Legislature(1993 - 1994)

02/03/1993 09:06 AM STA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                 SENATE STATE AFFAIRS COMMITTEE                                
                        February 3, 1993                                       
                            9:06 a.m.                                          
  MEMBERS PRESENT                                                              
  Senator Loren Leman, Chairman                                                
  Senator Mike Miller, Vice Chairman                                           
  Senator Robin Taylor                                                         
  Senator Jim Duncan                                                           
  Senator Johnny Ellis                                                         
  MEMBERS ABSENT                                                               
  All Present                                                                  
  COMMITTEE CALENDAR                                                           
  SENATE BILL NO. 29                                                           
  "An Act making  a special appropriation to  the principal of                 
  the Alaska permanent  fund; and  providing for an  effective                 
  SENATE CONCURRENT RESOLUTION NO. 1                                           
  Relating to the twenty-seventh annual Boys' State.                           
  SENATE BILL NO. 56                                                           
  "An  Act  relating to  the  budget reserve  fund established                 
  under  art.  IX,  sec.  17, Constitution  of  the  State  of                 
  SENATE BILL NO. 1                                                            
  "An Act relating  to retirement  incentive programs for  the                 
  public   employees'   retirement   system,   the   teachers'                 
  retirement system, and  certain persons  under the  judicial                 
  retirement system; and providing for an effective date."                     
  SENATE BILL NO.10                                                            
  "An  Act establishing  a  retirement incentive  program  for                 
  certain employees; and providing for an effective date."                     
  SENATE BILL NO. 6                                                            
  "An Act amending and making effective an annuity program and                 
  amendments to the longevity bonus  program and the permanent                 
  fund dividend program provided for in secs.  2 - 18, ch. 99,                 
  SLA 1985; and providing for an effective date."                              
  PREVIOUS SENATE COMMITTEE ACTION                                             
  SB 29 - See State Affairs minutes dated 1/29/93.                             
  SCR 1 - No previous action to record.                                        
  SB 56 - No previous action to record.                                        
  SB  1 - No previous action to record.                                        
  SB 10 - No previous action to record.                                        
  SB  6 - No previous action to record.                                        
  WITNESS REGISTER                                                             
  Senator Randy Phillips                                                       
  State Capitol                                                                
  Juneau, Alaska  99801-1182                                                   
  POSITION STATEMENT: Testified on SB 56.                                      
  Representative Kay Brown                                                     
  State Capitol                                                                
  Juneau, Alaska  99801-1182                                                   
  POSITION STATEMENT: Testified on SB 56.                                      
  Darrel Rexwinkel, Commissioner                                               
  Department of Revenue                                                        
  P. O. Box 110400                                                             
  Juneau, Alaska 99811-0400                                                    
  POSITION STATEMENT: Testified on SB 56.                                      
  Shelby Stastny, Director                                                     
  Office of Management and Budget                                              
  P. O. Box 110020                                                             
  Juneau, Alaska  99811-0020                                                   
  POSITION STATEMENT: Testified on SB 1 & SB 10.                               
  Barry Haight                                                                 
  991 Vail View Dr.                                                            
  Fairbanks, Alaska 99712                                                      
  POSITION STATEMENT:  Supports SB 1 & SB 10.                                  
  Jim Preston                                                                  
  P. O. Box 210336                                                             
  Auke Bay, Alaska  99821                                                      
  POSITION STATEMENT: Supports SB 1.                                           
  Bob Deitrick                                                                 
  4421 Teel Court                                                              
  Juneau, Alaska  99801                                                        
  POSITION STATEMENT:  Supports SB l.                                          
  Mike Harold                                                                  
  9582 Whitewater Court                                                        
  Juneau, Alaska  9980l                                                        
  POSITION STATEMENT:  Supports SB 1.                                          
  Bill Kelder, Aide                                                            
  Senator Jay Kerttula                                                         
  State Capitol                                                                
  Juneau, Alaska  99801-1182                                                   
  POSITION STATEMENT:  Testified on SB 6.                                      
  Senator Jay Kerttula                                                         
  State Capitol                                                                
  Juneau, Alaska  99801-1182                                                   
  POSITION STATEMENT:  Testified on SB 6.                                      
