02/17/2004 08:05 AM House STA

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled

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ALASKA STATE LEGISLATURE HOUSE STATE AFFAIRS STANDING COMMITTEE February 17, 2004 8:05 a.m. MEMBERS PRESENT Representative Bruce Weyhrauch, Chair Representative Jim Holm, Vice Chair Representative John Coghill Representative Bob Lynn Representative Paul Seaton Representative Ethan Berkowitz Representative Max Gruenberg MEMBERS ABSENT All members present COMMITTEE CALENDAR HOUSE BILL NO. 394 "An Act extending the Alaska Commission on Aging." - MOVED HB 394 OUT OF COMMITTEE HOUSE BILL NO. 329 "An Act relating to retirement incentive programs for the public employees' retirement system, the judicial retirement system, and the teachers' retirement system; relating to separation incentives for certain state employees; and providing for an effective date." - HEARD AND HELD OVERVIEW: DEPARTMENT OF ADMINISTRATION [Discussion of questions for department response at a future time.] SENATE BILL NO. 270 "An Act establishing November as Avalanche Awareness Month." - HEARD AND HELD PREVIOUS COMMITTEE ACTION BILL: HB 394 SHORT TITLE: COMMISSION ON AGING SPONSOR(S): REPRESENTATIVE(S) HOLM 01/20/04 (H) READ THE FIRST TIME - REFERRALS

01/20/04 (H) STA, HES 02/10/04 (H) STA AT 8:00 AM CAPITOL 102 02/10/04 (H) Heard & Held 02/10/04 (H) MINUTE(STA) 02/17/04 (H) STA AT 8:00 AM CAPITOL 102 BILL: HB 329 SHORT TITLE: RETIREMENT INCENTIVE PROGRAM SPONSOR(S): REPRESENTATIVE(S) MCGUIRE 05/21/03 (H) READ THE FIRST TIME - REFERRALS 05/21/03 (H) STA, L&C, FIN

01/13/04 (H) STA AT 8:00 AM CAPITOL 102

01/13/04 (H) <Bill Hearing Postponed>

01/29/04 (H) STA AT 8:00 AM CAPITOL 102

01/29/04 (H) Heard & Held

01/29/04 (H) MINUTE(STA) 02/05/04 (H) STA AT 8:00 AM CAPITOL 102 02/05/04 (H) <Bill Hearing Postponed> 02/17/04 (H) STA AT 8:00 AM CAPITOL 102 BILL: SB 270 SHORT TITLE: AVALANCHE AWARENESS MONTH SPONSOR(S): SENATOR(S) GREEN

