Legislature(2013 - 2014)SENATE FINANCE 532
04/12/2014 10:00 AM Senate FINANCE
| Audio | Topic |
|---|---|
| Start | |
| SB193 | |
| SB209 | |
| SB141 | |
| SB209 | |
| SB220 | |
| HCR15 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 220 | TELECONFERENCED | |
| + | SB 209 | TELECONFERENCED | |
| + | SB 193 | TELECONFERENCED | |
| + | SB 141 | TELECONFERENCED | |
| += | HB 32 | TELECONFERENCED | |
| += | HCR 15 | TELECONFERENCED | |
| + | TELECONFERENCED |
SENATE FINANCE COMMITTEE
April 12, 2014
10:12 a.m.
10:12:35 AM
CALL TO ORDER
Co-Chair Meyer called the Senate Finance Committee meeting
to order at 10:12 a.m.
MEMBERS PRESENT
Senator Pete Kelly, Co-Chair
Senator Kevin Meyer, Co-Chair
Senator Anna Fairclough, Vice-Chair
Senator Click Bishop
Senator Mike Dunleavy
Senator Lyman Hoffman
Senator Donny Olson
MEMBERS ABSENT
None
ALSO PRESENT
Senator Peter Micciche; Senator Bill Wielechowski; Senator
Peter Micciche, Sponsor; Angela Rodell, Commissioner,
Department of Revenue; Michael Barnhill, Deputy
Commissioner, Department of Administration; Gary Bader,
Chief Investment Officer, Treasury Division, Department of
Revenue.
PRESENT VIA TELECONFERENCE
James Nagel, Mechanical Inspection Manager, Department of
Labor and Workforce Development, Anchorage; John MacKinnon,
Executive Director, Associated General Contractors,
Anchorage; Brother Tom Patmor, Self, Clam Gulch; Jenny
Olendorff, Self, Soldotna; Chrystal Schoenrock, Business
Owner, Nikiski; Susan Smalley, Volunteer, Central Pen
Hospital, Kenai; John Parker, Self, Kenai; Gary Superman,
Business Owner, Nikiski; Patricia Patterson, Owner, Lucky
Lady Tobacco, Soldotna; Carmen Lunde, Kodiak Cabaret,
Hotel, Restaurant, and Retailers Association (CHARR),
Kodiak; George Gatter Jr., Self, Kodiak; Becky Stoppa,
Self, Wasilla; Sara Wilber, Self, Wasilla; Ashley Peltier,
Self, Wasilla; Terry Snyder, Self, Palmer; Elizabeth
Ripley, Executive Director, Mat-Su Health Foundation,
Wasilla; Robin Minard, Self, Wasilla; Janet Kincade,
Business Owner, Palmer; Mike Gutierrez, Director, American
Cancer Society Alaska, Anchorage; Marge Stoneking, American
Lung Association, Anchorage; Heather Aronno, American
Cancer Society Action Network, Anchorage; Dale Fox,
President and CEO, Alaska CHARR, Anchorage; Brendan Doyle,
AK Vapors Club; Isaac Howell, Owner, Cold Vapes 907,
Anchorage; Brian Caton, Owner, Northern Lights Vapor
Company, Anchorage; Melissa G. Mudd, Self, Palmer; David
Hubbard, Self, Cold Vapes 907; Linda Gutierezz, Self,
Anchorage; Matthew Rossiter, Self, Anchorage; Cindy Powell,
Self, Anchorage; Ellen Adlam, Consumer Representative,
Alaska Primary Care Association, Anchorage; Angelo Reale,
Owner, Reale Vapes, Wasilla; Logan Kling, Self, Wasilla;
George Pierce, Self, Kasilof; Richard Fields, Self,
Wasilla; Cory Frisby, Self, Wasilla; Fred Edelen, Self,
Wasilla; Jackie Ness, Self, Wasilla; Jennifer Adzima, Self,
Anchorage; Betty MacTavish, Self, Cordova; Zoya Ponomareva,
Self, Anchorage; Aaron Cardwell, Mad Murdocks, Anchorage;
Kathy Jackman, Self, Palmer
SUMMARY
SB 141 NATIONAL GUARD ID & VEHICLE FEES
SB 141 was HEARD and HELD in committee for
further consideration.
