Legislature(2019 - 2020)BELTZ 105 (TSBldg)

04/16/2019 03:30 PM COMMUNITY & REGIONAL AFFAIRS

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Audio Topic
03:31:40 PM Start
03:32:23 PM SB46
04:27:56 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
*+ SB 46 TEACHERS & PUB EMPLOYEE RETIREMENT PLANS TELECONFERENCED
Heard & Held
-- Testimony <Invitation Only> --
**Streamed live on AKL.tv**
                    ALASKA STATE LEGISLATURE                                                                                  
    SENATE COMMUNITY AND REGIONAL AFFAIRS STANDING COMMITTEE                                                                  
                         April 16, 2019                                                                                         
                           3:31 p.m.                                                                                            
                                                                                                                                
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Senator Click Bishop, Chair                                                                                                     
Senator Chris Birch, Vice Chair                                                                                                 
Senator Lyman Hoffman                                                                                                           
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Senator Mia Costello                                                                                                            
Senator Elvi Gray-Jackson                                                                                                       
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
SENATE BILL NO. 46                                                                                                              
"An Act  relating to restoration  of tenure for  certain disabled                                                               
individuals; relating to the  Public Employees' Retirement System                                                               
of Alaska and the teachers'  retirement system; providing certain                                                               
employees an  opportunity to choose  between the  defined benefit                                                               
and  defined   contribution  plans   of  the   Public  Employees'                                                               
Retirement System of Alaska and  the teachers' retirement system;                                                               
and providing for an effective date."                                                                                           
                                                                                                                                
     - HEARD & HELD                                                                                                             
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
BILL: SB 46                                                                                                                   
SHORT TITLE: TEACHERS & PUB EMPLOYEE RETIREMENT PLANS                                                                           
SPONSOR(s): SENATOR(s) KIEHL                                                                                                    
                                                                                                                                
02/08/19       (S)       READ THE FIRST TIME - REFERRALS                                                                        
02/08/19       (S)       CRA, FIN                                                                                               
04/16/19       (S)       CRA AT 3:30 PM BELTZ 105 (TSBldg)                                                                      
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
SENATOR JESSE KIEHL                                                                                                             
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT: Sponsor of SB 46, introduced the bill.                                                                    
                                                                                                                                
DAN DOONAN, Executive Director                                                                                                  
National Institute on Retirement Security                                                                                       
Washington, D.C.                                                                                                                
POSITION STATEMENT:  Provided an overview of  the defined benefit                                                             
retirements plans pertaining to SB 46.                                                                                          
                                                                                                                                
JUSTIN BRANDT, Probation Officer                                                                                                
Bethel Probation Office                                                                                                         
Alaska Department of Corrections                                                                                                
Bethel, Alaska                                                                                                                  
POSITION STATEMENT: Testified in support of SB 46.                                                                            
                                                                                                                                
TIM PARKER, President                                                                                                           
National Education Association-Alaska                                                                                           
Anchorage, Alaska                                                                                                               
POSITION STATEMENT: Testified in support of SB 46.                                                                            
                                                                                                                                
ROBERT MURPHY, representing self                                                                                                
Kodiak, Alaska                                                                                                                  
POSITION STATEMENT: Testified in support of SB 46.                                                                            
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
                                                                                                                                
3:31:40 PM                                                                                                                    
CHAIR  CLICK  BISHOP called  the  Senate  Community and  Regional                                                             
Affairs Standing Committee meeting to  order at 3:31 p.m. Present                                                               
at  the call  to order  were Senators  Hoffman, Birch,  and Chair                                                               
Bishop.                                                                                                                         
                                                                                                                                
         SB 46-TEACHERS & PUB EMPLOYEE RETIREMENT PLANS                                                                     
                                                                                                                                
3:32:23 PM                                                                                                                    
CHAIR BISHOP  announced the consideration  of Senate Bill  46 (SB                                                               
46).                                                                                                                            
                                                                                                                                
