 million over five years,
by retiring an estimated 30 teachers.
Number 691
BRUCE LUDWIG, Business Manager of the Alaska Public Employees
Association and Secretary/Treasurer of the state AFL/CIO, noted HB
270 would stimulate Alaska's economy. Money invested in PERS and
SBS is invested outside the state. When a person retires, that
money comes back into the state in the form of a pension or an
annuity, is spent in the community, and creates 1.8 other jobs.
Number 707
JEFF BUSH remarked that the Juneau School District needs tools to
deal with financial problems, and HB 270 would provide those tools.
TAPE 95-41, SIDE A
Number 000
JAMES TEDFORD observed most school districts are in a financial
crisis. He urged the committee to move HB 270 so a RIP could be in
place before the end of this school year.
Number 024
HERB HOLEMAN said he spoke for many other state employees who
support HB 270. He works for the Department of Administration, is
a range 21M, and his position could easily be filled by a range 17A
which would be one-half to two-thirds of his salary.
Number 056
CHAIR JAMES noted Representative Kim Elton was present in the
audience.
Number 067
PHYLLIS OLSTA spoke on behalf of employees of the Alaska Marine
Highway ferry system. HB 270 would allow retirement of employees
hired under the old contract of 1986; newer employees are under a
new contract with more spartan benefits. Hiring new employees
would stimulate the Alaska economy and "get rid of the people who
are just coasting along waiting for something to happen."
Number 106
DR. GLEN MASSAY, Director of Mat-Su College, stated via
teleconference the estimated savings for Mat-Su College would be
$150,000 if HB 270 passed, allowing them to retire four or five
positions. This would be a great help.
Number 114
MARY ANN CASEY said via teleconference, HB 270 would eliminate
uncertainty and help Aniak School District.
THOMAS BROCK said via teleconference, HB 270 would benefit Aniak
School District by providing cost savings and opportunities for new
teachers.
Number 155
CHAIR JAMES called Annalee McConnell and Bob Stalnaker back to the
table to answer questions.
Number 165
REPRESENTATIVE ROBINSON asked how proposals would be scrutinized,
and by whom, in keeping with HB 270.
Number 175
MS. MCCONNELL replied her office intends to very tightly scrutinize
the proposals because they need the cost savings. They cannot
afford to be inaccurate on projections. The downsizing pressures
have increased, and all commissioners are aware of the need for
significant savings. Her office will review proposals both from a
budget analyst side and from a policy and organizational side to be
sure both are achievable.
Number 224
REPRESENTATIVE ROBINSON inquired how the Administration would deal
with explaining who fits and who does not fit into the program.
MS. MCCONNELL answered the Cabinet has had many discussions about
this very issue. First, they are acknowledging this will be a
difficult task, and managers will have to be prepared to justify
their criteria. Expectations need to be reduced, and the public
needs to be aware this is not an across-the-board RIP.
Number 285
REPRESENTATIVE PORTER asked if anyone from the Department of Law
had been asked to consider the legal issues of equal protection
regarding the selection process.
MS. MCCONNELL responded the question had been raised. The bill has
specific language to make it clear there is no entitlement for
employees and there is no contractual right for employees.
MR. STALNAKER added those questions had been dealt with in prior
RIPs.
Number 320
MS. MCCONNELL said they cannot guarantee no one will challenge it,
but the bill is carefully structured in Section 12 to minimize the
risk. She added the affect on employee morale of not having a RIP
needs to be considered, when it is well known jobs are going to be
cut. This is very disruptive. A RIP reduces anxiety regarding the
future for the remaining work force.
Number 368
CHAIR JAMES said she sees a really big savings for the school
districts in dollars, but she cannot accept the idea that a new
person is as good as an experienced one. Experience is valuable.
She was also concerned about what happens to stability of the
Teachers Retirement System (TRS) if people are suddenly dumped into
it ahead of schedule to collect their retirement.
Number 390
MS. MCCONNELL responded to the first part of the question by
agreeing new employees do not have the same experience as older
ones, but determination will be made at the local level regarding
how to deal with budget cuts. A choice between cutting students'
services and increasing class size, versus hiring some less
expensive teachers, is best made by each district. The program is
optional.
Number 418
MR. STALNAKER addressed the question of TRS by saying the actuaries
were sound in the two previous RIP bills. He added a teacher, even
if designated, would not be required to take advantage of the RIP.
In the previous program, of all those designated only about
one-third elected to take the opportunity. Regarding the actuarial
soundness of the systems and what happens if people are dumped into
the system early, he said this cost is factored into the overall
cost analysis and must be offset by savings.
