Legislature(2007 - 2008)CAPITOL 106

03/31/2007 10:00 AM House STATE AFFAIRS


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10:07:44 AM Start
10:09:06 AM HB179|| HB191
12:10:43 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
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+= HB 179 PUBLIC EMPLOYEE/TEACHER RETIREM'T SYSTEMS TELECONFERENCED
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
                    ALASKA STATE LEGISLATURE                                                                                  
             HOUSE STATE AFFAIRS STANDING COMMITTEE                                                                           
                         March 31, 2007                                                                                         
                           10:07 a.m.                                                                                           
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Bob Lynn, Chair                                                                                                  
Representative Bob Roses, Vice Chair                                                                                            
Representative John Coghill                                                                                                     
Representative Kyle Johansen                                                                                                    
Representative Andrea Doll                                                                                                      
Representative Max Gruenberg                                                                                                    
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative Craig Johnson                                                                                                    
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
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 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                                                                             
03/29/07       (H)       Heard & Held                                                                                           
03/29/07       (H)       MINUTE(STA)                                                                                            
03/31/07       (H)       STA AT 10:00 AM CAPITOL 106                                                                            
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
REPRESENTATIVE MIKE KELLY                                                                                                       
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:   As  prime sponsor of  HB 179,  reviewed the                                                               
bill's main objectives.                                                                                                         
                                                                                                                                
LARRY SEMMENS                                                                                                                   
Kenai, Alaska                                                                                                                   
POSITION STATEMENT:  Testified during the hearing on HB 179.                                                                    
                                                                                                                                
LYDIA GARCIA                                                                                                                    
Interim Executive Director                                                                                                      
National Education Association of Alaska (NEA-Alaska)                                                                           
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:   Testified on  behalf of the  13,000 members                                                               
of NEA-Alaska in opposition to HB 179.                                                                                          
                                                                                                                                
ROD L. BETIT, President/CEO                                                                                                     
Alaska State Hospital and Nursing Home Association (ASHNHA)                                                                     
Juneau, Alaska                                                                                                                  
POSITION  STATEMENT:   Testified in  support of  the 80/20  split                                                               
proposed in HB 179.                                                                                                             
                                                                                                                                
GAVIN D. CHARRIER                                                                                                               
Local   6137   Alaska   Public   Employees   Association/American                                                               
Federation of Teachers (APEA/AFT)                                                                                               
Ketchikan, Alaska                                                                                                               
POSITION  STATEMENT:   Testified  on behalf  of  himself and  the                                                               
Local 6137 APEA/AFT during the hearing on HB 179.                                                                               
                                                                                                                                
JIM DUNCAN, Business Manager                                                                                                    
Alaska State Employees Association Local 52                                                                                     
Anchorage, Alaska                                                                                                               
POSITION  STATEMENT:   Testified on  behalf of  the approximately                                                               
8,200 general  government unit employees in  Alaska in opposition                                                               
to the provisions  of HB 179 related to the  increase in employee                                                               
contribution of 5 percent.                                                                                                      
                                                                                                                                
MICHAEL E. LAMB, CPA, CGFM, Chief Financial Officer                                                                             
Fairbanks North Star Borough                                                                                                    
Fairbanks, Alaska                                                                                                               
POSITION STATEMENT:   Offered suggestions  during the  hearing on                                                               
HB 179.                                                                                                                         
                                                                                                                                
DUANE MORAN, President                                                                                                          
Anchorage Council of Education                                                                                                  
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:   Testified  that he takes  significant issue                                                               
with the portion of HB 179  which proposes a [5 percent] increase                                                               
in employee contributions.                                                                                                      
                                                                                                                                
RICK SCHIKORA                                                                                                                   
(No address provided)                                                                                                           
POSITION STATEMENT:   Testified on  behalf of himself  during the                                                               
hearing on HB  179, in support of  Representative Kelly's efforts                                                               
to "get everybody to come to the table."                                                                                        
                                                                                                                                
GARY HUTCHINSON                                                                                                                 
(No address provided)                                                                                                           
POSITION STATEMENT:   Testified on  behalf of himself  during the                                                               
hearing on HB 179.                                                                                                              
                                                                                                                                
JASON AVERY                                                                                                                     
Fairbanks, Alaska                                                                                                               
POSITION  STATEMENT:     Testified   on  behalf  of   himself  in                                                               
opposition to  the 5 percent  increase in  employee contributions                                                               
proposed in HB 179.                                                                                                             
                                                                                                                                
DAN WAYNE, Attorney                                                                                                             
Legislative Legal and Research Services                                                                                         
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Answered questions  during the hearing on HB
179.                                                                                                                            
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
CHAIR BOB LYNN called the  House State Affairs Standing Committee                                                             
meeting  to  order  at  10:07:44   AM.    Representatives  Roses,                                                             
Coghill, Johansen, Gruenberg, Doll, and  Lynn were present at the                                                               
call to order.                                                                                                                  
                                                                                                                                
HB 179-PUBLIC EMPLOYEE/TEACHER RETIREM'T SYSTEMS                                                                              
                                                                                                                                
[Contains mention of HB 191.]                                                                                                   
                                                                                                                                
CHAIR LYNN  announced that the  only 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."                                                                       
                                                                                                                                
10:09:06 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  MIKE KELLY,  Alaska State  Legislature, as  prime                                                               
sponsor of  HB 179, reviewed that  the bill's main purpose  is to                                                               
address  the  $10  billion  unfunded   liability  of  the  Public                                                               
Employees'  Retirement  System  (PERS) and  Teachers'  Retirement                                                               
System  (TRS).   He noted  that PERS  is currently  funded at  65                                                               
percent, while TRS  is currently funded at 60 percent.   The bill                                                               
proposes  that the  state  pick  up 80  percent  of the  unfunded                                                               
liability obligation, while  the employers pay 20  percent of the                                                               
obligation.  Those in the  plan would contribute 5 percent toward                                                               
current period costs.                                                                                                           
                                                                                                                                
10:12:52 AM                                                                                                                   
                                                                                                                                
CHAIR  LYNN asked  Representative  Kelly to  confirm  that the  5                                                               
percent would not  be used as "a penalty to  the new employees to                                                               
pay for  the sins  of whatever caused  the unfunded  liability in                                                               
the past."                                                                                                                      
                                                                                                                                
REPRESENTATIVE KELLY confirmed that is true.                                                                                    
                                                                                                                                
10:13:36 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE ROSES asked where the  monies from the 80-20 split                                                               
would go.                                                                                                                       
                                                                                                                                
REPRESENTATIVE KELLY replied that  those monies are reserved with                                                               
a  present value  for future  payments over  the lifetime  of the                                                               
employee.                                                                                                                       
                                                                                                                                
REPRESENTATIVE  ROSES  stated  his understanding  that  currently                                                               
there are two  pools of money:   one is generated as  a result of                                                               
those called, "active employees."   A contribution is made by the                                                               
employer  and  the  employee  on  behalf of  the  employee.    He                                                               
continued:                                                                                                                      
                                                                                                                                
     And so, what you're saying  is that at this point, that                                                                    
     5  percent would  add to  the ...  percentage that  the                                                                    
     employee that is actively working  currently pays.  And                                                                    
     if my numbers  serve me correctly, ...  it's about 8.69                                                                    
     percent, as I recall, so this  would bring it up to ...                                                                    
     13 [percent]?                                                                                                              
                                                                                                                                
10:16:34 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE KELLY answered that's correct.                                                                                   
                                                                                                                                
REPRESENTATIVE ROSES continued:                                                                                                 
                                                                                                                                
     So,  that's   this  pool  of   money  for   the  active                                                                    
     employees.   The  only  way any  money  gets into  this                                                                    
     other pool  over here -  ... [regarding] the  ones that                                                                    
     are drawing benefits - is  at the time they retire, the                                                                    
     money moves from  the active pool over  to the inactive                                                                    
     or the retired pool where  the benefits are drawn from.                                                                    
     Is that correct?                                                                                                           
                                                                                                                                
REPRESENTATIVE KELLY said that's roughly correct.                                                                               
                                                                                                                                
REPRESENTATIVE ROSES continued:                                                                                                 
                                                                                                                                
     And at the  time that money is  transferred, there's an                                                                    
     actuarial  calculation  made  for  each  of  the  those                                                                    
     employees that retires,  and that actuarial calculation                                                                    
     is based  on the average  of their highest  three years                                                                    
     or  whatever system  they're in,  and  along with  that                                                                    
     [go]   all   the   actuarial  tables   that   determine                                                                    
     longevity, ... et  cetera.  So, [what]  goes with that,                                                                    
     then, is the cost of  the medical retirement system for                                                                    
     whichever plan  they fall  under.   And that  amount of                                                                    
     money is transferred to this inactive or retired pool.                                                                     
                                                                                                                                
REPRESENTATIVE KELLY confirmed that's correct.                                                                                  
                                                                                                                                
REPRESENTATIVE ROSES continued:   "So, we've defined  where the 5                                                               
percent would  be; it would be  in the active pool.   Where would                                                               
the 80/20 split for the unfunded liability ... go?"                                                                             
                                                                                                                                
REPRESENTATIVE KELLY answered:                                                                                                  
                                                                                                                                