  Nancy Bear Usera, Commissioner                                               
  Department of Administration                                                 
  P. O. Box 110200                                                             
  Juneau, Alaska  99801-0200                                                   
  POSITION STATEMENT:  Testified on SB 6.                                      
  Mary Lou Meiners                                                             
  American Assoc. of Retired Persons                                           
  P. O. Box 20412                                                              
  Juneau, Alaska  99802                                                        
  POSITION STATEMENT:  Supports SB 6.                                          
  ACTION NARRATIVE                                                             
  TAPE 93-7, SIDE A                                                            
  Number 001                                                                   
  CHAIRMAN LEMAN called  the Senate Affairs  Committee meeting                 
  to order at 9:06 a.m. and  announced SB 29 (APPROP: EARNINGS                 
  RESERVE TO PF PRINCIPAL) to be up for consideration.                         
  SENATOR  MILLER  moved to  pass  SB 29  from  committee with                 
  individual recommendations.  There were no objections and it                 
  was so ordered.                                                              
  SENATOR LEMAN announced SCR  1 (TWENTY-SEVENTH ANNUAL  BOY'S                 
  STATE) to be up for consideration.                                           
  SENATOR  LEMAN relinquished  control  to Senator  Miller and                 
  presented  a  brief  sponsor's statement.    SENATOR  MILLER                 
  returned control to Senator Leman.                                           
  SENATOR  MILLER  moved to  pass  SCR l  from  committee with                 
  individual recommendations.  There were no objections and it                 
  was so ordered.                                                              
  SENATOR LEMAN  introduced SB  56  (ADMINISTRATION OF  BUDGET                 
  RESERVE   FUND)   and    invited   Senator   Phillips    and                 
  Representative Brown to join the committee at the table.                     
  SENATOR PHILLIPS  testified that  the legislation  clarifies                 
  "administrative  proceedings" and  puts  the money  into the                 
  Constitutional Budget Reserve Fund.                                          
  SENATOR MILLER moved to adopt the work draft dated 2/2/93 to                 
  SB 56.  There were no objections and it was so ordered.                      
  REPRESENTATIVE  BROWN   said   she   participated   in   the                 
  development  of  the  bill  as  she   is  a  member  of  the                 
  Legislative Budget and Audit Committee.   She explained that                 
  the CS has  two changes on page  1, section 1, which  is the                 
  section that reflects  the interest as well as  penalties on                 
  past  due taxes.   Secondly,  on page  2, line 2,  the words                 
  "been requested" was substituted for  the word "begun" which                 
  she  said  also refers  to  past due  taxes.   She  said the                 
  substantial lag time  between the request  and the time  the                 
  hearing actually began needed to be addressed.                               
  Number 065                                                                   
  REPRESENTATIVE  BROWN explained  the  issues are  what money                 
  should go into the Constitutional Budget Reserve and what is                 
  meant by the term "administrative proceeding."                               
  DARREL  REXWINKEL,  Commissioner,   Department  of   Revenue                 
  testified in  favor of  the amendments  adopted  in CSSB  56                 
  (STA).   He  said in  1990, the  voters adopted  legislation                 
  regarding the  Constitutional Budget Reserve  Fund which has                 
  language  about the settlement of taxes  which would go into                 
  COMMISSIONER REXWINKEL  said an  Attorney General's  opinion                 
  explain   what   really   constitutes   an   "administrative                 
  proceeding."  During  the audit process, the  taxpayers file                 
  voluntary tax returns  which the  Department of Revenue  can                 
  audit.  Because of the large  amounts of money involved, all                 
  of the major  oil producers are  audited.    As a result  of                 
  that audit  process, an assessment  notice is  issued.   The                 
  taxpayer then  has sixty  days to  pay the  tax, request  an                 
  informal conference, or  request a formal hearing.  He noted                 
  it has to go  through a formal hearing process before it can                 
  go to litigation.                                                            
  COMMISSIONER  REXWINKEL   said  he  supports   the  Attorney                 
  General's opinion.                                                           
  Number 120                                                                   
  He also said  there was  some question about  the amount  of                 
  money involved.   Last  year there  was $16  million in  the                 
  Constitutional Budget  Reserve  Fund.    Once  the  Attorney                 
  General's opinion had been released, they started to look at                 
  the  settlement   receipts  and   noticed  that  some   were                 
  improperly classified as general fund money.  The Department                 
  then started auditing general  fund receipts as far  back as                 
  July 1, 1990 to see if it had any funds that belonged in the                 
  Constitutional  Budget Reserve  Fund.    The Department  now                 
  believes  the  amount  that  goes  into  the  Administrative                 
  Settlement account is probably a little over $200 million.                   
