Legislature(2013 - 2014)SENATE FINANCE 532
04/19/2014 09:00 AM Senate FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB19 | |
| HB160 | |
| HB282 | |
| HB140 | |
| HB316 | |
| HB385 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 385 | TELECONFERENCED | |
| += | HB 278 | TELECONFERENCED | |
| += | HB 19 | TELECONFERENCED | |
| += | HB 160 | TELECONFERENCED | |
| += | HB 282 | TELECONFERENCED | |
| += | HB 287 | TELECONFERENCED | |
| += | HB 306 | TELECONFERENCED | |
| += | HB 140 | TELECONFERENCED | |
| + | HB 316 | TELECONFERENCED | |
| + | HB 384 | TELECONFERENCED | |
| += | HJR 10 | TELECONFERENCED | |
| + | TELECONFERENCED |
SENATE FINANCE COMMITTEE
April 19, 2014
9:40 a.m.
9:40:46 AM
CALL TO ORDER
Co-Chair Meyer called the Senate Finance Committee meeting
to order at 9:40 a.m.
MEMBERS PRESENT
Senator Kevin Meyer, Co-Chair
Senator Pete Kelly, Co-Chair
Senator Anna Fairclough, Vice-Chair
Senator Click Bishop
Senator Mike Dunleavy
Senator Lyman Hoffman
Senator Donny Olson
MEMBERS ABSENT
None
ALSO PRESENT
Darrell Breese, Staff, Representative Bill Stoltze;
Christine Marasigan, Staff, Senator Kevin Meyer; Brodie
Anderson, Staff, Representative Steve Thompson; Sara
Chambers, Director, Division of Corporations, Business and
Professional Licensing, Department of Commerce, Community
and Economic Development; Representative Doug Isaacson;
Representative Lora Reinbold; Arnold Liebelt, Policy
Analyst, Office of Management and Budget; Anna Latham,
Staff, Representative Kurt Olson; Barbara Huff Tuckness,
Director, Government and Legislative Affairs, Teamsters
Local 959; James Armstrong, Staff, Senator Kevin Meyer;
David Teal, Director, Legislative Finance Division; Angela
Rodell, Commissioner, Department of Revenue.
PRESENT VIA TELECONFERENCE
Rachael Petro, President and CEO, Alaska Chamber,
Anchorage; Ward Hurburt, Chief Medical Officer, Department
of Health and Social Services, Anchorage.
SUMMARY
CSHJR 10(FIN)
CONST. AM: TRANSPORTATION FUND
CSHJR 10(FIN) was SCHEDULED but not HEARD.
CSHB 19(RLS)(efd am)
PERM. MOT. VEH. REGISTRATION/TRAILERS
CSHB 19(RLS)(efd am) was REPORTED out of
committee with a "do pass" recommendation and
with previously published indeterminate fiscal
note: FN3(ADM).
CSHB 140(FIN) am
REGULATIONS: NOTICE, REVIEW, COMMENT
CSHB 140(FIN) am was HEARD and HELD in committee
for further consideration.
CSHB 160(FIN)
LICENSING OF ATHLETIC TRAINERS
CSHB 160(FIN) was REPORTED out of committee with
a "do pass" recommendation and with previously
published fiscal impact note: FN1 (CED).
CSHB 278(FIN)am
EDUCATION
CSHB 278(FIN)am was SCHEDULED but not HEARD.
CSHB 282(JUD)
LANDLORD AND TENANT ACT
CSHB 282(JUD) was REPORTED out of committee with
individual recommendations and with previously
published zero fiscal note: FN1 (REV).
CSHB 287(RLS)am
OIL ROYALTIES; TAX CREDIT
CSHB 287(RLS)am was SCHEDULED but not HEARD.
CSHB 306(FIN)
EVAL. INDIRECT EXPENDITURES; TAX CREDITS
CSHB 306(FIN) was SCHEDULED but not HEARD.
CSHB 316(FIN)
WORKERS' COMPENSATION MEDICAL FEES
CSHB 316(FIN) was REPORTED out of committee with
individual recommendations and with previously
published fiscal impact note: FN2 (LWF); and
previously published indeterminate fiscal note:
FN3 (ADM).
HB 384am ALASKA MINIMUM WAGE
HB 382 am was SCHEDULED but not HEARD.
HB 385 PERS/TRS STATE CONTRIBUTIONS
SCSHB 385(FIN) was REPORTED out of committee with
a "do pass" recommendation and with two new
fiscal impact notes from the Senate Finance
Committee and the Governor.
CS FOR HOUSE BILL NO. 19(RLS)(efd am)
"An Act relating to permanent motor vehicle
registration in the unorganized borough and in a
municipality that has elected to allow permanent
registration; relating to the registration fee for
noncommercial trailers and to the motor vehicle tax
for trailers; and providing for an effective date."
9:42:23 AM
DARRELL BREESE, STAFF, REPRESENTATIVE BILL STOLTZE, stated
that the bill provided an option for permanent vehicle
registration for vehicles eight years or older and
noncommercial trailers.