01/16/04 (S) READ THE FIRST TIME - REFERRALS

01/16/04 (S) STA WITNESS REGISTER LAURA BAKER, Budget Chief Division of Administrative Services Department of Health and Social Services Juneau, Alaska POSITION STATEMENT: Explained the 2/12/04 fiscal note to 394. STEVEN P. ASHMAN, Director Central Office Division of Senior and Disability Services Department of Health and Social Services Juneau, Alaska POSITION STATEMENT: Discussed 2/3/04 fiscal note to HB CHAIR WEYHRAUCH announced that the first order of business was HOUSE BILL NO. 394, "An Act extending the Alaska Commission on Aging." CHAIR WEYHRAUCH noted that before the committee is a fiscal note dated 2/12/04, and he requested the department review it. Number 0165 LAURA BAKER, Budget Chief, Division of Administrative Services, Department of Health and Social Services (DHSS), explained that the earlier fiscal note the committee had received reflected an imbalance between the expenditures and the fund sources. However, the fiscal note dated 2/12/04 should reflect the operating expenditures and funding in the total of $351.7, which is reflective of what is in the governor's fiscal year (FY) 2005 budget proposal. Ms. Baker clarified that the fiscal note is not an additional cost, rather it reflects the cost associated with the commission if it's extended. CHAIR WEYHRAUCH informed the committee that the committee packet includes pages 1-4 of the commission's plan. Number 0337 STEVEN P. ASHMAN, Director, Central Office, Division of Senior and Disability Services, Department of Health and Social Services, recalled that at the committee's prior hearing there was discussion regarding the 2/3/04 fiscal note analysis which specified: "If the ACoA [Alaska Commission on Aging] expires, the Department of Health and Social Services (DHSS) stands to lose $13 million in federal dollars for senior services." Under the Older American Act the State of Alaska is required to establish an advisory council and ACoA meets that requirement. He explained that ACoA is required to develop and administer an area plan, conduct public hearings, represent the interests of the older persons, and review and comment on community policies, programs, and actions that impact Alaskans. Without such an advisory commission as ACoA, the state would be in jeopardy of losing those funds. Number 0486 BARNARSI LAL, Chair, Alaska Commission on Aging (ACoA), Department of Health and Social Services, recalled that at the last hearing clarification was requested regarding the need for a commission in order to receive federal dollars. Mr. Lal also recalled that there was concern with the fiscal note because it looked as if the ACoA was making a profit, which isn't the case. If one reviews the budget and compares it to the year 2004, one will discover that there is a reduction of about $56,000. In response to Chair Weyhrauch, Mr. Lal said that other members of ACoA should be arriving as there is a three-day meeting being held [in Juneau] in order to do the hiring for the executive director of ACoA. CHAIR WEYHRAUCH thanked Mr. Lal for his service on ACoA. MR. LAL assured the committee that all the members serving on ACoA are very dedicated seniors who represent a wide spectrum of society. Mr. Lal highlighted that the members must keep in mind that the senior population is going to double by 2010 and by Lal said that it makes sense that seniors be provided with services that would allow them to live with dignity, grace, and in settings that are close to their homes. Number 0729 REPRESENTATIVE LYNN also thanked Mr. Lal for his service on ACoA. Representative Lynn asked if any legislation involving seniors has ever come before ACoA for advice. MR. LAL noted that most recently ACoA has supported the governor's senior care program. In the past ACoA has be asked to provide support for various pieces of legislation, including the advisory vote for the pioneers' homes and veterans' homes. In further response to Representative Lynn, Mr. Lal recalled that ACoA has been approached before legislation has been introduced with regard to whether it should be introduced or the content of such legislation. He recalled that one such piece of legislation dealt with the quality of life of senior citizens. Number 0921 REPRESENTATIVE GRUENBERG related his understanding that members of ACoA aren't confirmed by the legislature. MR. LAL agreed. In response to Representative Gruenberg's question regarding term limits for ACoA, Mr. Lal opined that seven or eight years of service is reasonable and provides others the opportunity to serve. Mr. Lal said that he didn't have any problems with the term limits for ACoA [as specified in AS 47.45.200(c)]. REPRESENTATIVE GRUENBERG pointed out that under AS recommendations directly to the governor and the legislature with respect to legislation, regulations, and appropriations for programs or services that benefit older Alaskans". Therefore, he asked if there is anything Mr. Lal would like to recommend. MR. LAL noted that ACoA is supporting the governor's senior care program. Number 1059 REPRESENTATIVE HOLM directed attention to the Division of Legislative Audit's audit of the Department of Health and Social Services Alaska Commission on Aging Sunset Review dated October 1, 2003. On page 16 of the audit, it specifies that in a number of cases the backup [to the financial reports] haven't been sent to the [Division of Legislative Audit]. Therefore, Representative Holm charged Mr. Lal with reviewing the aforementioned in order that the appropriate supporting backup is sent so that the federal funding is at the [correct level]. MR. LAL pointed out that until last year ACoA was in the grant- making role. However, the Department of Administration was providing support to ACoA for generating those type reports as well as timely submission of those reports. He assured Representative Holm that he would convey the charge to Mr. Ashman and the deputy commissioner. Number 1175 SAM TRIVETTE, Retired Public Employees of Alaska, testified in support of the continuation of ACoA, which is very important. He noted that he attends ACoA meetings on a fairly regular basis and receives the ACoA newsletter. The commissioners are very dedicated, he said. Mr. Trivette said, personally, he would like for ACoA to have a stronger voice. In response to Chair Weyhrauch, Mr. Trivette said that ACoA [meetings] are fairly easy to follow, although there has been some confusion regarding who is doing what since the changeover. CHAIR WEYHRAUCH asked if there is a form available to provide input with regard to how to better facilitate the information coming