Legislature(2007 - 2008)CAPITOL 106
03/29/2007 08:00 AM House STATE AFFAIRS
| Audio | Topic |
|---|---|
| Start | |
| HB171 | |
| HB179 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 179 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | HB 171 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
HOUSE STATE AFFAIRS STANDING COMMITTEE
March 29, 2007
8:07 a.m.
MEMBERS PRESENT
Representative Bob Lynn, Chair
Representative Bob Roses, Vice Chair
Representative John Coghill
Representative Craig Johnson
Representative Andrea Doll
Representative Max Gruenberg
MEMBERS ABSENT
Representative Kyle Johansen
COMMITTEE CALENDAR
HOUSE BILL NO. 171
"An Act relating to the terms of legislators, the date and time
for convening regular legislative sessions, adoption of uniform
rules of the legislature and to certain of those rules, the date
for organizing the Legislative Budget and Audit Committee, and
deadlines for certain matters or reports to be delivered to the
legislature or filed; prohibiting bonuses for legislative
employees; and providing for an effective date."
- MOVED CSHB 171(STA) OUT OF COMMITTEE
HOUSE BILL NO. 179
"An Act relating to insurance for public employees, teachers,
and certain retired public employees and teachers and to
supplemental employee benefits; relating to teachers' and public
employees' defined benefit retirement plans, to teachers' and
public employees' defined contribution retirement plans, to
employee and employer contributions to the teachers' retirement
system and the public employees' retirement system, and to the
administration of the Public Employees' Retirement System of
Alaska and the deferred compensation program for state
employees; establishing in the Department of Revenue the
teachers' retirement system past service cost liability account
and the public employees' retirement system past service cost
liability account; relating to benefits of, references to
federal law in, and investments in the teachers' retirement
system and the public employees' retirement system; modifying
the jurisdiction of the independent office of administrative
hearings as related to retirement and related personnel
benefits; and providing for an effective date."
- HEARD AND HELD
PREVIOUS COMMITTEE ACTION
BILL: HB 171
SHORT TITLE: ACCOMMODATE 90-DAY SESSION
SPONSOR(s): RULES
03/01/07 (H) READ THE FIRST TIME - REFERRALS
03/01/07 (H) STA
03/06/07 (H) STA AT 8:00 AM CAPITOL 106
03/06/07 (H) Scheduled But Not Heard
03/15/07 (H) STA AT 8:00 AM CAPITOL 106
03/15/07 (H) Heard & Held
03/15/07 (H) MINUTE(STA)
03/22/07 (H) STA AT 8:00 AM CAPITOL 106
03/22/07 (H) Heard & Held
03/22/07 (H) MINUTE(STA)
03/24/07 (H) STA AT 10:00 AM CAPITOL 106
03/24/07 (H) Heard & Held
03/24/07 (H) MINUTE(STA)
03/29/07 (H) STA AT 8:00 AM CAPITOL 106
BILL: HB 179
SHORT TITLE: PUBLIC EMPLOYEE/TEACHER RETIREM'T SYSTEMS
SPONSOR(s): REPRESENTATIVE(s) KELLY
03/05/07 (H) READ THE FIRST TIME - REFERRALS
03/05/07 (H) STA, FIN
03/29/07 (H) STA AT 8:00 AM CAPITOL 106
WITNESS REGISTER
TAMARA COOK, Director
Legislative Legal and Research Services
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Answered questions during the hearing on HB
171.
JOHN BOUCHER, Senior Economist
Office of the Director
Office of Management and Budget (OMB)
Juneau, Alaska
POSITION STATEMENT: Answered questions during the hearing on HB
171.
REPRESENTATIVE MIKE KELLY
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Introduced HB 179 as prime sponsor.
DEREK MILLER, Staff
to Representative Mike Kelly
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: On behalf of Representative Kelly, prime
sponsor of HB 179, reviewed the sectional analysis.
ACTION NARRATIVE
CHAIR BOB LYNN called the House State Affairs Standing Committee
meeting to order at 8:07:42 AM. Representatives Roses, Coghill,
Johnson, Gruenberg, Doll, and Lynn were present at the call to
order.
HB 171-ACCOMMODATE 90-DAY SESSION
8:08:51 AM
CHAIR LYNN announced that the first order of business was HOUSE
BILL NO. 171, "An Act relating to the terms of legislators, the
date and time for convening regular legislative sessions,
adoption of uniform rules of the legislature and to certain of
those rules, the date for organizing the Legislative Budget and
Audit Committee, and deadlines for certain matters or reports to
be delivered to the legislature or filed; prohibiting bonuses
for legislative employees; and providing for an effective date."