     That split  would go  to fill the  hole between  the 60                                                                    
     percent funding  and 100 percent funding,  which is the                                                                    
     present  value of  those benefits  over time.   So,  it                                                                    
     goes into  that bucket  or into  the past  service cost                                                                    
     bucket.                                                                                                                    
                                                                                                                                
REPRESENTATIVE ROSES asked, "So, it goes into the retired one?"                                                                 
                                                                                                                                
REPRESENTATIVE KELLY answered yes.                                                                                              
                                                                                                                                
REPRESENTATIVE  ROSES said  the ARM  Board  has a  pool of  money                                                               
which it invests to generate revenue.   He said the pool of money                                                               
to  pay retirees  is not  fully funded  because of  unanticipated                                                               
costs and  increased costs  of medical,  for example.   Regarding                                                               
the pool of money for  active employees, he deduced, "They're not                                                               
drawing benefits, so  there's isn't shorted."   He indicated that                                                               
when  those in  that  group  retire, there  will  be an  unfunded                                                               
liability because  there wasn't  enough money generated  into the                                                               
system.  He continued:                                                                                                          
                                                                                                                                
     So, there's  an unfunded liability here  and there's an                                                                    
     unfunded liability  here.  That unfunded  liability and                                                                    
     the payments  for those are  the responsibility  of the                                                                    
     ARM Board.   So, do we  have a third pool  of money, or                                                                    
     does the  ARM Board money  sit entirely over  here with                                                                    
     the retired side?                                                                                                          
                                                                                                                                
10:18:10 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE KELLY explained:                                                                                                 
                                                                                                                                
     The accounts established here  reside in the Department                                                                    
     of Revenue,  but ...  it is  the responsibility  of the                                                                    
     ARM Board to determine what  comes in the front end and                                                                    
     what goes out the back, ...  and to manage the money in                                                                    
     the middle.                                                                                                                
                                                                                                                                
10:18:37 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE   ROSES  said   the  Department   of  Revenue   is                                                               
responsible of  all kinds of  accounts, one  of which is  the ARM                                                               
Board.  He clarified that he  wants to know where the 80/20 would                                                               
go.                                                                                                                             
                                                                                                                                
10:19:18 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  KELLY said  the 80/20  formula would  be used  to                                                               
restore the unfunded liability.                                                                                                 
                                                                                                                                
REPRESENTATIVE  ROSES summarized  that  the more  that goes  into                                                               
the system, the more it will  defer any increases to the unfunded                                                               
liability.   He said, "I  think what I hear  you saying is:   The                                                               
80/20  is  to  address  what  we already  know  is  the  unfunded                                                               
liability; the  increase in the 5  percent is to help  offset any                                                               
additional increases to what that  liability would be as the cost                                                               
of doing business."                                                                                                             
                                                                                                                                
REPRESENTATIVE KELLY responded that  that is essentially correct.                                                               
He indicated that  the unfunded liability is in  a constant state                                                               
of  flux.   For example,  the next  actuarial change  relative to                                                               
life expectancies will "put another hit on the system."                                                                         
                                                                                                                                
10:22:00 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  GRUENBERG asked,  "The  5 percent  could go  into                                                               
either pot.  Is that correct?"                                                                                                  
                                                                                                                                
10:22:26 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE KELLY responded that it  is clear there would be a                                                               
problem  with the  5 percent  going into  the unfunded  liability                                                               
pot,  because that  is a  result of  mistakes made  in the  past;                                                               
therefore,  it has  to  go  towards offsetting  the  cost of  the                                                               
current period.                                                                                                                 
                                                                                                                                
REPRESENTATIVE GRUENBERG  noted that the House  Special Committee                                                               
on Ways  and Means  calls the two  factors the  "reserve account"                                                               
and the "active account.  He  said there is another aspect to the                                                               
issue, as well.  He offered  his understanding that the 5 percent                                                               
would  apply  to both  the  defined  benefit  (DB) plan  and  the                                                               
defined contribution (DC) plan.                                                                                                 
                                                                                                                                
REPRESENTATIVE  KELLY clarified  that  that is  actually not  the                                                               
case;  [the 5  percent] applies  only to  the PERS'  and TRS'  DB                                                               
plans.                                                                                                                          
                                                                                                                                
10:26:37 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  KELLY, in  response to  Representative Gruenberg,                                                               
defined anticipated  cost as the  normal cost rate -  the payment                                                               
of  benefits accruing  to employees  in the  current period.   He                                                               
stated, "It does  not relate to the period behind  you.  Nor does                                                               
it relate  to those  who came in  under the  defined contribution                                                               
plan."                                                                                                                          
                                                                                                                                
10:27:29 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  GRUENBERG  observed  that   in  a  DC  plan,  the                                                               
employee and  the state  employer each  contribute a  set amount,                                                               
thus he questioned what unanticipated cost there would be.                                                                      
                                                                                                                                
REPRESENTATIVE  KELLY  indicated that  comparing  the  DC and  DB                                                               
plans is  like comparing apples  to oranges.  He  reiterated that                                                               
the discussion  [about the  5 percent] is  strictly about  the DB                                                               
plan.                                                                                                                           
                                                                                                                                
REPRESENTATIVE GRUENBERG  concluded, "So these people  are paying                                                               
an  additional 5  percent to  cover unfunded  costs for  somebody                                                               
else."                                                                                                                          
                                                                                                                                
CHAIR LYNN noted that that had been his previous question.                                                                      
                                                                                                                                
REPRESENTATIVE KELLY  explained that the active  employees in the                                                               
current period are  paying those costs that are  accruing to them                                                               
for  future  periods.   The  unfunded  liability,  he  explained,                                                               
relates to the DB  plan and affects the people in  that plan.  He                                                               
said, "We  don't ask the  retired folks to  come to the  table on                                                               
this, because  they are  no longer  in their  productive period."                                                               
He relayed  that there  are many  people receiving  benefits, and                                                               
the   cost   of  that   coverage   has   gone  up   dramatically.                                                               
Representative Kelly said  what he is attempting to do  - as much                                                               
as he would like not to have to  - is ensure that the very people                                                               
who benefit  and who  are still actively  employed help  with the                                                               
overall  cost.   He  talked  about bringing  all  parties to  the                                                               
table.   He  noted  that in  the  past, about  half  the cost  of                                                               
benefits was paid by all  the beneficiaries; however, that number                                                               
has slipped  to one-sixth.   Representative Kelly said  he thinks                                                               
his proposal is  reasonable, and he said he  would even encourage                                                               
unions  to become  involved.   He  concluded, "And  so, the  only                                                               
place that's available  - and it might even be  difficult - is in                                                               
the current  cost rate,  not in  the unfunded  liability portion.                                                               
You can't mix the two."                                                                                                         
                                                                                                                                
10:33:06 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE COGHILL  said it seems  that HB 179 would  ask for                                                               
an extra 5  percent from active employees to  contribute to their                                                               
own  retirement.     He  indicated  that  he   thinks  the  80/20                                                               
requirement of  the bill is problematic.   He said the  state has                                                               
promised to  have a retirement  system.   He stated, "So,  at the                                                               
end of the  day, we could end  up with 100 percent  of the cost."                                                               
He said  employees agreed  to pay a  certain rate  toward funding                                                               
the  retirement of  their employees,  while those  employees have                                                               
also agreed  to pay into  their own  retirement.  He  offered his                                                               
understanding that "that has ...  been different from employer to                                                               
employer."  He continued:                                                                                                       
                                                                                                                                
     So,  help  me if  I'm  misunderstanding  this, but  the                                                                    
     80/20 that  you have  here, or  the other  numbers that                                                                    
     are figured  on how  to blend that,  is to  say there's                                                                    
     going  to  be winners  and  losers  here, because  some                                                                    
     people have contributed very well,  and are very sound,                                                                    
     and  are  not contributing  up  to  the 20  percent  as                                                                    
     employers.   There  are  others who  have  not done  so                                                                    
     well, and we're going to end  up picking up a big chunk                                                                    
     of theirs.                                                                                                                 
                                                                                                                                
     So, I  guess what I'm asking  is:  [Is] the  80 percent                                                                    
     really our  responsibility, or do  they really  in fact                                                                    
     bear  100  percent  of the  responsibility,  and  we're                                                                    
     actually  going in  saying, "No,  we'll pick  that up,"                                                                    
     because we  know at  the end  of the  day it's  a state                                                                    
     full faith and credit issue?                                                                                               
                                                                                                                                
10:35:31 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE KELLY clarified  that TRS has a  single rate; PERS                                                               
has 160  different rates  - one  for each employer.   He  said he                                                               
thinks  Representative Coghill's  comment  regarding the  state's                                                               
bottom-line responsibility is noteworthy.   He said HB 179 is not                                                               
the  only option  to consider,  but it  is one  that "just  might                                                               
work."   He  said he  has been  chastised as  a conservative  for                                                               
"putting  the  state   numbers  so  high."     He  remarked  that                                                               
municipalities  would think  the  number is  too  low; they  want                                                               
85/15.     Regarding  municipalities,  he  related   a  story  of                                                               
Fairbanks  selling  its  utilities.   Regarding  that  story,  he                                                               
concluded:                                                                                                                      
                                                                                                                                