SB 193 CONTRACTORS: BONDS; LICENSING
SB 193 was REPORTED out of committee with a "do
pass" recommendation and with previously
published indeterminate fiscal notes: F1(CED) and
F2(LWF).
SB 209 REGULATION OF SMOKING
SB 209 was REPORTED out of committee with a "do
pass" recommendation and with a new indeterminate
fiscal note from the Department of Health and
Social Services; four previously published fiscal
impact notes: FN1(DOT), FN2(DOT), FN3(DOT), and
FN4(DOT); and previously published zero fiscal
notes: FN5(ADM) and FN6(DEC).
SB 220 PERS/TRS STATE CONTRIBUTIONS
SB 220 was HEARD and HELD in committee for
further consideration.
CSHB 32(FIN)
LINES OF BUSINESS ON BUSINESS LICENSE
CSHB 32(FIN) was SCHEDULED but not HEARD.
CSHCR 15(FIN)
TASK FORCE ON UNMANNED AIRCRAFT SYSTEMS
CSHCR 15(FIN) was SCHEDULED but not HEARD.
SENATE BILL NO. 193
"An Act relating to bonds required for contractors."
10:13:54 AM
SENATOR PETER MICCICHE, explained that the legislation
would increase the license bond amounts to the following:
general contractors, $25,000; general contractors who
perform only residential, $20,000; mechanical or specialty
contractors, $10,000; and contractor performing minimal
work, $5,000. The construction industry, which will be
impacted by the legislation, brought forth the
recommendation to make an adjustment in the bond amounts.
given the increase in inflation over the last 30 years, the
industry felt an increase was long overdue. Purchasing a
bond generally costs a small percentage of the total amount
of coverage, thus providing a significant benefit to the
public and other businesses in relation to the small cost
increase as a result of the legislation. He stated that SB
193 also corrected a loophole in the statute. All
professional contractors are required to be licensed and
file a bong. A notable exemption is that the law did not
intend to impose license and bond requirements upon non-
professional contractors such as family members, friends,
or neighbors who get paid for a small amount of work.
Current law allows work under $10,000 to be exempt and this
wording allowed individuals who sell themselves as
professionals to avoid the statutory licensure
requirements. In these cases, the public has no recourse
against unlicensed and un-bonded contractors.
Co-Chair Meyer stated that he has some people online that
would be able to testify about the legislation. Senator
Micciche stated that those testifiers may be able to
explain how the current bond rates hamper the Department of
Law's consumer protection activities. He stated that the
bill was about modernization and fairness.
Co-Chair Meyer wondered how the bill would impact the
handyman. Senator Micciche replied that the bill would not
impact the handyman. If that individual advertises, it
would not affect the individual. The only impact the bill
might have is that it would save the individual
approximately $250 per year, because that person currently
was bonded at the next highest level of contractor.
Senator Micciche stressed that if someone chose to not
follow the current law by not being bonded as a contractor,
that person would still be able to become bonded. The bill
provided savings for the smaller contractors, who were
fully bonded, licensed and insured.
10:18:07 AM
Senator Dunleavy remarked that he had many questions, but
would not know how to approach the topic without seeing how
the legislation was implemented. He wondered how the bill
would affect someone who was providing $5000 worth of work.
Senator Micciche asked if that person would be advertising
that work.
Senator Dunleavy stated that the individual would not be
advertising their work. Senator Micciche stated that the
legislation would change the bonding for the few people
that were not advertisement.
Senator Dunleavy queried the requirement. Senator Micciche
responded that the legislation changed the requirement at
the $5000 level, and would add about $250 per year to that
person's business cost.
Senator Dunleavy wondered how the legislation would affect
a person who advertised. Senator Micciche replied that
nothing would change for the person who advertised.
Senator Bishop felt that the legislation held a universal
benefit, based on the number of letters of support. He felt
that the legislation would be of benefit to the smaller
contractors, because the creditors may have improved
confidence that the contractor will complete a project or
receive funding to initiate a project.
Senator Bishop queried the Department of Labor and
Workforce Development's (DLWF) position on the legislation.
JAMES NAGEL, MECHANICAL INSPECTION MANAGER, DEPARTMENT OF
LABOR AND WORKFORCE DEVELOPMENT, ANCHORAGE (via
teleconference), stated that DLWF was neutral on the bill.