[Before the committee was the committee substitute (CS) for HB
171, Version 25-LS0653\E, Cook, 3/16/07.]
8:08:54 AM
REPRESENTATIVE GRUENBERG moved to adopt the committee substitute
(CS) for HB 171, Version 25-LS0653\M, Cook, 3/26/07, as a work
draft. There being no objection, Version M was before the
committee.
8:09:24 AM
REPRESENTATIVE COGHILL, in response to a request from Chair
Lynn, explained that Version M incorporated the amendment that
moved the start dates of the legislature. He noted that that
amendment had been offered by Representative Johnson at the last
bill hearing. He said the first year of the two-year
legislature would start [on the second Monday] in January, but
the second year would begin in February.
8:10:53 AM
REPRESENTATIVE COGHILL moved to adopt Conceptual Amendment 1,
labeled 25-LS0653\M.1, Cook, 3/28/07, which read as follows:
Page 7, line 28:
Delete all material and insert:
"* Sec. 17. AS 24.05.150(b) is repealed.
* Sec. 18. The uncodified law of the State of
Alaska is amended by adding a new section to read:
REINSTATEMENT OF LAWS IN UNAMENDED FORM.
AS 18.65.085(b), 18.65.086(b), AS 24.05.080,
24.05.090, AS 24.08.035(a), 24.08.050,
AS 24.20.171(a), 24.20.206, 24.20.311,
AS 24.45.041(e), AS 37.07.040(7), 37.07.070,
AS 37.10.050(c), AS 38.04.022(b), AS 38.05.027(b), and
AS 39.05.080(1) shall read as they read on
December 31, 2007.
* Sec. 19. Sections 1 - 16 of this Act take effect
January 1, 2008.
* Sec. 20. Sections 17 and 18 of this Act take
effect June 1, 2009."
The Legal Services Division is directed to incorporate
this amendment into CSHB 171(STA) in the form required
by the Manual of Legislative Drafting.
8:11:07 AM
REPRESENTATIVE JOHNSON objected for discussion purposes.
8:11:14 AM
REPRESENTATIVE COGHILL spoke to Conceptual Amendment 1. He said
it would provide a sunset date, giving the legislature three
years to "work the system under this law," at which point the
system would be reevaluated. He noted that lines 6-10 [as
numbered on the amendment] list the reinstatement of laws in
unamended form.
8:12:29 AM
REPRESENTATIVE GRUENBERG noted that Tamara Cook, the director of
Legislative Legal and Research Services, is available to answer
questions. He said the sunset date to which Representative
Coghill referred would be June 1, 2009. He remarked that line
3, [as numbered on the amendment], would repeal Section 17, AS
24.05.150(b); however, he said he does not find that in statute
or in the bill. He asked Ms. Cook for explanation.
8:14:38 AM
TAMARA COOK, Director, Legislative Legal and Research Services,
Alaska State Legislature, explained as follows:
That is the initiated language that creates the 90-day
session ..., and it actually does not appear in
statute or even on the electronic database, alas,
because the ... election was held so late and then the
results certified so late that we were unable to get
it printed in the statutes. But ... [AS] 24.05.150(b)
is the initiated language that says the legislature
shall meet for 90 consecutive days.
8:15:21 AM
REPRESENTATIVE GRUENBERG directed attention to the initiative in
the committee packet, which read as follows:
AN INITIATIVE
Relating to a 90-day regular session of the
legislature; and providing for an effective date.
_______________
* Section 1. AS 24.05.150 is amended by adding a
new subsection to read:
(b) The legislature shall adjourn from a regular
session within 90 consecutive calendar days, including
the day the legislature first convenes in that regular
session.
* Sec. 2. This Act takes effect on the first day of
the Second Regular Session of the Twenty-Fifth Alaska
Legislature.
8:16:14 AM
MS. COOK, in response to a question from Representative
Gruenberg, confirmed that the constitution allows the
legislature to repeal an initiative no sooner than two years
after it becomes effective. She responded to a comment by
Representative Gruenberg regarding Conceptual Amendment 1 as
follows:
The way it is drafted, it is an outright repeal; but
it is an outright repeal that does not take effect for
2.5 years. So, the legislature, of course, could pass
legislation to undue that which it has done before it
takes effect.