     They did  things which  they thought  at the  time were                                                                    
     responsible  for the  most part,  as did  the employees                                                                    
     who  were involved.    So, I'm  not  saying that  there                                                                    
     isn't  a tale  of  woe behind  almost  every place  you                                                                    
     point your  finger, but I'm  saying that this  tries to                                                                    
     cut through  that, not  have the  law suits,  [and] get                                                                    
     all three of the parties to  the table in a fair manner                                                                    
     ....                                                                                                                       
                                                                                                                                
10:39:50 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE ROSES  asked Representative Kelly to  confirm that                                                               
the aforementioned 5  percent would pertain only to  the DB plan,                                                               
which includes Tiers I, II, and III  of [PERS] and Tiers I and II                                                               
of TRS.                                                                                                                         
                                                                                                                                
REPRESENTATIVE KELLY said that's correct.                                                                                       
                                                                                                                                
REPRESENTATIVE ROSES directed  attention to a chart  on the third                                                               
page of  a memorandum  in the committee  packet from  Senator Kim                                                               
Elton,  [which shows  normal  cost and  accrued  liability].   He                                                               
illustrated that the PERS total for  the Tier 3 DB plan, shown on                                                               
the chart to  be 10.83 percent, would increase  with the addition                                                               
of 5 percent.                                                                                                                   
                                                                                                                                
REPRESENTATIVE  KELLY  first said  the  total  obligation of  the                                                               
current period does not change,  but then amended his response to                                                               
say that  it does, however, "ramp  up."  He referred  to comments                                                               
that  he said  Representative Roses  had made  on a  previous day                                                               
regarding cost-containment  measures.   Regarding the  5 percent,                                                               
he used a 17 percent rate as an example.  He said:                                                                              
                                                                                                                                
     Let's say  that a  year from  now it's  going to  be 17                                                                    
     [percent].    That  wouldn't  change;  that  would  not                                                                    
     become 22  [percent].  ...  For the employer,  it would                                                                    
     reduce that  rate initially, and of  course, over time,                                                                    
     that is going up.                                                                                                          
                                                                                                                                
REPRESENTATIVE  KELLY  concluded that  he  thinks  the answer  to                                                               
Representative Roses' question is no.                                                                                           
                                                                                                                                
REPRESENTATIVE  ROSES asked,  "So, the  increase to  the employee                                                               
does  not show  up in  this normal  cost that  we have  from Buck                                                               
Consulting,  when they're  looking  at what  percentage is  being                                                               
paid in."                                                                                                                       
                                                                                                                                
REPRESENTATIVE  KELLY  said  the  answer  to that  is  yes.    He                                                               
continued:                                                                                                                      
                                                                                                                                
     It  would show  up in  this  fashion:   Let's say  that                                                                    
     today, just  to pick  up a  number, ...  the rate  is 7                                                                    
     percent,  by the  employee, and  that the  total is  17                                                                    
     [percent].   So, the  employer is  picking up  this ...                                                                    
     extra ...  10 [percent].   If the employee steps  up to                                                                    
     the plate for  5 [percent], the 17  doesn't change, but                                                                    
     the impact initially  on the employer is  to bring that                                                                    
     total cost down.                                                                                                           
                                                                                                                                
REPRESENTATIVE ROSES  calculated that  with the 5  percent added,                                                               
the employer normal  cost would show an increase,  though not the                                                               
full 5 percent.                                                                                                                 
                                                                                                                                
REPRESENTATIVE KELLY responded no.  He explained:                                                                               
                                                                                                                                
     It would stay  exactly the same, assuming  there was no                                                                    
     upward pressure at that moment  you freeze it.  Call it                                                                    
     17 [percent],  the employee ...  would be picking  up a                                                                    
     share   that    is   currently   in    the   employer's                                                                    
     calculations, and that relieves  some pressure on them,                                                                    
     relative to this total cost.                                                                                               
                                                                                                                                
10:43:18 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  ROSES,   regarding  the  proposed   80/20  split,                                                               
remarked that  only 1 of the  160 employees in PERS  is the State                                                               
of  Alaska.   The other  159  in that  retirement system  include                                                               
school  districts and  the university  system, for  example.   He                                                               
emphasized that  although they operate as  separate entities, the                                                               
vast majority  of their  operating expenses  and funds  come from                                                               
general fund appropriations  from the State of Alaska.   He asked                                                               
Representative Kelly if he thinks that is a fair assessment.                                                                    
                                                                                                                                
REPRESENTATIVE KELLY answered yes.  He offered an example.                                                                      
                                                                                                                                
REPRESENTATIVE ROSES stated:                                                                                                    
                                                                                                                                
     The major  gain we're going  to have by doing  an 80/20                                                                    
     split is  really only going  to have the net  result on                                                                    
     those communities that have their  own taxation base to                                                                    
     where they  can pick up  a portion of that  20 percent.                                                                    
     Because [for] all of those  school districts and all of                                                                    
     those  areas  and  all  of  those  employers  that  get                                                                    
     everything through a  general fund, you can  call it an                                                                    
     80/20 split  if you  want, but  the state's  paying 100                                                                    
     percent.  So, the only  ones we're really talking about                                                                    
     are  those   entities  that  have  some   ...  type  of                                                                    
     individual  revenue   production  other   than  general                                                                    
     funds.                                                                                                                     
                                                                                                                                
REPRESENTATIVE   KELLY  indicated   that  Representative   Roses'                                                               
statement is accurate.                                                                                                          
                                                                                                                                
REPRESENTATIVE ROSES  remarked that the  individuals representing                                                               
the small  pool [of entities  with their own  revenue production]                                                               
are  the  same  individuals  who  come  to  the  offices  of  the                                                               
legislature   asking  for   increased   revenue;  therefore,   he                                                               
suggested,  "Isn't the  state  also picking  up  a percentage  of                                                               
that?"   He stated  that he understands  the significance  of the                                                               
issue  and applauds  Representative Kelly  for tackling  it.   He                                                               
said if the  legislature does not find a fix,  it will be holding                                                               
up all  the rest of the  funding for every other  entity that has                                                               
not  been addressed  in  the budget.   He  said,  "The thing  I'm                                                               
having the hardest time dealing with is  it appears to me to be a                                                               
very small  percentage of  people that  we're talking  about that                                                               
were  even  going  to  be  able   to  pick  up  that  20  percent                                                               
themselves.   The state's  really responsible  for almost  all of                                                               
it."                                                                                                                            
                                                                                                                                
10:47:25 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE   KELLY    responded   that   "that    number   is                                                               
identifiable."    He   said  he  does  not   disagree  with  what                                                               
Representative   Roses  said.     He   described  [the   unfunded                                                               
liability] as  a complicated issue to  solve.  He said  HB 179 is                                                               
different than  other approaches because  it focuses on  "how you                                                               
split  it  up  on  the   rate."    He  mentioned  other  proposed                                                               
solutions.   He concluded,  "I've tried  to pick  the one  area -                                                               
that's the  normal cost  rate -  we just might  be able  to agree                                                               
upon."                                                                                                                          
                                                                                                                                
10:50:55 AM                                                                                                                   
                                                                                                                                
LARRY  SEMMENS   testified.    He  stated   his  appreciation  of                                                               
Representative Kelly's work  on HB 179.  He noted  that he is the                                                               
finance director  at the City  of Kenai and  a member of  the ARM                                                               
Board.  Last year, when Representative  Roses was a member of the                                                               
ARM  Board, both  short-term and  long-term recommendations  were                                                               
sent  to the  legislature.   The short-term  solution was  to put                                                               
more money  into the systems to  halt the growth of  the unfunded                                                               
liability.   The long-term  solution was  embodied in  House Bill                                                               
375,  a  bill  which  passed   unanimously.    Mr.  Semmens  said                                                               
Representative Kelly  has inserted parts  of House Bill  375 into                                                               
HB  179, including  the  past service  liability  accounts and  a                                                               
split between  the state and employers.   He noted that  in House                                                               
Bill 375, that split was 85/15, and in HB 179 it is 80/20.                                                                      
                                                                                                                                
MR.  SEMMENS said  that  from the  standpoint  of both  municipal                                                               
employers and  the Alaska Municipal League  (AML), priorities are                                                               
stability, affordability,  and predictability  of the  rates, and                                                               
[HB   179],  at   80/20,  certainly   addresses   the  issue   of                                                               
affordability.  He noted that last  year AML had a target rate of                                                               
20  percent.   Using the  80/20 calculation  to the  current PERS                                                               
rate of  approximately 40  percent results  in an  approximate 20                                                               
percent rate for  employers.  Mr. Semmens stated  he is confident                                                               
that although AML's  official position is 85/15,  the 80/20 split                                                               
would be endorsed after an  official meeting with its membership.                                                               
He concluded,  "... If  we can  come up  with a  long-term stable                                                               
rate ...  in the neighborhood  of 20 percent, I'm  confident that                                                               
employers will welcome that."                                                                                                   
                                                                                                                                
MR.  SEMMENS  said  he  has   not  studied  the  technical  fixes                                                               
recommended by  the administration.  He  encouraged the committee                                                               
to focus  on the  normal cost  rate, which is  rising.   He said,                                                               
"Employees may be willing to take a share of that."                                                                             
                                                                                                                                