  Number 175                                                                   
  SENATOR TAYLOR said he disagreed  strongly with the Attorney                 
  General's opinion and is  not yet convinced that there  is a                 
  real reason to  modify what  he considers to  be very  clear                 
  Number 200                                                                   
  COMMISSIONER REXWINKEL testified  that the informal  hearing                 
  process is  like an  extension of  the  audit. The  auditors                 
  issue   assessment  notices,   sometimes,   based  on   very                 
  incomplete  information.    Through   the  hearing  process,                 
  auditors stick by their assessment notice or issue a revised                 
  notice of assessment.  Then there  is either a settlement or                 
  a hearing.                                                                   
  JAMES  BALDWIN, Assistant  Attorney General,  testified that                 
  the  Department  of Law  was  not concerned  with  where the                 
  dollars would wind up, they were concerned with establishing                 
  a good definition of "administrative proceedings" aside from                 
  the audit process.                                                           
  Number 225                                                                   
  REPRESENTATIVE BROWN  asked about  the recalculation of  the                 
  Administrative Settlement Account and the source of the $200                 
  million.  COMMISSIONER REXWINKEL answered that was yet to be                 
  fully determined.   A majority  of the funds  came from  the                 
  litigation  on  the   royalty  cases,   so  it  is   clearly                 
  Constitutional Budget Reserve Fund money.                                    
  Number 250                                                                   
  SENATOR  LEMAN  commented that  he  was concerned  about the                 
  retroactive application of the audits.                                       
  REPRESENTATIVE  BROWN   explained  the  bill   would  become                 
  effective 90  days after  enactment if  it did  not have  an                 
  effective date. As  it is  drafted presently,  the issue  is                 
  what to do  with the Administrative Settlement  Account that                 
  was mixed with the general fund.   Presumably, she said, you                 
  could make this bill retroactive and try to sweep money back                 
  into  the Constitutional  Budget  Reserve  Fund.   Assistant                 
  Attorney General Baldwin  suggested the six months  that now                 
  appears  in  this bill.    REPRESENTATIVE BROWN  agreed with                 
  Senator  Taylor  that the  language  in the  constitution is                 
  clear  and that  we  are attempting  to  capture all  monies                 
  including  windfalls  and  back  taxes.   For  the  Attorney                 
  General to ignore the issue of where the money ended up, she                 
  thought, was a misreading  of the history.  She  did believe                 
  that it is necessary  to pass some bill that  addresses this                 
  Number 300                                                                   
  SENATOR LEMAN said he would like to know why the bill needed                 
  an effective date sooner  than ninety days to deal  with the                 
  retroactive issues?                                                          
  Number 325                                                                   
  REPRESENTATIVE BROWN said the last section of the bill makes                 
  it easier to access  the fund by defining what  is available                 
  for appropriations.  That is  a provision the administration                 
  does support.   It specifies that  we could not be  counting                 
  the  earnings  reserve  of  the  permanent fund  before  the                 
  legislature  could  access  this fund  or  other  designated                 
  Number 350                                                                   
  SENATOR  DUNCAN  said the  Committee  should have  a clearer                 
  understanding  from the administration  what the real impact                 
  is on revenues  available for fiscal year  94.  COMMISSIONER                 
  REXWINKEL said he would have the information in a week.                      
  REPRESENTATIVE BROWN said she had requested an accounting on                 
  October 5, 1992.   She  received a brief  reply in  December                 
  saying there was $103 million in the fund  and she was still                 
  trying  to get a  straight answer  on what  settlements have                 
  come in and what the disposition of them has been.                           