9:42:45 AM
AT EASE
9:43:42 AM
RECONVENED
Senator Bishop MOVED to REPORT CSHB 19(RLS)(efd am) out of
committee with individual recommendations and the
accompanying fiscal note. There being NO OBJECTION, it was
so ordered.
CSHB 19(RLS)(efd am)was REPORTED out of committee with a
"do pass" recommendation and with previously published
indeterminate fiscal note: FN3(ADM).
9:44:24 AM
AT EASE
9:45:12 AM
RECONEVENED
CS FOR HOUSE BILL NO. 160(FIN)
"An Act relating to the licensing and regulation of
athletic trainers."
9:45:29 AM
Vice-Chair Fairclough MOVED to ADOPT the committee
substitute for SCS CS HB 160(FIN), Work Draft 28-LS0423\H
(Martin, 4/19/14). There being NO OBJECTION, it was so
ordered.
CHRISTINE MARASIGAN, STAFF, SENATOR KEVIN MEYER, explained
the changes in the committee substitute. She stated that
the version addressed some of the concerns that were
considered during the committee. She announced that she
worked closely with the sponsor and took into account some
comments from various physical therapists that had
expressed concern. She announced that many problems could
not be resolved in regards to the definitions, but Mr.
Anderson could provide further detail.
BRODIE ANDERSON, STAFF, REPRESENATIVE STEVE THOMPSON,
stated that page 2, line 12 resolved some problems
regarding emails from fitness trainers and coaches. He read
from the bill:
Nothing in this chapter requires the licensing of a
coach or fitness trainer who 1) does not use a title
listed in (d) of this section, and is acting within
the scope of the person's duties as a coach or a
fitness trainer.
Mr. Anderson shared that he had worked with the fitness
trainers and coaches to resolve the conflict. He shared
that there were various definitions regarding a defined
scope of practice that included "athletic injury or
illness" found on page 4.
Vice-Chair Fairclough wondered if the CS affected the
fiscal note. Mr. Anderson replied that he did not believe
that the CS affected the fiscal note.
Vice-Chair Fairclough stressed that she would like to know
for sure that the fiscal note does not change.
SARA CHAMBERS, DIRECTOR, DIVISION OF CORPORATIONS, BUSINESS
AND PROFESSIONAL LICENSING, DEPARTMENT OF COMMERCE,
COMMUNITY AND ECONOMIC DEVELOPMENT, stated that the fiscal
note remained the same.
Vice-Chair Fairclough MOVED to REPORT SCS CSHB 160(FIN out
of committee with individual recommendations and the
accompanying fiscal note. There being NO OBJECTION, it was
so ordered.
SCS CSHB 160(FIN) was REPORTED out of committee with a "do
pass" recommendation and with previously published fiscal
impact note: FN1 (CED).
CS FOR HOUSE BILL NO. 282(JUD)
"An Act relating to the rights and obligations of
residential landlords and tenants; and relating to the
taking of a permanent fund dividend for rent and
damages owed to a residential landlord."
9:52:41 AM
REPRESENTATIVE DOUG ISAACSON, stated that he was available
to answer questions.
Vice-Chair Fairclough MOVED to REPORT CSHB 282(JUD) out of
committee with individual recommendations and the
accompanying fiscal note. There being NO OBJECTION, it was
so ordered.
CSHB 282(JUD) was REPORTED out of committee with individual
recommendations and with previously published zero fiscal
note: FN1 (REV).
9:55:31 AM
AT EASE
9:58:52 AM
RECONVENED
CS FOR HOUSE BILL NO. 140(FIN) am
"An Act relating to the proposed adoption, amendment,
or repeal of a regulation; and relating to contact
with agencies about regulations."
9:59:19 AM
REPRESENTATIVE LORA REINBOLD, stated that the intent of the
legislation was to provide better information about
regulations that may significantly affect private
individuals and businesses, other state agencies and local
governments. She shared that HB 140 required that
regulation notices include information about estimated
costs beyond those to the agency. In view of the increasing
reach of the Washington D.C. into Alaska's affairs, the
bill also requires that when the federal government is the
reason for the regulation, the exact federal law, executive
order or decision be identified in order for Alaskans to
better understand government actions that affect their
businesses and lives.
Senator Dunleavy wondered who might be in opposition to the
bill. Representative Reinbold replied that there was some
initial opposition to the bill from the Regulatory
Commission of Alaska (RCA), and the Alaska Oil and Gas
Conservation Commission (AOGCC). She pointed out that
neither organization offered vocal opposition until she
asked for their input. She stressed that the current
version exempted those organizations.
Senator Hoffman queried the reason that they wanted to be
exempted. Representative Reinbold responded that she did
not want to speak for those organizations. She furthered
that, in general, those organizations felt that they were
independent and "quasi-judicial." She stated that the
Alaska's legal department felt that, just because they were
independent did not merit their exemption.
Senator Olson wondered if Representative Reinbold was in
favor of the exemptions. Representative Reinbold responded
that she felt fine about the exemptions, and remarked that
many bills required some compromise.
10:04:57 AM
Senator Olson felt that some of the exempted agencies
should be examined further.