3:32:51 PM                                                                                                                    
SENATOR JESSE  KIEHL, Alaska  State Legislature,  Juneau, Alaska,                                                               
sponsor of  SB 46, stated  that most committee members  have seen                                                               
in some form  of this legislation in the past.  SB 46 would allow                                                               
teachers,  troopers,  firefighters,  and other  public  employees                                                               
that  are new  hires  to  choose between  one  of two  retirement                                                               
systems. These are the current  defined contribution system where                                                               
an employee has  an individual account that  they are responsible                                                               
for investing,  or a defined  benefit pension system. SB  46 also                                                               
allows employees  currently working  in the  defined contribution                                                               
systems  in  Alaska a  one-time  choice  to  convert to  the  new                                                               
defined benefit tier. The new  defined pension tier created by SB                                                               
46 is designed to be  more predictable, more affordable, and more                                                               
stable than the legacy pension systems  the state once had. SB 46                                                               
keeps in place  all the smart reforms that were  put into the law                                                               
a few years back in terms  of predictability and stability of the                                                               
pension  system,  multiple  actuaries,  a  retirement  management                                                               
board  with  disinterested  board  members,  and  regular  Alaska                                                               
experience studies.                                                                                                             
                                                                                                                                
SENATOR KIEHL  detailed that SB  46 puts  in place an  element of                                                               
risk  sharing  to  protect  against  the  possibility  of  future                                                               
unfunded liabilities. The  risk sharing in SB 46 comes  in on the                                                               
health  benefit. The  health benefit  for retirees  has been  the                                                               
hardest to predict  over time. SB 46 provides  that the employees                                                               
will share  in the risk  of rising health insurance  costs during                                                               
their retirement years.                                                                                                         
                                                                                                                                
He summarized  that the teachers  who educate  Alaska's children,                                                               
the police and firefighters who  protect families, the biologists                                                               
who  manage natural  resources,  and other  public employees  who                                                               
serve Alaska  and its cities will  be able under SB  46 to choose                                                               
the  benefit  that  best  fits   their  service.  Past  actuarial                                                               
analysis of similar bills has  shown that the this structure will                                                               
save the  state money in the  near term and will  be cost neutral                                                               
or better in the long term.                                                                                                     
                                                                                                                                
3:35:28 PM                                                                                                                    
CHAIR  BISHOP asked  if the  bill will  provide an  option for  a                                                               
person in Tier IV to participate in a defined benefit plan.                                                                     
                                                                                                                                
SENATOR  KIEHL answered  yes. He  explained that  someone who  is                                                               
currently working  as a  public employee in  the Tier  IV Defined                                                               
Contribution  Retirement Plan  will  have a  one-time-irrevocable                                                               
opportunity  to convert  to  the new  defined  benefit tier.  The                                                               
balance of  the person's defined  contribution account  would buy                                                               
their  service years  in the  pension system  up to  their actual                                                               
years worked.  However, if the  individual's account has  a loss,                                                               
the state will not pick up  the difference. The person can either                                                               
receive  credit  for  fewer  years  in  the  system  or  pay  the                                                               
difference out  of pocket. SB 46  is written so that  an unfunded                                                               
liability   is  not   created  from   conversions.  There   is  a                                                               
conversion, but the conversion is not free.                                                                                     
                                                                                                                                
3:37:12 PM                                                                                                                    
SENATOR BIRCH  remarked that  he has not  seen a  defined benefit                                                               
program that  has not put an  additional burden on the  state and                                                               
taxpayers. He  asked what  the current  unfunded liability  is to                                                               
the state  from the PERS/TRS liability  and will the bill  add or                                                               
decrease the liability.                                                                                                         
                                                                                                                                
SENATOR  KIEHL answered  that  the  Alaska Retirement  Management                                                               
(ARM) Board  recently revisited the  unfunded liability  from old                                                               
defined benefit  systems for PERS  and TRS. The  current unfunded                                                               
liability is approximately $8 billion.                                                                                          
                                                                                                                                
He emphasized  that there  is no  risk-free retirement  system in                                                               
the  world.  The  state's  current  defined  contribution  system                                                               
leaves  the risk  of an  employee outliving  their assets  on the                                                               
individual  retiree. The  state does  not have  a trust  fund for                                                               
senior benefits or other elder care programs.                                                                                   
                                                                                                                                