  Number 375                                                                   
  COMMISSIONER  REXWINKEL  apologized to  Representative Brown                 
  and  to the State  Affairs Committee members,  but the audit                 
  was not done, yet.                                                           
  SENATOR  TAYLOR    wanted  to  determine the  definition  of                 
  "administration  hearing"  and  "receive."     He  was  also                 
  concerned about the ability of the Governor and the Attorney                 
  General to settle litigation like the $16 million with Tyson                 
  Seafoods.  Apparently,   the  Attorney   General  has   been                 
  negotiating with Tyson to build the  State a couple of boats                 
  for The Department  of Fish  and Game.   While  the need  is                 
  there and  Tyson can build  them at a  low price,  he didn't                 
  think it was  the Attorney General's  job to decide how  the                 
  settlement  should  be  spent.    He  thought   it  was  the                 
  legislature's job to appropriate those funds.                                
  The legislature  let it  happen once  with the  Exxon-Valdez                 
  settlement, but he  would not support further  activities of                 
  that nature.                                                                 
  Number 400                                                                   
  SENATOR  LEMAN  said  the  committee  would  hold SB  56  in                 
  committee  and  appointed   a  subcommittee  consisting   of                 
  Senators Duncan, Taylor and Leman.                                           
  and SB  10  (RETIREMENT  INCENTIVE PROGRAM)  to  be  up  for                 
  Number 420                                                                   
  SENATOR DUNCAN,  prime sponsor of  SB l, testified  that the                 
  state had two previous retirement incentive programs in 1986                 
  and 1989.  The 1986 program saved approximately  $73 million                 
  dollars in personal services costs, with approximately 2,300                 
  employees  retired  under that  program.   The  1989 program                 
  resulted  in  a savings  of  $23  million dollars  with  the                 
  retirement of about 1,800 employees.                                         
  Last year  when the legislation was introduced and passed by                 
  the legislature, it  was estimated  there were about  10,600                 
  employees  eligible  for the  retirement  incentive program.                 
  About 20 to 30 percent  of those eligible have retired.   It                 
  was  estimated that  at that  2,000  - 3,000  might actually                 
  participate in  a retirement  incentive program.  He had  no                 
  reason to  believe that  number has  decreased, in  fact, it                 
  probably has increased.                                                      
  To qualify, an employee must be  within three years of early                 
  or  normal  retirement.  The increased  benefit  would  vary                 
  depending on each individual's length  of service, their age                 
  and which retirement system they are participating in.   The                 
  personal services savings required by the program will again                 
  be calculated over a five year period.                                       
  Letters are  on  file in  support  of the  program,  Senator                 
  Duncan  said,  from  such  places  as the  Anchorage  School                 
  District and  the Cities  of North  Pole, Hoonah,  Wrangell,                 
  Kenai,  Ketchikan, Juneau,  etc.   He  said  there is  great                 
  support for the program.                                                     
  Number 450                                                                   
  SENATOR DUNCAN  thought the  most compelling  facets of  the                 
  program  really are the  economic benefits it  brings to the                 
  state,  not  just   to  state  government,  but   to  school                 
  districts,  other  governmental   entities,  and   municipal                 
  governments. He said that the audits clearly point out there                 
  is a personal services savings.                                              
  In  a period of tightening budgets and declining revenues an                 
  early  retirement program means fewer  layoffs.  It's a more                 
  humane  and  a  more rational  way  of  reducing government.                 
  Studies  indicate   it  has  not  negatively   impacted  the                 
  retirement  system,  because  it's  a  fully  funded,  sound                 
  program.  It's a  management tool that should be  available.                 
  Even if there are not going to be massive layoffs due  to an                 
  economic downturn,  SENATOR  DUNCAN said the stated  goal of                 
  this administration and the majority  of this legislature is                 
  to  reduce  government   expenditures  and  reduce  personal                 
  services cost.                                                               
  Number 500                                                                   
  Furthermore, there's nothing mandated in  this program other                 
  than that we make the program available for managers.                        
