Legislature(2007 - 2008)SENATE FINANCE 532
05/02/2007 01:30 PM Senate FINANCE
| Audio | Topic |
|---|---|
| Start | |
| SB124 | |
| SB125 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 125 | TELECONFERENCED | |
| += | SB 124 | TELECONFERENCED | |
| += | SB 104 | TELECONFERENCED | |
| + | TELECONFERENCED |
MINUTES
SENATE FINANCE COMMITTEE
May 2, 2007
2:06 p.m.
CALL TO ORDER
Co-Chair Bert Stedman convened the meeting at approximately
2:06:05 P M.
PRESENT
Senator Lyman Hoffman, Co-Chair
Senator Bert Stedman, Co-Chair
Senator Kim Elton
Senator Donny Olson
Senator Joe Thomas
Senator Fred Dyson
Also Attending: DAVE GRAY, Chief of Staff to Senator Olson; GUY
BELL, Assistant Commissioner, Department of Labor and Workforce
Development; MILES BAKER, Staff to Senator Stedman; KEVIN
BROOKS, Deputy Commissioner, Department of Administration; KATHY
WASSERMAN, Alaska Municipal League
Attending via Teleconference: From Anchorage: MIKE ANDREWS,
Director, Alaska Works Partnership Inc.; From Fairbanks: MICHAEL
SEXTON, Executive Director, Mechanical Contractors; From an
Offnet Location: LARRY SEMMENS, Finance Director, City of Kenai
SUMMARY INFORMATION
SB 124-ALASKA WORKFORCE INVESTMENT BD ALLOCATION
The Committee heard from the bill's sponsor, the Department of
Labor and Workforce Development, and took public testimony. The
bill was held in Committee.
SB 125-PERS /TRS CONTRIBUT'NS; UNFUNDED LIABILITY
The Committee reviewed and adopted a committee substitute. An
explanation of the committee substitute was provided by Co-Chair
Stedman's staff; the bill's fiscal note was explained by the
Department of Administration, and public testimony was heard.
The bill reported from Committee.
SB 104-NATURAL GAS PIPELINE PROJECT
This bill was scheduled but not heard.
2:07:08 PM
CS FOR SENATE BILL NO. 124(L&C)
"An Act relating to unemployment contributions for the
Alaska technical and vocational education program and to
the allocation of money appropriated to the Alaska
Workforce Investment Board; and providing for an effective
date."
This was the first hearing for this bill in the Senate Finance
Committee.
Co-Chair Stedman specified that the intent today was to hear an
explanation of the bill from its sponsor, hear public testimony,
and address Committee questions. The bill would be held in
Committee.
2:07:40 PM
Senator Olson, the bill's sponsor, informed the Committee that
this legislation would increase training opportunities for the
workforce that would be required to support the anticipated
Alaska gas pipeline project. The University of Alaska
participated in the development of the bill.
2:08:29 PM
DAVID GRAY, Chief of Staff to Senator Olson, explained that the
original version of the bill solely proposed expanding the
Alaska Training and Vocational Education Program's (ATVEP)
vocational and technical (Voc-Tec) training opportunities to
include the Voc-Tec training center in Nome. Subsequently
however, as specified in the Senate Labor and Commerce (L&C)
committee substitute before the Committee, the training
opportunities were broadened as the result of discussions with
Alaska Work Products, Inc. and the University.
Mr. Gray noted that to support the additional training
opportunities, funding for ATVEP would be increased as reflected
in the Department of Labor and Workforce Development's revised
fiscal note dated April 27, 2007.
Mr. Gray pointed out that the funding levels for current ATVEP
participants would be increased under this legislation and three
additional Voc-Tec entities would be added: the Northwest Alaska
Career and Technical Center in Nome; the Delta Career
Advancement Center, and the Alaska Works Partnership Program
(AWPP). AWPP is "a consolidation of many union training programs
that are available to both union and non-union Alaskans".
Mr. Gray communicated that AWPP has a history of working with
the University and technical centers throughout the State,
specifically those in rural areas, to train individuals.
Mr. Gray clarified that ATVEP's current and proposed funding
levels are depicted on page 3 of the revised fiscal note.
Existing program participants' funding levels would simply be
increased were the legislation adopted; else wise they would be
unaffected.
2:11:38 PM
Senator Dyson asked how the school selections were made.
