Legislature(1999 - 2000)
01/21/2000 09:06 AM Senate FIN
| Audio | Topic |
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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
January 21, 2000
9:06 AM
TAPES
SFC-00 # 7, Side A and B
CALL TO ORDER
Co-Chair John Torgerson convened the meeting at
approximately 9:06 am.
PRESENT Co-Chair John Torgerson, Senator Al Adams, Senator
Dave Donley, Senator Lyda Green, Senator Randy Phillips,
Senator Gary Wilken, Co-Chair Parnell
Also Attending:
Senator Taylor and Senator Elton
Bruce Richards, Special Assistant, Department of
Corrections; Larry Persily, Deputy Commissioner, Department
of Revenue; Nanci Jones, Director, Permanent Fund Dividend
Division; Marsha Partlow, State GED Director, Department of
Labor & Workforce Development; Jean Smith, Legislative
Assistant, Senator Mackie; Guy Bell, Director, Division of
Retirement & Benefits; Bill Church, Retirement Supervisor,
Division of Retirement & Benefits; Earl Clark, former
Professor, University of Alaska; Project Coordinator,
Department of Public Safety; Clarke Damon, former state
employee.
Attending via Teleconference:
Blair McCune, Deputy Director, Public Defender Agency
Michael Dean
SUMMARY INFORMATION
SB 1-NO MANDATORY PAROLE RELEASE WITHOUT GED
The Department of Corrections, Department of Revenue,
Permanent Dividend Fund Division and the Department of
Labor & Workforce Development testified. A Committee
Substitute was amended and adopted. The bill was held in
Committee.
SB 85-CREDITED SERVICE FOR TEMP EMPLOYEES:PERS
The Division of Retirement and Benefits, as well as members
of the public testified. The bill was held in Committee.
SB 123-PUBLIC INTEREST LITIGANT: FEES
This bill was scheduled but not heard.
CS FOR SENATE BILL NO. 1(JUD)
"An Act conditioning the award of good time and
release on mandatory parole on the attainment of
certain minimum educational standards for prisoners
serving certain sentences."
Co-Chair Torgerson noted that a Committee Substitute (CS)
was before the Committee regarding this legislation.
Senator Adams clarified that when SB 1 was before the
Committee last session, he introduced an amendment and was
not sure if it had been adopted. The intent of this
amendment was to increase the "good time" allowance by 60
days, once a General Educational Development Diploma (GED),
was acquired by an inmate. It was determined that this
amendment was not moved.
Senator Donley stated that Alaska has made tremendous
progress in criminal justice laws over the last decade.
Crime does not pay in Alaska anymore. Back in the 60's
these laws were embarrassingly lenient for murder and other
various crimes. Now people are serving longer sentences
and crime has gone down. Senator Donley felt as though
there was a direct relationship here, partly due to the
progress that this legislature has made, sometimes in
objection to the Administration. Alaska still has one of
the most liberal "good time" laws in the United States. It
is also very difficult for someone to lose his or her good
time. Presently the law allows for an individual that
behaves well to be able to reduce their sentence by one-
third. The national standard, both federal and state, is
85 per cent. In Alaska an individual usually only serves 66
percent of his sentence while incarcerated.
Senator Donley stated that the biggest single factor for
whether people behave themselves once out of prison is
whether or not they can read and write. The correlation
between people who cannot read and write and recidivism is
very high. This legislation attempts to give an incentive
to those prisoners, while incarcerated, to read and write,
by offering them a chance to a full "good time" reduction.
The original legislation proposed that a prisoner would
only get two-thirds existing "good time" if they did not
learn to read and write. The CS before the Committee
reduces this to only a one-twelfth reduction of the
available "good time," if they do not learn to read and
write. Unfortunately the fiscal impacts of holding back
one-third "good times" are high, but he thought the
department's estimates of how much more time people would
spend in prison was exaggerated, even though it is hard to
predict these things. The concern of the Committee last
year was the fiscal note, which was at about $800,000.
Over the interim Senator Donley's office worked on two
things: reducing the fiscal impact by reducing the amount
of time that is offered as the incentive and seeking funds
sources in an attempt to balance the fiscal note. Last
year, they worked with Senator Halford's SB 4 and SB 219
regarding victims programs and added several revenue
generators there. The money estimated from these
generators, were in excess of what the programs would
actually cost. They rolled these revenue generators into a
CS for this bill. Unfortunately, they have not been able
to get an estimate from the Administration regarding how
much monies would be created as a result of these
generators.
