Legislature(1999 - 2000)
03/31/1999 08:03 AM Senate FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
MINUTES
SENATE FINANCE COMMITTEE
March 31, 1999
8:03 AM
TAPES
SFC-99 # 74, Side A and Side B
CALL TO ORDER
Co-Chair John Torgerson convened the meeting at
approximately 8:03 AM
PRESENT
Senator John Torgerson, Senator Sean Parnell, Senator Randy
Phillips, Senator Dave Donley, Senator Gary Wilken and
Senator Al Adams were present when the meeting convened.
Senator Loren Leman, Senator Pete Kelly and Senator Lyda
Green arrived shortly thereafter.
Also Attending:
GUY BELL, Director, Division of Retirement and Benefits,
Department of Administration; BILL CHURCH, Retirement
Supervisor, Division of Retirement and Benefits, Department
of Revenue; JUANITA HENSLEY, Administrator, Division of
Motor Vehicles, Department of Administration; TAMMY
STROMBERG, Fiscal Analysis, Division of Legislative
Finance; CHRISTOPHER ROBINSON, Executive Director, Special
Education Services and member of Alaska Association of
School Districts; Carl Rose, School Board; Don Etheridge,
lobbyist; DON VALESKO, Business Manager, Public Employees
Local 71; SUSAN ANNIS, Vice President, NEA-Alaska; LINDA
MCCREA, employee of the Anchorage School District; PAM
LABOLLE, President, Alaska Chamber of Commerce; DARROLL
HARGRAVES, Executive Director, Alaska Council of School
Administrators; LARRY WIGGIT, Executive Director of Public
Affairs, Anchorage School District.
Attending via Teleconference: From Anchorage: BARBARA HUFF,
Teamsters Local 959.
SUMMARY INFORMATION
SB 9-PERS CREDIT FOR NONCERTIFICATED EMPLOYEES
The committee heard testimony from the sponsor, the
Division of Retirement and Benefits and the public. The
bill was reported out of committee with no changes.
SB 85-CREDITED SERVICE FOR TEMP EMPLOYEES:PERS
The committee heard testimony from the sponsor, the
Division of Retirement and Benefits and Teamsters Local
959. The bill was held in committee.
SB 33-TASK FORCE ON PRIVATIZATION
This bill was scheduled but not heard.
CS FOR SENATE BILL NO. 9(HES)
"An Act relating to the calculation of employee
contributions and credited service in the public
employees' retirement system for noncertificated
employees of school districts, regional educational
attendance areas, the special education service
agency, the Alaska Vocational Technical Center, and
the state boarding schools; and providing for an
effective date."
Senator Gary Wilken, sponsor of the bill, testified. He
explained this bill addressed non-certified (or classified)
school district employees. They made up the janitors,
secretaries and the support staff who kept the schools
running as they should and supported the teachers and
administrators. They were treated differently than the
teaching and professional staff as they only accrued 9
months of retirement each year while the others accrued a
full year. So at the end of thirty years working in the
school district they only had 22 1/2 of retirement.
SB 9 would change that. It would still allow them to work
nine months out of the year but they would make twelve
months worth of contribution. They were requesting the
additional three months of accrual for which they were
willing to pay. There would be no cost to the state system.
He noted the positive fiscal note of $72,400 in the first
year to set up the program. After that, there would be
zero expense to the state. This bill would recognize that
those workers were just as important as the teachers and
administrators.
He listed the school districts and other groups across the
state in support of the bill. He also pointed out that this
bill had been before the Legislature in the past.
Co-Chair John Torgerson asked if there was a retroactive
clause for employees who may be already out of the system.
Senator Gary Wilken said there was not, that the program
began on its effective date.
Co-Chair John Torgerson wanted to know how the bill would
effect to the retirement incentive plan. Senator Gary
Wilken didn't believe it would. He deferred to Guy Bell of
the Division of Retirement and Benefits to better explain.
Senator Loren Leman said it seemed to him that if someone
elected to participate in the system, they believed it
would provide some value to them. Since the state was not
putting into the system, how would it benefit the
employees, where would it come from? Senator Gary Wilken
explained that the additional value would come from the
increase in the employee contribution given today's value,
thus allow them to save more money in today's dollars.
Currently, these employees contributed 6.75 percent of
their salary across nine months. Under this bill, they
would contribute eight percent during the nine months.