  TAPE 93-7, SIDE B                                                            
  Number 560                                                                   
  SHELBY STASTNY, Director,  Office of Budget  and Management,                 
  said the administration's  position on SB 1 and SB 10 is not                 
  popular, and it  was not taken lightly.  They  believe it is                 
  the appropriate position, however.                                           
  They  believe the  retirement  incentive programs  work very                 
  effectively  when   there  are  large  numbers   of  layoffs                 
  required.  Many private industries and governments have used                 
  it as a  tool when significant  layoffs are necessary.   MR.                 
  STASTNY said one of the  difficulties the administration has                 
  with a series of retirement incentive programs  is that they                 
  lose their  effectiveness.  They begin to  have the opposite                 
  effects  for  which  they  were  intended.    As  retirement                 
  incentive programs become  a regular occurrence, it  is very                 
  difficult for a person to retire normally.                                   
  Although a person does, as Senator Duncan said, pay into the                 
  retirement  program for their share  of the actual cost, the                 
  fact  remains  that it  does  give  them an  opportunity  to                 
  participate in the retirement program for an extended period                 
  of time.   If it's on the books  as a tool, then it's in the                 
  back  of everybody's  head  that maybe  they  ought to  wait                 
  around  for  it and  lobby  the  administration to  make  it                 
  Number 575                                                                   
  MR. STASTNY said  the administration believes that  the cost                 
  savings are  not  there unless  there are  large numbers  of                 
  layoffs, and they  may not necessarily  be there then.   The                 
  average amount saved  by the state  in the last RIP  program                 
  was $8,000 per  employee, more or  less.  The difficulty  in                 
  the calculation comes  with the number  of people who  would                 
  have retired anyway.  $8,000 is  a skinny margin  as far  as                 
  savings go.   It doesn't take many of those people who would                 
  have  retired  anyway to  wipe  out the  $8,000  average per                 
  employee savings.  His responsibility as the Director of the                 
  Office of Management and Budget is to make sure the state is                 
  spending money appropriately and the  programs we enter into                 
  make good economic sense.                                                    
  In order for  RIP programs to  save a significant amount  of                 
  money,  a  large number  of the  positions  need to  be held                 
  vacant  which  could be  written  into  the way  the  RIP is                 
  administered by the state.                                                   
  The last point is the drain it has on good experienced state                 
  employees at  a time when our revenue  projections are going                 
  down.  It seems that  we ought to be working to hang  on the                 
  most  experienced employees  rather  than encouraging  those                 
  people to leave.                                                             
  We believe that at  this particular point in our  history it                 
  doesn't make good  sense to enact  these bills, MR.  STASTNY                 
  SENATOR DUNCAN  said a  person has  to decide  if they  will                 
  retire by a certain date, according to his legislation.  For                 
  example, state employees have an application period of three                 
  months.  Participation is not mandatory.  It is a management                 
  decision.    This  is  a  management  tool  which should  be                 
  SENATOR DUNCAN  asked Mr. Stastny  if the Governor's  FY '94                 
  budget took  into  account inflationary  increases, cost  of                 
  living increases for  contracts, and built in  increases for                 
  education  funding etc.?   Or  were agencies being  asked to                 
  absorb those monies?  MR. STASTNY answered that agencies are                 
  asked to absorb significant amounts of money, yes.                           
  SENATOR  DUNCAN asked  if there  were  major reorganizations                 
  going on in state  government that could impact a  number of                 
  positions?    MR.  STASTNY  answered  that  there  was  some                 
  reorganization being  planned, but whether  they will entail                 
  significant reductions, he  could not answer that  for sure.                 
  SENATOR  DUNCAN  said that  rumors  are, for  example, DOTPF                 
  design  and  construction   in  southeast  could  lose   ten                 
  SENATOR DUNCAN  asked  if  there  was  any  concern  in  the                 
  administration that  oil prices might  continue to  decline.                 
  MR. STASTNY answered obviously there is always that concern.                 