10:54:51 AM                                                                                                                   
                                                                                                                                
LYDIA  GARCIA,  Interim  Executive Director,  National  Education                                                               
Association of  Alaska (NEA-Alaska),  testified on behalf  of the                                                               
13,000  members of  NEA-Alaska  in  opposition to  HB  179.   She                                                               
questioned why  time is being  spent on a  bill that is  not only                                                               
unconstitutional,  but also  so wrong  for the  State of  Alaska.                                                               
She continued:                                                                                                                  
                                                                                                                                
     Governor Sarah  Palin has stated on  numerous occasions                                                                    
     that a  pension is a  promise.  NEA-Alaska  agrees with                                                                    
     the  governor  that  the  state  promised  employees  a                                                                    
     specific pension  for a specific contribution.   It was                                                                    
     not public  school employees who decided  to reduce the                                                                    
     employer  contribution early  this decade.   Why  would                                                                    
     the state want  to put any liabilities on  the backs of                                                                    
     the  employees?    [Martin Luther]  King  was  fond  of                                                                    
     saying, "A promise  made is a debt unpaid."   The State                                                                    
     of Alaska made the promise  to its employees; the state                                                                    
     needs to pay the debt.                                                                                                     
                                                                                                                                
MS. GARCIA  said HB  179 proposes  to cut the  pay of  all public                                                               
employees by 5 percent, which  she said would affect every single                                                               
public  employee,   including  teachers,  police   officers,  and                                                               
firefighters.   She stated that educators  making $15,000-$20,000                                                               
a  year can't  afford  to  pay an  additional  $750-$1,000.   She                                                               
reminded the  committee that NEA-Alaska, the  Anchorage Education                                                               
Association,  and the  Anchorage  School  District have  recently                                                               
finished up to  two years of "intense, arduous  bargaining."  She                                                               
continued:                                                                                                                      
                                                                                                                                
     The raises of  3-4 percent over the next  few years are                                                                    
     fair  and will  hopefully  keep inflation  at  bay.   I                                                                    
     shudder to think  of the passage of HB  179 and telling                                                                    
     our members that their 3  percent raise is actually a 2                                                                    
     percent cut in pay.                                                                                                        
                                                                                                                                
MS. GARCIA  noted that two years  ago, Chair Lynn was  one of the                                                               
leaders involved  in the  fight to  maintain the  defined benefit                                                               
program for public  employees.  She emphasized  the importance of                                                               
returning  Alaska to  a defined  benefit program  for its  public                                                               
employees.    She   said  there  are  several   other  pieces  of                                                               
legislation addressing the issues  of retirement and the unfunded                                                               
liability.   She asked  that the  committee not  allow HB  179 to                                                               
pass out of the House State Affairs Standing Committee.                                                                         
                                                                                                                                
MS. GARCIA, in response to  Chair Lynn's request that she explain                                                               
why HB 179  is unconstitutional, cited Article 12,  Section 7, of                                                               
the Constitution  of the State  of Alaska, which read  as follows                                                               
[original punctuation provided]:                                                                                                
                                                                                                                                
                                                                                                                                
     SECTION 7.   Retirement Systems.Membership  in employee                                                                    
     retirement  systems  of  the  State  or  its  political                                                                    
     subdivisions    shall    constitute    a    contractual                                                                    
     relationship. Accrued  benefits of these  systems shall                                                                    
     not be diminished or impaired.                                                                                             
                                                                                                                                
10:59:29 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  GRUENBERG  observed  that HB  179  includes  many                                                               
types of legal  issues; however, neither it nor any  of the other                                                               
pension legislation is slated to  be heard in the House Judiciary                                                               
Standing Committee.   He noted that  three of the members  of the                                                               
House  State Affairs  Standing Committee  also sit  on the  House                                                               
Judiciary Standing  Committee, and  he emphasized  the importance                                                               
of considering  all the legal issues  related to HB 179.   To all                                                               
those who had  testified or were yet to testify,  he stressed the                                                               
necessity  of  legal  opinions  and case  citations  to  back  up                                                               
statements.  He said without  such documentation those statements                                                               
would not be  helpful to the committee.   He said he  is not just                                                               
talking about  Article XII, Section  7, but is also  referring to                                                               
other issues,  such as the impairments  of collectively bargained                                                               
contracts.                                                                                                                      
                                                                                                                                
11:01:06 AM                                                                                                                   
                                                                                                                                
CHAIR  LYNN confirmed  that he  did oppose  Senate Bill  141 last                                                               
year.   He said he  wished that  a bill such  as HB 179  had been                                                               
available then.   He talked about the balance  of extricating the                                                               
state   from   the   unfunded  liability   while   simultaneously                                                               
protecting the  rights of  the workers.   Employees  and retirees                                                               
must be the bottom line in the issue, he posited.                                                                               
                                                                                                                                
11:02:19 AM                                                                                                                   
                                                                                                                                
MS.  GARCIA, in  response to  Representative Gruenberg,  said she                                                               
would  be happy  to provide  the legal  opinions and  information                                                               
related to her statements.                                                                                                      
                                                                                                                                
11:02:52 AM                                                                                                                   
                                                                                                                                
ROD L.  BETIT, President/CEO, Alaska  State Hospital  and Nursing                                                               
Home  Association  (ASHNHA), noted  that  he  is representing  37                                                               
member facilities from  around the state.  He noted  that most of                                                               
those facility representatives were in  town the previous day for                                                               
a legislative update.  He continued as follows:                                                                                 
                                                                                                                                
     [They]  took up  this  piece of  legislation and  asked                                                                    
     that  I  report to  you  that  they greatly  appreciate                                                                    
     Representative   Kelly    bringing   this    piece   of                                                                    
     legislation forward to deal with  the piece on unfunded                                                                    
     liability  between the  state and  employer funding  of                                                                    
     that ...  hole.   They understand that  hole has  to be                                                                    
     filled,  but  they've  in good  faith  participated  at                                                                    
     rates that they felt were appropriate for those years.                                                                     
                                                                                                                                
     The difference  between the 35  or 40 percent  rate and                                                                    
     the  20 percent  is just  astronomical on  our members,                                                                    
     particularly our five, small  hospital members that are                                                                    
     also  community hospitals.    Petersburg, for  example:                                                                    
     the difference would be $800,000  a year - not just one                                                                    
     year, but we're told for  the next quarter of a century                                                                    
     - to dig out of this  hole.  They have a patient census                                                                    
     of 1.5 patients per day.   The rate increase to come up                                                                    
     with that  kind of  money would just  be enormous  - in                                                                    
     the 40-50 percent range.                                                                                                   
                                                                                                                                
     I would ask  that this be given  consideration and that                                                                    
     you do give support to the  80/20 split.  We think it's                                                                    
     a fair  way to try  to recover  from the damage  of the                                                                    
     past and  to spread that  burden in a more  (indisc. --                                                                    
     sneezing) way, but in a  way that's sustainable for the                                                                    
     employers that are ... contributing to this problem.                                                                       
                                                                                                                                
11:04:50 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  GRUENBERG stated  that the  committee also  needs                                                               
legal research regarding "the  interplay between this legislation                                                               
and any applicable  federal legislation."  He asked  Mr. Betit to                                                               
comment.                                                                                                                        
                                                                                                                                
MR.  BETIT responded  that ASHNHA  is not  speaking to  any legal                                                               
aspect of HB 179, nor is  he speaking to any components that deal                                                               
with employee contributions to the  current Public Employees' and                                                               
Teachers' Retirement Systems.   He clarified that  he is speaking                                                               
solely to the policy question of how  much of the past ills - the                                                               
unfunded liability  - should be borne  by the state and  how much                                                               
by the employer.                                                                                                                
                                                                                                                                
11:06:01 AM                                                                                                                   
                                                                                                                                
GAVIN D.  CHARRIER testified on  behalf of himself and  the Local                                                               
6137 Alaska  Public Employees Association/American  Federation of                                                               
Teachers (APEA/AFT).   He relayed  that he is a  34-year resident                                                               
of Alaska who has been  employed by the Ketchikan Gateway Borough                                                               
as   an   airport   equipment  mechanic   and   aircraft   rescue                                                               
firefighter, contributing 7.5 percent to PERS.  He continued:                                                                   
                                                                                                                                
     As a  19-year collective bargaining negotiator  for our                                                                    
     employee  group,  Local  6137  of  the  [Alaska  Public                                                                    
     Employees' Association/American  Federation of Teachers                                                                    
     (APEA/AFT)], historically  Ketchikan is noted  as being                                                                    
     one of the  highest cost of living  regions, while also                                                                    
     being  the  lowest  political ...  subdivision  in  the                                                                    
     state.    Over  the  years our  members  have  suffered                                                                    
     substandard  wages  in  lieu   of  a  generous  benefit                                                                    
     package  that   we  have  collectively  been   able  to                                                                    
     maintain  through   negotiations  with   the  Ketchikan                                                                    
     Gateway Borough.                                                                                                           
                                                                                                                                
     PERS/TRS retirement  is considered  to be one  of those                                                                    
     benefits that  is under constant erosion,  such as Tier                                                                    
     I,  II,  III,  IV,  and  now  a  proposed  increase  in                                                                    
     contribution  rates,  with   nothing  more  other  than                                                                    
     status quo  in return.  If  employee contribution rates                                                                    
     are  successfully  increased  to  5  percent  from  the                                                                    
     current 9.6  school district,  7.5 police/firefighters,                                                                    
     and  6.75 of  all others,  to a  14.6, 12.5,  and 11.75                                                                    
     percent, respectively, then  this will certainly create                                                                    
     a  financial   hardship  for  many  of   those  current                                                                    
     substandard ... wages barely enough to make ends meet.                                                                     
                                                                                                                                