CHAIR LYNN expressed concern that there be nothing in Conceptual
Amendment 1 that would "go against the will of the people as
expressed in the initiative which established the 90-day
session," and he asked Ms. Cook to confirm that there was not.
MS. COOK responded, "Yes, for the period of the two years within
which the legislature is restricted from repealing an
initiative."
8:18:09 AM
REPRESENTATIVE JOHNSON removed his objection to Conceptual
Amendment 1. There being no further objection, Conceptual
Amendment 1 was adopted.
8:18:21 AM
REPRESENTATIVE COGHILL moved to adopt Amendment 2, labeled 25-
LS0653\M.2, Cook, 3/28/07, which read as follows:
Page 6, line 18:
Delete "fifth [30TH] legislative day"
Insert "30th legislative day in odd-numbered
years and through the fifth legislative day in even-
numbered years"
Page 6, line 21:
Delete "15th [45TH] legislative day"
Insert "30th legislative day in odd-numbered
years and through the 15th [45TH] legislative day in
even-numbered years "
Page 7, line 20, following "session,":
Insert "or, following a gubernatorial election
year, within the first 30 days after the legislature
convenes in regular session,"
Page 7, lines 24 - 25:
Delete "15 [30] days of the convening of the
regular session"
Insert "presentment deadline [30 DAYS OF THE
CONVENING OF THE REGULAR SESSION]"
8:18:31 AM
REPRESENTATIVE ROSES objected for discussion purposes.
8:18:37 AM
REPRESENTATIVE COGHILL spoke to Amendment 2. He said it is an
amendment requested by the administration.
8:19:19 AM
JOHN BOUCHER, Senior Economist, Office of the Director, Office
of Management and Budget (OMB), directed attention to [lines 16-
18], on page 6 of Version M, which read as follows:
(1) requests by the governor for
supplemental appropriations for state agency operating
and capital budgets for the current fiscal year may be
introduced by the rules committee only through the
fifth [30TH] day;
MR. BOUCHER said the administration is concerned that in the odd
numbered years - those years in which the legislative session
would begin in January - the timelines would be too tight to
produce those [requests]. He said Amendment 2 proposes that in
the odd numbered years, the requests could be submitted on the
thirtieth day.
MR. BOUCHER pointed out page 6, [lines 19-21], which read:
(2) requests by the governor for budget
amendments to state agency budgets for the budget
fiscal year may be received and reviewed by the
finance committees only through the 15th [45TH]
legislative day.
MR. BOUCHER said that timeline would also be tight in the odd-
numbered years; therefore, Amendment 2 proposes that in those
odd-numbered years, those requests be accepted on the thirtieth
day.
MR. BOUCHER said the fifth day of session following a
gubernatorial election would also be a tight time frame by which
the governor would have to have his/her appointments ready;
therefore, Amendment 2 would move that deadline to the thirtieth
day.
8:21:58 AM
REPRESENTATIVE GRUENBERG directed attention to a memorandum from
Mr. Boucher to Representative Coghill, dated March 22, [2007],
which he said describes the administration's reasons for
requesting Amendment 2.
8:22:56 AM
REPRESENTATIVE ROSES withdrew his [objection] to Amendment 2.
There being no further objection, Amendment 2 was adopted.
8:23:10 AM
REPRESENTATIVE GRUENBERG moved to adopt Amendment 3, labeled 25-
LS0653\M.1, Cook, 3/28/07, which read as follows:
Page 3, following line 1:
Insert a new bill section to read:
"* Sec. 4. AS 24.05.180 is amended by adding new
subsections to read:
(c) The chair of a standing or special committee
that meets during the interim to consider an
introduced measure shall give at least 30 days' notice
of the meeting. The notice must include the subject
and number of the measure that will be heard.
(d) A member of a standing or special committee
may attend a meeting held by that committee during the
interim telephonically or by teleconference. The
member may vote on any question before the committee;
however, the vote shall be conducted in such a manner
that the public and other committee members may know
the vote of the member who attends telephonically or
by teleconference.
(e) A standing committee may report a measure
from committee during the interim. A committee member
who is voting telephonically or by teleconference
shall sign a copy of the committee report and indicate
on the copy the member's recommendation. The member
shall send the signed copy by facsimile or other
electronic means to the committee chair. The member
shall also mail the original signed copy to the senate
secretary or the chief clerk of the house of
representatives, as appropriate. The chair of the
committee shall deliver the committee report and the
facsimile copy to the senate secretary or the chief
clerk of the house of representatives to be taken up
when the legislature next convenes."