Senator Adams asked if this piece of legislation was
necessary. He referred to the Alaska Statute 12.55.015.10,
which states that the judge or the court system can order
the defendant (while incarcerated) to participate or comply
with a treatment plan of the rehabilitation program that is
related to the defendant's offense. He noted that they
already have the ability to impose the requirement of
obtaining a GED. He made mention of this present
legislation's fiscal note and how money could be saved by
not adopting it. He also mentioned that this legislation
calls for taking permanent fund monies away from
individuals, but he noted that there are already agencies
in place, which depend on receiving this money.
Senator Phillips asked about language on page three,
section four, regarding the state holding a prisoner's
permanent fund dividend (PFD) for one year after they are
released from prison.
Senator Donley responded that this was the language of the
existing law but that in the new legislation this time
frame would expand to two years. He explained that
presently, when a person commits a felony, the law states
that the first year they get out of prison, they will not
get their permanent fund dividend, but they do get it
afterwards. This new legislation states that they would
not receive it for two years, for those individuals
committing a felony.
Co-Chair Torgerson noted that it would be hard to quantify
the money generated from permanent funds unless release
dates of the defendants were specifically known. He stated
that he did not disagree with this legislation and felt it
was important to mandate education under these
circumstances. He added that there still is a fiscal note
problem and that because of this, they must look at
alternative methods.
Senator Green stated that she understood what this
legislation was attempting to do, but she wondered how the
individual who already has their high school diploma or
even a college degree would have an incentive to further
their education. She asked if this new legislation creates
a situation for discrimination.
Senator Donley responded that this legislation was designed
for people to acquire at least the threshold of an
education. He stated that he would have no problem with
inmates continuing their education beyond.
Senator Green noted that the State would not want to pay
for this continuing education though.
Senator Donley added that for someone to be able to read
and write is essential, especially once they are released
from prison. In response to Senator Adams concern, there
is no way to order these individuals to work towards
obtaining a GED. This legislation creates a more specific
incentive for individuals to participate in these programs
even if the court has not ordered them to do so.
Senator Green inquired about the development of waivers, in
terms of who would not be required to take a test. She
asked how parameters were established.
Senator Donley noted that the waivers would be for somebody
found incapable. Occasionally there are people without the
mental capacity to realize a GED. If English is not a
person's primary language, or if the person's age or social
background is such that the Commissioner determined that
they were unable to meet this educational requirement,
these inmates would be disallowed. This would ensure that
they are not unduly or unfairly discriminated against.
Senator Green thought that because this waiver is so broad,
most Commissioners could find a reason to require someone
to obtain his or her GED. She noted that the Committee was
not trying to diminish what was already in the law, by
adding these waivers. She thought this question of pre-
testing an individual was more complex than it appeared to
be and wondered if Senator Donley's staff had met with an
educator to work out these details. This pre-testing issue
could become a bigger issue than requiring a GED, in light
of prisoner's rights.
Senator Donley responded that it was his understanding that
the department already pre-tests everyone that comes into
their system, establishing education levels.
Senator Adams stated that through this legislation the
prisoners are motivated more by negative incentives. The
present law allows for one-third off for good time, but
instead this legislation goes back to one-twelfth off which
is 25 percent more time in prison. He noted that the
sponsor of this legislation wished to lower the fiscal
impact by taking prisoner's PFDs and noted that there are
other agencies already in line for these funds. He felt as
though the Committee should leave the existing statute in
place, while at the same time accepting his amendment in
order to keep the cost of this legislative down.
Senator Wilken asked about the period of time that a
prisoner's permanent fund is held from one year to two
years. He wondered if the only purpose of this is to fund
the bill.
Senator Donley stated that the Committee had already passed
the related funding out in another piece of legislation and
he referred to SB 219.
Co-Chair Torgerson added that the Senate was that high up
yet on SB 219. The Senate passed this legislation out, but
now it is over on the House side.
Senator Wilken spoke to page two, line nine regarding a
high school diploma and asked if this bill took into
account an exit exam requirement, which is now law in the
State of Alaska.
Senator Donley responded that an exit exam is required for
anyone, so it applies here also. This bill should not have
to explicitly state this as such, although this was
certainly Senator Donley intent.
Senator Wilken asked about someone without a high school
education, which becomes incarcerated, and obtains a GED
while in jail. Would they receive a "good time" advantage
over someone who already has their high school diploma, he
asked.
Senator Donley stated that these individuals would. One of
the original versions of the legislation had a provision
for continuing education programs and "good time"
incentives, but it also had a high fiscal note impact.
