Legislature(2015 - 2016)SENATE FINANCE 532
03/29/2016 01:00 PM Senate FINANCE
| Audio | Topic |
|---|---|
| Start | |
| SB207 | |
| SB208 | |
| SB209 | |
| SB210 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 207 | TELECONFERENCED | |
| *+ | SB 208 | TELECONFERENCED | |
| *+ | SB 209 | TELECONFERENCED | |
| *+ | SB 210 | TELECONFERENCED | |
| + | TELECONFERENCED |
SENATE FINANCE COMMITTEE
March 29, 2016
1:14 p.m.
1:14:13 PM
CALL TO ORDER
Co-Chair MacKinnon called the Senate Finance Committee
meeting to order at 1:14 p.m.
MEMBERS PRESENT
Senator Anna MacKinnon, Co-Chair
Senator Pete Kelly, Co-Chair
Senator Peter Micciche, Vice-Chair
Senator Click Bishop
Senator Mike Dunleavy
Senator Lyman Hoffman
Senator Donny Olson
MEMBERS ABSENT
None
ALSO PRESENT
Laura Cramer, Staff, Senator Anna MacKinnon; Brett Huber,
Staff Senator Pete Kelly; James Armstrong, Staff, Senator
Pete Kelly.
SUMMARY
SB 207 PERS AND TEACHERS EMPLOYER CONTRIBUTIONS
SB 207 was HEARD and HELD in committee for
further consideration.
SB 208 ELIMINATE AK PERFORMANCE SCHOLARSHIP
SB 208 was HEARD and HELD in committee for
further consideration.
SB 209 PERS EMPLOYER CONTRIBUTIONS
SB 209 was HEARD and HELD in committee for
further consideration.
SB 210 COMM. REV. SHARING;PROP. TAX EXEMPTIONS
SB 210 was HEARD and HELD in committee for
further consideration.
1:15:34 PM
Co-Chair Kelly shared that there would be a suite of bills
that acted in concert with the operating budget. He hoped
that the bill would cover the reduction portion of the
budget. He stated that there were other bills that covered
reductions in Medicaid and crime costs. He stressed that
there should be a focus on mitigating the impact on
communities. He stressed that the communities would be
given warning, band be provided time to adjust to the
proposals within the bills. He hoped that the pieces of
legislation would pass, but he understood that many would
not pass through the system. He remarked that the input of
members of the various communities were extremely valuable.
Senator Hoffman commented on the community revenue sharing
program. He stated that, at the time of the program's
creation, Alaska was enhanced by substantial revenue. He
hoped that the legislation would examine the program to
limit its availability. He announced that the name of the
program would be changed to the "Community Assistance
Program."
1:20:17 PM
Co-Chair Kelly stressed that many people affected by the
bills had a heightened level of concern, because they may
not have all of the information. He hoped that there would
be a complete discussion regarding the motivations of the
bills. He stressed that there was a $4.1 billion budget
deficit, so there must be a change in the structure of
government. He remarked that the bills attempted to improve
the current structures.
Co-Chair MacKinnon announced that public testimony would
not be taken during the current meeting. She shared that
there were various pieces of analysis that should be
considered, before the public could weigh in on the bills.
She stated that there would be a notice regarding public
testimony. She urged any criticism to be followed by
recommendations.
SENATE BILL NO. 207
"An Act relating to increasing employer contributions
to the defined benefit plan in the teachers'
retirement system."
1:24:15 PM
JAMES ARMSTRONG, STAFF, SENATOR PETE KELLY, introduced the
legislation:
Senate Bill 207 proposes a gradual, multi-year
increase in the employer contribution rate for the
Teachers Retirement System (TRS) from the current
level of 12.56 percent to 19 percent for FY 2017, 20
percent in FY 2018, 21 percent in FY 2019, and a final
increase to 22 percent in FY 2020.
The TRS was established as a cost sharing plan in
which all employers pay one uniform rate and share in
the liabilities and the assets of the plan. In 2008,
with the passage of Senate Bill 125, the uniform rate
was established at 12.56 percent, with the State of
Alaska paying the difference in costs between the
uniform rate and the actuarial cost, which was
determined by the Alaska Retirement Management Board
and the actuary consultants to the State of Alaska.