Co-Chair Meyer felt that the legislation could be expanded
at a later date, in order to incorporate some of the
exempted organizations. Representative Reinbold announced
that all of the agencies, boards, and commissions were
included with the four exclusions. She felt that there were
good reasons for the Board of Game and Board of Fish to be
excluded, because of the number of regulations. She did not
want to be inundated as a regulatory review committee with
600 emails based on regulations. She felt that increasing
accountability and transparency was essential, and was
provided in a packet.
Senator Hoffman felt that the organizations were exempt
because the fiscal note for the executive branch stated
that the exemption would reduce the overall fiscal impact.
He relayed that the last paragraph of the executive branch
fiscal note stated that the agencies must add indeterminate
positions and resources would be needed to comply with the
legislation.
Co-Chair Meyer wondered if the fiscal note total for the
bill was $600,000. Vice-Chair Fairclough replied that the
total for the fiscal notes was $677,000.
Co-Chair Meyer stated that the bill had been modified from
its original version in order to reduce the fiscal impact.
Vice-Chair Fairclough looked at FY 16, and noted that the
annual operating cost increase that was quantified under
the three fiscal notes was $677,200, without the
indeterminate note.
Senator Olson felt that there were many people that may be
negatively impacted by the exclusion of some of the
organizations. He felt that the people should be protected
by having many of the regulations publicly reviewed.
10:09:31 AM
Vice-Chair Fairclough wondered if there was a consideration
for a tiered approach for gradual implementation of the
program in order to understand the fiscal impact of the
broader approach. She stressed that she supported the
concept, but was concerned about the indeterminate note.
Representative Reinbold replied that she felt the
legislation outlined a phased approach. She shared that the
bill was "gentle" as related to her feelings about the
regulatory process. She explained that the bill looked in
aggregate of the costs to the agency, other agencies, and
municipalities. It provided an aggregate based on a good
faith effort with no ability to sue for inaccuracy or
inefficient information, and provide online public
transparency.
Vice-Chair Fairclough stressed that she was not commenting
on the pressure that the bill may provide, but rather
whether a phased approach focusing on each department may
be simpler. She felt that the bill may be outlining a
broader approach to the issue.
Ms. Chambers testified regarding the fiscal note. She
announced that one of the fiscal notes totaled $333,000 in
the first year. She noted that there were many elements in
the bill which triggered that number. She stated that the
division supported transparency in government, and remarked
that there were many activities in the bill that the agency
currently conducts. She remarked that the division's boards
and commissions operated slightly differently that other
boards and commissions. The bill had the potential to
impact the licensees, because any costs that result from
the bill would be picked up by the licensees. The fiscal
impact was not a general fund obligation. She looked at
Section 2 of the bill, and expressed concern regarding the
issue of aligning the boards and commissions with regular
response to specific issues raised by the administrative
regulation review committee and some governor's office
concerns. She felt that the issue was important to her
division, because they tried to be as transparent as
possible. She stressed that the travel cost in the fiscal
note should be considered a "worst case scenario", because
it related to the possibility of board meetings in response
to any changes or recommendations by the Governor's Office
or the Administrative Regulation and Review Committee. She
stated that the division conducted approximately 25
regulation projects per year, which were board and
commissions. She stated that she did not anticipate the
division's travel costs, she stressed that there could be a
possibility for an in person meeting.
10:16:29 AM
AT EASE
10:26:13 AM
RECONVENED
Co-Chair Meyer CLOSED public testimony.
Ms. Chambers stated that she had some more fiscal concerns
that she would like to express to the committee. She looked
at Section 3, and remarked that there was a requirement for
the agency to make a good faith effort to estimate the cost
to the state agency, private persons, other agencies, and
municipalities. She stated that the division had a
logistical concern with its twenty volunteer boards and
commissions and the type of regulations that were often
passed. She felt that it may be difficult to estimate the
cost in a good faith effort that would amount to education
to the public to some of the board regulations. She
remarked that there could be continuing education changes,
and the cost to the private person could be difficult to
quantify if the variety of courses were examined
nationwide. She understood that it was an extreme example,
but was a potential way to not satisfy the education of the
public. She also pointed out Section 7 regarding agency
contact with the public. She remarked that the she was not
intending to call out the division's inability to comply,
but rather the difficulty with the boards and commissions
to potentially comply with the requirements. She remarked
that the good faith effort to answer public questions
received in writing, or asked at a public meeting, were
received, weighed, and deliberated at the boards and
commissions meetings. She felt that the bill would require
the boards to speak to questions that may come up in
writing through the agency prior to public input would be
collected. She stressed that the agency did not have staff
that was empowered by the boards to speak on their behalf.
She remarked that many of the boards were ably administered
by the staff, but were mostly managed by licensee examiners
that oversaw up to three boards. She felt that the bill may
require additional meetings or procedures for boards to
answer.
10:31:28 AM
Ms. Chambers she pointed out that Section 8 only allowed
oral commentary as public comment, which could be received
through the division office. She explained that interested
parties, licensees, and the public could contact the office
to ask questions that the division would be obliged to
respond. She noted that many of her concerns from the
previous section would be amplified with the Section 8
issue. She remarked that there would need to be an
additional staff person to corral the comments and maintain
the concerns for the public record.