GUY BELL, Director, Division of Retirement and Benefits,
Department of Administration, testified. He explained the
fiscal note saying the only change was to the division's
computer programming to accompany the increased
withholdings. The collected funds would be placed in a
trust fund.
Co-Chair John Torgerson asked if the funds for the
programming would be initially forward funded from the
trust and then recuperated based on a formula. Guy Bell
affirmed and explained the employee would be responsible
for actuarial cost of this additional benefit. The
division built in a small factor for the overhead expenses
and also for possible adverse selection. This was a ten-
percent factor in addition to the calculated cost.
Senator Pete Kelly asked for explanation of actuary rate.
Guy Bell explained that when an actuary calculated a rate,
they calculated a single rate for a whole group. It was an
average. It was desired that there be a single rate that
the employee would know they would be paying every year
until they retire. The estimate was 1.25 percent additional
that the employee would pay. They built in a factor to try
to offset the impact.
Senator Lyda Green wanted to know the involvement of the
school districts. Guy Bell replied that the division had a
computer system that was sent to the school districts.
There was a possibility they would have to also update
their systems using the provided software. The districts
would enter the information and return it to the division.
Senator Lyda Green asked if the financial impact on each
school district would be minimal. Guy Bell affirmed.
Senator Gary Wilken told her he had contacted the school
districts and was assured it would be minimal. Senator Lyda
Green wanted to make sure that school districts weren't
forced to incur a large expense to implement this program.
Co-Chair John Torgerson asked about employees who were no
longer employed in the school district but decided they
wished to contribute. Guy Bell said this would not apply
to employees no longer working in the school district. If
they came back to work they could then participate. It
would only apply to work performed after the effective date
of the bill.
Co-Chair John Torgerson asked about the effect to any
retirement incentive plan. Guy Bell couldn't see how this
would have any effect on a RIP.
Co-Chair John Torgerson wanted to know if an employee's
qualifying years would increase in a RIP program if they
bought into this program. BILL CHURCH, Retirement
Supervisor, Division of Retirement and Benefits, Department
of Revenue, said they would.
Co-Chair John Torgerson wondered if there was a risk or any
additional costs to the fund because of that. Bill Church
answered no.
CHRISTOPHER ROBINSON, Executive Director, Special Education
Service Agency and member of the Alaska Association of
School Administrators, testified. Both organizations were
in support of the bill. He detailed the benefits to the
employees. The effect would be to delay the period of work
required in order for the employee to become eligible for
retirement. The employee could put themselves on a
timeframe for retirement comparable to other employees in
the school district.
Co-Chair John Torgerson had another question of Guy Bell.
He did not see any minimum requirement of the amount of
time an employee needed to work to be eligible. Could an
employee who worked only five months buy into the program
at a higher rate? Guy Bell explained that an employee could
buy into it but he didn't know if it would be to the
employee's benefit. Bill Church added that the reason the
9-month employees were targeted for examples was because
they wanted the employee to have the option of choosing.
Co-Chair John Torgerson asked about a nine month employee
who opted to participate then was cut back to only five
months, would they be forced to continue to participate.
Guy Bell answered that they would still participate but
would still be only required to pay the same eight-
percent.
SUSAN ANNIS, Vice President, NEA-Alaska, testified. In the
years she had been involved with the school district this
item had always been a priority. She spoke about the
current situation where the employees could only accrue
retirement for 15 years when they had worked for 20, while
their teaching counterparts were eligible to retire with a
full pension. She also pointed out that even though they
were seasonal employees, they were ineligible for
collecting unemployment due to special provisions.
LINDA MCCREA, employee of the Anchorage School District,
testified. She worked ten months and wished to participate.
DON VALESKO, Business Manager, Public Employees Local 71,
representing Anchorage School District employees,
testified. He spoke about the "little people" who made the
schools run. He testified in support of the bill. He had
questions on the amount each employee would be required to
contribute based on the number of months they worked. He
pointed out that if the contributions were based only on
the nine-month factor, then the system would make money off
of the ten and eleven month employees. He felt the bill
needed a little work to fix this problem.
DARROLL HARGRAVES, Executive Director, Alaska Council of
School Administrators, testified. He brought a message from
the Alaska Association of School Administrators that they
supported the bill. It was a human thing, he said. This
addressed a group of employees who were under-appreciated
and unrecognized. He told of a time when there was no
retirement for these employees and a janitor who retired
after 23 years of service and the Legislature issued a
citation and granted the retirement benefits.