Senator Wilken responded that he agrees with what Senator
Donley is attempting, but added that if a prisoner already
has a high school diploma, they are at a disadvantage for
obtaining "good time" incentives.
Senator Green noted that if someone flunked the GED test,
they would be allowed to take it again within a year, and
two times the next, etceteras, not to mention the cost of
the tutorial. She reminded the Committee of discussions
some three years ago regarding the change to the post
secondary education loan program. There was great pressure
placed on the legislature to approve the right of prisoners
to apply for loans, while still incarcerated. She stated
that she did not want to revisit similar conversations.
Senator Donley wished to disagree with the characterization
Senator Adams presented as to this bill creating a backward
system for "good time." He felt it was a step forward and
reiterated Alaska's liberal "good time" allowances and
comparable percentages with other states. This legislation
helps to make individuals more accountable for their crimes
and adds incentives for education. He then clarified the
related fiscal calculations and noted that the fraction was
based on one-third rather than the full "thing."
Senator Adams responded that he still maintains this
legislation goes backwards. The Committee has worked hard
on missions and measures. One of these, for the Department
of Corrections, is that their facilities promote positive
changes. This legislation goes backwards against policies
they are trying to set up, which is a good education. This
legislation is unnecessary since such provisions are
already established in present law.
BRUCE RICHARDS, Special Assistant, Department of
Corrections referred to the previous discussion about "good
time" numbers in Alaska. The national standard for "truth
in sentencing" is at 85 percent. He added that Alaska has
very tough sentences. On an average most states with 85
percent "truth in sentencing" still serve less time than
those do for murder in the first and second degree. He
checked with the Office of Justice and Bureau statistics.
He found that "truth in sentencing" state inmates serve
less time than prisoners do in Alaska. The way the
Department of Corrections reads the bill, if someone fails
to get their GED and they are deemed capable, they would be
entitled to a one-twelfth "good time" reduction. This
means they would serve 8 percent less of their full
sentence, as opposed to 33 percent less. It is not one-
twelfth of 33 percent, but one-twelfth of 100 percent.
This means a reduction of one-twelfth off the total
sentence, rather than one-twelfth of the current statutory
"good time" at 33 percent.
Co-Chair Torgerson noted that this was an important point.
He clarified whether Senator Donley was calculating this as
one-twelfth off of the one-third amount or not.
Senator Donley stated that this is what the Committee was
trying to accomplish.
Mr. Richards referred to page two, line 19 of the proposed
CS, "one-twelfth of the term or terms of imprisonment." If
someone failed to acquire their GED, they would be entitled
to one-twelfth of the term or terms of imprisonment,
rounded-off to the nearest day.
Co-Chair Torgerson pointed out that if the Department does
institute one-twelfth of the "good time" credit, the fiscal
note would change to reflect this.
Mr. Richards suggested that the amount of credit to be
deducted should be increased not by taking a percentage of
the statutory "good time" in place. If the Committee
wanted this number higher, they could set the number higher
than one-twelfth, rather than building steps into the
formula. He also referred to a pertinent memo that he
previously submitted to the Committee as having an
incorrect fiscal note, which should actually be greater
than what was noted there.
Co-Chair Torgerson recommended the Committee adopt the CS
along with pertinent language changes so the Department
could submit an updated fiscal note along with the bill's
next hearing.
Mr. Richards responded to a question posed by Senator Green
regarding a prisoner who might serve 12 years and factoring
"good time" estimates in their sentences. He noted that if
someone were originally sentenced for 12 years, under
current statute, they would get a 33 percent reduction for
statutory "good time," which would be four years. Under
the CS, if a prisoner came into the system with a current
diploma, they would still get four years off. If they came
in without a diploma, obtained it while they were
incarcerated before the date that they would normally come
under "good time," they would be entitled to the same four
years. This would change for someone who failed to obtain
their GED, after determining they were capable without any
extenuating circumstances, such as English as a second
language, or their age or social background comes into
play. They then would be entitled to a one-twelfth
reduction, which translated to an eight-percent reduction
in their sentence.
Mr. Richards refreshed the Committee's recollection; those
issues discussed last year. There are no other states,
which would have imposed legislation such as this,
requiring a person to obtain a GED in order for them to
qualify for "good time." Florida entitles a prisoner a 60-
day meritorious "good time" credit if someone obtains a
GED. The only state that comes close to this is Tennessee.