He stated that the legislation provided some benefit to the
consumer and to the current group of business people that
were operating under the current handyman law. Those
individuals were currently prohibited from advertising that
would lead a reasonable person to believe that they are a
contractor. By requiring bonding, that handyman would be a
licensed contractor. The legislation would open up their
opportunities for business and advertising.
Senator Dunleavy queried the groups that could be
negatively impacted by the bill. Mr. Nagel felt that the
bill would only increase the cost by about $250 per year
for the individuals who were operating solely under a
business license, but were not a licensed contractor. Under
current law, if that individual embarked on a project that
was valued at $2500 or more, that individual already had to
carry the same liability insurance as a general contractor,
which was the largest expense.
10:23:50 AM
Senator Olson wondered how the bill would affect owner
builders. Senator Micciche replied that the bill would not
affect owner builders, unless there was a hired contractor.
JOHN MACKINNON, EXECUTIVE DIRECTOR, ASSOCIATED GENERAL
CONTRACTORS, ANCHORAGE (via teleconference), testified in
support of the legislation. He stated that he began work on
the legislation four years prior, and engaged other trade
associations. At that time, the home building market was
not very robust, so there was not a strong effort to move
the legislation. The home market had recently improved, so
the organizations felt the pressure to promote the
legislation. He stated that there was a focus on ensuring
that the levels were beneficial to all involved. The level
was ultimately agreed upon, and the level was close to what
the 1983 levels would have been, if they had been adjusted
for inflation. He stressed that SB 193 was about increased
bond amounts for contractors, to ensure that the
individuals in the contracting business receive a license
and a bond. He stressed that neighbors, friends, etc.,
could assist in building, but if they begin to advertise,
they must obtain a bond.
Co-Chair Meyer CLOSED public testimony.
Co-Chair Meyer wondered why the fiscal notes were
considered indeterminate. Senator Micciche replied that
DLWF was not sure how the finances would be impacted. He
stressed that the effects would be negligible, if any.
Co-Chair Kelly MOVED to REPORT SB 193 out of committee with
individual recommendations and the accompanying fiscal
notes. There being NO OBJECTION, it was so ordered.
SB 193 was REPORTED out of committee with a "do pass"
recommendation and with previously published indeterminate
fiscal notes: F1(CED) and F2(LWF).
10:29:00 AM
AT EASE
10:33:47 AM
RECONVENED
SENATE BILL NO. 209
"An Act prohibiting smoking in certain locations; and
providing for an effective date."
10:35:04 AM
BROTHER TOM PATMOR, SELF, CLAM GULCH (via teleconference),
He stated that he was a former smoker. He felt that
businesses should have smoking rooms, because many smokers
were forced outside into the freezing cold in order to have
a cigarette.
10:36:50 AM
JENNY OLENDORFF, SELF, SOLDOTNA (via teleconference), spoke
in support of the legislation.
10:37:48 AM
CHRYSTAL SCHOENROCK, BUSINESS OWNER, NIKISKI (via
teleconference), spoke against the legislation. She
testified that smokers should be given rights as much as
nonsmokers.
10:40:26 AM
SUSAN SMALLEY, VOLUNTEER, CENTRAL PEN HOSPITAL, KENAI (via
teleconference), spoke in support of the legislation. She
stressed that the effects of smoking was carried by the
entire community.
10:41:40 AM
JOHN PARKER, SELF, KENAI (via teleconference), stated that
he was a smoker, and testified in support of the
legislation. He stressed that cigarette smoking and
cigarette smoke was killing people.
10:43:28 AM
GARY SUPERMAN, BUSINESS OWNER, NIKISKI (via
teleconference), testified against the legislation.
10:46:24 AM
PATRICIA PATTERSON, OWNER, LUCKY LADY TOBACCO, SOLDOTNA
(via teleconference), spoke in opposition to the
legislation.
10:50:50 AM
CARMEN LUNDE, KODIAK CABARET, HOTEL, RESTAURANT, AND
RETAILERS ASSOCIATION (CHARR), KODIAK (via teleconference),
testified against the legislation.
10:53:21 AM
GEORGE GATTER JR., SELF, KODIAK (via teleconference),
testified against the legislation. He felt that an
individual had a right to smoke in a public place.