This allowed the state to share in the payment of the
unfunded liability of the system with the employers.
The establishment of the 12.56 percent and the
commitment of the state to assist in costs over 12.56
percent was made at a time when oil value was setting
not only record price, but generating record state
revenue.
From FY2008 through FY2016, TRS appropriations ranged
from $130 million to $317 million annually. During
those nine years, a cumulative total of $1.824 billion
was appropriated to the TRS unfunded liability. In
addition to the state assistance payments, in FY 2015,
an appropriation was made to the TRS Fund in the
amount of $2,000,000,000 in order to improve the
health of the system and reduce the unfunded
liability. In total, state unrestricted general fund
assistance has exceeded $3.8 billion over the past
nine years.
SB 207 is a conservative approach to balancing the
state's current fiscal reality and its commitment to
assisting TRS employers with the cost and the unfunded
liability of the system.
1:26:08 PM
Co-Chair Kelly shared that, in 2008, there was an increase
in the Base Student Allocation (BSA) to cover the PERS
obligations. He stated that the increase was approximately
$80 million per year, totaling $220 million to date. He
shared that the legislature appropriated $2 billion into
the TRS unfunded liability. He queried the current number.
Mr. Armstrong replied that it was $228 million.
Co-Chair Kelly shared that the $228 million was for TRS. Je
remarked that the money was the district's obligation
carried by the state. He pointed out that the districts
would be obligated to a much healthier system, because of
the recent deposits into the unfunded liability. He felt
that the state would mitigate the impact on the community,
because the state would allocated money to cover the
increased cost. He shared that there was concern from the
districts, because they wanted time to adjust to the
increases. The bill gives the districts five years, which
was more than the request for three years. He shared that
it was anticipated that the districts would receive $36.5
million to cover the costs of the increases. He wondered
whether the state would cover the 10 percent. Mr. Armstrong
replied that he could provide the estimates.
Co-Chair MacKinnon felt that the better numbers would be
available with the Buck Analysis. She stressed that the
state was working with local communities. She remarked that
the state had "carried" an additional responsibility in a
budget surplus time. She felt that the reiterated that the
state needed to "bridge" the costs to the cause of the
costs.
Mr. Armstrong noted that the mitigating funds would be
appropriated using the adjusted average daily membership,
which increased local need, and allowed for the communities
to fund to the education cap.
Co-Chair MacKinnon noted the cash infusion to TRS of $2
billion, as an effort to make the system whole. She
remarked that there was an additional proposed cash
infusion to help communities shoulder the burden
Vice-Chair Micciche felt that there should be a discussion
about assignment of responsibility.
Co-Chair MacKinnon felt that the Department of
Administration (DOA) could provide that information.
SB 207 was HEARD and HELD in committee for further
consideration.
SENATE BILL NO. 208
"An Act eliminating the Alaska education grant program
and the Alaska performance scholarship program; and
providing for an effective date."
1:33:12 PM
BRETT HUBER, STAFF SENATOR PETE KELLY, introduced the bill:
Senate Bill 208 sunsets the direct State aid for post-
secondary scholarships and grants provided through the
Alaska performance scholarship (APS) program and the
Alaska education grant (AEG) program. This legislation
proposes a wind down period to allow current APS
participants, and high school seniors in the
preparatory process for this application period, to
finish their course of study. The APS will close to
new entrants following the application deadline this
July and the program will be repealed in July of 2022.
Although students must qualify annually for grants
under the AEG program, the sunset coincides with that
of the APS in this legislation.
These state scholarship programs were adopted at a
time when oil value was setting not only record price,
but record state revenue. Under SB 208 the State would
still continue to fund the APS the program, and the
corresponding AEGs during the wind down phase,
providing an orderly closure of these programs as well
as a glide path for the transition.
Co-Chair MacKinnon requested a history of the program. Mr.
Huber replied that in 2010, SB 221 was passed. It
established the original direct state-funded post-secondary
scholarship program, "The Alaska Merit Scholarship
Program." A task force was established to examine higher
education, and the appropriate funding for the future. He
furthered that in 2012, HB 104 passed, which renamed the
program to "The Alaska Performance Scholarship", and
created the direct state-funded grant program, "The Alaska
Education Grant." The bill also created the Higher
Education Fund, which was capitalized to fund the two
programs. It provided a formula of 7 percent of market
value and a split of two-thirds and one-third between the
performance scholarships and the education grant programs.