Vice-Chair Fairclough wondered why the governor's order did
not accomplish the proposed tasks in the bill. Ms. Chambers
responded that the governor's order was received the fall
prior, and the division worked to analyze the scope of
regulations. She felt that the compliance level would
result in a similar outcome.
Vice-Chair Fairclough felt that the indeterminate fiscal
note should be changed to zero. She suggested that a highly
justified supplemental budget item could be included in
following year. She stressed that the governor's order was
the catalyst for implementation.
Senator Hoffman felt that there should be an inclusion of
the RCA, Boards of Fish and Game, and the AOGCC, so they
can comply with the governor's executive order. He remarked
that there were concerns regarding the actions of the
Boards of Fish and Game, and stressed that they especially
should be included in the legislation.
10:36:10 AM
Senator Olson queried the most recent review of the
regulations. He recalled that he never had to meet with a
regulatory board while he was a member of a medical board.
If there was a regulatory review of the medical board, he
assumed it was conducted via teleconference. He wondered
what had changed recently to require physical attendance
for the review board meetings. Ms. Chambers responded that
the fiscal note reflected the "worst case scenario", where
board members may make the executive decision to meet. She
shared that there were tools provided for teleconferencing.
Many boards and commissions strived to meet via
teleconference for focused purposes.
Senator Olson felt that continued education did not require
a face to face meeting. He agreed with Vice-Chair
Fairclough, that the fiscal note could be almost zero. Ms.
Chambers responded that the division would advise the
boards to meet via teleconference, because there were
minimal costs for meeting via teleconference. She stressed
that, if a board intended to meet in person, she would
allow that meeting to occur.
ARNOLD LIEBELT, POLICY ANALYST, OFFICE OF MANAGEMENT AND
BUDGET, (OMB) spoke to the fiscal impact of the legislation
across all departments as related to Section 3. He stated
that Section 2 should be considered the policy portion of
the bill. He remarked that Section 2 outlined the repeal of
the boards and commissions from the existing language.
There were approximately more than 100 boards and
commissions. He restated that the bill exempted the Board
of Game, Board of Fish, RCA, and the AOGCC. He explained
that the regulations would pass before the governor, and he
would participate in the process. He stated that boards and
commissions generally operated independently, and were
staffed with members of the public to represent the public
within the industries. He pointed out that Section 3
addressed the cost impact for the department and the boards
and commissions, because it asks the state agencies to
prepare an annual cost impact for private person including
businesses and municipalities. Through the fiscal note
process, the division already ascertained with that cost
would be for legislation and anticipated regulations to
state agencies. He stated that providing a cost estimate in
the aggregate was helpful, but that was primarily the
source of the cost. The indeterminate note from OMB
represented all the other agencies that did not submit a
fiscal note, but remarked that the note would have some
impact. He stressed that OMB could not estimate the number
of regulations or the cost therein.
10:43:05 AM
Co-Chair Meyer looked at AO.266, and felt that the work
outlined in the proposed legislation should already occur.
Mr. Liebelt responded that the work was similar, but the
cost came in when departments need to add to their workload
by estimating what the cost would be for private persons.
He stated that the departments were not currently staffed
for the requirements in the legislation. He noted that the
Boards of Game and Fish could see as much as 500 proposals
per year for regulations.
Senator Hoffman looked at the third paragraph of the
executive branch fiscal note, which referred to 162
municipalities in Alaska. He assumed that those
municipalities would also be impacted, but the fiscal note
did not reflect what costs would be attributed to them. He
wondered if there was an estimate for fiscal impact to the
municipalities in Alaska. Mr. Liebelt agreed that the
fiscal note excluded the municipalities, and the paragraph
was included to comment on the number of municipalities
that could or could not be impacted by regulations. He
looked at Section 3, which stated that the department's
boards and commissions would be required to provide the
cost impact to the municipality as a result of regulations.
Senator Hoffman stated that he did not understand why a
fiscal note would be zeroed out, with the knowledge of
probable costs. He felt that the agencies should be held
accountable for cost outlines, because those agencies
drafted the indeterminate fiscal note. He did not want to
impose an unfunded mandate to the agencies or
municipalities.
10:47:38 AM
AT EASE
11:01:14 AM
RECONVENED
CSHB 140(FIN)am was HEARD and HELD in committee for further
consideration.
11:02:02 AM
AT EASE
11:02:42 AM
RECONVENED
CS FOR HOUSE BILL NO. 316(FIN)
"An Act relating to workers' compensation fees for
medical treatment and services; relating to workers'
compensation regulations; and providing for an
effective date."
11:03:16 AM
ANNA LATHAM, STAFF, REPRESENTATIVE KURT OLSON, introduced
the legislation and read from the sponsor statement:
For the past decade, Alaska has faced the highest
workers compensation rates in the nation.
The Alaska Workers' Compensation Board, the
Legislature, the Alaska Health Care Commission and the
Administration agree that effective reform is needed,
and is crucial to Alaska's economic future.
In 2005, the Alaska Legislature passed HB 13, which
established a workers' compensation fee schedule based
on usual, customary and reasonable rates, set at the
90th percentile, with a geographic differential. This
made incremental changes for the better, but it wasn't
the sweeping reform that Alaska truly needs.