He explained  that SB 46  is designed  to have as  much stability                                                               
and predictability as possible,  but with a risk-sharing element.                                                               
There  have been  other ideas  brought forward  for sharing  risk                                                               
between  employee  and  employer.  The  legacy  systems  put  100                                                               
percent  of  the  risk  on  the employer  side,  the  state,  the                                                               
municipalities, and the school  districts. Currently, the defined                                                               
contributions  system  puts  100  percent  of  the  risk  on  the                                                               
individual  employee.  The  current defined  contribution  system                                                               
makes  sense for  retirees with  military retirement  benefits or                                                               
individuals  who don't  plans to  stay in  Alaska long  enough to                                                               
vest. However, for  those people who do plan to  make a career in                                                               
Alaska  and whose  skills will  benefit the  state over  the long                                                               
term, the  defined benefit pension system  set forth in SB  46 is                                                               
designed to minimize risk of unfunded liability.                                                                                
                                                                                                                                
He said  he would be  happy to work  with the committee  if there                                                               
are  other risk  sharing elements  deemed essential  in designing                                                               
the bill going forward.                                                                                                         
                                                                                                                                
3:40:17 PM                                                                                                                    
CHAIR  BISHOP said  the committee  will work  with Senator  Kiehl                                                               
during  the next  session  but now  he'd like  to  hear from  the                                                               
scheduled presenters.                                                                                                           
                                                                                                                                
SENATOR  BIRCH  reiterated  his   concern  that  the  bill  might                                                               
increase  the existing  $8 billion  liability. He  noted that  he                                                               
brought the same  question up during last year and  was told that                                                               
providing actuarial information  on the net present  value of the                                                               
liability was  expensive. He emphasized that  the committee needs                                                               
to understand the impact to the state and Alaskans.                                                                             
                                                                                                                                
3:42:20 PM                                                                                                                    
CHAIR  BISHOP  announced that  the  committee  will hear  invited                                                               
testimony for SB 46.                                                                                                            
                                                                                                                                
3:42:40 PM                                                                                                                    
DAN DOONAN, Executive Director,  National Institute on Retirement                                                               
Security (NIRS),  Washington, D.C., provided an  overview titled,                                                               
"Defined  Benefit   Retirement  Plans   and  the   Public  Sector                                                               
Workforce."  He   discussed  the  slide  DB   Pensions  Are  Cost                                                               
Efficient: Still a Better Bang for the Buck" as follows:                                                                        
                                                                                                                                
   • Cost Comparison:                                                                                                           
        o NIRS looked at the cost to replace 53 percent of final                                                                
          income under 3 retirement plan structures.                                                                            
        o The defined benefit pension cost 48 percent less than                                                                 
          using individual accounts in a direct contribution                                                                    
          savings plan to provide the same amount of income.                                                                    
                                                                                                                                
He addressed,  "3 Key  Reasons Why  Defined Benefit  Pension (DB)                                                               
Plans  Cost  Less  than  Defined   Contribution  (DC)  Plans"  as                                                               
follows:                                                                                                                        
                                                                                                                                
   1. Pool the longevity risks.                                                                                                 
   2. Maintain optimally balanced investment portfolio, avoid                                                                   
    need to down-shift (risk/return) as nearing retirement.                                                                     
   3. DB plans have higher investment returns and lower fees                                                                    
     compared to individual investors in DC accounts.                                                                           
                                                                                                                                
He  explained  that pensions  can  pool  longevity risks.  On  an                                                               
individual level there's a lot  of variation in retiree longevity                                                               
and  lifespan. An  individual should  be  concerned about  having                                                               
enough  to   last  through  retirement,  but   for  large  groups                                                               
longevity can  be estimated. There  is an efficiency  in planning                                                               
and pooling  longevity risk. In  the past, pensions  have updated                                                               
longevity  assumptions  periodically,  but  many  plans  now  use                                                               
generational  mortality tables  that anticipate  future mortality                                                               
improvements.                                                                                                                   
                                                                                                                                