Renumber the following bill sections accordingly.
REPRESENTATIVE GRUENBERG spoke to Amendment 3. He said it would
allow the legislature to take its work to the people. He said
the legislature should conduct its business during the interim,
and he emphasized the importance of allowing legislators to
participate remotely, because Alaska is such a big state. He
noted that the language of Subsection (c) in Amendment 3 is
problematic.
8:25:59 AM
REPRESENTATIVE DOLL objected to Amendment 3.
8:26:08 AM
REPRESENTATIVE GRUENBERG moved to adopt Amendment 1 to Amendment
3, as follows:
On page 1, line 5 [as numbered on Amendment 3]:
Between "at least" and "day's notice"
Delete "30"
Insert "14"
There being no objection, Amendment 1 to Amendment 3 was
adopted. Subsequently, Representative Gruenberg mentioned that
the amendment was necessary because 30 days is too long.
8:26:50 AM
REPRESENTATIVE GRUENBERG, regarding [paragraph] (d) in Amendment
3 [as amended], noted that currently, both the Legislative
Council and Legislative Budget & Audit vote on questions
telephonically. He reviewed [paragraph] (e) of Amendment 3. He
noted that a bill would not be able to go to the next committee
of referral during interim, because it must first be read across
the House floor during session.
8:31:16 AM
MS. COOK, in response to a remark by Representative Johnson,
stated:
I don't believe you need to address the quorum issue
in this particular amendment, because no committee can
act without a quorum. In addition, in our Uniform
Rules, ... the signature requirement on a committee
report is that a majority of the full membership must
sign that report. That rule is not altered by this
amendment. Right now, I would observe that committees
of the legislature, including standing and special
committees, do conduct business by teleconference
during the session, and they establish quorums by
teleconference, with the presence of the individual
who is attending electronically noted in the record.
MS. COOK reviewed that currently, under the Uniform Rules as
they've been interpreted, during the interim a committee member
can attend a standing committee meeting via teleconference and
vote on the adoption of a CS or the adoption of an amendment,
but he/she could not vote to pass a bill out of committee
outside of session.
8:33:03 AM
REPRESENTATIVE JOHNSON asked what changes would need to be made
in order to allow [the next committee of referral to possess a
bill passed out of the first committee of referral].
8:33:45 AM
MS. COOK said currently the way [Amendment 3, as amended] is
written, the committee report would go back to the full House to
be read across the House floor when it is next convened in
session, which she said preserves the power of each individual
House member to object to the committee report. Once the bill
goes into the second committee, she pointed out, the opportunity
to object is lost. She said there may be something to be gained
by allowing bills to move on to the next committee of referral
during interim without going to the House floor; that would be a
policy call, and Amendment 3 could be the vehicle for such a
change.
8:35:05 AM
REPRESENTATIVE JOHNSON asked if a bill can be "read across"
during a technical session.
8:35:22 AM
MS. COOK stated her belief that it is dangerous to introduce a
bill during a technical session. She offered her interpretation
of a technical session as one in which a quorum has not been
established on the record. She continued:
The constitution requires that each bill receive three
readings. ... The act of introducing a bill
constitutes the first reading. ... As we know, the
legislature cannot conduct business without a quorum
being present. Even though there is no vote required
when the first reading is given, and therefore there
is no motion made, and there is ... no record
necessarily created of the lack of a quorum, if the
issue came up, you would cast a potential doubt on the
validity of the first reading of that bill.
REPRESENTATIVE COGHILL recollected that in the past, committee
reports have been read in technical session. He asked if there
has been a ruling on that before.
8:36:44 AM
MS. COOK responded:
The direction in the constitution and in Mason's
Manual is that the legislature conduct no business
without a quorum, and accepting a committee report
constitutes the conduct of business. And in that
sense it's probably not appropriate. Nonetheless, the
reading of a committee report and referring the bill
to the next committee is somewhat different in that it
... does not have a constitutional dimension. The
reading of the report is not one of the three
constitutionally required readings that a bill gets.
You don't go to second reading until ... the bill is
returned to the floor from the [House Rules Standing
Committee]. So, we don't have the constitutional
cloud as a result of the practice of reading a
committee report. Now, obviously, if the legislature
is in technical session, and by definition or practice
there is not a quorum present, that does not mean that
a legislator could not attend and be available, and if
that person objected to a particular committee report,
that individual would have the right at that point to
object to that report and, presumably, to place a call
on the House. And at that point, technical session or
no, the House would be obligated to get a quorum
present and resolve the problem with the committee
report. And for those reasons, it doesn't strike me
as legally as serious a practice to read a committee
report across as it does to attempt to introduce a
bill.