They have never enforced the taking away of "good time,"
due to overcrowding in facilities. The Department of
Corrections believe that this same goal could be reached by
giving everyone a 33 percent statutory "good time"
reduction, along with a 60 day credit for obtaining a GED
such as Senator Adams suggested.
Co-Chair Torgerson noted that it was his understanding
there might be a new federal regulation pending that would
require educating prisoners under the age of 22. They
would use the public school system to educate inmates under
the age of 22 by federal requirement. This possibility
needs to be considered in light of the number of inmates
estimated in the system presently at 411 inmates under 22
years of age. These inmates would possibly be educated by
running them through the foundation formula and paid for by
the Department of Education. If this does happen, it would
change the way he viewed this legislation. He wondered
what the number of inmates was over the age of 22 that have
their GEDs. It was his understanding that under this
proposed federal regulation, there would be at least 100
inmates in Spring Creek who would qualify for an education.
Senator Donley referred to the Department of Correction's
memo and noted that there are other states that are trying
to get inmates educated through an array of programs. He
felt that on a national level, basic education for
prisoners is a good thing. He asked how other states try
to reconcile the issue of those prisoners who already have
their GED, giving those inmates without one, an advantage.
Mr. Richards responded that the department did not ask
states how they have reconciled this situation. The Alaska
Department of Law feels that the state would prevail
because of the interest of providing educational
opportunities for inmates. They are certain that lawsuits
would be filed, but in this event, the state would most
likely prevail.
Senator Donley noted that if Alaska was already at the
national standard now, an 85 percent "truth in sentencing"
situation, he would support Senator Adam's amendment for
additional time off. His concern was that Alaska is only
at 65 percent, which is why he was reluctant to add more
"good time" into this formula.
Senator Donley referred to Mr. Richards's memo that made
reference to Virginia and its literacy requirement where
inmates are ineligible for the maximum amount of "good
time," if they chose not to participate in literacy
programs. He asked if this was not the same as what the
Committee was presently proposing.
Mr. Richards noted that this issue referred to by Senator
Donley was in regards to parole and he further stated that
while inmates are not denied parole strictly for refusal to
participate, further participation is stressed for those
whose parole requests are turned down. This was more of a
parole issue, rather than "good time."
Senator Adams questioned the fiscal note. He realized that
a new one would be adopted once the CS was also adopted.
He reiterated the permanent fund provision and asked if the
Department of Corrections was able to determine what agency
had first priority over an individual's PFD in order for
the Committee to determine how much money overall would be
available for this program.
Tape: SFC - 99 #7, Side B, 9:54 p.m.
MR. PERSILY, Deputy Commissioner, Department of Revenue
stated that he was before the Committee on behalf of the
Child Support Enforcement Division. Under the current law,
child support has first priority for garnisheeing the
permanent fund dividend. He stated for the record that the
Department of Revenue and the Division opposes further
attempts that would limit the amount of money garnisheed
for child support debt. The more recipients that are cut
off this list, the less money the division will get for
child support. This past year, the Division of Child
Support Enforcement collected about $14.5 million from
dividends. There is no exact way to know if the proposed
CS before the Committee is adopted, how many dividends for
garnisheeing would be affected. It is guesswork now in
terms of how many dividends they are losing. It would also
depend on whether the former inmate chooses to stay in the
state. Individual case files would have to be pulled in
order to see, when an inmate was released, where they moved
to, whether or not they are still eligible, etceteras.
"Under this proposed CS, there would be several hundred
additional people who currently qualify for a dividend who
would not under the provision that an inmate would lose
their dividend to a second year."
Co-Chair Torgerson asked if under current law whether or
not they take the first year's dividend once an inmate is
released. He asked if the division files for this dividend
automatically or does the inmate file, following by the
state garnisheeing it.
Mr. Persily stated that the Department of Corrections gives
the Permanent Fund Division a tape of people who have
served time, and then the division runs it against past
applications. They look to see if an applicant received a
dividend and whether or not he or she is a felon. "We
assume they were eligible before, they will be eligible
this year, we come up with a number, multiply that by the
amount of the PFD and tell Office of Management and Budget
this is how much money is available because these people
are not eligible." The inmate does not apply, the
department comes up with a quasi-educated guess regarding
how many people are not eligible and then this money is
made available and appropriated to Gate Money, Violent
Crimes, Compensation Board, Sexual Offender Programs,
ecetera.
Co-Chair Torgerson noted that if this were the case, then
Mr. Persily's prior testimony regarding an inmate moving
out of state is irrelevant in terms of one or two years, if
this number is just an estimate.