  SENATOR DUNCAN said that all those  things concern all of us                 
  and you  should have a management tool  available to address                 
  those situations.   MR. STASTNY  said he understood  Senator                 
  Duncan's concern.                                                            
  SENATOR TAYLOR said  he could  understand the tough  manager                 
  argument and also appreciated the difficulty a manager would                 
  have taking out  a crystal  ball to try  and determine  what                 
  would happen in the future.                                                  
  SENATOR TAYLOR asked if once the department makes a decision                 
  to participate, do  they have an  idea how many people  will                 
  actually take  advantage  of  the  program.  SENATOR  DUNCAN                 
  answered that the decision is  always in management's hands.                 
  The  first decision  to  be made  is  will state  government                 
  participate  at  all.    Second,   will  the  Department  of                 
  Administration participate.   Third, of the 200 - 400 people                 
  eligible in administration, which of them will be allowed to                 
  SENATOR TAYLOR asked, if management would have the authority                 
  to discriminate among  the employees  once they have  opted.                 
  SENATOR DUNCAN answered that they had in the past.                           
  Number 910                                                                   
  BARRY HAIGHT, Fairbanks  fire fighter, representing  a group                 
  of  Fairbanks  Public  Safety  employees,  supported  SB  1,                 
  because he believed  the Retirement Incentive Program  is an                 
  effective management tool to cut costs and reduce government                 
  in times of declining revenues.                                              
  He  said  the  City  of  Fairbanks  and  its employees  have                 
  participated in two previous programs and it had worked well                 
  saving 3/4  of a million dollars  in the 1989 program.   The                 
  City has agreed with its fire fighters to participate in any                 
  future early retirement programs.                                            
  SENATOR  TAYLOR  asked if  the  program they  were currently                 
  operating under  was a twenty-year  and out program  and was                 
  there a five-year  buy-in of  previous military  time?   MR.                 
  HAIGHT answered the program was twenty-years and out.  There                 
  was also a buy-in for military time.                                         
  Number 860                                                                   
  JIM  PRESTON,  President-elect   of  the  Juneau   Education                 
  Association, and teacher at the local high school, stated as                 
  an  employee  of the  Juneau  School  District, he  was  not                 
  eligible  under  the  proposal  to  retire.   If  the  early                 
  retirement program would not have been vetoed last  year, we                 
  could have saved in our own district  one and a half million                 
  dollars, and that's out of a $35 million dollar budget.                      
  Another  advantage  to  using early  retirement  is  that by                 
  replacing a retiring  teacher with a less  expensive younger                 
  teacher fresh from  the university with new  ideas certainly                 
  would increase the chances for restructuring to occur.                       
  Number 835                                                                   
  BOB DEITRICK, President of the Juneau Education Association,                 
  and  teacher at the  Harborview Elementary School, supported                 
  SB 1.  The district is at a point where the budget  is being                 
  reviewed for next year.  There is a shortfall in next year's                 
  budget.   Fortunately, the School Board held some money back                 
  this year for  carry-over because  of the budget  shortfall.                 
  However,  Juneau  is looking  at a  two  percent cut  in the                 
  school district's budget. In another year, we are looking at                 
  a  greater deficit in our budget.  Layoffs will occur in the                 
  Juneau School District if we don't  have some way of cutting                 
  back our expenses.                                                           
  The local economy will  benefit by the passage of  this bill                 
  by keeping people in the city and in the state.                              
  In the education business, you cannot  cut positions and you                 
  cannot cut classrooms.  If you cut classroom  positions, you                 
  increase class size.  For  the benefit of the kids, we  need                 
  passage of this bill.                                                        
  Number 770                                                                   
  MR. DEITRICK said we  need to have an avenue to  maintain an                 
  equitable  program  to  deliver  services  to  kids  in  the                 
  MIKE HAROLD, Juneau  Education Association and a  teacher at                 
  the high school, said most of  the teachers (120 to 160) are                 
  eligible under  this program  to retire.   In  the past  two                 
  RIP's 70 teachers  retired at a  savings to the district  of                 
  $1,500,000.  Many teachers stayed and continued teaching.                    
  MR.  HAROLD  said  he  was  eligible under  this  particular                 
  program and probably would elect to take it.                                 