8:38:23 AM
REPRESENTATIVE COGHILL said he does not want committee reports
read during technical session, but he has seen it done. He
concurred that any one individual in the body of the legislature
should be able to object to a committee report.
8:39:04 AM
REPRESENTATIVE JOHNSON stated that if there was some manner in
which the right [to object to a committee report] could be
preserved, while allowing the bill to move to the next committee
of referral, he envisions the first day of the 90-day session
commencing with a lot of committee work already completed. He
said, "I see this as a way, in that second session, to hit the
ground running."
8:40:12 AM
REPRESENTATIVE GRUENBERG said he would have no objection should
the committee wish to take further steps [through Amendment 3,
as amended].
CHAIR LYNN recommended that the committee hold off on that
issue.
8:40:35 AM
REPRESENTATIVE ROSES said he would object to [Representative
Johnson's] idea, because it would be "skirting on the edge" of
declaring a full-time legislature. He indicated that having all
legislators together during session allows for a larger variety
of views to be aired and considered than the opinions of a
seven-member committee during the interim. He stated, "The
other part that gives me a little bit of concern about this ...
has to do with the amount of pressure that could be put on those
seven committee members to try to get a bill pushed through in
the interim that they probably would never have a chance to see
in the light of day in full session."
8:42:31 AM
CHAIR LYNN commented on the importance of observing body
language and making eye contact, which can only happen when
committee members are all sitting in a room together.
8:43:03 AM
REPRESENTATIVE ROSES, in response to Representative Gruenberg,
clarified that he has no objection to "Amendment 3, as amended."
8:43:40 AM
REPRESENTATIVE GRUENBERG clarified for the record that there is
nothing in [Amendment 3, as amended] that would prohibit a
committee from meeting "all together" to hear a bill, sign it in
person, and transmit it to the clerk. He added, "That would be
up to the chair." He stated, "This would simply allow the
committee to take up a bill."
8:44:13 AM
REPRESENTATIVE JOHNSON asked that the committee abandon his idea
and move on to discussion of Amendment 3, as amended.
8:44:28 AM
REPRESENTATIVE COGHILL said although he likes the idea of
getting more done during the interim, he thinks it is important
that everyone meet in the same room, because he does not want a
situation to occur whereby some committee members are passing
information to each other that the other committee members
participating via teleconference cannot see.
8:46:29 AM
REPRESENTATIVE ROSES reminded the committee of a recent bill
heard that would make it illegal for a legislator to change
his/her vote from outside influence. He said, "Without being
under the watchful eye of everybody being present, it would be
very difficult for somebody to either prove or disprove whether
or not that occurred when there was nobody else able to see what
was going on because they were doing it over the telephone." He
summarized that the concept is not troublesome, but the
implementation of it is.
8:47:53 AM
REPRESENTATIVE GRUENBERG said he does not want to withdraw
Amendment 3 [as amended]. He said it would make it possible for
constituents come to meetings in the interim in their home town;
it would take the legislature to the people. He stated, "This is
one of the first real steps we've taken to ease us conducting
our hearings in a state that's one-fifth the size of the United
States."
8:49:29 AM
REPRESENTATIVE DOLL said she does not know how the legislature
will conduct a 90-day session without this amendment. She
removed her objection to Amendment 3 [as amended].
8:51:26 AM
REPRESENTATIVE JOHNSON moved Conceptual Amendment 2 to Amendment
3 [as amended], to add "or other means" after the words "by
mail". There being no objection, Conceptual Amendment 2 to
Amendment 3, as amended, was adopted.
8:51:58 AM
REPRESENTATIVE COGHILL stated his objection to Amendment 3 [as
amended].
A roll call vote was taken. Representatives Johnson, Gruenberg,
and Doll voted in favor of Amendment 3, as amended.
Representatives Coghill, Roses, and Lynn voted against it.
Therefore, Amendment 3, as amended, failed by a vote of 3-3.
8:52:56 AM
REPRESENTATIVE COGHILL moved to report CSHB 171, Version 25-
LS0653\M, Cook, 3/26/07, as amended, out of committee with
individual recommendations and the accompanying fiscal notes.
There being no objection, CSHB 171(STA) was reported out of the
House State Affairs Standing Committee.