Mr. Persily agreed but noted that this makes it harder to
estimate, because right now if someone is eligible this
year, it is assumed that they are eligible as long as they
are in state custody. "We have two years and we do not
know where they are anymore, it makes it even harder to
guess."
Senator Green wanted to confirm that no name identification
was included along with the Department's request to the
Permanent Fund to get a total for the number of PFDs.
Mr. Persily stated that he believed the Department of
Corrections provides a tape with names of people in custody
on it. This is then matched against Permanent Fund
Dividend records in order to ascertain who was eligible in
past years, but who are now in state court due to a
felonious charge.
Co-Chair Torgerson asked if this meant that if someone was
arrested before they were eligible for the dividend that
they would not garnishee the dividend the first year after
release. His understanding was that the department
automatically filed for the inmates and there was some sort
of mechanism to track this. He asked if an inmate becomes
eligible for residency in Alaska, regarding a dividend, if
he or she is incarcerated.
MS. JONES, Director, Permanent Fund Dividend Division noted
that there were two characteristics, which they keep in
mind while reviewing the list from Corrections. If a
person never applies for a dividend, they are obviously not
eligible to receive one. If they applied and then were
denied, they are not eligible. They would have to have
established residency, become eligible for the program in
order for them to count this as a positive.
Senator Adams asked what percentage of the dividend
garnisheed was used for child support.
Mr. Persily stated that the Child Support Agency takes 100
percent of the Alaska Permanent Fund Dividend.
Senator Donley asked for clarification. He understood the
Department's motivation to protect the best interest of
their clients, which are people entitled to child support.
For one year that they could currently garnishee the
dividend they would be able to, for some of those who got
out of prison for a year, the department would not be able
to take that person's dividend. The department could still
go after an individual for child-support if the released
prisoner was employed or had other means of support at
their disposal. This bill would not preclude them from
tapping into the permanent funds.
Mr. Persily responded yes, but pointed out that in some
cases this was their only source of revenue for support.
Usually people who serve time in prison have limited
earning potential.
Co-Chair Torgerson asked if the department had any idea of
the number of dividends they get from prisoners. Is there
anyway to track these numbers.
Senator Adams noted that this legislation taps into the
permanent fund money and utilizes it towards lowering the
cost of its fiscal note and he asked how much money would
there be left after the agencies, first in line, had taken
their chunk. He wondered if there was a way to track these
amounts to see if there was anything left in a prisoner's
account to apply towards this bill's fiscal note.
Mr. Persily responded that if inmates were allowed to get
their dividends or whatever monies left over, a person
would have to pull the case files for all the inmates, look
for any possible liens, or if all restitution or court
fines were all paid off. In order to do this, all the case
files would have to be pulled, which would be a lengthy
process.
Senator Donley asked whether these inmates' dividends go
into a pool of funds based on the fact that they are
incarcerated and not allowed to keep this money for
themselves. He didn't think this question was answered
clearly.
Ms. Jones responded that this would be a pool of money that
is diverted from the prisoners had they been eligible, they
would have received "x" amount of money. The division
notifies Office of Management and Budget, they in turn make
this money available for appropriation to the various
entities. She added that with the present CS there is a
false sense of security about the second year. There is a
disincentive for person's to file, knowing that their
dividend is automatically going to be taken. Also, there
is no tracking of this individual anymore, if in fact, they
have completed 100 percent of their sentence. Unless, they
filed for a dividend, the department could not count them
according to the provision included in the CS. She noted
that this was a phantom year, which the department could
not quantify by conducting an actual head count. When
someone is incarcerated, this can be done, to an extent.
Senator Donley responded that the department presently
deals with the current law, allowing for the first year an
inmate is released by taking their dividend. He asked how
this would be significantly different allowing for a two
year time period.
Ms. Jones pointed that for a year a person is incarcerated,
the department knows this person is not eligible for a
dividend, but their numbers are still tallied for
calculation purposes. An inmate is not eligible for a
dividend within a year after their release. "They are
actively still in the possession of the state. The state
reports that these people were incarcerated for these
qualifying years. It is not an automatic, like you're
saying, the year they get out they automatically get it.
It's the year, the qualifying year before the dividend
whether or not they were sentenced, all or part, of that
calendar year, or either incarcerated. We know those
numbers." She also noted, according to the Committee's CS,
when these people are released (within the next year) the
department has no idea whether these people still exist
unless they apply for a dividend. They would have to
state, that yes, I was incarcerated. The department could
not assume that this person would still qualify for a
dividend. A good revenue number cannot be generated
because of the second, "phantom" year.