LARRY WIGGIT, Executive Director of Public Affairs,
Anchorage School District, testified. He referred to
written testimony submitted earlier. He gave examples of
employees who would be affected and worked for him. He said
this was not a matter of someone retiring at age 25 rather
than 30. It was a difference of someone being able to
retire at age 63 versus age 67.
Co-Chair John Torgerson asked if there were any employees
who worked twelve months under this same system. Larry
Wiggit said there was one and detailed.
BARBARA HUFF, Teamsters Local 959, testified via
teleconference from Anchorage. The union represented
Anchorage School District Employees and supported the bill.
Senator Randy Phillips asked Guy Bell to respond to Mr.
Valesko's concerns. Guy Bell responded that if the program
was to apply to a variable system to collect based on the
number of months worked at different times by different
employees it would be administratively complicated.
Therefore, they had chosen to go with a flat rate. He said
it would be consistent with the TRS system.
Senator Gary Wilken made a motion to move from committee CS
SB 9 (HES). Without objection, it was so ordered.
CS FOR SENATE BILL NO. 85(L&C)
"An Act relating to credited service in the public
employees' retirement system for temporary
employment."
JEANNIE SMITH, staff to Senator Jerry Mackie sponsor of the
bill, testified. Currently, employees in the PERS system
could buy back their temporary time. However, this time
did not count toward the minimum service needed for their
retirement eligibility.
She told the committee this bill would allow these
employees currently covered under PERS to buy any temporary
time and have it credited toward that minimum service time
for retirement. It would provide equity among state
employees. It was an issue of fairness. They should be
allowed to pay for months that they actually worked.
The fiscal impact on this legislation for temporary service
as recognized under the retirement system provided that the
employee would pay the full actuarial cost. There were no
general funds involved. There would be computer
programming necessary to implement the program as reflected
in the Department of Administration fiscal note.
The legislation would allow the state to realize immediate
cost savings by enabling employees to meet the retirement
eligibility threshold sooner. The employees prone to use
this for retirement credit were employees with the higher
service codes thus they are on the higher end of the pay
scale, according to Jeannie Smith.
She continued saying SB 85 was a responsible piece of the
puzzle in the development of Alaska's long term budget
solution. This was a reasonable economic tool that may be
used to minimize the impact of downsizing Alaska's state
government.
She spoke of a position statement submitted by the
Department of Administration. It said that the bill would
have the effect of allowing the employees to meet the
retirement eligibility threshold sooner than they would
otherwise be anticipated.
She then noted a list of Alaskan employers who were
included within the umbrella of this bill who did not work
for the State Of Alaska.
She concluded by stating that this bill sent a positive
message to state workers and other employers and employees
across the state.
Guy Bell and Bill Church returned to the table to address
this bill. Guy Bell commented that this would allow
employees to pay the cost to use temporary service that
they had worked as membership service toward their
retirement. Public employees with temporary service time
would be affected. Currently, they could buy that temporary
service time but could not use it toward retirement
eligibility for 20 or 30 and out contracts. This would
allow them to pay some extra, which would be the actuarial
costs. He gave examples of the police or firefighter
component of PERS. The full responsibility for paying the
cost would rest with the employee.
Senator Randy Phillips asked if there was a difference
between seasonal and temporary employees. Guy Bell
explained that a seasonal employee was considered permanent
and they did pay into PERS during their period of work. A
temporary employee was not a PERS employee. There was no
deduction from their salary and they did not receive PERS
credit.
Senator Randy Phillips wanted to know how many temporary
employees were in the state system and what was the average
length of service in that status. Bill Church said the
division did not know since people did not claim their
temporary service. Senator Randy Phillips asked how many
permanent temporary workers were there. Bill Church
responded that the division did not track that information.
Based on the employees who did claim their temporary
service, they could prepare an estimate. Guy Bell added
that there were many public employees in the retirement
system and state employees were only a part. There were
people with temporary service who worked for other
employers.
Senator Al Adams asked about the fiscal note for SB9 and
wanted to know if this program could be implemented with
the computer modifications made to the other program for
school employees. Bell replied that the changes were
slightly different but that it was a small cost to the
system. The two were calculated separately because it was
not known if both bill would be adopted.