He  said  pensions  can   also  maintain  consistent  portfolios.                                                               
Individuals  should  be changing  their  investments  to be  more                                                               
conservative as  they approach and  enter retirement.  By pooling                                                               
investments pensions  have a mathematical advantage  over the do-                                                               
it-yourself type plans.                                                                                                         
                                                                                                                                
MR.  DOONAN said  pensions  also benefit  from  the economies  of                                                               
scale  in  professional  management. Pension  funds  systemically                                                               
rebalance and  tend to not  chase the  market because a  fund did                                                               
badly the previous year.                                                                                                        
                                                                                                                                
3:46:52 PM                                                                                                                    
He addressed,  "DB Plan's  Role in  the Public  Sector: Workforce                                                               
Management" as follows:                                                                                                         
                                                                                                                                
   • Improve public sector productivity.                                                                                        
   • Help recruit and retain quality workers.                                                                                   
   • Address teacher shortage.                                                                                                  
                                                                                                                                
He noted  that the median  tenure for public employees  is nearly                                                               
twice as  long as in the  private sector. Reasons for  the tenure                                                               
difference  includes  the  impact   of  incentives  and  employee                                                               
benefits.                                                                                                                       
                                                                                                                                
He   addressed,   "Pensions   Help  Deliver   Strong   Mid-career                                                               
Retention." He  referenced a  chart from a  study that  looked at                                                               
teacher pensions and retention in  six different states. There is                                                               
significant turnover  in the early  years, some people  move jobs                                                               
or realize  the teaching  profession is  not a  good fit.  Once a                                                               
teacher  stays  several  years  and grows  into  their  job,  the                                                               
retention rates  improve dramatically - generally  until teachers                                                               
are  eligible  for  retirement.   Retirement  provisions  in  the                                                               
different systems is the key  takeaway for stronger retention for                                                               
mid-career workers.                                                                                                             
                                                                                                                                
He  addressed, "Result:  Career  Employment Becomes  Commonplace"                                                               
referencing a NIRS  report on teacher pension vs.  401(k)s in six                                                               
states where  the median  age a teacher  leaves employment  is 58                                                               
with 25 years of service.                                                                                                       
                                                                                                                                
3:49:19 PM                                                                                                                    
He  addressed,  "Case  Studies:  Risk-Sharing"  from  a  National                                                               
Association of State Retirement  Administrators (NASRA) report on                                                               
"In-depth: Risk Sharing in Public Retirement Plans" as follows:                                                                 
                                                                                                                                
   • Variable Employee Contribution Rates.                                                                                      
   • Contingent or Limited Cost-of-Living Adjustments.                                                                          
   • Cash Balance Hybrid Plans.                                                                                                 
   • Direct Benefit and Direct Contribution Hybrid Plans.                                                                       
                                                                                                                                
MR. DOONAN explained  that new public retirement  plans blend the                                                               
provisions from the traditional pensions and the 401k plans.                                                                    
                                                                                                                                
He  addressed,  "What  Resources  are  Needed  to  Maintain  your                                                               
Standard of Living?"  and referenced research from  Aon that took                                                               
a deeper look at retirement needs.  He said the private need is a                                                               
large bucket that  includes employer plans that  suggest 11 times                                                               
pay at  retirement, which is a  multiple that seems high  to many                                                               
people given American's savings  levels. Financial advisors often                                                               
begin conversations about  drawing down assets by  using the four                                                               
percent rule,  which is  an amount that  could be  too aggressive                                                               
given the current  low interest rates. The report  from Aon looks                                                               
at different factors  that would lead to  more customized savings                                                               
targets based on age and  income levels. For example, Millennials                                                               
should  have higher  savings targets  than  Baby Boomers  because                                                               
health  care costs  are likely  to  grown faster  than wages  and                                                               
longevity improvements are likely to continue.                                                                                  
                                                                                                                                
3:51:37 PM                                                                                                                    
He addressed, "Retire Readiness Checkpoints" as follows:                                                                        
                                                                                                                                