2:12:08 PM
Mr. Gray reiterated that the original bill only proposed
expanding the program to include the North Arctic Career Center
in Nome. The Delta Career Center and the Alaska Work Products
training program were added at the recommendation of the
University and Alaska Work Products, Inc.
2:12:35 PM
Senator Dyson qualified his concern. The question was whether
other qualified Voc-Tec training schools had been considered or
notified of this opportunity.
2:13:01 PM
Mr. Gray was uncertain whether "a broad solicitation" had been
conducted. To that point however, he attested that the
University was aware of the spectrum of Voc-Tec programs in the
State. The Alaska Works Partnership program has also coordinated
Voc-Tec efforts throughout the State.
Mr. Gray emphasized that the intent of this legislation was to
enhance pipeline construction training center opportunities.
2:13:57 PM
Senator Dyson worried that only government or union schools had
been considered to the detriment of private trade schools.
2:14:23 PM
GUY BELL, Assistant Commissioner, Department of Labor and
Workforce Development, informed the Committee he was available
to answer questions about the Department's fiscal note.
No questions were forthcoming.
2:15:05 PM
MIKE ANDREWS, Director, Alaska Works Partnership Inc., testified
via teleconference from Anchorage and attested to the benefits
the bill would provide. It "would significantly increase the
ability of our State's trained workers for good paying jobs in
Alaska, particularly those in construction and pipeline
construction jobs".
Mr. Andrews stated that Alaska Works Partnership has a good
working relationship with the training centers supported by
ATVEP. Alaska Works Partnership has trained hundreds of workers
from all regions of the State, including rural and remote areas.
Programs include building construction, highway construction,
student programs, and electrical and plumbing programs.
Mr. Andrews also noted that training is provided regardless of
union or non-union status.
Mr. Andrews informed the Committee that the bill is supported by
a wide range of the State's construction industry including
Associated General Contractors of Alaska, numerous homebuilder
associations in the State, the North Slope Contractors
Association, Bristol Bay Housing Authority, and Wilder
Construction. Several school districts also work with Alaska
Works Partnership to train youth. The entities that support the
bill are involved in such things as road construction,
commercial and residential building construction, and pipeline
construction in rural and urban areas of the State.
2:18:08 PM
Mr. Andrews addressed Senator Dyson's concern regarding how the
training entities were chosen. For the past several years, the
Legislature selected six entities to receive State Voc-Tech
training funds: the University of Alaska, AVTEC, Kotzebue, SAVEC
in King Salmon, Yuut in Bethel, and the Galena Regional Training
Center. It has been determined that additional training centers
were necessary and places such as the Delta Career Advancement
Center and the Nome training center were recommended.
Mr. Andrews stated that Alaska Works Partnership was "engaged"
because it "was constructing a pipeline training facility in
Fairbanks" that would offer four types of construction training.
Mr. Andrews urged the Committee to advance the bill.
2:19:10 PM
Senator Thomas acknowledged there being widespread support for
vocational technical training. While there has been mention of
school districts' involvement with construction training
programs, he has not heard about an outreach to the State's
military population; particularly young veterans.
2:19:36 PM
Mr. Andrews informed the Committee that Alaska Works Partnership
offers a statewide "Helmets to Hardhats" program with outreach
to veterans, their spouses, particularly those involved with the
Alaska National Guard and National Guard Reserves. He shared
details of the program and characterized it as "a very active
program". Only one other state has such a program.
2:20:19 PM
MICHAEL SEXTON, Executive Director, Mechanical Contractors of
Fairbanks, testified via teleconference from Fairbanks on behalf
of contractors in the welding, plumbing, and pipefitting
industry. He appreciated Senator Olson's effort to expand this
training program as these contractors place tremendous emphasis
on hiring local Alaskan workers. They have worked for the past
six years with Alaska Works Partnership to further training and
hiring of rural Alaskans. Expanding this program would
strengthen the Alaska workforce that will be required to support
the pipeline industry. It would also support the operation of
the Fairbanks pipeline training center. He urged the Committee
to support the bill.
2:22:38 PM
Co-Chair Stedman invited Guy Bell to discuss the Department's
$2,912,200 fiscal note dated April 27, 29007. He also noted the
bill was accompanied by a $129,600 fiscal note from the
University, dated April 30, 2007. A one page spreadsheet titled
"SB 124: Allocation Changes to Alaska Workforce Investment"
[copy on file] has been developed by his office for reference
purposes.