Co-Chair John Torgerson asked if this would be handled on
an individual basis or would a single percent be imposed
based on the actuarial costs. Guy Bell replied that it
would be calculated on an individual basis since each case
was different. The difference here was that an employee
would purchase time that they worked probably a number of
years ago. Very often, a person first worked as a temporary
and then worked into a permanent position. That had to be
calculated on an individual basis.
Senator Randy Phillips compared this to the last bill where
seasonal employees had no control of the number of months
they could work. He wondered if with the employees
addressed in this bill, were there any inequities within
the group of temporary employees that needed to be
adjusted. He spoke about the different classifications of
people and assumed most were serving a probationary period
before entering a full time status. Guy Bell said this was
different than probationary since they were hired as
temporary employees. When a person was first hired in a
permanent position they were on probation but still
contributed to PERS, he explained.
Co-Chair John Torgerson was confused about initial
testimony saying that temporary time did not count. Could
an employee go back and pick up time served in temporary
service even when they were not in the system.
Bill Church responded that employees could once they were
vested in PERS. Then they could claim all full-time
temporary service. That was the main difference with this
bill and SB 9. SB 85 dealt with employees who by the nature
of their employment were excluded from becoming a vested
member of PERS. They could then claim all full-time
temporary service and pay the rate for that.
Co-Chair John Torgerson wanted to know if buying in counted
toward becoming vested. Bill Church answered no; a person
must already be vested. Co-Chair John Torgerson asked if
once they were vested, how would the division calculate the
payment for the five-year period. Bill Church said once
they employee is vested they could go back and pay for the
earlier temporary service. He detailed his own situation
with his three months of temporary service.
Co-Chair John Torgerson wanted to know what was the average
term of temporary service. Bill Church said it varied and
depended on the term of employment. Co-Chair John
Torgerson had questions about qualifications for PERS.
Church replied it was calculated by time served as a paying
member of PERS.
Co-Chair John Torgerson asked if this bill had a
retroactive clause for an employee who was out of the
system. Bill Church replied that an employee would be able
to pay into the service to meet the eligibility for
retirement. The employee could chose to buy it as just
credited service or also for service to be credited for
accrual. It was an individual decision.
Co-Chair John Torgerson asked if this was an irrevocable
election. Bill Church affirmed.
Co-Chair John Torgerson asked why there weren't the same
triggers in this bill as in the last bill of 90 days and
180 days.
Tape: SFC - 99 #74, Side B 8:50 AM
Bill Church responded there was already an existing period
of service that had happened in the past. The election
could be made at any time before the employee retired. The
only difference would be the amount of interest accrued and
charged based on how long ago the temporary service was
performed. He detailed the differences in accrual
procedures between this bill and SB 9, which was an on-
going program.
Co-Chair John Torgerson then asked about the effect this
bill would have on the RIP. It seemed to him that this
would have a greater direct affect than the last bill had.
He noted that in order to qualify a saving to the state had
to be shown. Would this change some of those
determinations? Bill Church said this would only apply to
retirement qualifications and cost savings would still be
up to the employer.
Senator Randy Phillips asked if there was a difference
between union and nonunion employees' retirement. Church
said there was not.
Senator Randy Phillips referred to a letter in the packet
by a school district temporary employee on the Kenai
Peninsula. She had worked for nine years as a temporary.
It seemed like a long time for temporary. Church clarified
that the testimony was directed at the wrong bill and
really applied to SB 9 because she was a school district 9-
month employee.
Senator Randy Phillips noted different classifications for
different employees and the different benefits afforded
those. He wanted to know if this would cause inequalities
for those employees. Bill Church replied that union
affiliation would not matter in this program.
Barbara Huff testified via teleconference from Anchorage in
favor of the bill. She spoke about the difference of this
bill from the previous bill. This bill would impact the
majority of the members her organization represented within
the Anchorage Municipal Employees Association. She did not
see a significant number of employees who would be impacted
one way or another, but this bill would grant them an
opportunity if they chose. She spoke about the temporary
employees covered in the bargaining unit.
Co-Chair John Torgerson ordered the bill held in committee.
ADJOURNED
Senator Torgerson recessed the meeting at 8:59 AM.
SFC-99 (1) 3/31/99
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