10:56:32 AM
BECKY STOPPA, SELF, WASILLA (via teleconference), testified
in support of the legislation, but spoke against the
exclusion of e-cigarettes and the opt out provision.
10:57:09 AM
SARA WILBER, SELF, WASILLA (via teleconference), spoke in
support of the legislation, but spoke against the exclusion
of e-cigarettes and the opt out provision.
10:57:55 AM
ASHLEY PELTIER, SELF, WASILLA (via teleconference),
testified in support of the legislation, but spoke against
the exclusion of e-cigarettes and the opt out provision.
10:58:33 AM
TERRY SNYDER, SELF, PALMER (via teleconference), urged
support of the legislation, but testified against the
exclusion of e-cigarettes and the opt out provision.
10:59:23 AM
ELIZABETH RIPLEY, EXECUTIVE DIRECTOR, MAT-SU HEALTH
FOUNDATION, WASILLA (via teleconference), testified in
support of the legislation, but spoke against the exclusion
of e-cigarettes and the opt out provision.
Co-Chair Meyer handed the gavel to Vice-Chair Fairclough.
11:02:02 AM
ROBIN MINARD, SELF, WASILLA (via teleconference), testified
in support of the legislation.
11:02:58 AM
JANET KINCADE, BUSINESS OWNER, PALMER (via teleconference),
testified in support of the legislation, but spoke against
the exclusion of e-cigarettes.
11:04:11 AM
MIKE GUTIERREZ, DIRECTOR, AMERICAN CANCER SOCIETY ALASKA,
ANCHORAGE (via teleconference), testified in support of the
legislation.
11:04:44 AM
MARGE STONEKING, AMERICAN LUNG ASSOCIATION, ANCHORAGE (via
teleconference), testified in support of the legislation,
but spoke against the exclusion of e-cigarettes and the opt
out provision.
11:05:53 AM
HEATHER ARONNO, AMERICAN CANCER SOCIETY ACTION NETWORK,
ANCHORAGE (via teleconference), testified in support of the
legislation, but spoke against the exclusion of e-
cigarettes and the opt out provision.
11:06:25 AM
DALE FOX, PRESIDENT AND CEO, ALASKA CHARR, ANCHORAGE (via
teleconference), spoke against the legislation. He felt
that the bars and restaurants should be exempted from the
legislation.
11:09:06 AM
BRENDAN DOYLE, AK VAPORS CLUB (via teleconference), spoke
against the legislation, because he felt that e-cigarettes
should be allowed in public spaces.
11:11:38 AM
ISAAC HOWELL, OWNER, COLD VAPES 907, ANCHORAGE (via
teleconference), testified against the legislation, because
he felt that e-cigarettes should be allowed in public
spaces.
11:13:42 AM
BRIAN CATON, OWNER, NORTHERN LIGHTS VAPOR COMPANY,
ANCHORAGE (via teleconference), quoted the Alaska
Constitution. He spoke against the legislation.
11:16:46 AM
Mr. Caton stressed that he would like to continue with his
testimony. Vice-Chair Fairclough stated that he was allowed
two minutes to testify.
Mr. Caton disagreed, because he had timed a testifier who
spoke for twelve minutes Vice-Chair Fairclough stated that
that was an invited testimony.
11:17:13 AM
MELISSA G. MUDD, SELF, PALMER (via teleconference),
testified in support of the legislation, but spoke against
the exclusion of e-cigarettes and the opt out provision.
11:17:57 AM
DAVID HUBBARD, SELF, COLD VAPES 907 (via teleconference),
testified against the legislation.
11:19:16 AM
LINDA GUTIEREZZ, SELF, ANCHORAGE (via teleconference),
testified in support of the legislation, but spoke against
the exclusion of e-cigarettes and the opt out provision.
11:20:07 AM
MATTHEW ROSSITER, SELF, ANCHORAGE (via teleconference),
testified against the legislation. He remarked that e-
cigarettes were helpful to helping him quit smoking.
11:22:06 AM
CINDY POWELL, SELF, ANCHORAGE (via teleconference),
testified in support of the legislation, but spoke against
the exclusion of e-cigarettes and the opt out provision.
11:23:41 AM
ELLEN ADLAM, CONSUMER REPRESENTATIVE, ALASKA PRIMARY CARE
ASSOCIATION, ANCHORAGE (via teleconference), testified in
support of the legislation, but spoke against the exclusion
of e-cigarettes and the opt out provision.