Mr. Bell directed attention to the comparison of current and
proposed Program funding as depicted on page 3 of the fiscal
note. The total status quo program funding for FY 08 is
estimated to be $6,043,600. The cost of the program would be
expanded to $9,166,100 if this bill was enacted.
2:24:41 PM
Mr. Bell stated that the net program increase of $3,122,500
consisted of the projected increase in program revenues and the
increase in distribution amounts to the existing program
entities and the three new program participants.
2:26:35 PM
Senator Olson thanked the Committee for scheduling this hearing
on the bill. It would benefit the future needs of Alaska and its
citizens.
The bill was HELD in Committee.
2:27:13 PM
SENATE BILL NO. 125
"An Act relating to the accounting and payment of
contributions under the defined benefit plan of the Public
Employees' Retirement System of Alaska, to calculations of
contributions under that defined benefit plan, and to
participation in, and termination of and amendments to
participation in, that defined benefit plan; making
conforming amendments; and providing for an effective
date."
This was the fifth hearing for this bill in the Senate Finance
Committee.
Co-Chair Stedman specified that this legislation, referred to as
the "cost share bill", pertained to the retirement funds of the
majority of municipalities in the State.
Co-Chair Stedman advised that a new committee substitute had
been developed. The intent is that this forthcoming committee
substitute, which incorporated the issues discussed by the
Committee, would be reported from Committee.
2:27:45 PM
Co-Chair Hoffman moved to adopt committee substitute, Version
25-GS1074\O, and it's accompanying fiscal notes as the working
documentation.
Co-Chair Stedman pointed out that Members' bill packets also
contained a "side-by-side comparison" titled "Analysis of
Changes CSSB 125 vs. SB 125" [copy on file] which compared
language differences between Version "O" and the original
version of the bill. A five page spreadsheet titled "CSSB 125
Rate Backup: Impact on 22% Employer Rates of Hold Harmless and
Recoup provisions" [copy on file] had also been distributed.
2:28:47 PM
MILES BAKER, Staff to Co-Chair Stedman, directed his remarks to
the "Analysis of Changes CSSB 125 vs. SB 125" side-by-side
comparison. Sections of Version "O" that mirrored language in
the previously adopted committee substitute, Version 25-
GS1074\K, would not be discussed as those changes had been
addressed during the overview of that committee substitute on
April 28, 2007.
Mr. Baker announced that the first change that would be
addressed was the addition of a new section, Sec. 4, on page 3
beginning on line 5. This section addressed concerns regarding
how the 22 percent Public Employees Retirement System (PERS)
employer contribution rate would be allocated. It clarified that
employers must allocate three percent of the 22 percent to the
Health Reimbursement Arrangement (HRA). Part of the confusion
was that HRAs were specified in a different State Statute than
the Statute pertaining to the contribution rate.
2:31:24 PM
Mr. Baker identified the next change as being in Sec. 19, page 9
line 14. While Sec. 4 addressed the HRA allocation concern
regarding PERS, this change would similarly clarify the Teachers
Retirement System (TRS) employer contribution rate allocation to
the HRA account.
2:32:42 PM
Mr. Baker announced that the most substantial change in Version
"O" is in Sec. 21, page 9, line 20. He referred the Committee to
the aforementioned five page spreadsheet. Sec. 21 addressed the
concern that the hold harmless provisions in the previous bill
versions only applied to PERS employers. This section was
revised to include TRS employers who employed PERS members.
Mr. Baker continued. Sec. 21(a) established the appropriate
contribution rate for FY 2008 (FY 08). This enabled those
employers "who had paid excess into the system over the last
three years to recoup that excess amount".
Mr. Baker specified that Sec. 21(b) would specify the employer
contribution rates for FY 09 through FY 12.
Mr. Baker also communicated that the five-year hold-harmless
provision "would bring some parity" to those employers whose
contribution rates had been "substantially below" 22 percent.
This parity effort also considered those entities who had been
paying substantially more than 22 percent and who would
experience "a substantial savings in their general fund budget".
Mr. Baker directed attention to the five page spreadsheet and
noted that the information it depicted, in essence, "justifies
the percentages that are in the bill". The first two pages deal
with the PERS political subdivisions; page 3 deals with entities
referred to as "PERS Other". This would include entities such as
the Alaska Municipal League, the Southeast Regional Resource
Center, and the Tlingit Housing Regional Housing Authority. Page
4 depicts school districts and page 5 is a summary of the total.