HB 316 proposes a solution to this challenge by
introducing a new fee schedule. HB 316 changes the
basis for the fee schedule from what physicians charge
in a geographic area, to what it costs physicians to
perform medical procedures. Thirty-two states
currently use this relative values unit methodology,
which incorporates the relative value of a physician's
work, practice expense, and professional liability
insurance. A conversion factor and geographic
differential is applied to the formula. This relative
value unit methodology is a system that is owned by
the American Medical Association, and is the basis for
Medicare and Medicaid's payment schedules.
The Medical Services Review Committee will set the
conversion factors for the fee schedules, which
require the approval of the Commissioner of Labor and
Workforce Development before they are adopted into
regulation by the Workers' Compensation Board. The
Board will also set reimbursement rates for air
ambulance services, and the markup rates for
prescription drugs and durable medical equipment.
HB 316 introduces comprehensive reform of Alaska's
workers' compensation fee schedule, in an effort to
reduce exorbitant costs in both the public and private
sectors.
I urge your support of this legislation.
Co-Chair Meyer understood that the bill had received
support from the majority of affected parties. Ms. Latham
agreed that there were 38 letters of support in the bill
packet from various medical, union and other related
groups. She furthered that the sponsor had worked with all
stakeholders involved during the legislative process; 5
hearings were heard in House Labor and Commerce and 2 in
the House Finance Committee, prior to the bill moving to
the senate.
Vice-Chair Fairclough read from an April 17, 2014 letter
from the Alaska Chamber of Commerce:
While Committee Substitute House Bill 316 (HB 316) is
singularly focused on the medical fee schedule, it is
an important piece of the overall workers'
compensation system. Until now, the Alaska Chamber has
withheld support from HB 316. Not because the changes
made by HB 316 move workers' comp in the wrong
direction, but because additional reforms introduced
during the legislative process have yet to be
included. Our primary concern is that HB 316 will only
have a short-term effect on workers' compensation
medical costs over the next several years.
Vice-Chair Fairclough noted that Alaska ranked last in the
nation when it came to worker's compensation reform. She
wondered if the legislation would improve the state's
standing, and what the effects would be on employers and
employees. Ms. Latham replied that there were many reforms
that needed to be addressed when discussing worker's
compensation. She believed that the chamber wanted to
implement evidence based best practices and utilization as
part of the reform. The sponsor holds that the process
should consist of 2 parts, lowering fees and implementing
utilization and evidence based best practices.
11:08:45 AM
Vice-Chair Fairclough understood that the legislation would
also benefit employers. Ms. Latham responded yes; employers
would pay lower premium rates.
Senator Bishop expressed support for the intent of
legislation. He noted in member packets the letters of
support from labor and contract associations, as well as
certain municipalities and boroughs (copy on file).
Senator Olson remarked that the letters of support were
from industry. He queried whether employees had offered
support for the legislation. Ms. Latham replied one
individual testified in House Labor and Commerce concerning
their experience in the worker's compensation system. She
relayed that the previous hearings of the legislation had
been publicly noticed and that the process had been very
open to the public. She added that the Alaska State Medical
Association offered full support of the legislation
following the amendment of the bill in the House Finance
Committee; the amendment would allow the Commissioner of
Labor to approve the conversion factor set by the Medical
Services Review Committee (MSRC). She maintained that the
process had been open and transparent.
Senator Olson expressed concern that the bill could be too
ambitious. He worried about a hasty transition from the
usual, customary, and reasonable (UCR) fee schedule to a
resource based scenario. He wondered if the sponsor had
been in discussions with pain management clinics, or
patients that dealt with pain management. Ms. Latham
stated that a HB370 was up in Senate Judiciary, and spoke
to the fee schedule as it pertained to pain management. She
asserted that the Resource-Based Relative Value Scale
(RBRVS) methodology in the bill was sound and had been
developed by Harvard researchers. She relayed that the UCR
was inherently inflationary. She shared that 32 states had
adopted the RBRVS methodology with a conversion factor, not
in phases but in a swift switch from one to the next.
11:13:13 AM
Senator Dunleavy asked whether practitioners from remote
areas of the state had testified on the legislation. Ms.
Latham said that the only practitioners that had testified
on the bill were physical therapists in Fairbanks. She
added that the sponsor had worked closely with the Alaska
State Hospital and Nursing Home Association (ASHNA),
adopting a critical access hospital exemption because ASHNA
used a different federal Medicaid billing schedule. She
furthered that a geographic differential had been applied
for smaller, rural hospitals and clinics.
Senator Olson understood that there was a letter of support
from the Alaska State Medical Association (ASMA) in member
packets. Ms. Latham replied in the affirmative.
Co-Chair Meyer wondered if chiropractors had expressed an
opinion on the bill. Ms. Latham responded that the
chiropractic community had not expressed an opinion on the
legislation.
Senator Dunleavy asked whether cost issues due to Alaska's
unique terrain had been considered during the process. Ms.
Latham replied yes. She reiterated that the bill contained
a critical access hospital exemption and the ability of the
board to apply a geographic differential, as well as the
initial conversion factor.