Senator Donley added that the way to get around this issue
would be to manipulate the dividend calculation allowing
for the assumption that the same number of inmates were
released, remained in the state but were illegible. This
number could be rolled into the total calculation formula
so that this amount of money would be received as normal
for those persons currently incarcerated. This allowance
would have to be spelled out specifically in this new
legislation.
MARSHA PARTLOW, State GED Director, Department of Labor &
Workforce Development offered two technical amendments
regarding the present CS (JUD) before the Committee.
First, the words on line 9, "a general education
development diploma." She noted that the actual title for
this should be, "general educational development diploma."
Second, for the Committee's consideration, the phrase on
line 9 and 10, as it reads, "has obtained a high school
diploma, a general educational development diploma or the
equivalent." She noted that unless there was a definition
of another equivalent diploma that she was not aware of,
she believed that the wording should actually be on line 9,
"has obtained a high school diploma or its equivalent, a
general educational development diploma."
Senator Donley responded that the intent of this section
takes into account that maybe some other states would not
have the same terminology as Alaska does. The matter of
"equivalent" would apply to what other states or even other
countries might provide for the same type of educational
requirement.
Ms. Partlow noted that this was a valid point and withdrew
her suggestion for the second technical amendment.
BLAIR MCCUNE, Deputy Director, Alaska Public Defender
Agency testified by teleconference and noted that they had
submitted an indeterminate fiscal note for this
legislation. He added that the agency was concerned about
an inmate who is incapable of obtaining a diploma and what
the measures of assessment might be. [Inaudible.] If this
becomes an internal departmental matter, they do not
usually represent prisoners under these circumstances. He
said it would be very difficult to determine whether
someone is incapable of obtaining a diploma, whether due to
time constraints or otherwise. He then made reference to
the statute read previously by Senator Adams. Under
current law the department handles quite a few cases where
probation can be taken away before someone is released,
which is called, "Anticipatory Revocation." This is used
normally in the event where an inmate refuses to
participate in treatment programs, such as substance abuse.
In these cases, if an inmate refuses participation, some of
their "good time" can be taken away. This process is
explicitly laid out in statute. He was concerned that the
refusal to participate in a GED program could become a more
serious offense than participation in a substance abuse or
sex offender program. Once the "good time" is taken away,
the incentive to go through with these other rehabilitative
programs would not exist.
Mr. McCune then spoke to a concern about the current
system, under the aforementioned statute, where the judge
or the parole board has an opportunity to look at what the
prisoner's efforts might be towards obtaining a GED. He
used the example of an inmate who decides to "blow off" the
GED and then another individual who is somewhat "slow," but
nonetheless capable who works very hard right up until the
end of their sentence and then fails. He felt there should
be some kind of decision-making body to access the fairness
of such situations. As a final comment, he noted that even
with the existing "good time" laws in Alaska, jail terms
are much longer than many other states.
Co-Chair Torgerson stated that he would not mind adopting a
CS in order to get a fiscal note before the Committee. He
further noted that he would not mind receiving a fiscal
note related to Senator Adam's amendment, in order to
compare the two while making a final decision about this
bill.
Senator Donley moved for the adoption of the proposed CS
with the addition of, on page two, line ten, changing the
word "education" to "educational," and on page two, line
19, changing one-twelfth to one-fourth.
Senator Adams added that he does not oppose the adoption of
this CS, even though this piece of legislation is not
necessary.
Co-Chair Torgerson stated that hearing no objection to the
adoption of this CS, it was so moved, with the minor
changes at noted. He then asked that Mr. Richards supply
the Committee with a relevant fiscal note, one for the
adopted CS and one for Senator Adam's amendment. Co-Chair
Torgerson stated that this legislation would be held over
for further discussion.
CS FOR SENATE BILL NO. 85(L&C)
"An Act relating to credited service in the public
employees' retirement system for temporary
employment."
JEAN SMITH, Legislative Assistant, Senator Mackie, read the
sponsor statement into the record. This legislation was
introduced at the request of Senator Mackie's constituents.
She stated that SB 85 is an effective management tool for
the state to utilize and minimize the impact of current and
future budget reductions. The bill will have the effect of
allowing employees to meet their retirement eligibility
threshold sooner than would otherwise be anticipated. The
employees prone to use this benefit retirement credit are
employees with higher service totals on the higher end of
the pay scale. Additionally, employer costs decrease when
these employees are replaced through reduced costs to the
supplemental benefit system and to the retirement systems.