Number 453
REPRESENTATIVE PORTER said he was concerned with employees who want
to take advantage of a RIP but are not eligible, from a legal
standpoint. In any event, those who do take advantage of a RIP are
covered by retirement until they die, and each one of those time
periods would be extended by three years. The state, as the
employer, would be responsible for back-funding and making this
actuarily sound. A demonstrated cost savings is only required for
the first three years, but what about the last three years at the
other end?
Number 472
MS. MCCONNELL said the demonstration of cost savings is not limited
to just the first three years, but it must include them.
REPRESENTATIVE PORTER asked if the cost savings must be
demonstrated for the duration.
MR. STALNAKER said that was correct. Each calculation is done on
an individual basis, and health insurance costs might even be
factored in, in addition to an administrative fee.
Number 501
CHAIR JAMES asked if there is an estimate of how many employees are
still working past retirement and have opted not to retire yet.
MR. STALNAKER replied the average age of retirement is generally
three years beyond eligible retirement age.
Number 518
CHAIR JAMES observed that private industry uses RIPs as a
management tool to handle downsizing. It is never intended to save
money, to her knowledge, and in fact it usually costs money. If HB
270 is a tool for downsizing, it should say so. She agreed with
Representative Porter's concern that people will be treated
selectively.
CHAIR JAMES continued school districts will not be downsizing their
teaching staff, though it would be good to decrease the number of
administrators, and she might agree a RIP would benefit school
districts. But she thinks something is wrong with the existing
system if we believe new hires are just as good as old ones at
twice the salary. We need to address that problem at the same time
so we are not back in the same situation in another ten years,
needing to get rid of high paid people and hire lower paid ones.
Number 549
MS. MCCONNELL said that was a good point. New labor contracts will
have provisions different from the old ones, in an effort to
address some of these issues. But even with revised salary
schedules, a person in year one will not make the same amount as
someone who has worked in a job for 10 or 15 years because we hope
they do gain experience and skill as they go along.
Number 567
REPRESENTATIVE PORTER said his questions were not aimed at trying
to make the bill not work, but at trying to make it work. He asked
if he was correct in understanding the teachers' retirement system
was not a 20 year retirement.
MR. STALNAKER replied the teachers' system was a 20 year system for
new hires. The new hires' benefits are less costly, in both PERS
and TRS, and include a reduction in benefits.
REPRESENTATIVE PORTER asked if this means the new hires will be
less expensive throughout their whole careers.
MR. STALNAKER responded the retirement system contribution rate is
the same for all employees, new or old, but the new hires will
accumulate less costs.
Number 602
REPRESENTATIVE PORTER asked if costs of individual employees would
be compared with their replacements.
MR. STALNAKER said the Office of Management and Budget would do
that comparison for state employees and certify the cost savings to
his office. For school districts, the calculations would be done
by the district and certify them to his office. His office does
not plan to "police" or double check what numbers are used or how
the calculations are done. He does not think it would be
appropriate to do so.
Number 623
REPRESENTATIVE PORTER asked if a significant difference was
expected between state teachers and a specific district in the
savings projected.
MR. STALNAKER replied he would not expect a significant difference.
Number 648
MS. MCCONNELL added there are two sets of calculations done. In
the Office of Management and Budget, savings will be analyzed in
light of what an employee costs as well as what the replacement
will cost. These figures are matched with Retirement and Benefits
to see the actual bottom line. It is a split responsibility.
Number 664
CHAIR JAMES mentioned the fiscal note and the cost of up-front
three year advance payments, noting there will also be a cost of
administering.
Number 687
MR. STALNAKER referred to the section of the bill allowing payments
to be made over a three year period, saying overall cost savings
must exceed the cost of those. It would require no additional
funds. The administrative costs are required within 30 days of the
contract, which pays for the administrative costs in the fiscal
note.
MR. STALNAKER continued he anticipates approximately 14,500 people,
through both PERS and TRS, to be eligible.
TAPE 95-41, SIDE B
Number 000
CHAIR JAMES asked how much of the cost would be coming from the
state as an employer.
MR. STALNAKER replied it depends upon the participation, since the
employer pays 15 percent up-front. If the employer chooses not to
participate, it costs them nothing.
Number 035
CHAIR JAMES appointed a subcommittee to consider HB 270:
Representative Porter, Chair; and Representatives Ogan and
Robinson, members.
REPRESENTATIVE ROBINSON inquired what problem areas the
subcommittee would be working on.
CHAIR JAMES replied the subcommittee would contact the departments
regarding that.
REPRESENTATIVE ROBINSON asked when the bill would be back in front
of the whole committee.
CHAIR JAMES said she would defer to the subcommittee on that
decision.
REPRESENTATIVE ROBINSON asked what other committee referrals the
bill had.
CHAIR JAMES answered, Labor and Commerce and Finance.
ADJOURNMENT
CHAIR JAMES adjourned the meeting at 12:30 p.m.
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