The committee took an at-ease from 8:53:50 AM to 9:01:57 AM.
HB 179-PUBLIC EMPLOYEE/TEACHER RETIREM'T SYSTEMS
9:02:00 AM
CHAIR LYNN announced that the last order of business was HOUSE
BILL NO. 179, "An Act relating to insurance for public
employees, teachers, and certain retired public employees and
teachers and to supplemental employee benefits; relating to
teachers' and public employees' defined benefit retirement
plans, to teachers' and public employees' defined contribution
retirement plans, to employee and employer contributions to the
teachers' retirement system and the public employees' retirement
system, and to the administration of the Public Employees'
Retirement System of Alaska and the deferred compensation
program for state employees; establishing in the Department of
Revenue the teachers' retirement system past service cost
liability account and the public employees' retirement system
past service cost liability account; relating to benefits of,
references to federal law in, and investments in the teachers'
retirement system and the public employees' retirement system;
modifying the jurisdiction of the independent office of
administrative hearings as related to retirement and related
personnel benefits; and providing for an effective date."
9:02:30 AM
REPRESENTATIVE MIKE KELLY, Alaska State Legislature, introduced
HB 179 as prime sponsor. He paraphrased his sponsor statement,
which read as follows [original punctuation provided]:
The State of Alaska's retirement system unfunded
liability is approaching $10 billion. PERS is
currently 65% funded and TRS is 60% funded.
HB 179 would implement a comprehensive plan to return
the State's crippled retirement system to soundness.
It establishes a cost-sharing plan to eliminate the
unfunded liability in the defined benefit plans. It
obligates the state to pay 80% of the unfunded
liability. The other employers would come to the table
with 20%. Included in the bill is a plan to raise
contribution rates for active legislators, Governors,
commissioners, judges, police officers, firefighters,
teachers, equipment operators, clerks, accountants,
etc ... in the defined benefit plans 5% above current
levels. Employee contributions would go towards the
cost of providing employee benefits in the current
period. This three-way partnership ensures that
everyone has skin in the game and actively
participates in the sacrifice involved in funding the
defined benefit plans and returning them to financial
soundness. It also makes required technical changes to
the state's defined contribution plan.
The Alaska Retirement Management Board recently
adopted employer average contribution rates of 54% of
wages for TRS and 39% for PERS for FY '08. These
employer contribution rates required to eliminate the
unfunded liability are simply unsustainable.
Bankruptcies and elimination of critical services in
our communities will be averted by implementing HB
179. If the state agrees to pick up 80% of the tab,
these rates will level off at a high, but sustainable
level. HB 179 sets up the accounts necessary to
receive payments to extinguish the unfunded liability.
It would also accommodate infusions of cash or lump-
sum payments at any time the parties choose to use
these methods to take advantage of temporary surpluses
or debt instruments.
In wrap up, it is important to understand what this
bill does and what it does not pretend to do. It does
not look back to how we got in this mess. It does not
create a single dollar to pay down the $10 billion
unfunded liability. What it does provide is a cost-
sharing mechanism for completing the tough task of
restoring health to our defined benefit plans. You may
argue it is too high for the state at 80%. You may
argue that it will upset the active plan members that
are covered. I would argue that when the all-in cost
of providing benefits in the old defined benefit plans
have tripled since 1999, the legislature would be
derelict in our duties if we did not look to all
parties to assist us, including the beneficiaries who
enjoy the benefits of the old systems which have
proven over-rich and unsustainable.
9:11:36 AM
REPRESENTATIVE KELLY said there are Legislative Legal and
Research Services and AG opinions related to this issue. He
noted that he wrote a letter to Attorney General Talis Colberg
[dated March 28, 2007, included in the committee packet], in
which he asks for the AG's feedback. He said the proposed
legislation is but one suggestion. If that doesn't work,
tougher measures can be taken, for example: wage freezes, wage
reductions, an end to contract increases, and potential layoffs.
He said no legislator would challenge the statement that the
State of Alaska is going into a 10-year deficit. He said the
state will stay in that deficit until it gets a gas line. He
noted that the governor has a related bill in both the House and
Senate. He stated, "This bill includes those components on the
technical fix, as well."