Savings are realized in the long term by replacing tier one
and tier two category employees with tier three category
employees in order to lower benefit costs. Currently these
temporary employees can buy their temporary time, however,
this time does not count towards their minimum service
requirement needed for retirement. This amends Alaska
Statutes by enabling the employees covered under PERS, to
buy back their temporary time and have it credited towards
the minimum service time for retirement.
Last session, the Senate Labor and Commerce Committee
amended this bill. On page one, line nine, after the word
"retires," they added "an election under this subsection
does not change the date that an employee is considered to
have commenced participation in the system under Alaska
Statute, 39.35.120." This language was added to clarify
the original intent of this legislation, that employees who
qualified under tier two could not use temporary time to
qualify for tier one benefits. They added this language to
strengthen the intent of this provision so it could not be
misinterpreted to provide that flexibility. The fiscal
impact on this legislation, since temporary service is
recognized under the retirement system, provides that the
full actuarial cost of using the temporary service be paid
for by the employee. There is no general fund expenditure
involved in this proposal. The Department of
Administration's fiscal note reflects a designated fund
source, the Retired Employees Retirement Trust Fund,
contracted services are required for computer system
modifications.
Amendment #1: This amendment allows for the combination of
Public Employees' Retirement System (PERS) and Teachers'
Retirement System (TRS.) Senator Wilken moved for an
adoption saying that the fiscal note affected about 50
people around the state. He also noted that it was not his
intent to burden SB 85 with this issue, but he thought this
might be a good time to discuss its ramifications.
GUY BELL, Director, Division of Retirement & Benefits
Department of Administration stated that the department
supports SB 85. He then submitted a related fiscal note of
$4,000, for programming time, to accommodate this change of
allowing employees to count their temporary service to 20
and out, or 30 and out. It is the intent that the full
cost to opt for the service credit provision be borne by
the employee making that election.
Mr. Bell then spoke to the amendment. It adds public
service retirement benefit to the PERS statute. It would
allow a person who has at least a total of five years of
service in PERS and TRS combined, at least two of which are
in PERS and paid (monies within the system.) This person
could apply and receive a retirement benefit under PERS.
Presently, a person must have a minimum of five years in
PERS or eight years in the Teachers Retirement System.
This would allow combined five years from both systems to
qualify for a retirement benefit. He noted that this issue
boiled down to fairness. These folks have paid in their
contributions and the employer has contributed toward a
retirement benefit as well. He pointed out there is a
small number of individuals involved with this issue,
roughly about 50 statewide. The individuals who find
themselves in this situation (a no man's land), possibly
years ago may have been working for state government and
then switched from a PERS to TRS program. This amendment
would effectively address a gap in the law, to allow these
people to obtain a retirement benefit. If there is a
difference in cost between what the system has built up
through contributions and interest, and the expected pay
out of benefits over the lifetime of the member, the
employee would pay the actuarial cost at the time of their
retirement. This amendment would have a zero fiscal impact
because it does require the individual to pay any cost
calculated beyond what is allowed by the system on that
person's behalf.
Co-Chair Torgerson noted that a few years ago, when this
was offered, it had an attached fiscal note which read:
"This change would not have a measurable impact on employee
contribution rates, or the total funding ratio of PERS or
TRS. It would increase the PERS unfunded liability by
$492,000 and a TRS unfunded liability by $1.4 million. He
asked if these 50 individuals would pick up the cost of
$1.9 million of unfunded liabilities or was this situation
rectified by the amendment.
Mr. Bell responded that their actuary had not done this
type of calculation.
Co-Chair Torgerson assumed that something had changed in
their system to account for such a discrepancy.
BILL CHURCH, Retirement Supervisor, Division of Retirement
and Benefits noted that the shifting of liability states
the obvious, a movement of money from the TRS to the PERS
system. As they look at unfunded liability, they look at
assets over liabilities and come up with the difference.
By shifting this money, this means that that there is less
money in the total assets. This is where the statement as
noted by Senator Taylor comes from. This represents
monies that the actuary has not calculated as being paid
out. In other words, the system has unrealized gain
because someone has put in time, but they are not eligible
for benefits. This money is still in the employer's
account. What this has a tendency to do, not so much in
TRS, since they work on a flat constant employer rate, but
in PERS, it affects the amount of money in the employer
fund. The larger this fund is, the lower the employer's
rate tends to be. When someone puts their money in, the
interest that is gleaned on this amount over time,
(considering the employee leaves their contribution in the
system), this money tends to push down the employer
contribution rate. Through the proposed legislation, this
money would be utilized by the employee, which explains the
statement read by Co-Chair Torgerson. Technically, there
is fundamentally no change to the rate of the fund itself,
due to the amount of employees affected.