There were other needs based and performance based grants
and scholarships that had existed since the 1970s. He
remarked that, in 2009, there was a multi-year capital
budget appropriation of $2.5 million as the funding
mechanism that ran through 2012.
Co-Chair MacKinnon requested a Sectional Analysis.
Co-Chair Kelly remarked that there was a hope to have an
overall savings, in combination with the passage of current
bills, of hundreds of millions of dollars.
1:39:04 PM
Mr. Huber discussed the Sectional Analysis (copy on file):
Section 1: Removes references to statutes that are
repealed in later sections of the act.
Section 2: Amends AS 14.43.810 (a) to limit Alaska
performance scholarships to Alaska residents who
graduate from high school in or before July 15, 2016.
Section 3: Provides that, to be eligible for an Alaska
performance scholarship a student must apply to the
commission on or before July 15, 2016.
Section 4: Prohibits the Department of Education and
Early Development from extending a student's
eligibility for Alaska performance scholarship past
July 15, 2022.
Section 5: Amends AS 14.45.130(a), which relates to
the duties of religious or private schools to remove
references to the Alaska performance scholarship.
Section 6: Amends AS 37.14.750 (a), which establishes
thee Alaska higher education investment fund, to
remove references to the Alaska education grant
program and the Alaska performance scholarship
program.
Section 7: Repeals AS 14. 03. 113, which requires
school districts to determine whether graduating
students are eligible for Alaska performance
scholarships, on July 2016.
Section 8: Repeals sections that establish the Alaska
Advantage education grant program and the Alaska's
performance scholarship program on July 16, 2022.
Section 9: Provides that the Alaska Commission of
Postsecondary Education may not award an Alaska
performance scholarship to a new applicant who first
applies for a scholarship after July 15, 2016.
Section 10: Allows the Department of Education and
Early Development, the Department of Labor and
Workforce Development, and the Alaska Commission on
Postsecondary Education to adopt regulations necessary
to implement the act. The regulations may not take
effect before the effective date of the law being
implemented.
Section 11: Makes sections 2- 4 of the act retroactive
to July 15, 2016.
Section 12: Provides that sections 1, 5, and 6, of the
act take effect July 16, 2022.
Section 13: Provides that sections 2 - 4, and 7 - 10
of the act take effect immediately.
Co-Chair MacKinnon queried a resource for additional
information.
1:43:37 PM
Senator Dunleavy requested numbers from the inception of
the program and the completion rate.
Vice-Chair Micciche requested a full set of numbers since
the inception of the program; and the results and benefits
to Alaskans.
Mr. Huber looked at the document titled, "Alaska
Performance Scholarship and Education Grant History" (copy
on file). The document provided numbers on awards, dollars,
recipients, etc. He noted that the Postsecondary Education
Commission also had a website; and provided an annual
report to the legislature of the participation and results
in the program.
Co-Chair MacKinnon stated that the commission at university
would comment on the program.
Vice-Chair Micciche remarked that he wanted to know how
many students were kept in the state through the program.
Mr. Huber remarked that there was information available.
Senator Bishop commented that there was a program through
the PickClickGive that captured all students.
Co-Chair Kelly queried more information for the state's
ability to provide an education to the gifted students.
SB 208 was HEARD and HELD in committee for further
consideration.
SENATE BILL NO. 209
"An Act relating to increasing employer contributions
to the defined benefit plan in the Public Employees'
Retirement System of Alaska."
1:48:51 PM
LAURA CRAMER, STAFF, SENATOR ANNA MACKINNON, introduced SB
209:
Senate Bill 209 proposes a gradual, multi-year
increase in the employer contribution rate for the
Public Employees Retirement System (PERS) from the
current level of 22 percent to 24.5 percent for FY
2017, 25.5 percent in FY 2018, and 26.5 percent in FY
2019.
In 2008, with the passage of Senate Bill 125, the
uniform rate was established at 22 percent, with the
State of Alaska paying the difference in costs between
the uniform rate and the actuarial cost, which was
determined by the Alaska Retirement Management Board
and the actuary consultants to the State of Alaska.