9:15:19 AM
REPRESENTATIVE KELLY said new advancements made in the field of
medicine and increased life expectancy have increased the cost
of covering benefits to retirees, but the [contribution] rates
have not been increased. He continued:
I think that we are derelict if we do not step up to
the plate. And I hope we do not hide behind the worry
that we can't do this because of the supreme court,
because there are other ways than the rate. I hope we
don't have to go there; I hope there's a way to do it
through the rate. ... This proposal, at 3-4 percent
after ... taxes, is ... a bargain ....
REPRESENTATIVE KELLY mentioned other bills moving through
committees. He said HB 179 is an omnibus approach that has "an
added component."
9:16:57 AM
CHAIR LYNN asked if it would have been good for the legislature
to have "done" HB 179 before passing Senate Bill 141.
REPRESENTATIVE KELLY said the two bills are virtually unrelated.
He explained that Senate Bill 141 was set up to halt further
growth of the unfunded liability, while HB 179 would reduce the
existing liability.
CHAIR LYNN clarified that he wants to know if it would have been
helpful to have passed HB 179 in order to whittle down the
unfunded liability, whether or not Senate Bill 141 was passed.
REPRESENTATIVE KELLY replied that that could have been done, but
he stated that he doesn't think anyone was ready to support that
idea then.
9:19:12 AM
CHAIR LYNN asked for an example of how much would come out of
employees' pockets at three different salary ranges.
9:19:30 AM
REPRESENTATIVE KELLY said he could get that information to the
committee.
CHAIR LYNN remarked that people are concerned about what it will
cost out of their own pockets.
9:20:17 AM
REPRESENTATIVE ROSES directed attention to page 2 of the handout
in the committee packet entitled, "HB 179 Walkthrough," which
shows [a current Teachers' Retirement System (TRS) employer rate
total of] 54.03 percent. He asked if that is the proposed
Alaska Retirement Management (ARM) Board rate for fiscal year
2008 (FY 08) to meet the actuarial responsibilities.
REPRESENTATIVE KELLY answered yes and confirmed that that rate
has not yet been implemented. In response to a follow-up
question from Representative Roses, he said the current FY 07
rate that was passed last year is in the low, 20 percent range.
9:22:16 AM
REPRESENTATIVE ROSES, regarding an 80/20 percent split, said if
the actuaries were to revise their calculation of the unfunded
liability a year from now from, for example, $12 million to $28
million, [the employers] would still have to pick up 20 percent
of the difference in that amount.
9:22:47 AM
REPRESENTATIVE KELLY confirmed that Representative Roses'
example is correct. He said Representative Roses is referring
to the volatility of system.
9:23:40 AM
REPRESENTATIVE ROSES observed that the 5 percent employee
contribution rate would be deducted from the wages of everybody
currently employed under any Public Employees' Retirement System
(PERS) or TRS tier.
REPRESENTATIVE KELLY confirmed that is correct for those
currently under the defined benefit plan.
REPRESENTATIVE ROSES asked Representative Kelly for the number
of people currently collecting retirement benefits versus the
number of active employees.
REPRESENTATIVE KELLY said he can make that information available
to the committee.
REPRESENTATIVE ROSES remarked that it sounds as though the state
is asking those currently working to support those already in
retirement.
9:25:14 AM
REPRESENTATIVE DOLL asked if the 5 percent would increase with
medical costs or is set.
REPRESENTATIVE KELLY answered that HB 179 would make that 5
percent a set amount. He explained, "If you were 7 percent now,
that would go to 12 [percent]; and although the volatility in
the system could move it up and down for the employer for the
beneficiary, that would be set."
9:25:40 AM
REPRESENTATIVE ROSES expressed concern regarding looking at
adjustments solely to the contribution rate when so much of the
unfunded liability is created because of the unpredictability of
medical costs. He reviewed that in the past, the state tried to
adjust retirees' benefits, a law suit ensued, and a decision was
made by the court that that could not be done. He recalled the
court's decision was that the state cannot diminish the quality
of the benefits it has provided, but he said he does not know of
any language forbidding cost containment measures, such as
setting up a system of preferred providers or contractual
obligations. He said other states have established strict
protocols as to when a procedure would be necessary or when a
further test would be recommended, and those protocols have
shown considerable medical cost savings for those states.