Co-Chair Torgerson stated that he appreciated the
explanation and added that he would require a zero fiscal
note stating as such.
SFC-00 # 8, Side A
Co-Chair Parnell wondered about this bill and its purpose
to rectify a situation similar to one that might take place
in the private sector. He pointed out that people make
career changes, from one job to the next, without a clear
purpose to retirement benefits. He asked if this was part
of the argument.
Mr. Bell gave an extreme example of an employee who might
work eleven and one-half years between PERS and TRS, 4 and
one-half in PERS and 7 and one-half years in the TRS and
not be eligible to receive a retirement benefit.
Co-Chair Parnell noted that these are career choices that
people make.
Mr. Bell added that the least restrictive system is PERS,
which requires a total of five years of service. If
someone has less than five years of service in PERS, the
only entitlement that someone would have, is to their own
contributions plus interest. They are not entitled to
retirement benefits. This new legislation allows for a
person who has at least five years of service between PERS
and TRS effectively, entitled to receive a retirement
benefit in the future. This seems reasonable to the
department.
Co-Chair Parnell asked whether the judicial system came
under a different retirement system.
Mr. Bell answered affirmatively.
Co-Chair Parnell asked how this department would be treated
under a PERS and TRS scenario. If someone only had 4 and
one-half years in PERS and then went to the Judicial
system, could that person work a year in the latter and
still link up for a benefit under this new legislation.
Mr. Church responded that these two retirement systems were
not linked at all. These have been set up as different
retirement systems, focusing on specific groups of people.
They were originally established individually and funded
separately. The only current link between the systems, is
between PERS and TRS. If a person is vested in one system
they can apply for a conditional service benefit only if
they have a minimum of two years paid in the other
companion system. Each benefit and the rate an employer
pays are separate.
Co-Chair Parnell added that as a policy matter if it is
good for one employee, it should be good for another. He
asked if they had looked at the overall state retirement
system to see how many different ones there were and how
they could be linked if deemed appropriate.
Mr. Bell responded that the basic retirement systems in the
state are PERS, TRS, Judicial, and the Elected Public
Officers Retirement System (EPORS) which is a 60-person
retirement system and one that existed for a very short
period of time.
Senator Donley thought that the Employee Retirement Income
Security Act (ERISA) required no more than a five-year
vesting. He asked if the reason that TERS is eight years
is because it is a state sovereignty question.
Mr. Bell responded that the state was not subject to ERISA.
Senator Green asked if this proposed legislation would
apply only if someone qualified for benefits in neither
system.
Mr. Church responded affirmatively.
EARL CLARK, former professor, University of Alaska, and
Project Coordinator, Department of Public Safety testified
in favor of the proposed legislation. He outlined for the
Committee, his work history over the years, the combination
of which did not count towards retirement. He built up
service in both systems, but does not have a retirement.
He stated that this legislation rectifies a situation for
employees that have served the State of Alaska.
CLARKE DAMON, testified in support of SB 85. He stated
that his career was in education and throughout this period
he participated in six different retirement programs. He
receives $88 from the Carpenter's union. He then gave a
detailed synopsis of his work history for the Committee.
Mr. Damon calculated his contributions to each of the
departments of which he had the opportunity to work for,
along with the contributions made by the State into his
retirement. As of July 1997, the balance of these funds
was $69,000 for his contributions and $139,000 from the
fund earnings. This retirement would work out to be
$606.00 monthly, $237.00 for his benefit and $348.00 for
health benefits. After 18 years from the date of
retirement, the total unrealized benefit to Mr. Damon would
total $584,000. Based on an average life expectancy, this
total would go up to $704,000 at an eight-percent earnings
rate of $4703.00 per month. At this present time, Mr.
Damon is not eligible to receive any of these monies, due
to the limitations of the present legislation. Mr. Damon
made the point that he was at the mercy of reorganizations
of departments and/or reclassifications of jobs.
MICHAEL DEAN, testified by teleconference in Anchorage in
support of SB 85. He urged the Committee to do whatever
was necessary to expedite this legislation.
Senator Taylor requested that the Division of Retirement &
Benefits provide a fiscal note incorporating changes in the
proposed amendment. Amendment #1 was TABLED. The bill was
held in Committee.
ADJOURNED
Senator Torgerson adjourned the meeting at 10:59 am.
SFC-00 (1) 1/21/00
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