   • The average employee needs to accumulate 11.1 times pay by                                                                 
     age 67 to maintain their preretirement standard of living                                                                  
     throughout retirement, after Social Security.                                                                              
   • Employee savings milestones throughout their career,                                                                       
     targets include Social Security participation:                                                                             
        o Age 35: 2.0 multiple of pay saved;                                                                                    
        o Age 45: 4.0 multiple of pay saved;                                                                                    
        o Age 55: 7.0 multiple of pay saved;                                                                                    
        o Age 60: 8.5 multiple of pay saved;                                                                                    
        o Age 65: 10.5 multiple of pay saved;                                                                                   
        o Age 67: 11.1 multiple of pay saved.                                                                                   
                                                                                                                                
He  said for  many Alaska  public sector  employees, knowing  how                                                               
much  to save  is hard  because they  are not  covered by  Social                                                               
Security. The  "Retirement Readiness Checkpoints" is  a good idea                                                               
for private  savings in addressing  the retirement  problems from                                                               
volatile returns, low interest rates,  runaway health costs, life                                                               
expectancies,  and   the  broad  challenges  for   retirement  in                                                               
general.                                                                                                                        
                                                                                                                                
SENATOR BIRCH asked him to  confirm that the retirement readiness                                                               
checkpoint for age 35 is a  multiple of 2, which means a 35-year-                                                               
old  should   have  saved  double  their   income  towards  their                                                               
retirement to maintain their pre-retirement standard of living.                                                                 
                                                                                                                                
MR. DOONAN answered yes.                                                                                                        
                                                                                                                                
3:54:35 PM                                                                                                                    
He  addressed,  "Economic  Impact  of  Alaska's  Public  Retirees                                                               
Spending" as follows:                                                                                                           
                                                                                                                                
   • Expenditures by public sector retirees' DB pensions provide                                                                
     steady economic stream to Alaska. In 2016, these                                                                           
     expenditures supported the following in Alaska:                                                                            
        o Over 11,791 jobs that paid $580 million in wages.                                                                     
        o $1.89 billion in total economic output.                                                                               
        o Each dollar in DB benefits supported $1.25 in total                                                                   
          economic activity.                                                                                                    
        o $319 million in federal, state and local tax revenues.                                                                
        o Each taxpayer dollar "invested" in plans supported                                                                    
         $4.77 in total economic activity in the state.                                                                         
                                                                                                                                
He opined  that the  economic impact  of pensions  generally gets                                                               
less attention.  The contributions into the  retirement plan does                                                               
not disappear, the  money gets paid out to real  people that live                                                               
in  communities  who spend  their  money  in grocery  stores  and                                                               
restaurants.                                                                                                                    
                                                                                                                                
He addressed,  "83 percent of  Americans: Public Pensions  a Good                                                               
Way to Recruit and Retain Employees" as follows:                                                                                
                                                                                                                                
   • Strongly agree: 45 percent.                                                                                                
   • Somewhat agree: 38 percent.                                                                                                
   • Somewhat agree: 7 percent.                                                                                                 
   • Strongly disagree: 2 percent.                                                                                              
   • Don't know: 8 percent.                                                                                                     
                                                                                                                                
He said NIRS  recently did public opinion  research on retirement                                                               
security.  Americans  are  generally concerned  about  retirement                                                               
security, health care costs  in retirement, long-term-care costs,                                                               
saving  enough, and  longevity.  Americans have  a  good view  of                                                               
their retirement  challenges and their concern  is not polarized.                                                               
NIRS  asked if  pensions are  a good  way to  recruit and  retain                                                               
public employees  and 83 percent  of respondents  strongly agreed                                                               
or somewhat agreed with the question.                                                                                           
                                                                                                                                
3:56:48 PM                                                                                                                    
CHAIR BISHOP  stated that his intent  is to have Mr.  Doonan back                                                               
in person when the bill is heard again in 2020.                                                                                 
                                                                                                                                
CHAIR  BISHOP  announced that  the  committee  will hear  invited                                                               
testimony on SB 46.                                                                                                             
                                                                                                                                