out of ACoA to better benefit seniors and aging Alaskans. MR. TRIVETTE answered that he hadn't given that much thought. However, he suggested that trying to get the newsletter more widely distributed might be of benefit. He explained that he is notified via e-mail that the newsletter is available, which is probably a good process for those seniors connected to the [Internet]. However, less than half of the Retired Public Employees of Alaska are connected to the Internet. In further response to Chair Weyhrauch, Mr. Trivette said that [the Retired Public Employees of Alaska] newsletter sometimes references an article [from ACoA's newsletter]. Number 1340 RUTH SANDVIK said that she is coming from the point of view of a customer of ACoA. Ms. Sandvik commended the work of ACoA and urged everyone to watch and listen to this program because the need for this type of program will never end. As was pointed out, the population of elders [in Alaska] is increasing. Therefore, she encouraged the committee to continue ACoA. Number 1436 CHRISTINE EARHARDT, Administrative Health Assistant, Tanana Tribal Council, testified in support of extending ACoA, which is the exclusive funding agency for the Tanana elders residence. The Tanana elders' residence has been operated for over 20 years. Number 1552 REPRESENTATIVE SEATON moved to report HB CHAIR WEYHRAUCH announced that the next order of business was HOUSE BILL NO. 329, "An Act relating to retirement incentive programs for the public employees' retirement system, the judicial retirement system, and the teachers' retirement system; relating to separation incentives for certain state employees; and providing for an effective date." CHAIR WEYHRAUCH reminded the committee that before the committee is CSHB 329, two fiscal notes. Number 1690 MELANIE MILLHORN, Director, Health Benefits Section, Division of Retirement & Benefits, Department of Administration, noted that the [division] has provided a fiscal note [dated 2/14/04] that reflects the cost to administer HB 329 versus be eligible would receive in the absence of 329. RIP] would receive the extra service outlined in 329] would remain unfilled or become filled by lower paid employees. REPRESENTATIVE GRUENBERG commented that he didn't see any of that reflected in the fiscal note. MS. MILLHORN explained that the fiscal note prepared for the division doesn't look at the savings rather it looks at the resources necessary to provide the adequate staffing level to allow the parties to retire. REPRESENTATIVE GRUENBERG said that he didn't see any fiscal note showing the other side of the equation, and therefore he requested an explanation. Number 2855 KEVIN JARDELL, Assistant Commissioner, Office of the Commissioner, Department of Administration, commented that it's difficult to show the savings. He related his belief that the legislation is set up such that it has to be a neutral cost and on top of that there would be some savings. Therefore, the actuary has reviewed the costs, which will have to be done in any instance in which a RIP is presented to the Department of Administration. The aforementioned needs to work out to be neutral and although there could potentially be additional savings, it would have to work out to at least be [cost] neutral. "The bill assumes it'll be a zero cost it," he clarified. Therefore, Mr. Jardell opined that the more important analysis is to review the cost per employee and how likely it is that enough savings will be achieved to offset the cost to reach the neutral requirements of the legislation. In further response to Representative Gruenberg, Mr. Jardell related his understanding that the legislation requires a neutral cost savings before [a RIP] can be authorized. REPRESENTATIVE SEATON asked if the term "neutral cost" means that the state would save money in current administrative terms while shifting the expense to the retirement system. TAPE 04-16, SIDE B MR. JARDELL deferred to the representative from the Office of Management & Budget. Number 2956 JACK KREINHEDER, Chief Analyst, Office of the Director, Office of Management & Budget, Office of the Governor, turned to Representative Seaton's question regarding the liability to the retirement system. He explained that the legislation requires that the liability to the retirement system be offset before an employee is allowed to participate. In other words, the employee is required to contribute three years of his or her contributions, which would be roughly 18-20 percent of the employee's salary. The employer is required to pick up the difference. For example, if the cost per PERS employee is about $100,000 for additional retirement benefits specified in this legislation, the employee would contribute three years of contributions and the employer would contribute the balance. The intent is to be cost neutral for the retirement system. Therefore, using Mercer's $432 million and assuming that every [PERS] employee participated, the state and municipalities would end up writing checks to PERS for that $432 million. Although the legislation intends to be cost neutral, Mr. Reynolds' 2/13/04 letter specifies the following: "future changes (such as improvements in longevity or higher than anticipated medical cost increases) may affect the ultimate cost neutrality of the program." Number 2823 REPRESENTATIVE SEATON highlighted that there has been an increase in PERS and TRS of 4 and 5 percent. According to the actuarial information presented [to the House Special Committee on] Education [the PERS and TRS percentages] to fund the balance should be at 34 and 35 percent of employee salaries. Therefore, there is the probability that it will increase from the 16 percent contribution rate this year. He informed the committee that the 7.5 percent for health care was increased by 3.5 percent in 2002 and thus it now totals 12 percent. Furthermore, the federal government has adopted a new longevity table that extends longevity by another two or so years. Representative Seaton opined that without including the aforementioned, there will be a deficit to the program. MR. KREINHEDER said that Representative Seaton's concern is valid. Any unanticipated increases in costs later would result in the RIP not being fully cost neutral. All the costs expected today are included in the calculation. REPRESENTATIVE BERKOWITZ suggested obtaining input from the Alaska Municipal League (AML) and those municipalities that will be impacted. Number 2704 REPRESENTATIVE SEATON returned to the fact that this legislation is revenue neutral and inquired as to why Mercer would say that there would be a 3-4 percent