REPRESENTATIVE ROSES said he appreciates Representative Kelly's
plan to create a level playing field; however, he said
addressing the money and not the cause is like going to a doctor
who treats the symptoms without addressing the cause. He said
he thinks there is more work to do than just adjusting the
rates. He recollected that when PERS and TRS were established,
there were three contribution levels: the state's, the
employers', and the employees'. At some point in time, he said,
the actuaries reported that the state was over 100 percent
funded and oil was at $8 a barrel, and the administration quit
paying into PERS and TRS and made no more contributions until
money was added to the foundation formula. That gap in payments
by the state, he said, is part of the cause of the unfunded
liability. He relayed that he appreciates that under HB 179,
the state would "pick up 80 percent"; however, he questioned
whether that would be enough. He stated, "At some point in
time, if the municipalities and small school districts become
insolvent, the state's going to eat 100 percent of it, not just
81 percent. And so, I think we need to look for something
that's going to hold everybody harmless, [and] let's ... move
this to where we need to be. And if I knew what the magic
numbers were I'd have helped you write the bill."
9:29:37 AM
REPRESENTATIVE KELLY said he would cosponsor [legislation
related to] each of the cost containment ideas mentioned by
Representative Roses. He talked about converting some defined
benefits to defined contributions, using employee parking as an
example. He talked about the ease of adding benefits versus the
constraints in taking them away, because they effect so many
groups. He stated that HB 179 is a step [toward improvement].
He added that Representative Rose's points are well taken.
9:33:13 AM
REPRESENTATIVE ROSES shared an anecdote illustrating the
difficulty he once experienced in attempting to opt out of some
of his own coverage. He said it is an absurdity that needs to
be fixed.
REPRESENTATIVE KELLY said he does not disagree.
9:35:18 AM
REPRESENTATIVE KELLY, in response to a question from
Representative Johnson, confirmed that the legislature can
choose to raise contribution levels, because it controls
benefits.
9:36:12 AM
DEREK MILLER, Staff to Representative Mike Kelly, Alaska State
Legislature, on behalf of Representative Kelly, prime sponsor of
HB 179, reviewed the sectional analysis [included in the
committee packet]. Regarding Section 4, he explained, "If you
were a Tier II employee, and you retire tomorrow, and you cash
out all of your contributions, if you rehire after July 1, 2010,
you're in the defined contribution (DC) plan." Regarding
Section 6, he explained that "hybrid plan" means there are
defined benefit components in the TRS DC plan, including medical
benefits, death and disability components, and survivor's
pension. Regarding Section 9, Mr. Miller offered his
understanding that currently there are 10 separate investment
options for an employee to make.
9:39:04 AM
MR. MILLER noted that Section 14 can be found on page 7 of the
bill. Regarding Section 20, he indicated that because the fixed
benefits under the DC plan of TRS are defined by statute, they
would not be "encumbered under the nonguarantee clause." Mr.
Miller suggested that representatives from the Department of
Administration could further explain Section 21. He noted that
Section 25 is a cost-sharing component of the bill that is
divided into three sections. He said "This is getting into the
80/20 cost-sharing that we had mentioned before." He pointed
out that Section 34, which relates to PERS, is similar to
Section 1, which relates to TRS.
MR. MILLER related that Sections 35 and 36 "team up." He
explained:
This is where we ... try to get the PERS employer
rates to be one consolidated, cost-sharing rate as the
TRS employer rate is currently set. Right now [there
are] 160 different employers in the PERS system and
they all each pay a different rate, and ... both
Sections 35 and 36 change that to a cost-sharing rate.
MR. MILLER said Section 37 is similar to Section 4, and he said
there are people available who are better suited to explain the
differences between Sections 37 and 38. Regarding Section 40,
he noted that the administrator of the plan also is responsible
for adopting regulations. During his review of Section 44 in
the sectional analysis, he reiterated that some of the technical
fixes are "replicated across both PERS and TRS." For example,
he said Section 49 is similar to Section 13.
9:48:18 AM
MR. MILLER also noted that Section 54 is similar to Section 18.
9:53:04 AM
REPRESENTATIVE ROSES said he would like to know what percentage
of schools are not under a unified borough or municipality
"where they contribute to the system and there [are] just
straight funds coming from the state." He said he would also
like to know the percentage of retirees receiving benefits as
compared to the percentage of people currently employed in Tiers
I, II, and III. Finally, he said he would like to know how many
of the employers under the PERS umbrella are state government
employees. He asked, "Have you broken them out by departments
or is the state just considered one of the 160? Because it
doesn't matter what you do with the 5 percent there, the state
picks up the whole tab anyway." He said having those numbers
would help in perpetuating the discussion.
[HB 179 was heard and held.]
ADJOURNMENT
There being no further business before the committee, the House
State Affairs Standing Committee meeting was adjourned at
9:54:13 AM.
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