     PERS/TRS   employees  have   had  no   option  but   to                                                                    
     contribute  every   pay  period  to   their  retirement                                                                    
     account.  The explanation that  I've been given is that                                                                    
     the  employer,  on  the other  hand,  doesn't  have  to                                                                    
     contribute a  plug nickel into  the Tier I, II,  or III                                                                    
     employees'  account  until  the  day  comes  when  that                                                                    
     particular  employee retires  and starts  drawing their                                                                    
     hard-earned retirement at  the PERS Board designation's                                                                    
     percentage  amount  calculated  at 2  percent  for  ...                                                                    
     their first  ten years of employment,  plus 2.5 percent                                                                    
     per year for all years  after ten, times the average of                                                                    
     the three highest consecutive years of salary.                                                                             
                                                                                                                                
     With  the  creation of  Tier  IV  employees last  year,                                                                    
     there  is no  new money  coming in  to help  offset the                                                                    
     deficit retirement  account balance.  When  the retiree                                                                    
     draws  their monthly  retirement check  from ...  PERS,                                                                    
     PERS  sends  simultaneously  [to]  the  employer  their                                                                    
     portion of what they  owe the account to proportionally                                                                    
     refund that  retirees' retirement  at what  has already                                                                    
     been  determined  by  the   PERS  Board  as  previously                                                                    
     mentioned.                                                                                                                 
                                                                                                                                
     ... I believe  it's time for the employers  to ... take                                                                    
     fiduciary  responsibility, step  up to  the plate,  and                                                                    
     begin   actively  participating   in  matched   funding                                                                    
     PERS/TRS Tiers  I, II, and  III defined  benefit groups                                                                    
     upfront,  alongside  the employees'  contributions  bi-                                                                    
     monthly  as  ...  they currently  are  with  the  newly                                                                    
     created Tier IV defined [contribution] employee group.                                                                     
                                                                                                                                
11:09:32 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE   ROSES  asked   Mr.  Charrier   to  confirm   his                                                               
indication  that school  districts and  municipalities don't  pay                                                               
anything into the system until the employee retires.                                                                            
                                                                                                                                
MR. CHARRIER  said that  has been  his understanding  after phone                                                               
calls to  representatives of PERS.   He  said he knows  there are                                                               
different  political  subdivisions of  the  state  that fund  the                                                               
account  readily and  generously, while  others seem  to postpone                                                               
their payments into that account until the employee retires.                                                                    
                                                                                                                                
REPRESENTATIVE ROSES  suggested the  possibility that  two issues                                                               
are being mixed together in this discussion.  He clarified:                                                                     
                                                                                                                                
     There's an  account that is  for the  active employees,                                                                    
     where  the  employee and  the  employer  pay into  that                                                                    
     account.   Then when  that employee retires,  the money                                                                    
     and  all   of  the  obligation  that   goes  with  that                                                                    
     retirement  then  transfers  from that  active  account                                                                    
     into the  retired account.   So, what  you're referring                                                                    
     to, I think,  is the process by which  the active funds                                                                    
     move over  to the retired  or the inactive funds.   But                                                                    
     the municipalities  pay it  in each  month the  same as                                                                    
     the  employee  does;  it's  into  that  active  account                                                                    
     rather  than the  retired account.   So,  I think  what                                                                    
     you're   stating   is   partially  correct,   but   the                                                                    
     municipalities and school districts  pay in every month                                                                    
     [the] same  as everybody  else does  - it  just doesn't                                                                    
     move  to  that account  with  the  employee until  they                                                                    
     retire, but the money's already there.                                                                                     
                                                                                                                                
11:11:36 AM                                                                                                                   
                                                                                                                                
JIM DUNCAN, Business Manager,  Alaska State Employees Association                                                               
Local  52,   on  behalf  of   the  approximately   8,200  general                                                               
government unit  employees in Alaska, testified  in opposition to                                                               
the  provisions of  HB 179  related to  the increase  in employee                                                               
contribution of 5 percent.  He  said he opposes the increase both                                                               
for PERS  and TRS  employees, even though  he does  not represent                                                               
the latter.   He stated that that  provision is unconstitutional.                                                               
He  discussed  an  attorney  general's  opinion  on  the  matter,                                                               
written in April 2005, [included  in the committee packet], which                                                               
outlines that  there is  a requirement  in the  constitution that                                                               
makes it  unlawful to  impair benefits  of the  retirement system                                                               
once  someone has  entered into  that  system.   He related  that                                                               
there have  been six court cases  on the issue, to  date, and the                                                               
court has found for the employee each time.                                                                                     
                                                                                                                                
MR. DUNCAN  said back in  1986, when  he was a  Representative in                                                               
the House, the employee contribution  rate did increase; however,                                                               
that happened  at the same  time as  an enhancement of  benefit -                                                               
the  automatic pension  adjustment.   He  said  if the  committee                                                               
moves forward with the bill, he would expect litigation.                                                                        
                                                                                                                                
MR.  DUNCAN reviewed  that  House Bill  475  was introduced  last                                                               
year, which included  "fix it" provisions for  the already passed                                                               
Senate Bill  141; however, House  Bill 475 never made  it through                                                               
the  Senate and  emergency regulations  had  to be  adopted as  a                                                               
result.  He stated:                                                                                                             
                                                                                                                                
     And based  upon information  provided to  the [Internal                                                                    
     Revenue  Service (IRS)]  that  legislation had  passed,                                                                    
     the  IRS  found the  defined  contribution  plan to  be                                                                    
     compliant.   The  provisions  were  never passed;  they                                                                    
     were put into place by  emergency regulation.  It is my                                                                    
     position  that it  was not  appropriate to  do that  by                                                                    
     emergency  regulation,  and  so,  whether  or  not  the                                                                    
     provisions  are  in  place  ...  is  still  subject  to                                                                    
     challenge."                                                                                                                
                                                                                                                                
MR. DUNCAN  suggested that if  the committee wants a  solution to                                                               
the retirement and benefits system,  it should return to the Tier                                                               
III defined benefit  plan.  He concluded, "The  Buck Report shows                                                               
that the Tier III defined benefit  plan is not causing a problem,                                                               
is not  really causing  an undervaluation.   In  fact, it  is the                                                               
same  cost  if not  less  costly  than the  defined  contribution                                                               
plan."                                                                                                                          
                                                                                                                                
11:15:46 AM                                                                                                                   
                                                                                                                                
CHAIR LYNN asked Mr. Duncan what he  would think of HB 179 if the                                                               
5 percent provision were not in it.                                                                                             
                                                                                                                                
MR. DUNCAN  replied that the  Alaska State  Employees Association                                                               
stands ready to assist the  legislature in making its policy call                                                               
as to  whether the split should  be 80/20 or 85/15,  but he noted                                                               
that his preference is for the latter.                                                                                          
                                                                                                                                
11:16:57 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE GRUENBERG directed attention  to a memorandum from                                                               
Legislative Legal and Research Services,  dated January 29, 2005,                                                               
[included in  the committee  packet], which  he pointed  out only                                                               
refers to  a 1981 case.   He requested  that Mr. Duncan  have his                                                               
legal   staff  review   the  memorandum   and   respond  to   it.                                                               
Furthermore,  he  said  he  looks  forward  to  getting  a  legal                                                               
memorandum from  Mr. Duncan.   Finally, he  said he  is concerned                                                               
about the  effect of the  5 percent change on  currently existing                                                               
collectively bargained agreements.                                                                                              
                                                                                                                                
MR.  DUNCAN stated  that although  he has  great respect  for the                                                               
attorneys who  work in Legislative  Legal and  Research Services,                                                               
the legislative  counsel who wrote  the January 29  memorandum is                                                               
"absolutely  wrong  in   that  memo"  and  "did   not  give  full                                                               
consideration  to  the  provisions  that are  referenced  in  the                                                               
attorney  general's  opinion."   In  response  to  Representative                                                               
Gruenberg's  third  statement, he  said  it  is  clear that  a  5                                                               
percent increase  in an employee's  contribution rate equals  a 5                                                               
percent decrease in pay.  He  stated, "We are trying to negotiate                                                               
a collective  bargaining agreement for  this point, but  have not                                                               
yet reached an agreement.   We hope to in the  near future."  Mr.                                                               
Duncan said over the past  10-15 years, employees have seen their                                                               
take home  decrease, because  the wages  of state  employees have                                                               
fallen  17 percent  behind the  increases in  the consumer  price                                                               
index  (CPI).   Conversely,  the federal  government and  private                                                               
sector has kept pace [with the CPI].                                                                                            
                                                                                                                                