11:24:25 AM
ANGELO REALE, OWNER, REALE VAPES, WASILLA (via
teleconference), testified against the opt-out e-cigarettes
portion of the bill.
11:26:26 AM
LOGAN KLING, SELF, WASILLA (via teleconference), strongly
opposed the legislation.
11:27:10 AM
GEORGE PIERCE, SELF, KASILOF (via teleconference), spoke
against the legislation.
11:30:28 AM
RICHARD FIELDS, SELF, WASILLA (via teleconference),
testified against the legislation.
11:31:58 AM
CORY FRISBY, SELF, WASILLA (via teleconference), spoke
against the legislation.
11:32:31 AM
FRED EDELEN, SELF, WASILLA (via teleconference), spoke
against the legislation.
11:33:54 AM
JACKIE NESS, SELF, WASILLA (via teleconference), testified
against the legislation.
11:34:47 AM
JENNIFER ADZIMA, SELF, ANCHORAGE (via teleconference),
testified in support of the legislation.
11:35:18 AM
BETTY MACTAVISH, SELF, CORDOVA (via teleconference),
testified in support of the legislation.
11:36:23 AM
ZOYA PONOMAREVA, SELF, ANCHORAGE (via teleconference),
testified in support of the legislation, but spoke against
the exclusion of e-cigarettes and the opt out provision.
11:36:54 AM
AARON CARDWELL, MAD MURDOCKS, ANCHORAGE (via
teleconference), testified against the inclusion of e-
cigarettes in the legislation.
11:40:11 AM
KATHY JACKMAN, SELF, PALMER (via teleconference), testified
in support of the legislation, but spoke against the
exclusion of e-cigarettes and the opt out provision.
11:40:56 AM
Vice-Chair Fairclough stated that written testimony could
be submitted to the Senate Finance Committee by sending it
to senate.finance.committee@akleg.gov.
11:41:51 AM
Vice-Chair Fairclough CLOSED public testimony.
11:41:58 AM
AT EASE
11:42:34 AM
RECONVENED
SB 209 was HEARD and HELD in committee for further
consideration.
SENATE BILL NO. 141
"An Act relating to vehicle registration fees for
members of the Alaska National Guard."
11:43:01 AM
SENATOR BILL WIELECHOWSKI, explained the legislation. He
stated that the act would waive vehicle registration fees
for active members of the Alaska National Guard. There are
approximately 4,000 Alaskans serving in the Alaska Army
Guard and the Alaska Air Guard. He felt that their
dedication and service were greatly appreciated, and the
Guard provided support to the state and local governments
with fire suppression, flood management, and other
emergency services. Currently, Guard members receive free
hunting and fishing licenses, and other limited benefits.
Vice-Chair Fairclough stated that written testimony could
be submitted to the Senate Finance Committee by sending it
to senate.finance.committee@akleg.gov.
Vice-Chair Fairclough CLOSED public testimony.
SB 141 was HEARD and HELD in committee for further
consideration.
11:45:30 AM
AT EASE
11:45:42 AM
RECONVENED
11:46:06 AM
RECESSED
5:08:55 PM
RECONVENED
SENATE BILL NO. 209
"An Act prohibiting smoking in certain locations; and
providing for an effective date."
5:09:32 PM
Co-Chair Meyer noted that public testimony for the
legislation had concluded earlier in the day. He wondered
whether there were additional comments on the bill. He
thanked the sponsor for introducing the bill. He invited
the sponsor to address the committee.
SENATOR PETER MICCICHE, SPONSOR, addressed the bill. He
shared that he had been against the ordinance in Anchorage,
but was now a big proponent of a smoke-free workplace. He
referred to the restaurant Humpy's in Anchorage. The
ultimate goal was the health of Alaskans. He stressed that
the bill tried to save the state over $500 million
annually.
Co-Chair Meyer thanked the sponsor. He noted that he and
Vice-Chair Fairclough had been on the Anchorage Assembly
when the ordinance had come through. He recalled that the
business Chilkoot Charlie's had initially been opposed to
the ordinance, but it was now a proponent. He pointed to
the fiscal notes. He asked if the sponsor had comments on
the fiscal notes.
Senator Micciche commented on the fiscal notes.