This made the PERS a cost sharing plan in which all
employers pay one uniform rate and share in the
liabilities and the assets of the plan. This allowed
the state to share in the payment of the unfunded
liability of the system with the employers.
The establishment of the 22 percent and the commitment
of the state to assist in costs over 22 percent was
made at a time when oil value was setting not only
record price, but generating record state revenue.
From FY2008 through FY2016, PERS appropriations ranged
from $108 million to $312 million annually. During
those nine years, a cumulative total of $1.708 billion
was appropriated to the PERS unfunded liability. In
addition to the state assistance payments, in FY 2015,
an appropriation was made to the PERS Fund in the
amount of $1,000,000,000 in order to improve the
health of the system and reduce the unfunded
liability. In total, state unrestricted general fund
assistance has exceeded $2.7 billion over the past
nine years.
Senate Bill 209 is a conservative approach to
balancing the state's current fiscal reality and its
commitment to assisting PERS employers with the cost
and the unfunded liability of the system.
This legislation provides a level of stability that
will assist the State of Alaska and PERS employers in
fulfilling the obligation to a healthy retirement
system for its members.
Co-Chair MacKinnon felt the sectional analysis was covered
in the bill introduction.
1:49:37 PM
Co-Chair Kelly recalled that the initiation of the 22
percent was at a period of time when the unfunded liability
obligation was approximately $4 billion. He remarked that
the stock market fell in 2008, which changed it to a $15
billion unfunded liability.
Co-Chair MacKinnon queried the desired information to
evaluate the bill.
Vice-Chair Micciche requested the history of the state's
contributions to municipalities He also wanted to
understand the true rate.
Co-Chair MacKinnon explained that the state covered above
the 22 percent, so municipalities covered the 22 percent.
Vice-Chair Micciche wondered what happened to the defined
contribution plan piece. He wondered if the new
contribution would be higher than 24.5 percent.
Co-Chair MacKinnon hoped to hear from Buck on the actuary
analysis.
Ms. Cramer stated that the system allowed for every
employee to be covered. She remarked that there was no
differentiation between the two plans. She stated that
there would be a more thorough discussion.
Co-Chair MacKinnon explained that if an average employee
made $100,000 under tier 1 with a cash call of 36 percent,
the state would contribute $36,000. A new employee under
the defined contribution, the state may contribute $12,000,
creating a disadvantage. The system looked at the employees
as a whole, so all employees were treated equitably when
applying for a job. She remarked that it would be unfair
for a new employee to outpace an older employee.
Vice-Chair Micciche wanted to clarify the burden to
municipalities and the state.
Senator Hoffman queried the annual costs over the course of
the five-year increment.
Senator Dunleavy wanted to examine the time of inception.
1:56:12 PM
Co-Chair MacKinnon shared that there was a new general
accounting rule, so the municipalities were working on
keeping up with the debt.
Co-Chair Kelly felt that there was not a connection between
the APS and the bill. He felt that the money would be used
as a "shock absorber" to the communities in SB 207 and SB
208.
Co-Chair MacKinnon stated that SB 207 and SB 208 were
linked in an effort to use a one-time funding source to
TRS.
Vice-Chair Micciche stressed that he wanted to best
research the municipalities who were in the most need of
relief.
Co-Chair MacKinnon stressed that SB 209 and SB 210 were
interrelated in order to share the financial
responsibility.
SB 209 was HEARD and HELD in committee for further
consideration.
SENATE BILL NO. 210
"An Act relating to the community revenue sharing
program; changing the name of the community revenue
sharing program to the community assistance program;
and relating to the municipal property tax exemption
on the residence of a senior, a disabled veteran, and
a widow or widower of a senior or disabled veteran."
2:00:20 PM
LAURA CRAMER, STAFF, SENATOR ANNA MACKINNON, explained SB
210:
With a $3.7 billion shortfall for Fiscal Year 2016 and
a projected shortfall of $4 billion for Fiscal Year
2017, the legislature is examining programs that were
created to provide assistance to communities when
Alaska was experiencing surplus revenues due to the
high price of oil. In 2008, the legislature created
the Community Revenue Sharing program, which
distributes funds to communities to be spent at their
discretion. The program was established under the
principle that when oil revenues were high, the wealth
would be shared with local communities.