11:19:34 AM                                                                                                                   
                                                                                                                                
MICHAEL E.  LAMB, CPA, CGFM,  Chief Financial  Officer, Fairbanks                                                               
North  Star Borough,  noted  that he  is a  co-chair  of the  AML                                                               
revenue finance  subcommittee.   He thanked  Representative Kelly                                                               
for his "tenacity and dogged  determination to help in crafting a                                                               
final solution  to the multiple PERS  and TRS issues."    He said                                                               
the proposed legislation includes  some necessary components.  He                                                               
said he  thinks the  following needs  to be  combined to  come up                                                               
with a solution  that would work long term and  would embrace the                                                               
previously  mentioned  components of  predictability,  stability,                                                               
and affordability:   some of  the language  from HB 179,  some of                                                               
the governor's  cost-sharing language, some of  the DB/DC salary-                                                               
base language,  some of House  Bill 13's pension  obligation bond                                                               
language - also supported by the  governor, and some of the House                                                               
committee substitute proposals.                                                                                                 
                                                                                                                                
MR. LAMB  stated that  HB 179 recognizes  the need  for technical                                                               
corrections made  as a result  of Senate Bill 141.   Furthermore,                                                               
it  recognizes  the  existence  of  a  consolidated  cost-sharing                                                               
system  and  the need  for  legislative  language that  "reflects                                                               
that."   He  spoke  of  "an outcome  where  all member  employers                                                               
should  be assigned  a single,  uniform rate,"  and he  said that                                                               
should include  the State of Alaska  as employer.  He  said there                                                               
must be  a rate that  is predictable and palatable  to everyone's                                                               
budget.                                                                                                                         
                                                                                                                                
MR.  LAMB  emphasized that  the  aforementioned  85/15 split  was                                                               
intended so  that 85 percent  of the  bill was "pulled  away" and                                                               
"treated  like  a mortgage  payment,"  with  the balance  of  the                                                               
liability  -  the   15  percent  -  shared   "across  all  member                                                               
employers, including the state," so  that the state's budget also                                                               
had a benefit rate that was  affordable.  He said the 80/20 split                                                               
proposed  in HB  179  is  not quite  structured  like the  "80/15                                                               
shared solution."  "Accordingly,"  he said, "the resulting member                                                               
employer  rates  end  up  too   high  after  known,  future-year,                                                               
unfunded obligation increases are factored in."                                                                                 
                                                                                                                                
11:23:58 AM                                                                                                                   
                                                                                                                                
MR.  LAMB,  in  response  to a  request  for  clarification  from                                                               
Representative Coghill,  emphasized that the key  element in this                                                               
discussion  is  about   the  rate,  which  he  said   has  to  be                                                               
affordable.   He stated, "If the  rates in the past  had been set                                                               
appropriately, ... the  only rate that we would  be talking about                                                               
today  is the  normal cost  rate,  which is  14.48 [percent]  for                                                               
[fiscal year 2008  (FY 08)]."  He said he  thinks many people are                                                               
saying that  the state  is "bailing out  in helping  other member                                                               
employers pay for  their unfunded obligation."   Mr. Lamb offered                                                               
his perspective  that it is  those member employers -  with every                                                               
dollar paid  above the 14.48 percent  normal cost rate -  who are                                                               
actually helping pay down the  obligation that was created by the                                                               
state's  setting rates  incorrectly in  the past.   He  concurred                                                               
with Representative  Roses that the  State of Alaska's  budget is                                                               
the source  of funding not only  for its own employees,  but also                                                               
for the  University of Alaska  and school districts  - especially                                                               
rural schools.   The goal,  he said, needs to  be to find  a rate                                                               
whereby all  member employers pay  as much  as they can,  so that                                                               
services are provided, without going bankrupt.                                                                                  
                                                                                                                                
11:27:55 AM                                                                                                                   
                                                                                                                                
DUANE MORAN, President, Anchorage  Council of Education, which is                                                               
affiliated     with     the      Alaska     Public     Employees'                                                               
Association/American Federation  of Teachers, noted that  he is a                                                               
PERS  Tier   III  employee.     He  expressed   appreciation  for                                                               
Representative Kelly's  efforts in  introducing HB 179,  but said                                                               
he takes  significant issue  with the portion  of the  bill which                                                               
proposes a  [5 percent] increase  in employee contributions.   He                                                               
asked   the  committee   to  consider   the  law   of  unintended                                                               
consequences:  A  5 percent, after-tax cut in  wages would result                                                               
in an  unintended movement from  the active employee pool  to the                                                               
retired pool.   The $10  billion short-funding  is over a  20- to                                                               
25-year period, he  said.  He indicated that a  rapid increase in                                                               
current costs will  also increase the liability.   He agreed that                                                               
predictability   and    certainty   are   important    in   labor                                                               
negotiations,  because, "If  there's a  change this  year on  the                                                               
employee contribution, what's  to say there wouldn't  be a change                                                               
next year?"  Mr. Duran concluded:                                                                                               
                                                                                                                                
     There's a  difference between having  skin in  the game                                                                    
     and a  pound of flesh,  and a 5 percent,  after-tax pay                                                                    
     cut would be more than a pound of flesh.                                                                                   
                                                                                                                                
11:30:35 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  GRUENBERG asked  if a  5 percent  deduction would                                                               
have the same effect as a 5 percent tax on employees.                                                                           
                                                                                                                                
MR.  DURAN  answered,  "Absolutely."     He  revealed  that  many                                                               
employees have  said they  are at  the point  where if  they were                                                               
faced  with a  5 percent  cut in  wages, they  would leave  state                                                               
employment,  work  for  the  private   sector,  and  collect  the                                                               
insurance benefits  of their pension  now rather than in  four to                                                               
five years.   He mentioned HB 191, which proposes  a $1,500 bonus                                                               
for employees  currently eligible to retire  to continue working,                                                               
while HB 179,  he observed, would cut salaries by  5 percent.  He                                                               
questioned what message the legislature is trying to send.                                                                      
                                                                                                                                
11:31:56 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE   ROSES    offered   the   following    point   of                                                               
clarification:                                                                                                                  
                                                                                                                                
     I think I heard in your  testimony that this would be a                                                                    
     5 percent  after-tax deduction,  but ...  actually, the                                                                    
     way it's proposed, it's a 5  percent prior to tax.  So,                                                                    
     ... the net result is not  a 5 percent decrease in pay.                                                                    
     It would be  more like two and  three-quarters to three                                                                    
     and  a quarter,  depending  on a  person's  wage.   But                                                                    
     nonetheless,  the  impact  that  you're  talking  about                                                                    
     would be ... [that] take home pay would be reduced.                                                                        
                                                                                                                                
MR.  DURAN recollected  that  he  had heard  the  term 5  percent                                                               
"after-tax" during Representative Kelly's testimony.                                                                            
                                                                                                                                
11:32:39 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  COGHILL,  responding   to  Mr.  Duran's  previous                                                               
statement regarding a  pound flesh, asked him to  think about the                                                               
"$10 billion tax that's going to  be sent to the people of Alaska                                                               
to keep  your retirement whole."   He  asked that Mr.  Duran "put                                                               
that in balance."                                                                                                               
                                                                                                                                
MR. DURAN  remarked that  he does  not think  any of  the current                                                               
members of  the legislature  were a  part of  the decision-making                                                               
processes in the 1960s.  He said  mistakes were made by "a lot of                                                               
different groups  of people,"  but "employees  did not  have that                                                               
contribution to those mistakes."                                                                                                
                                                                                                                                
REPRESENTATIVE COGHILL  responded, "We could argue  about it, but                                                               
the fact  is:   neither did  the children who  are going  to pick                                                               
this bill up."                                                                                                                  
                                                                                                                                
CHAIR LYNN disclosed  that he has a son  and daughter-and-law who                                                               
are under TRS in Anchorage.                                                                                                     
                                                                                                                                
REPRESENTATIVE COGHILL  said everybody on the  committee probably                                                               
has some [relatives in PERS and/or TRS].                                                                                        
                                                                                                                                
11:34:35 AM                                                                                                                   
                                                                                                                                
RICK SCHIKORA,  testifying on behalf  of himself, said  he thinks                                                               
Representative Kelly is doing a  good thing by attempting to "get                                                               
everybody to  come to  the table."   He said  it sounds  like the                                                               
80/20  split  may work.    If  Mr.  Duncan  is correct  that  the                                                               
proposed 5  percent increase is  unconstitutional, he  said, then                                                               
perhaps there  are other  options.  He  said DB  consultants have                                                               
told him  one option  is to  "change the  go-forward rate  of the                                                               
multiplier."  He offered further details.                                                                                       
                                                                                                                                
11:37:14 AM                                                                                                                   
                                                                                                                                
GARY  HUTCHINSON,  testifying  on  behalf of  himself,  told  the                                                               
committee that he has six  years' experience as a public official                                                               
for his  local municipality and  understands the impact  that the                                                               
unfunded  liability has  had  on his  school  district and  local                                                               
borough.   He thanked Representative  Kelly for his efforts.   He                                                               
stated, "I  have trouble  understanding how in  the world  we can                                                               
reach into any  savings account that belongs to  all Alaskans and                                                               
take $8  billion out  to fund  this pension  plan that  we cannot                                                               
afford, without  fixing it prospectively."   He said some  of the                                                               
ideas of  "the prior speaker" are  "in the right direction."   He                                                               
continued:                                                                                                                      
                                                                                                                                