increase if everyone eligible RIPs or an .6-.8 percent increase in everyone's rate of contribution. He related his understanding that this $100,000 to $120,000 that would have to be made up by the employee and his or her present dollar input shouldn't impact the rates at all. However, the 3- 4 percent rate increase seems to be significantly out of balance. MR. KREINHEDER remarked that he believes there may be some confusion on that point. He said that he believes that Mr. Reynolds' response was that the dollar amounts reflected in his letter for the total potential costs to the system if every eligible employee participated would be equivalent to a 3-4 percent rate increase. However, the aforementioned would only occur if the required contributions weren't made. If the required contributions were made, the only risk of a rate increase would be from these unanticipated future costs such as higher medical or longevity costs. MR. REYNOLDS agreed. However, Mr. Reynolds clarified that his figures have already taken into account the employee indebtedness. The aforementioned is specified in the first sentence of page 2 of Mercer's letter dated 2/13/04, which says "The total employer cost under proposed TAPE 04-17, SIDE B MR. ROSE related his belief that economics are driving the decisions being made. He highlighted that a large portion of what is being done now is driven by federal legislation. The question is: "Quality of instruction versus a reduction in programs and offerings?" Although one can make an argument for either, that is the dilemma. Mr. Rose remarked that the brain drain is going to have an impact and if the costs can't be reduced, he questioned what would be the ultimate effect in reduction of services. Number 0118 REPRESENTATIVE HOLM posed a situation in which 26 percent of those in TRS retire, which would amount to 900 people statewide. He asked where the 900 replacements would be found in such a situation. He pointed out that currently there aren't qualified people to be hired by the school districts. "If what we're trying to do now is provide a good education for the children of Alaska, this may well not be our best methodology," he commented. MR. ROSE reiterated that these decisions are purely economical and not program based or instructional based. With regard to finding replacements for those who RIP, Mr. Rose pointed out that the ability to attract and retain employees is hindered greatly because of the failure to keep pace with inflation. Although Mr. Rose acknowledged that [teachers] in Alaska are paid fairly well, he stressed that the state has lost its edge [in regard to pay and benefits package]. Mr. Rose explained that [AASB] is merely trying to obtain an opportunity to consider. REPRESENTATIVE GRUENBERG directed attention to page 2, lines 19- Gruenberg pointed out that there is the employer, the state, and the pension fund [involved]. From the point of view of the pension fund, there could be a situation in which the employer fulfills the requirement on page 2 and says there is a cost saving. However, with a huge deficit in the pension fund, the employer, because of the language on page 10, would basically be immunized. Therefore, the pension fund would wind up in a deficit situation worse than the current situation. Number 0635 MR. ROSE recalled that under past RIP legislation, he didn't believe that recovery [of employer delinquencies] was heavily considered. However, he believes it will weigh in heavier now. He then inquired as to how "political subdivision of the state" would be defined, pointing out that school districts are a political subdivision of the state. REPRESENTATIVE GRUENBERG opined that under this legislation school districts would be the employer. Representative Gruenberg surmised that those who could wind up paying for this could be the students due to the lack of future foundation money. MR. ROSE noted his agreement and highlighted the inability to predict the future situation other than the fact that there is a major problem with PERS and TRS for which there is no quick fix. With regard to whether this legislation exacerbates the problem, Mr. Rose opined that he didn't believe so when taking into account the requirements. "If you're looking at solvency, I think the ... section of the bill for recovery is something that needs to be considered, and perhaps more of an emphasis," he said. CHAIR WEYHRAUCH directed attention to Section 2(b) of Version H and asked if the three items listed under subsection (b) are intended to be alternative or cumulative requirements. MR. HILYARD answered that he believes they were intended to be cumulative. [HB ^OVERVIEW: DEPARTMENT OF ADMINISTRATION CHAIR WEYHRAUCH announced that there wasn't time to take up the Department of Administration overview. However, Chair Weyhrauch and the committee reviewed a list of questions to which the department could respond when the overview does occur. SB CHAIR WEYHRAUCH announced that final order of business was SENATE BILL NO. 270, "An Act establishing November as Avalanche Awareness Month." Number 1216 JACQUELINE TUPOU, Staff to Senator Lyda Green, Alaska State Legislature, paraphrased from the following written sponsor statement: Alaska is avalanche country. Each year Alaska loses more people to avalanches than any other state, regardless of population. During the last four winters alone, 28 Alaskans have died in avalanches. Last winter, avalanche dust clouds hit school buses on Thane road in Juneau two times. It is chilling to think of the possible outcomes. While often little can be done to prevent the occurrence of an avalanche, much can be done to prevent the loss of life from avalanches. Senate Bill 270 would establish November as Avalanche Awareness Month. This designation would serve to raise public awareness of the hazards associated with avalanches, and of the opportunities to participate in avalanche safety training at the beginning of the winter recreational season. It is hoped that public participation in avalanche safety programs will be increased. This increased participation will equip Alaskans with the skills necessary to survive potentially fatal encounters with avalanches and result in saved lives. MS. TUPOU relayed that many people wanted to testify in support of this legislation. She noted that when this legislation passed on the Senate floor, it did so with everyone present signing on as co-sponsors. [SB ADJOURNMENT There being no further business before the committee, the House State Affairs Standing Committee meeting was adjourned at 9:59 a.m.

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