Co-Chair Kelly MOVED to REPORT CSSB 209(HSS) out of
committee with individual recommendations and the
accompanying fiscal notes.
SB 209 was REPORTED out of committee with a "do pass"
recommendation and with a new indeterminate fiscal note
from the Department of Health and Social Services; four
previously published fiscal impact notes: FN1(DOT),
FN2(DOT), FN3(DOT), and FN4(DOT); and previously published
zero fiscal notes: FN5(ADM) and FN6(DEC).
5:15:38 PM
AT EASE
5:19:34 PM
RECONVENED
SENATE BILL NO. 220
"An Act relating to additional state contributions to
the teachers' defined benefit retirement plan and the
public employees' defined benefit retirement plan; and
providing for an effective date."
Co-Chair Kelly noted that the committee was hearing the
bill for the first time.
ANGELA RODELL, COMMISSIONER, DEPARTMENT OF REVENUE, pointed
to a PowerPoint presentation titled "PERS/TRS Funding
Solution" dated April 2014 (copy on file). She stressed
that pension funding, and its associated liability was a
concern for many years. She stated that she had evaluated
the history, and shared that there had been several Arm
Board meetings that addressed the severity and urgency of
the unfunded liability.
MICHAEL BARNHILL, DEPUTY COMMISSIONER, DEPARTMENT OF
ADMINISTRATION, pointed to slide 3, which outlined the
organization of the state's pension system. He stated that
the far left showed the DOR Treasury Division, the middle
showed the Alaska Retirement Management Board, and the
right showed the Department of Administration (DOA). He
moved to slide 4. He announced there were currently 27,000
active employees and close to 42,000 retirees. He looked at
slide 5 titled "Benefits." The state was currently paying
out $1 billion in benefits. All told the state was looking
at over $130 billion in benefit payments over the next 70
years. He stressed that the unfunded liablity was
approximately $11.9 billion
5:25:43 PM
Mr. Barnhill looked at the basic actuarial formula on slide
6. He stated that hopefully the amount would equal the
benefits. He stated that it was 7.5 percent for teachers,
and the amount typically did not change, but it had changed
in the past. He remarked that TRS had gone from 12 percent
to over 70 percent. He pointed to a variety of actuarial
assumptions. He turned to slide 7 titled "Events":
2002 - Milliman actuarial audit; dotcom collapse
2003 - FY 2002 valuations released with revised
assumptions. $4.1 billion unfunded liability
2005 - SB 141 enacted: DB plans closed; DC plans
created; PERB/TRB/ASPIB sunset; ARM Board created
2007 - ARM Board files suit against Mercer for
actuarial negligence; SB 123 enacted: PERS cost share
2008 - SB 125 enacted; employer contribution rates
capped; state assistance begins; Great Recession
begins
2009 - PERS/ TRS investment loss: 20.5 percent
2010 - Mercer litigation settled for $500 million, net
$403 million; other states begin to cut defined
benefits, change plans
2012 - Arm Board adopts level dollar amortization ;
$11.9 billion unfunded liablity
2013 - 12.5 percent investment gain; recession over
question
5:31:39 PM
Co-Chair Meyer queried what kind of cash infusion it would
take to get to the 80 percent. Mr. Barnhill answered that
if the $3 billion was funded the 80 percent would not quite
be reached. He looked at the actuarial letter, which
outlined the date as to which it would be met.
Co-Chair Meyer asked if it was easier to reach 80 percent
if there was a focus on only one approach. Mr. Barnhill
replied that it was difficult to say, when the discussion
was regarding appropriating billions of dollars from the
Constitutional Budget Reserve (CBR). He stressed that TRS
had a $4.7 billion unfunded liability, so if that was
funded more that PERS, the question was whether TRS could
reach the 80 percent mark quicker than TRS. He felt that
approach was possible, because it was a smaller unfunded
liability. He added that, with the governor's proposal,
PERS would reach the 80 percent level in 2025 and TRS would
reach the 80 percent level in 2027.
Co-Chair Meyer agreed that TRS would be easier to reach 80
percent, but felt that the PERS was a shared responsibility
with 60 percent from the state at 40 percent from the
municipalities. Mr. Barnhill agreed that it was a shared
responsibility. He remarked that there could be some
additional cost sharing between the state of Alaska
employers and the municipal employer, but the question was
regarding the best method to share the responsibility.