     Certainly   I   understand   [Representative]   Kelly's                                                                    
     interest  in increasing  the  employee contribution  to                                                                    
     buy another 5  percent is designed to  try and mitigate                                                                    
     the fact  that the plan  would not be fixed  under this                                                                    
     scenario,  and that  there would  be accruing  unfunded                                                                    
     liabilities, and that  the 5 percent is  designed to be                                                                    
     directed  toward that.   That  is a  step in  the right                                                                    
     direction, but I think we  need to also step back, look                                                                    
     at  this  plan  that   is  auguring  into  the  savings                                                                    
     accounts of all  Alaskans at an alarming  rate, and ask                                                                    
     ourselves, "Is this  a pension plan that  we can afford                                                                    
     in the future?"                                                                                                            
                                                                                                                                
MR.  HUTCHISON said  when he  served in  public office  two years                                                               
ago, the  deficiency then  was $5.7  billion, and  he said  it is                                                               
stunning  that it  is  currently  measured at  $10  billion.   He                                                               
stated:                                                                                                                         
                                                                                                                                
     I am not  in favor of the 80 percent  bail out if there                                                                    
     is   not  some   adjustment   to  the   plan  so   that                                                                    
     prospectively there isn't  additional, unfunded amounts                                                                    
     accruing to  the tax payers.   I'd be more in  favor of                                                                    
     65 percent, or lower, as the governor's proposed.                                                                          
                                                                                                                                
11:39:42 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  GRUENBERG  noted  that some  municipalities  have                                                               
limited their  taxes so  much that they  are not  contributing as                                                               
much as  some of  the other municipalities,  and he  said, "We're                                                               
trying to  do a  one-size-fits-all for  municipal contributions."                                                               
He  asked  Mr.  Hutchinson  how  the  state  should  handle  that                                                               
situation.                                                                                                                      
                                                                                                                                
MR.   HUTCHINSON  said   he  is   not   currently  an   official.                                                               
Notwithstanding  that, he  expressed his  own opinion  favoring a                                                               
cost-sharing approach, which  he said treats PERS  more like TRS.                                                               
He said,  "That's a  fair way  of dealing with  this plan,  and I                                                               
think it would be more  politically palatable."  He surmised that                                                               
Representative  Gruenberg is  probably referring  to rural  areas                                                               
that  don't  contribute,  ultimately  resulting  in  the  state's                                                               
picking up  the tab "one  way or the other."   He said  the issue                                                               
needs  to  be about  fixing  the  state's  retirement plan.    He                                                               
stated:                                                                                                                         
                                                                                                                                
     It would be better to  have more costs ... flow through                                                                    
     to  the  municipalities  and  the   tax  payers  if  no                                                                    
     adjustment  to  this  plan occurs,  making  it  a  more                                                                    
     affordable plan prospectively,  because the higher cost                                                                    
     that would trickle down  to the municipalities, trickle                                                                    
     down to the  tax payers, would be a  means of educating                                                                    
     the general public of the severity of this problem.                                                                        
                                                                                                                                
11:42:30 AM                                                                                                                   
                                                                                                                                
JASON  AVERY, testifying  on  behalf  of himself,  said  he is  a                                                               
member of the  Alaska Public Employees Association  and works for                                                               
Fairbanks  North Star  Borough Parks  and Recreation  Department.                                                               
He said  he is a  PERS Tier III employee  and has worked  for the                                                               
borough for 10 years.  He stated:                                                                                               
                                                                                                                                
     I understood  when I graduated  from college that  as a                                                                    
     public  employee, I'd  probably  be  making less  money                                                                    
     than I would  be in the private sector,  but would have                                                                    
     more stable  benefits and a  decent retirement  to look                                                                    
     forward to.   I'm  proud of  what I  do, but  with each                                                                    
     year I  feel the  public employees are  falling farther                                                                    
     and farther behind  in the pay that we  receive and the                                                                    
     retirement  benefits  we  were  promised.    I  support                                                                    
     statutory  changes  that  will protect  employers  from                                                                    
     having to pay ever  increasingly unsustainable rates to                                                                    
     the retirement  system, and  I understand  that leaving                                                                    
     the current  system as it  is will cause great  harm to                                                                    
     Alaska's schools and local governments.                                                                                    
                                                                                                                                
     I believe that  the state is responsible  for paying at                                                                    
     least  80 percent  of the  unfunded liability,  as it's                                                                    
     the  state's responsibility  for the  mistakes made  by                                                                    
     the investment in actuarial  companies that [it] hired,                                                                    
     and that  the remaining  20 percent  be covered  by the                                                                    
     employer.  I  do not believe that  the public employees                                                                    
     of this state  should be expected to  pay an additional                                                                    
     5  percent of  their hard-earned  paychecks to  pay for                                                                    
     mistakes that they  did not make.   Furthermore, I feel                                                                    
     that  the so-called  fix  of creating  a  Tier IV  with                                                                    
     [Senate  Bill]  141  has  made  it  very  difficult  to                                                                    
     recruit  qualified, new  employees, and  gives no  real                                                                    
     incentive for those  employees to stay in  the State of                                                                    
     Alaska as a defined benefit system has in the past.                                                                        
                                                                                                                                
11:45:00 AM                                                                                                                   
                                                                                                                                
DAN WAYNE, Attorney, Legislative  Legal and Research Services, as                                                               
the attorney  assigned to HB 179,  and in response to  Chair Lynn                                                               
and Representative Gruenberg, said  there may be a constitutional                                                               
issue with  the proposed 5  percent increase.   In response  to a                                                               
follow-up  question from  Representative  Gruenberg,  he said  he                                                               
does not  have a copy  of the legal  opinion to which  Mr. Duncan                                                               
previously alluded.                                                                                                             
                                                                                                                                
REPRESENTATIVE GRUENBERG  said he would like  Mr. Wayne's opinion                                                               
regarding  the  aforementioned  legal opinion  in  the  committee                                                               
packet and  the attorney  general's opinion,  once Mr.  Wayne has                                                               
had a chance to read both.                                                                                                      
                                                                                                                                
11:46:12 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE KELLY,  regarding the  legality of the  bill, said                                                               
he is aware  of the challenge relative to the  past service rate.                                                               
The opinions of  Legislative Legal and Research  Services and the                                                               
attorney  general address  the  normal cost  rate,  which is  the                                                               
current  period.   He  said  some say  the  reported $10  billion                                                               
unfunded liability is  actually closer to being $12  billion.  He                                                               
warned  that  the  state's  retirement  system  could  cost  $900                                                               
million a  year for the  next 25 years  before being solved.   He                                                               
emphasized the  enormity of  the problem  which the  state faces.                                                               
He said  he met  with the new  attorney general  [Talis Colberg],                                                               
who  is aware  of HB  179  and has  questions to  answer for  the                                                               
sponsor.   He concluded,  "Hopefully we  can find  a way  to make                                                               
sure that everyone's trying to lift their fare share."                                                                          
                                                                                                                                
11:48:25 AM                                                                                                                   
                                                                                                                                
CHAIR LYNN stated concern  over the potential unconstitutionality                                                               
of  the proposed  5  percent provision.   He  said  there may  be                                                               
battling opinions  between the previous attorney  general and the                                                               
current one.                                                                                                                    
                                                                                                                                
REPRESENTATIVE  KELLY  said he  intends  to  get answers  to  the                                                               
constitutional question,  but it  is not  his intention  to "drop                                                               
the plan to bring all three players to the table."                                                                              
                                                                                                                                
11:49:39 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE   KELLY,   in   response  to   a   question   from                                                               
Representative  Gruenberg, said  he hopes  that Attorney  General                                                               
Colberg can be forthcoming with  an answer regarding the question                                                               
of constitutionality.                                                                                                           
                                                                                                                                
11:50:32 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE ROSES stated:                                                                                                    
                                                                                                                                
     If  I've led  anybody to  believe that  I have  all the                                                                    
     answers to these  questions, I've certainly misdirected                                                                    
     people, because I  don't have all the  answers; I don't                                                                    
     even know  all the questions.   All  I know is  that we                                                                    
     have serious  issue to deal with  and we have to  get a                                                                    
     handle on it  right away or that [$12  billion] will be                                                                    
     [$15 billion].                                                                                                             
                                                                                                                                
     ... One of  the comments that somebody  online made is:                                                                    
     "You know, when I looked at  it a few years ago, it was                                                                    
     $2.5 billion and  now it's [$10 billion].   How did you                                                                    
     get  to that  point?"   Well, it's  simple:   we didn't                                                                    
     address  the problem.    And if  we  don't address  the                                                                    
     problem now, it's only going to get worse.                                                                                 
                                                                                                                                
REPRESENTATIVE  ROSES  expressed appreciation  of  Representative                                                               
Kelly's  willingness  to bring  something  for  the committee  to                                                               
consider.    He recognized  that  any  proposed legislation  will                                                               
offer parts that people like and other parts that are not liked.                                                                
                                                                                                                                
REPRESENTATIVE ROSES  said there are  two parts of the  bill that                                                               
concern him:   First the proposed 5 percent  increase in employee                                                               
contributions.  He  said he will not talk about  the legal issue,                                                               
but wants  to talk  about the  standpoint of  what the  5 percent                                                               
does:                                                                                                                           
                                                                                                                                