RACHAEL PETRO, PRESIDENT AND CEO, ALASKA CHAMBER, ANCHORAGE
(via teleconference), testified in support of the
legislation. She referred to the letter of support in
member packets (copy on file). She believed that the
legislation was a step in the right direction for systemic,
comprehensive change.
11:17:17 AM
WARD HURBURT, CHIEF MEDICAL OFFICER, DEPARTMENT OF HEALTH
AND SOCIAL SERVICES, ANCHORAGE (via teleconference), spoke
in support of the legislation. He shared that the
legislation was consistent with the recommendations of the
Alaska Healthcare Commission and that the new methodology
would encourage a free market. He opined that healthcare
and medical costs in the state were the highest in the
nation and the bill would open up better negotiations. He
said that there would be a conversion factor for the
resource based scale to reflect the costs in Alaska. He
noted that organized labor groups had testified in support
of the legislation.
BARBARA HUFF TUCKNESS, DIRECTOR, GOVERNMENT AND LEGISLATIVE
AFFAIRS, TEAMSTERS LOCAL 959, testified in support of the
legislation. She believed that the medical review board,
with the make-up of doctors and lay representatives, would
be effective.
Co-Chair Meyer CLOSED public testimony.
Senator Olson expressed concern that the legislation could
prove to alienate those already on the margins of society.
Vice-Chair Fairclough spoke to the fiscal notes. She
remarked that the FY15 column reflected $62 thousand, while
FY16 through FY18 reflected $54 thousand with an estimated
supplemental appropriation of $13,700. She felt that the
numbers were appropriate. She pointed out that fiscal note
3 reflected several indeterminate costs; however, the
analysis on page two of the note provided an appropriate
explanation for the indeterminate amount.
Vice-Chair Fairclough MOVED to REPORT CSHB 316(FIN) out of
committee with individual recommendations and the
accompanying fiscal notes. There being NO OBJECTION, it was
so ordered.
CSHB 316(FIN) was REPORTED out of committee with individual
and with previously published fiscal impact note: FN2(LWF);
and previously published indeterminate fiscal note:
FN3(ADM).
11:23:18 AM
AT EASE
11:44:29 AM
RECONVENED
Co-Chair Meyer handed the gavel to Co-Chair Kelly.
HOUSE BILL NO. 385
"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."
11:45:23 AM
Co-Chair Meyer MOVED to ADOPT SCSHB 385(FIN), Work Draft,
28-LSGH2241\U (Wayne, 4/17/14). There being NO OBJECTION,
it was so ordered.
11:46:05 AM
JAMES ARMSTRONG, STAFF, SENATOR KEVIN MEYER, discussed the
committee substitute sectional analysis (copy on file):
Section 1.
This section amends the Teachers' Retirement System
(TRS) state assistance statute (AS 14.25.085). This
statute was enacted in 2008 by SB 125, and currently
provides that the state shall appropriate the amount
sufficient to fully pay the total past service
liability for the year at the employer contribution
rate adopted by the Alaska Retirement Management Board
(ARMB). In practice, this means that the State
appropriates the amount that reflects the difference
between the TRS employer contribute ion rate cap of
12.56 percent and the actuarial contribution rate to
the TRS trust funds. In FY14, this amount was
approximately $317mm.
Section 1 amends AS 14.25.085 to implement the
Governor's proposal. Under the Governor's proposal,
$1.1 billion would be appropriated from the
constitutional budget reserve to the TRS trust fund,
and then from FY16 - FY36, an annual flat payment of
$343mm would be appropriated as state assistance.
According to Buck Consultants, the Governor's plan
would convert the actuarial approach for TRS from an
actuarial ratemaking paradigm to a fixed contribution
paradigm. In a ratemaking paradigm, each year the
actuary calculates what contribution rate is necessary
to pay down the accumulated past service liability.
In Alaska, this has resulted in highly volatile
employer contribution rates that over the past decade
have ranged from 12 percent to over 70 percent.
In a fixed contribution paradigm, the rate volatility
is eliminated. Instead the annual contribution is
fixed. In the case of TRS, the annual contribution is
fixed at $343mm. What can change each year, however,
is the term of the amortization.
Under the Governor's plan, the initial amortization
term is 21 years -fixed payments of $343mm through
FY36.
In the event of actuarial losses, the actuary may
advise that the amortization term needs to be
extended. So if there is a market downturn that
results in investment losses in FY18, the actuary may
advise that the amortization term must be extended to
FY43 in order to fully amortize the TRS unfunded
liability. Conversely, actuarial gains could result in
a shortening of the amortization term of less than 21
years.
Under the Governor's plan, the length of the
amortization term necessary to pay down the unfunded
liability will be evaluated each year. There could be
cases where the actuarial loss over a particular
period is sufficiently profound that payment of $343mm
over any length of amortization term is insufficient
to fully pay off the unfunded liability. In such case,
the actuary will assign a date on which the TRS trust
fund will exhaust its funds unless the $343mm annual
payment amount is increased. The actuaries call this
date the "cross-over" point.