3:57:35 PM                                                                                                                    
JUSTIN  BRANDT,  Probation   Officer,  Bethel  Probation  Office,                                                               
Alaska Department  of Corrections,  Bethel, Alaska,  testified in                                                               
support of SB 46. He said  the Bethel field office is seeing high                                                               
job turnover. Trainees  have been known to  complete their state-                                                               
paid academy training  and then leave for positions  in the Lower                                                               
48,  mainly  due to  retirement  benefits  and  a lower  cost  of                                                               
living.  Because  Bethel  is  in  a  remote  area,  there  is  no                                                               
personnel back  up. Probation officers  based in Bethel  cover an                                                               
area  the size  of Oregon  that includes  56 villages  outside of                                                               
Bethel.                                                                                                                         
                                                                                                                                
CHAIR  BISHOP  asked  how  long  he  had  been  with  the  Bethel                                                               
Probation Office.                                                                                                               
                                                                                                                                
MR. BRANDT answered five years.                                                                                                 
                                                                                                                                
CHAIR BISHOP asked if he came from another state.                                                                               
                                                                                                                                
MR.  BRANDT  replied  that  he graduated  from  college  in  West                                                               
Virginia and came to Alaska  on his first assignment. Some states                                                               
require  candidates to  pay  their own  way  through the  academy                                                               
training process, but  Alaska hires personnel and  pays for their                                                               
training.                                                                                                                       
                                                                                                                                
4:01:48 PM                                                                                                                    
TIM  PARKER,  President,  National  Education  Association-Alaska                                                               
(NEA-Alaska), Anchorage,  Alaska, testified in support  of SB 46.                                                               
He said  the issue that  SB 46  addresses is the  serious problem                                                               
with  teacher turnover,  particularly in  rural areas  of Alaska,                                                               
that  is  attributed  to  the   current  retirement  system.  The                                                               
retirement issue  pertains to people in  the Teachers' Retirement                                                               
System  (TRS) Tier  III and  Public Employees'  Retirement System                                                               
(PERS) Tier  IV. TRS-III is  considered the worst in  the country                                                               
and the system affects the  ability to attract and retain quality                                                               
educators to Alaska. TRS-III and  PERS-IV are nicknamed the death                                                               
tiers  because an  employee  does  not feel  like  they can  ever                                                               
retire because  of the incredible  amount of risk that  they have                                                               
to carry.                                                                                                                       
                                                                                                                                
He  noted that  TRS-III  and  PERS-IV changed  in  2006, but  the                                                               
change still  needs more work.  So much  risk has been  placed on                                                               
employees and the change has  been especially hard on the TRS-III                                                               
group because  they have  no Social  Security. Under  the defined                                                               
contribution  system,  69  percent  of  educators  will  probably                                                               
outlive their savings and face the prospect of being destitute.                                                                 
                                                                                                                                
4:05:14 PM                                                                                                                    
MR. PARKER addressed  the TRS group history in  not having Social                                                               
Security,  explaining that  the  Territory of  Alaska decided  in                                                               
1951 that teachers  would not participate in  Social Security and                                                               
the PERS group  did the same in  1978. A change was  made in 2006                                                               
on the PERS  side where a Supplemental Benefits  System (SBS) was                                                               
added, but  nothing was  done on  the TRS side,  there is  just a                                                               
defined contribution into a savings account.                                                                                    
                                                                                                                                
He  said  another  issue  that   TRS-III  faces  is  the  federal                                                               
government  Windfall Elimination  Provision  that targets  states                                                               
that are  not in  the Social  Security program  and a  penalty is                                                               
placed  on  earnings  in  an individual's  life.  All  the  noted                                                               
factors increase  the retirement risk factor  that makes employee                                                               
attraction and retention challenging.                                                                                           
                                                                                                                                
He noted  that more than 50  percent of the state's  teachers and                                                               
support professionals are in the  defined contribution system. No                                                               
one is  attending the state  job fairs  to fill the  nearly 1,000                                                               
openings  that occur  on  an annual  basis.  Positions are  going                                                               
unfilled through  the entire year  and that is standard  for most                                                               
Alaska school districts.                                                                                                        
                                                                                                                                