Senate Bill 210 proposes changes to the program,
allowing for communities to continue to receive
assistance, while establishing a structure to phase
out the program as originally intended when created.
Additionally, the legislature has heard concerns from
communities throughout Alaska about the burden
unfunded mandates, enacted by the legislature, places
on local governments. At low oil prices, the burdens
on communities are enhanced and even limits local
decision making. Under SB 210, discretion is returned
to the local communities to enact certain property tax
exemptions. This would allow communities to structure
their tax exemptions to serve their residents and meet
the needs of the communities to the maximum extent
possible.
Senate Bill 210, helps communities transition to more
local control, while continuing to receive assistance
from the state as they become less reliant on state
resources to support local government.
Co-Chair MacKinnon requested a sectional analysis.
Ms. Cramer discussed the Sectional Analysis (copy on file):
Section 1: Updates AS 28.10.181(d) reflecting the
repeal of AS 29.45.030(i) and inserts reference to AS
29.45.050(x) where the definition of "disabled
veteran" is now located as a result of this
legislation
Section 2: Updates the program name change "community
assistance" in AS 29.20.640(b)
Section 3: Updates the program name change "community
assistance" in AS 29.45.020
Section 4: Updates AS 29.46.030(h) reflecting the
repeal to 29.46.030(e) - (h) and (j)
Section 5: Moves repealed language under AS
29.45.030(k) to this section
Section 6: Updates AS 29.45.040(f) reflecting the
repeal of AS 29.45.030(i) reference to AS 29.45.050(x)
where the definition of "disabled veteran" is now
located as a result of this legislation
Section 7: Amends AS 29.45.050(i) allowing a
municipality to exempt real property from taxation
making it optional under state statute and places
widow or widower as a qualifier under this section
Section 8: Adds the definition of "disabled veteran"
and "widow or widower" to AS 29.45.050(x)
Section 9: Moves repealed language under AS
29.45.030(e) and AS 29.45.030(i) to this section
Section 10: Updates the program name change "community
assistance" in AS 29.45.660(b)
Section 11: Updates the program name change "community
assistance" in AS 29.60.810 (A)
Section 12: Updates the program name change "community
assistance" in AS 29.60.850 and reduces the minimum
balance to $15,000,000
Section 13: Updates the program name change "community
assistance" in AS 29.60.855, changes the basic amount
to $384,000, and directs the department to reduce the
basic amount pro rata if the fund balance is less than
$15,000,000
Section 14: Updates the program name change "community
assistance" in AS 29.60.860(a)
Section 15: Updates the program name change "community
assistance" in AS 29.60.860(b)
Section 16: Updates the program name change "community
assistance" in AS 29.60.865
Section 17: Adds the community assistance program to
the definition of "state money" in AS 29.71.040(h)(2)
- Procurement Preference
Section 18: Updates the program name change "community
assistance" in AS 36.10.090(b)
Section 19: Adds the community assistance program to
AS 36.10.125(c) - employment preferences
Section 20: Adds the community assistance program to
the definition of "state money" in AS 36.15.050(h)(3)
- Alaska Product Preference
Section 21: Adds the community assistance program to
AS 44.33.020(a) (20) requiring the Department of
Commerce, Community and Economic Development to
administer the program
Section 22: Updates the program name change "community
assistance" in AS 46.07.080(2)(iii)
Section 23: Repeals AS 29.45.0303(a)(6), 29.45.030¼
29.45.030(f), 29.45.030(g), 29.45.030(i), and
29.45.030(k)
2:06:42 PM
Co-Chair MacKinnon queried recommendations from the
committee.
Co-Chair MacKinnon stressed that the state was in a $4
billion deficit.
Co-Chair Kelly shared a history of the state's unfunded
liability.
Co-Chair MacKinnon stressed that the suite of bills
attempted to address the holes in Alaska's budget. She
remarked that the bills would provide an opportunity for
communities to understand the state's problems. She
stressed that the committee was attempting to address the
long-term fiscal problem, and the state could not continue
to address the major issue with budget. She remarked that
the funds were not available to continue to invest in the
same way as it had in the past.
SB 210 was HEARD and HELD in committee for further
consideration.
ADJOURNMENT
2:13:19 PM
The meeting was adjourned at 2:13 p.m.