The last new sentence of the amendment to AS 14.25.085
is intended to address situations where a cross-over
point is reached. It provides that the state will
appropriate an additional fixed amount sufficient to
amortize the unfunded liability over a period
consistent with actuarial standards.
Section 2.
This section implements the same amendment as does
section 1, for the Public Employees' Retirement System
(PERS) state assistance statute, AS 39.35.280. A
benefit to making this amendment in the PERS context,
is that a fixed contribution paradigm aligns the
respective interests of all PERS employers. PERS
employers all share in the actuarial gains, through
having a shorter amortization schedule, and share in
actuarial losses, through having a longer amortization
schedule.
Under the current version of AS 39.35.280, PERS
municipal employers are largely indifferent to the
impact of market downturns that create new unfunded
liability because their rate does not change, and the
State absorbs 100 percent of the impact of any new
unfunded liability. The Governor's proposal cost
shares such new unfunded liability in a fair way by
extending the amortization term, so that PERS
employers pay at the 22 percent capped contribution
rate for a longer period of time.
Section 3.
This section makes the bill contingent on the
enactment of constitutional budget reserve fund
appropriations to TRS in the amount of $1.1 billion,
and to PERS in the amount of $1.9 billion.
Section 4.
Establishes the effective date of this act as July 1,
2014.
Co-Chair Kelly queried the details of the legislation.
DAVID TEAL, DIRECTOR, LEGISLATIVE FINANCE DIVISION, looked
at a collection of graphs titled "Cumulative Costs of
Options to Eliminate PERS and TRS Unfunded Liability" dated
4/19/2014 (copy on file). He explained that the first graph
represented the total PERS and TRS. He stated that the fine
dashed line represented the fiscal impact of the
legislation, which was $1 billion for PERS and $2 billion
for TRS at a level percent. He stated that in 2015 there
would be a $3 billion cash infusion. He remarked that the
line started at $3 billion and showed its increased
cumulative costs with added state assistance each year,
with a total cost of approximately $10 billion in state
assistance through 2040. The second graph represented the
PERS system only, with a $1 billion starting point and a
total cost of approximately $4 billion. He stressed that
there was a discount of 3 percent, which was roughly the
anticipated rate of inflation. The third graph was for TRS
starting at $2 billion cash infusion and increases to a
total cost of just over $6 billion by 2040. The numbers
represent what was used to generate the graph.
11:51:07 AM
Co-Chair Kelly asked for explanation of the fiscal notes.
Mr. Teal replied that the TRS was $1 billion, and the
source of the money was the Constitutional Budget Reserve
(CBR). Because the CBR required a three-quarter vote, it
would not be attached to Section 2 of the operating budget
bill, rather it would be added to the Language Section. He
stated that 2016-2020 showed reductions from the base,
where the base had a level percent of pay under the current
scenario. There would be a reduction of roughly 200 million
per year from the current scenario under the legislation.
The TRS fiscal note had $2 billion cash infusion from the
CBR, and had savings of approximately $200 million per year
in the out years.
11:52:34 AM
AT EASE
11:53:38 AM
RECONVENED
11:53:43 AM
Senator Hoffman remarked that there were conversations in
previous committees that looked at the funding level of 70
percent. He queried the percentage impact of PERS and TRS.
Co-Chair Kelly replied that the legislation would put TRS
beyond 70 percent immediately, and deferred to Mr.
Armstrong.
Mr. Armstrong pointed to the two new fiscal notes. He
looked at page two, and referred to the funding ratios. He
stated that the infusion would bring PERS to 68.8 percent
by FY17, and would exceed 70 percent in FY18. The $2
billion infusion in TRS would bring it up 20 percent in one
year. He noted that the following year had a cumulative
increase of over 70 percent.
Vice-Chair Fairclough discussed a conceptual amendment. She
stated that there were some previous numbers that showed
potential of the fund in the out years retaining a balance
that should belong to the state, because the state was
providing the initial cash infusion. She remarked that the
current TRS funding ratio was 52.1 percent. The action
before the committee would increase the number by 17
percent, and would be brought to 73 percent. She felt the
funding could level, if given the right statements over
time.
Vice-Chair Fairclough MOVED to ADOPT Conceptual Amendment
1, 28-GH224\A.1, Wayne, 4/13/14 (copy on file).
Page 1, line 2, following the second occurrence of
"plan:
Insert "and to excess assets of those plans on
termination of the plans"
Page 2, following line 6:
"Sec. 2. AS 14.25.181(b) is amended to read:
(b) If, upon termination of the plan,
all liabilities are satisfied, any excess
assets shall be deposited in the general
fund, [REVERT TO THE EMPLOYERS AS DETERMINED
BY THE ADMINISTRATOR] subject to the
approval of the termination by the Internal
Revenue Service.
Sec.3. AS 39.35.115(e) is amended to read:
(e) If, upon termination of the plan,
all liabilities are satisfied, any excess
assets shall be deposited in the general
funds [REVERT TO THE EMPLOYERS AS DETERMINED
BY THE ADMINISTRATOR], subject to the
approval of the termination by the Internal
Revenue Service."
Renumber the following bill sections accordingly.