He  pointed  out  that  salaries in  Alaska,  especially  in  the                                                               
teaching field, are  not keeping up. The state  continues to drag                                                               
behind inflation  and the  rest of the  country has  noticed that                                                               
there is  a teaching shortage  and they are  increasing salaries.                                                               
More than 20 governors proposed  increases in teacher salaries as                                                               
part of  their budgets in  2019 while Alaska has  not. Washington                                                               
state had  increases of 15 to  20 percent across the  board and a                                                               
fair number of  Alaskan teachers have applied for  jobs and moved                                                               
there.                                                                                                                          
                                                                                                                                
4:08:46 PM                                                                                                                    
He  summarized that  relying on  a  savings account  is just  too                                                               
risky. One  hundred percent of  the risk  has been placed  on the                                                               
shoulders of teachers, plus they do  not have an SBS; there is no                                                               
other employee group that has  that. Teachers are not looking for                                                               
something that they  do not pay for, but the  state needs to make                                                               
sure that teachers  have a decent system and SB  46 is a solution                                                               
that NEA-Alaska favors.                                                                                                         
                                                                                                                                
SENATOR BIRCH asked if SBS is  a system that school districts can                                                               
opt into.                                                                                                                       
                                                                                                                                
MR. PARKER answered no.                                                                                                         
                                                                                                                                
SENATOR  BIRCH pointed  out  that  the state  has  an $8  billion                                                               
unfunded  liability with  respect  to the  current  PERS and  TRS                                                               
legacy  accounts.  He   said  he  struggles  with   the  idea  of                                                               
increasing  the current  unfunded liability  that burdens  future                                                               
generations. He  opined that defined benefit  programs are fading                                                               
away. He  asked at  what point should  an individual  employee be                                                               
responsible  for setting  aside what  they need  to take  care of                                                               
themselves when they cease to work.                                                                                             
                                                                                                                                
4:12:34 PM                                                                                                                    
MR. PARKER answered  that the idea that the  employee should save                                                               
some percentage  of money  is what the  private sector  does, but                                                               
the  employees  in the  private  sector  have a  Social  Security                                                               
option. Teachers  in Alaska  embrace setting  aside money  with a                                                               
return to  the Social Security  system. Alaska is the  only state                                                               
that  has  direct-contribution-only   option  for  teachers.  The                                                               
savings  account is  all a  retired  TRS-III teacher  has and  69                                                               
percent are  projected to run  out of their savings  during their                                                               
retirement.                                                                                                                     
                                                                                                                                
CHAIR BISHOP asked how many  states currently have direct benefit                                                               
plans for teachers.                                                                                                             
                                                                                                                                
MR. PARKER answered  that approximately 50 percent  of the states                                                               
offer  direct benefit  plans for  teachers with  many opting  for                                                               
hybrid plans. He reiterated that Alaska  is the only state with a                                                               
direct-contribution-only retirement plan.                                                                                       
                                                                                                                                
CHAIR BIRCH asked if he has  exit survey data on teachers leaving                                                               
employment in Alaska that are TRS-III.                                                                                          
                                                                                                                                
MR. PARKER  answered that school  districts do the  exit surveys,                                                               
but NEA-Alaska does not have a  good look at the entire state. He                                                               
detailed  that   every  year,  Alaska  has   approximately  9,000                                                               
teachers and 1,000 teaching positions come available.                                                                           
                                                                                                                                
4:16:28 PM                                                                                                                    
CHAIR BISHOP asked how long teachers stay employed at TRS-III.                                                                  
                                                                                                                                
MR. PARKER  answered that a  lot of  teachers leave on  a regular                                                               
basis and  close to 50 percent  of teachers leave in  the first 5                                                               
years.                                                                                                                          
                                                                                                                                