     The only responsibility I see  that the employee has in                                                                    
     this  is   the  fact   that  through   their  different                                                                    
     negotiations they've gotten salary  increases, and as a                                                                    
     result of  those salary increases,  they have  a higher                                                                    
     retirement.    I've  heard   some  people  say,  "Well,                                                                    
     they've  negotiated themselves  some very  fine medical                                                                    
     benefits."    Well,  that's  not  true.    The  medical                                                                    
     benefits they have now [have]  nothing to do with this.                                                                    
     The  medical   benefit  that   adds  to   the  unfunded                                                                    
     liability is  the medical benefit  they would  get when                                                                    
     they  retire; it  has  nothing to  do  with the  active                                                                    
     medical benefit.   So, people need  to understand that:                                                                    
     that's  got  nothing to  do  with  the state  -  that's                                                                    
     everything   to  do   with  their   local  negotiations                                                                    
     process.                                                                                                                   
                                                                                                                                
     So,  the  only  real  part that  the  [employees  have]                                                                    
     played in  this is  the desire to  have an  increase in                                                                    
     their wages.   The  serious problem I  have with  the 5                                                                    
     percent:   it almost in some  ways becomes retroactive,                                                                    
     even  though there's  an effective  date that  takes it                                                                    
     forward.  And  the reason I say  it becomes retroactive                                                                    
     is:  anyone that has  signed a negotiated agreement for                                                                    
     salaries - ... three-year  contracts - ... can't change                                                                    
     those.    Had  they   known  before  they  signed  that                                                                    
     contract and  negotiated that  contract that  there was                                                                    
     potential   for  a   5   percent  additional   employee                                                                    
     contribution that  they had to  make, they  maybe would                                                                    
     have negotiated differently,  because that's really the                                                                    
     only  part  that the  employee  has  any control  over.                                                                    
     Everything else is controlled by  the state:  where the                                                                    
     ARM Board sets the  rate; whether the legislature funds                                                                    
     the rate;  whether they decide, when  the actuary says,                                                                    
     "You need to pay 7  percent," and we decided we're only                                                                    
     going to pay 5, the actuary  said, "You need to pay 11,                                                                    
     we decided to  only pay 5."  That ARM  Board is [a] ...                                                                    
     quasi employee of the state.                                                                                               
                                                                                                                                
     And so,  clearly, the major responsibility  of where we                                                                    
     are is  the stakes,  regardless of how  we got  there -                                                                    
     and  [there are]  47  different versions.    But the  5                                                                    
     percent seems to me to be  the one that we do have some                                                                    
     control over right  now.  And I don't want  to sit here                                                                    
     and debate this thing for six  weeks and try to kill it                                                                    
     in committee, because  the fact of the  matter is we've                                                                    
     got six  other bills  out there  that are  dealing with                                                                    
     the  same  issue.     And  they're  all   going  to  be                                                                    
     consolidated  in the  [House] Finance  Committee.   The                                                                    
     Senate's going  to do  the same  thing, and  then we're                                                                    
     going to have to ... form  a group that's going to look                                                                    
     at trying to  solve the issues between the two.   But I                                                                    
     have a very  hard time moving this thing  forward.  And                                                                    
     I'll debate  the 80/20  when it  gets somewhere  else -                                                                    
     maybe even  on the  [House] floor  - if  it ends  up in                                                                    
     that version.   But the 5  percent is the one  that I'm                                                                    
     having  the most  concern with,  as well  as the  legal                                                                    
     part,  because I  think it's  a  little excessive,  and                                                                    
     I'll tell you why:                                                                                                         
                                                                                                                                
     ... If  I get  overridden on  this, and  everybody else                                                                    
     thinks that this  is a good thing, I would  like to see                                                                    
     it ... instituted  in a progressive manner,  so that we                                                                    
     start  out   with  something   that's  a   little  more                                                                    
     manageable - [for  example] if it were a  2 percent and                                                                    
     then it  went to  3.5 percent,  and then  it went  to 5                                                                    
     percent, or, even if we  didn't do anything with it, if                                                                    
     we passed it  at the 5 percent, put  the effective date                                                                    
     on  the 5  percent at  least three  years out,  because                                                                    
     nobody has a contract that  lasts more than three years                                                                    
     - so the people at least  knew where they were going to                                                                    
     be when  they were negotiating their  salaries, instead                                                                    
     of making it retroactive to  something they have ... no                                                                    
     capability of changing.                                                                                                    
                                                                                                                                
REPRESENTATIVE   ROSES  asked   Representative   Kelly  for   his                                                               
response.                                                                                                                       
                                                                                                                                
11:55:43 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE   KELLY   said   he   does   not   disagree   with                                                               
Representative Roses.   He said everyone is working  hard on this                                                               
issue.  He said he thinks "these  things" will sort out "as we go                                                               
forward."   He offered an  example of a situation  when everybody                                                               
came  to  the table  to  solve  a problem.    He  said there  are                                                               
Alaskans who  are not at the  negotiating table and he  is trying                                                               
to  represent them.    He  agreed that  the  employees have  done                                                               
nothing wrong,  and he stated  that he is  not trying to  pick on                                                               
them.  He  said it is the legislature that  sets the percentages.                                                               
He relayed that he would like  to see all people involved lifting                                                               
their fair share.                                                                                                               
                                                                                                                                
12:00:03 PM                                                                                                                   
                                                                                                                                
CHAIR  LYNN offered  his  understanding that  the  amount of  the                                                               
percentage does  not make a  difference in  whether or not  it is                                                               
unconstitutional.                                                                                                               
                                                                                                                                
REPRESENTATIVE KELLY said  that is "right on target."   He asked,                                                               
"Is it not a significant enhancement  to the plan to take both of                                                               
them from  60 and 65  percent funding  to 100 percent  health and                                                               
full funding?   ... I  would submit  that that is  an enhancement                                                               
and  that   the  court   might  just  take   a  look   at  that."                                                               
Representative Kelly  pointed out that the  current benefits were                                                               
established long  before a variety of  medical innovations became                                                               
available that also  increased the cost of  health care benefits,                                                               
and the rates have remained unchanged.                                                                                          
                                                                                                                                
CHAIR LYNN remarked that the court system is unpredictable.                                                                     
                                                                                                                                
12:02:18 PM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  ROSES  said  the  most predictable  part  of  the                                                               
unfunded liability is related to  the pension, and he agreed that                                                               
the most  unpredictable part  is related to  the cost  of medical                                                               
benefits.   He said he knows  the bill needs to  be advanced, but                                                               
he  said he  is  likely to  offer an  amendment  for a  graduated                                                               
employee  contribution  increase,  as  well as  an  amendment  to                                                               
postpone "the application of that  process for three years out so                                                               
that any  existing contracts that  just got negotiated  ... won't                                                               
be affected."   He noted that delaying the 5  percent would cause                                                               
an increase in  the unfunded liability, but that  impact would be                                                               
minimal compared to the potential negative impacts.                                                                             
                                                                                                                                
12:04:56 PM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  KELLY said  the  money that  the employees  would                                                               
bring to  the system would  be $100 million a  year.  He  said he                                                               
would not debate Representative  Rose's amendments out of respect                                                               
for the committee.                                                                                                              
                                                                                                                                
12:05:13 PM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  LYNN  closed  public  testimony.    He  expressed                                                               
appreciation   of  Representative   Kelly's  eloquence   and  his                                                               
tackling of the matter.                                                                                                         
                                                                                                                                
12:05:40 PM                                                                                                                   
                                                                                                                                
REPRESENTATIVE GRUENBERG said  he had to leave, but  did not want                                                               
to miss voting on this issue.                                                                                                   
                                                                                                                                
12:06:04 PM                                                                                                                   
                                                                                                                                
REPRESENTATIVE   ROSES   requested   holding   the   bill   until                                                               
[Tuesday's] meeting.                                                                                                            
                                                                                                                                
12:07:08 PM                                                                                                                   
                                                                                                                                
REPRESENTATIVE DOLL expressed  her appreciation of Representative                                                               
Roses'  input on  the bill,  as both  a former  math teacher  and                                                               
former member  of the ARM  Board, and  she stated support  of his                                                               
request to hold the bill.                                                                                                       
                                                                                                                                
12:07:38 PM                                                                                                                   
                                                                                                                                
REPRESENTATIVE COGHILL said  he was prepared to make  a motion to                                                               
move the bill out of committee.   He stated his concern regarding                                                               
holding the  bill in the  House State Affairs  Standing Committee                                                               
is that it could slow down  the conversation in the House Finance                                                               
Committee.  He  said he would be  "game" to hold the  bill to the                                                               
next week as long as no political games are being played.                                                                       
                                                                                                                                
CHAIR  LYNN said  he will  not allow  any political  games to  be                                                               
played  concerning this  or any  other  bill heard  in the  House                                                               
State  Affairs Standing  Committee.   Furthermore, he  stated his                                                               
intent  to  hear HB  179  first  thing  at the  committee's  next                                                               
meeting.                                                                                                                        
                                                                                                                                
12:09:22 PM                                                                                                                   
                                                                                                                                
REPRESENTATIVE ROSES  said he  would be willing  to move  his own                                                               
bill  back that's  slated for  Tuesday's schedule  if that  would                                                               
help.                                                                                                                           
                                                                                                                                
12:09:52 PM                                                                                                                   
                                                                                                                                
CHAIR LYNN announced that 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                                                               
12:10:43 PM.                                                                                                                  

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