Mr. Barnhill moved to slides 9 and 10 that included
different ways to pay down the unfunded liability. Until
2012, the ARM Board had methodologies to amortize the
unfunded liability over a 25-year period at a level
percentage of pay. This means that the payments on the
unfunded liability will increase at the same rate as
payroll. He stated that the trend of the payments from FY
15 through the FY 20s, the payments will increase. He
remarked that there was a concern that the approach would
be more expensive over time, so the ARM Board had examined
dozens of scenarios to find an affordable and appropriate
way to address the unfunded liability. He stated that slide
10 showed that the ARM Board created a level-dollar
amortization, which provided for level payments over time.
This formula was identical to a house mortgage formula. He
noted that the payments would increase from $630 million in
FY 14 to $975 million in FY 15, then crest over $1 billion
in in FY 16, and slowly decrease after that. He stated that
the ARM Board's recommendation caused some concern, because
of the affordability of the cash infusion. Reconciliation
must be met between the current needs and the future needs.
The governor weighed man approaches to strike the future
and current needs.
GARY BADER, CHIEF INVESTMENT OFFICER, TREASURY DIVISION,
DEPARTMENT OF REVENUE, introduced himself.
5:38:48 PM
AT EASE
5:39:14 PM
RECONVENED
Co-Chair Kelly asked to leave the investments out of the
presentation, because that topic had been discussed at a
previous meeting.
Commissioner Rodell moved to slide 16, "Problem: $11.9
Billion Retirement System Unfunded Liability."
The Public Employees Retirement System (PERS) and
Teachers' Retirement System (TRS) combined unfunded
liability is $11.9 billion
State Assistance payments to PERS and TRS rise from
$629 million in FY2014 to over $1 billion per year
Funding State Assistance solely through the operating
budget crowds out funding for other vital public
services
Rating agencies express concern with the increasing
liability
Commissioner Rodell highlighted slide 17, "Proposal: $3
Billion Investment in Trust Funds."
Invest a total of $3 billion in the Retirement Trusts
in FY 15:
$1.12 billion - Teachers' Retirement Fund
$1.88 billion - Public Employees' Retirement Fund
Funding source: The CBR
Includes state assistance payments for FY 15
Beginning FY 16, State Assistance payments would be
fixed at $500 million annually:
$157 million - Public Employees' Retirement
System (PERS)
$343 million - TRS
State assistance projected until FY 36; length of time
depends on actuarial gains or losses experienced
Commissioner Rodell looked at slide 19, "Governor's
Proposal." She noted that the governor proposed a one-time
cash infusion, so the annual payments into the 2030s would
remain at $500 million per year.
5:42:50 PM
Senator Bishop thanked the department for the presentation.
He asked about the number one credit concern raised by
ratings agencies. He wondered if the ratings agencies would
provide something to the state showing that its credit was
okay if the infusion was made. Commissioner Rodell replied
that the ratings agencies issued reports. The department
would report on the action taken by the legislature,
expected to see something over the course of the year.
Vice-Chair Fairclough asked about the two components
related to the ratings agencies. Commissioner Rodell
answered that each of the ratings agencies had its own
criteria. Debt counted for an additional 20 percent and
also included pension debt.
Senator Dunleavy had heard that if a certain approach was
used the accumulated debt included bonds, the unfunded
liability, and other potential liabilities. Commissioner
Rodell replied that agencies had noted strengths and
challenges in their reports. She announced that the
unfunded liability was listed as a credit concern for the
state.
Senator Dunleavy wondered what about the proposed approach
was made it the best option. Commissioner Rodell responded
that the approach recognized that additional contributions
were necessary and that a lump sum was not enough to make
the trust funds healthy, but amortized the debt over 25
years and put the state in a better place 5 years from now.
5:51:21 PM
Senator Dunleavy asked what the department would say about
putting another $2 billion or other into the fund.
Commissioner Rodell answered that DOR would examine what
the ongoing obligation would be for an additional $2
billion. She remarked that $3 billion was chosen, because
there was a consideration for other needs from the
reserves.
Co-Chair Meyer referred to Vice-chair Fairclough's earlier
question. He surmised that the cash infusion would be a
good option, if oil revenue would be increasing.