2:35:36 PM
Mr. Baker communicated that the spreadsheet contains information
on projected wage bases, entities' FY 07 contribution rates, the
amount paid in FY 07 as calculated at the FY 07 employer
contribution rate formula, the Alaska Retirement Management
Board (ARMB) recommended rate for FY 08, and the "gain/loss" on
that rate as affected by the 22 percent "fix".
Mr. Baker, using the spreadsheet as a tool, exampled the savings
that an entity such as Fairbanks, whose prior contribution rates
were significantly above the proposed 22 percent employer
contribution rate, would experience.
Mr. Baker also exampled the affect of the proposed 22 percent
rate on entities whose FY 07 contribution rate or FY 08 rate,
based on the ARMB adopted rate, was below 22 percent. Any such
community with a dollar amount showing in Column (9) would be
subject to the "hold-harmless" credit provision. The result of
that recalculation is depicted in Column (10).
Mr. Baker next spoke to columns (12) through (18). Any community
that had paid an excess contribution amount in FY 05, FY 06, or
FY 07 would have an amount reflected in Column (15). The total
excess amount paid by communities was $7,194,207. These entities
rates would be adjusted to allow them to recoup their overage in
the fiscal year following the enactment of this legislation.
Mr. Baker specified however that some of the communities that
made excess contributions had also contributed at a rate less
than 22 percent. They would also be subject to the hold harmless
provision. The total affect of the credit adjustments reflected
in the bill on their rate was depicted in Columns (19), (20),
and (21).
AT EASE 2:39:26 PM / 2:39:38 PM
Mr. Baker continued to address the calculations reflected in
Columns (19) through (21). The provisions pertinent to these
adjustments are included in Sec. 21 of the bill.
2:40:08 PM
Mr. Baker informed that the entities depicted on page 3 of the
spreadsheet were not addressed in the previous committee
substitute, as it had not included provisions pertinent to "PERS
Other" employers. The format of the information on this page
mirrored that of pages 1 and 2.
Mr. Baker stated that page 4 of the spreadsheet depicted the
affect of this legislation on school districts. The hold-
harmless provisions would also apply to districts such as the
Nenana School District, which had previously paid a contribution
rate below 22 percent. The total hold-harmless amount for school
districts was $1,102,187.
2:41:38 PM
Mr. Baker referred Members to the totals depicted on page 5. The
total five year annual hold-harmless amount is specified at
$5.15 million. He allowed that slight adjustments to this amount
might occur as payrolls fluctuated. The State would be required
to contribute any amount required beyond the maximum 22 percent
employer contribution rate.
Mr. Baker reminded the Committee that the City of Soldotna had
contributed an excess amount of one million dollars in FY 05.
Even after re-calculating their FY 08 rate to zero, that overage
could not be recouped in one year. Thus, they were added to the
hold harmless column and their rate would be adjusted over a
five-year period as reflected on page 5. As a result, $255,246
was added to the $5.15 million hold-harmless amount for FY 08.
Mr. Baker also noted that "one-time FY 08 rebate costs to the
State" of $7,194,207 would also be added for a total FY 08 cost
of $12,579,579. The State's costs for each of the following four
years would be $5,385,372. The rebate expense would not be a
factor.
Mr. Baker noted that this expense was a component of the
Department of Administration's fiscal note.
2:43:58 PM
KEVIN BROOKS, Deputy Commissioner, Department of Administration,
thanked Mr. Baker for developing the five-page spreadsheet. It
was helpful to the Department when they compiled this
complicated fiscal note.
Mr. Brooks reminded the Committee that Governor Sarah Palin
based her FY 08 operating budget on the employer contribution
rates that were calculated last fall. The State's PERS
contribution rate at that time was projected to be 44 percent.
The average PERS employer rate at the time was 39 percent.
Mr. Brooks specified that "the increases for that rate increase"
have since been "backed out" of the operating budget. The
operating budget in its current form specifies 22.5 percent for
the State's employer contribution rate. This was the current FY
07 rate. That number was the starting point for developing the
Department's fiscal note.
2:45:40 PM
Mr. Brooks also noted that the FY 08 operating budget, as
presented in HB 95-APPROP: OPERATING BUDGET/LOANS/FUNDS,
included a $180 million appropriation for PERS. That number
should be subtracted from the $193,113,200 FY 08 expense
depicted in the April 30, 2007 fiscal note. Thus "the
differential" increase is $13,100,000. $12,600,000 of that
reflects the $5.4 million in hold harmless money and the $7.2
million rebate provision. The $500,000 remaining variance could
be the result of various changes in formulas.