Page 2, line 25:
Delete "This Act is"
Insert "Sections 1 and 4 of the Act are"
Page 2, line 29:
Delete all material and insert:
"Sec 6. If secs. 1 and 4 of the Act
take effect, they take effect on the
effective date of the appropriations
described in sec. 5 of the Act or July 1,
1014, whichever is later.
Sec. 7. Except as provided in sex. 6 of
the Act, this Act takes effect July 1,
2014."
Co-Chair Meyer OBJECTED for discussion.
Vice-Chair Fairclough explained the conceptual amendment.
11:58:00 AM
Co-Chair Kelly announced that the conceptual amendment
would ensure that the excess money be cycled back into the
general fund.
Vice-Chair Fairclough felt that the Department of Law
needed to review the language in the conceptual amendment.
Co-Chair Meyer REMOVED his objection. There being NO
further OBJECTION, Conceptual Amendment 1 was adopted.
11:59:33 AM
AT EASE
12:01:19 PM
RECONVENED
12:01:46 PM
ANGELA RODELL, COMMISSIONER, DEPARTMENT OF REVENUE, (DOR)
shared that she had no concerns with the proposed changes
or the amendment that was adopted.
12:03:15 PM
Vice-Chair Fairclough stressed the importance of the
legislation. She commended the efforts of the governor and
the committee's effort on the legislation.
Co-Chair Kelly appreciated Vice-Chair Fairclough's
gratefulness.
Co-Chair Kelly remarked that the Buck Consultants memo
should travel with the bill.
Co-Chair Meyer stressed that the unfunded liability
included medical liability, and hoped that the bond raters
would take note of the enormous cash infusion. He stressed
that $3 billion was a substantial amount of money.
Co-Chair Kelly remarked that the committee must be prudent,
but felt that the legislation did not address the issue of
the state's reserves.
Co-Chair Meyer MOVED to REPORT SCSHB 385(FIN) out of
committee with individual recommendations, Letter from Buck
Consultants and the accompanying fiscal note(s). There
being NO OBJECTION, it was so ordered.
SCSHB 385(FIN) was REPORTED out of committee with a "do
pass" recommendation and with two new fiscal impact notes
from the Senate Finance Committee and the Governor.
12:17:15 PM
AT EASE
12:17:50 PM
RECONVENED
CS FOR HOUSE BILL NO. 278(FIN) am
"An Act increasing the base student allocation used in
the formula for state funding of public education;
relating to the exemption from jury service for
certain teachers; relating to the powers of the
Department of Education and Early Development;
relating to high school course credit earned through
assessment; relating to school performance reports;
relating to assessments; establishing a public school
and school district grading system; relating to
charter schools and student transportation; relating
to residential school applications; relating to tenure
of public school teachers; relating to unemployment
contributions for the Alaska technical and vocational
education program; relating to earning high school
credit for completion of vocational education courses
offered by institutions receiving technical and
vocational education program funding; relating to
schools operated by a federal agency; relating to a
grant for school districts; relating to education tax
credits; establishing an optional municipal tax
exemption for privately owned real property rented or
leased for use as a charter school; requiring the
Department of Administration to provide a proposal for
a salary and benefits schedule for school districts;
making conforming amendments; and providing for an
effective date."
CSHB 278(FIN)am was SCHEDULED but not HEARD.
CS FOR HOUSE BILL NO. 287(RLS) am
"An Act relating to the determination of the royalty
received by the state on oil production refined or
processed in the state; providing tax credits for
qualified infrastructure expenditures for in-state
refineries and hydrocarbon processing facilities;
approving and ratifying the sale of royalty oil by the
State of Alaska to Tesoro Corporation and Tesoro
Refining and Marketing Company LLC; and providing for
an effective date."
CSHB 287(RLS)am was SCHEDULED but not HEARD.
CS FOR HOUSE BILL NO. 306(FIN)
"An Act relating to the review and administration of
tax credit programs; requiring the Department of
Revenue to report indirect expenditures; relating to
the duties of state agencies; requiring the
legislative finance division to analyze certain
indirect expenditures; relating to lapse dates for
appropriations for capital projects; repealing the
insurance tax education credit, the income tax
education credit, the veteran employment tax credit,
the oil or gas producer education credit, the property
tax education credit, the mining business education
credit, the fisheries business education credit, the
fisheries business tax credit for scholarship
contributions, the fisheries business salmon product
development tax credit, the fisheries business salmon
utilization tax credit, the fisheries business landing
tax credit for scholarship contributions, the
fisheries resource landing tax credit for the
fisheries resource harvested under the community
development quota, the fisheries resource landing tax
education credit, and the film production tax credit;
and providing for an effective date."
CSHB 306(FIN) was SCHEDULED but not HEARD.
HOUSE BILL NO. 384 am
"An Act increasing the minimum wage; and providing for
an effective date."
HB 384 am was SCHEDULED but not HEARD.
CS FOR HOUSE JOINT RESOLUTION NO. 10(FIN)
Proposing amendments to the Constitution of the State
of Alaska creating a transportation infrastructure
fund.
CSHJR 10(FIN) was SCHEDULED but not HEARD.
ADJOURNMENT
12:18:19 PM
The meeting was adjourned at 12:18 p.m.