Commissioner Rodell believed it was the challenge the state
was faced with related to the revenue forecast. The concern
was not something that would continue to have support
especially with a closed system. There was no reason to
believe that it would not. She stressed that the liability
was inching up instead of down, which was why the concern
remained.
Co-Chair Meyer would appreciate acknowledgement from the
ratings agencies on how the action would impact the state's
credit rating. He asked if the bill locked the state into
annual payments of $500 million. Commissioner Rodell
replied that the bill did not lock the legislature into the
amount, it only recognized a fixed amount.
Co-Chair Meyer wondered how it differed from the pay as you
go plan. Commissioner Rodell answered that the pay as you
go method did not allow for the one-time appropriation. The
bill recognized the actuarial recommendation and the
commitment to an annual payment.
Co-Chair Meyer asked about the $700 million payment.
Commissioner Rodell answered that the bill included the
amount.
Co-Chair Kelly did not see vast differences between the
approaches to justify the bond rating improvement. He
wondered if Commissioner Rodell had ever worked for a bond
rating agency. Commissioner Rodell replied that she had
never worked for a bond rating agency.
Co-Chair Kelly never heard the case beyond bond raters on
why the state should not use the pay as you go method.
5:57:55 PM
Vice-Chair Fairclough pointed to slide 18 of the
presentation. She queried the effect on the state's
partners with the accumulation of the 38 percent and the
extension on the flat payments. She wondered how the flat
payments would impact the municipalities. She specifically
wondered if there was an analysis of the additional
employer contributions that would be required at a local
level to support the proposal. Mr. Barnhill replied that
those payments had been calculated, and agreed to provide
that information. He stated that the Buck letter outlined
the specifics of those payments.
Vice-Chair Fairclough clarified that she was interested in
specific costs to communities. She believed that Anchorage
was in the $200 million range.
Co-Chair Kelly asked the presenters to stay on track.
6:02:10 PM
Vice-Chair Fairclough wondered about an allocation to
PERS/TRS, and stated that David Teal, Director, Legislative
Finance Division had stated that the unfunded liability was
100 percent the state's responsibility. She wondered why
the specific mix had been chosen. Mr. Barnhill answered
that there were a variety of reasons and ways to slice and
dice the issue. He stressed that the PERS unfunded
liability was greater than TRS.
Vice-Chair Fairclough looked at the unfunded liability
ratio, and remarked that the unfunded liability was higher
in the TRS system. She remarked that 80 percent was a good
target, but the lower rates would affect the ratio. She
wondered why the ratio was not examined as well as the
dollars.
Co-Chair Kelly asked if 60 percent was the minimum funding
for TRS. Mr. Barnhill replied that he would like to get
above 60 percent. He furthered that exploring ratios was a
legitimate concern, and he was willing to engage in that
conversation.
Co-Chair Meyer referred to the bill language "subject to
appropriation." He was attempting to determine what a bond
rater may consider. He felt that the proposal may not
appropriate the amount. Commissioner Rodell replied that
the language was to recognize the constitutional
requirement that future legislatures could not be bound.
Co-Chair Meyer asked if the language would give the bond
raters cause for concern. Commissioner Rodell replied that
DOR had made avenues available to adjust the amount. She
stressed that the focus what on not locking in to something
the state could not sustain.
Co-Chair Meyer pointed to an issue that had not been
addressed. He believed Alaska was one of four states that
counted its medical benefits in the unfunded liability. He
wondered if the state received credit for counting it in
the unfunded liability. Commissioner Rodell replied in the
affirmative.
SB 220 was HEARD and HELD in committee for further
consideration.
CS FOR HOUSE BILL NO. 32(FIN)
"An Act providing for the issuance of one business
license for multiple lines of business; and providing
for reissuance of a business license to make a change
on the license."
HB 32 was SCHEDULED but not HEARD.
CS FOR HOUSE CONCURRENT RESOLUTION NO. 15(FIN)
Relating to the Task Force on Unmanned Aircraft
Systems.
HCR 15 was SCHEDULED but not HEARD.
Co-Chair Meyer discussed the schedule for the following
day.
6:07:37 PM
AT EASE
6:08:10 PM
RECONVENED
Co-Chair Kelly asked about conference committee.
ADJOURNMENT
6:08:38 PM
The meeting was adjourned at 6:08 p.m.