CHAIR BISHOP suggested  that NEA-Alaska focus on  exit surveys to                                                               
get to the  root of the problem  and let the data  help drive the                                                               
discussion.  He   agreed  that  wages  and   retirement  motivate                                                               
employment. He noted Mr. Parker's  recollection that in the 1990s                                                               
there  were  over  a  thousand   surplus  teachers  applying  for                                                               
positions  and  today  there  are basically  zero.  He  said  the                                                               
legislature knows there  is a problem and referenced  a bill that                                                               
passed the previous year for rehiring retired teachers.                                                                         
                                                                                                                                
MR. PARKER  concurred that  the need  to rehire  retired teachers                                                               
has grown because the state is  having a hard time attracting and                                                               
retaining teachers.                                                                                                             
                                                                                                                                
He said he  is telling TRS-III teachers to save  an additional 25                                                               
percent for  retirement due to the  inefficient retirement system                                                               
for teachers.                                                                                                                   
                                                                                                                                
CHAIR BISHOP  noted that improving student  outcomes is important                                                               
and the importance  of investing in teachers for the  long run to                                                               
improve  outcomes.  He  noted  that in  the  Finland  model,  one                                                               
teacher is with the same kids for seven years.                                                                                  
                                                                                                                                
4:21:26 PM                                                                                                                    
ROBERT MURPHY,  representing self,  Kodiak, Alaska,  testified in                                                               
support of  SB 46. He disclosed  that he is a  PERS-II person who                                                               
has seen  many changes  since he started  working for  the Alaska                                                               
Department of Fish and Game in  the 1980s. He said the department                                                               
has gone from the  premier agency to work for in  the state to an                                                               
agency that has a difficult  time competing with positions in the                                                               
federal  government  or  private   sector.  He  opined  that  the                                                               
difficulty in hiring  and retention is attributed  to the decline                                                               
in benefits that are offered.                                                                                                   
                                                                                                                                
4:25:11 PM                                                                                                                    
CHAIR BISHOP  said considering that  the legislature is  near the                                                               
end  of  the  session,  SB  46 will  be  held  in  committee  and                                                               
addressed early  in the next session.  He noted that he  is a co-                                                               
sponsor of  the bill  and emphasized that  he believes  a direct-                                                               
benefit plan does  work, but the legislation must  be honest with                                                               
the multiplier.                                                                                                                 
                                                                                                                                
SENATOR KIEHL  responded that  he looks  forward to  working with                                                               
Chair Bishop during the interim. He  said his staff will get back                                                               
to the committee with the requested information.                                                                                
                                                                                                                                
4:27:41 PM                                                                                                                    
CHAIR BISHOP held SB 46 in committee.                                                                                           
                                                                                                                                
4:27:56 PM                                                                                                                    
There being  no further  business to  come before  the committee,                                                               
Chair Bishop adjourned the Senate  Community and Regional Affairs                                                               
Standing Committee meeting at 4:27 p.m.                                                                                         

Document Name Date/Time Subjects
SB0046 Version A.PDF SCRA 4/16/2019 3:30:00 PM
SB 46
SB046 - Sponsor Statement 4.2.19.pdf SCRA 4/16/2019 3:30:00 PM
SB 46
SB046 - Updated Sectional Analysis 4.16.19.pdf SCRA 4/16/2019 3:30:00 PM
SB 46
Supporting Documents- Teacher Turnover Study.pdf SCRA 4/16/2019 3:30:00 PM
SB 46
Supporting Document- DPS Recruitment Retention Plan Overview.pdf SCRA 4/16/2019 3:30:00 PM
SB 46
Presentation_Doonan_April 2019.pdf SCRA 4/16/2019 3:30:00 PM
SB 46
SB046 - Fiscal Note 1-DOA-RNB.pdf SCRA 4/16/2019 3:30:00 PM
SB 46
SB046 - Fiscal Note 2-DOA-Commissioner.pdf SCRA 4/16/2019 3:30:00 PM
SB 46
Letter_AFL-CIO.pdf SCRA 4/16/2019 3:30:00 PM
SB 46
SB 46 Letters- Master file.pdf SCRA 4/16/2019 3:30:00 PM
SB 46