2:47:22 PM
Mr. Baker attested that a variance in the numbers was
inevitable, "depending on which numbers were run". The
calculation was based on projected salaries for all the
employers and the FY 05 valuations. The mechanics of the
calculation would attribute to the seemingly "half million
dollar rounding error".
Co-Chair Stedman acknowledged the explanation.
2:47:59 PM
Mr. Brooks noted that this concluded his fiscal note comments.
He was available to answer Committee questions.
2:48:11 PM
Senator Olson asked whether the $180 million the Governor
included in the FY 08 operating budget should also be subtracted
from the $218,287,000 FY 09 expense depicted on the fiscal note.
Mr. Brooks clarified that the entire amount depicted on the
fiscal note would be required in the out-years. As specified in
the bill, the State would be obligated to provide any amount
beyond the 22 percent paid by employers. He understood that
going forward that annual appropriation would not be included in
the operating budget. Thus, $218,287,000 would be required in FY
09. As the result of provisions in the bill, this amount is
expected to decline in FY 2011.
2:49:19 PM
LARRY SEMMENS, Finance Director, City of Kenai, testified via
teleconference from an offnet location and thanked the
Committee, the Legislature, and the Administration for the hard
work on this bill. He was pleased with the results and supported
the bill being moved forward.
Mr. Semmens informed the Committee that the Alaska Retirement
Management Board (ARMB) recently passed a resolution specifying
that if the direction of the bill continued "in its present
form", they would "support lowering the employer average rate to
32.51 percent".
2:50:18 PM
Co-Chair Stedman thanked Mr. Semmens for the contribution he has
made in addressing this issue.
2:50:28 PM
KATHY WASSERMAN, Alaska Municipal League (AML), spoke in "full
support" of the bill. She also appreciated the efforts exerted
to develop this bill; particularly those of Commissioner Annette
Kreitzer and Melanie Millhorn with the Department of
Administration; Miles Baker with Co-Chair Stedman's office;
Larry Semmens, Michael Lamb, and Co-Chair Stedman.
Ms. Wasserman expressed that this legislation would provide
"some closure to a very, very huge controversial issue" to AML
members and others.
2:52:00 PM
Co-Chair Hoffman acknowledged the effort put into this bill;
however, he exclaimed there being "no rhyme or reason to the
problems that people are experiencing above the 22 percent, and
I think that that goes to the Chairman when he looked at
resolving this problem. There still is some inequities in what I
perceive as assistance to those communities and we are still
contemplating a revenue sharing bill that can try to bring some
resemblance of fairness to the other communities that aren't
participating in PERS".
Co-Chair Hoffman asked Ms. Wasserman whether AML continued to
support the development of "a revenue sharing program with some
resemblance of fairness to offset the big beneficiaries of this
legislation".
Ms. Wasserman answered in the affirmative. AML hoped there would
be "some cash infusions" to help those communities that are in
need.
2:53:40 PM
Senator Elton voiced appreciation for the work conducted by Co-
Chair Stedman and his staff on this bill.
Co-Chair Hoffman repeated his earlier motion to adopt committee
substitute, Version 25-GS1074\O as the working document.
There being no objection, Version "O" was ADOPTED.
Co-Chair Hoffman moved to report the bill from Committee with
individual recommendations and accompanying fiscal notes.
Co-Chair Stedman repeated the motion and specified that the
spreadsheet would be included as part of the fiscal note.
There being no objection, CSSB 125(FIN) was REPORTED from
Committee with new $193,113,200 fiscal note from the Department
of Administration, dated April 30, 2007.
[NOTE: Co-Chair Stedman ordered a four-page March 29, 2007 Buck
Consultants response letter [copy on file], addressed to Kathy
Lea, Retirement Benefits Manager, Department of Administration,
regarding an unidentified PERS Analysis Request [copy not
provided] to be attached to the Committee Report.]
Co-Chair Stedman thanked the Committee for the attention
provided to this bill. It was a step forward in addressing the
State's retirement system issue.
2:55:25 PM
Co-Chair Stedman conducted housekeeping of the next day's
Committee meeting schedule.
ADJOURNMENT
Co-Chair Bert Stedman adjourned the meeting at 2:55:55 PM
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