  Number 730                                                                   
  BILL  KELDER,  aide  to  Senator  Kerttula,  testified  that                 
  because SB 1 and  SB 10 are virtually identical,  except for                 
  the windows of opportunity, and SB 1 was introduced  earlier                 
  by Senator Duncan  that he  would respectfully request  that                 
  action  on SB 10 be deferred at this time.  Senator Kerttula                 
  is  not  asking that  the bill  be  withdrawn, just  held in                 
  abeyance at the chairman's desire.                                           
  MR.  KELDER  said it  was  encouraging to  hear  Mr. Stastny                 
  testify that he didn't see  imminent massive layoffs coming,                 
  but he may be wrong and  Senator Kerttula thought this would                 
  be a very valuable tool to have in place.                                    
  SENATOR LEMAN said he would hold SB 1 for further testimony.                 
  SENATOR LEMAN announced SB 6 (ANNUITY PROGRAM AMENDMENTS) to                 
  be up for consideration.                                                     
  Number 750                                                                   
  SENATOR KERTTULA,  Sponsor, asked Ted Beilman to join him at                 
  the committee table.   SENATOR KERTTULA explained  that this                 
  particular  piece  of  legislation or  a  very  close cousin                 
  passed the Senate  last term.   This was a bill  that almost                 
  100,000  people  voted for.   He  said  he knows  the budget                 
  process and the  state can afford the annuity.  This time it                 
  should be adopted.                                                           
  Number 650                                                                   
  In December the  Wasilla Chamber of Commerce  again endorsed                 
  the annuity bill.  As far as he is concerned, the Department                 
  of Administration, the  people in  the Office of  Management                 
  and  Budget,  the third  floor  influence peddlers  with new                 
  master's  degrees who have never  been north of Yakutat have                 
  back doored and  confused this issue.   Their stair stepping                 
  program was  uneven  and puts  the  whole program  at  risk,                 
  because it may be unconstitutional.  He asked that they pass                 
  the bill and speed it on its way.                                            
  Number 550                                                                   
  NANCY    BEAR    USERA,    Commissioner,    Department    of                 
  Administration, explained that  the Governor has  introduced                 
  an  alternative to SB  6.   She  said the governor supported                 
  the annuity in 1986  when it was on the ballot, as she and a                 
  lot of Alaskans did.  Had that  bill passed at that time, we                 
  would be a long way down  the road toward resolving some  of                 
  these issues and narrowing the  funnel of people coming into                 
  the program.  The fact is for  whatever reason, the bill did                 
  not pass, it did not pass in 86,  87, 88, 89, 90, 91, 92 and                 
  here we are in l993 and the governor continues to support an                 
  annuity concept.                                                             
  She said she didn't think we could discuss this bill without                 
  admitting  it is a  bill for the middle  aged.  According to                 
  the Governor's  bill, anyone who is now  62 or older will be                 
  protected for  life as the  seniors are grandfathered  in in                 
  Senator Kerttula's bill.                                                     
  Number 500                                                                   
  COMMISSIONER USERA said  it was appropriate that  people who                 
  were  40-55 years old  enter into  this discussion,  and let                 
  them know what kinds  of programs they want to  be available                 
  for them when they  look to the state for  some supplemental                 
  COMMISSIONER  USER thought  the  financial aspects  of  this                 
  annuity simply would not make it viable.  The administrative                 
  costs are to  come out of  proceeds.   I takes a  tremendous                 
  amount of capitalization  to be able to  generate sufficient                 
  money to pay market  return on those investments as  well to                 
  absorb the  rate.  She also didn't think it was realistic to                 
  say that 50% of  the people were going to participate in the                 
  program.  And the people who do participate are probably the                 
  people least likely  to need  supplemental income when  they                 
  are older.  The fact is that most people take their dividend                 
  and spend it on current monthly  needs, so assuming there is                 
  going to be a high participation level is not realistic.                     
  Thirdly, she said, the there are financial institutions that                 
  have savings programs.  Certainly we would like to encourage                 
  savings for our future years.  The Department of Revenue has                 
  developed a direct deposit program  so people can have their                 
  dividend  check  deposited   directly  into  their   savings                 
  Fourth and finally, she  didn't think it was the  right time                 
  for the state to be setting up new government bureaucracies.                 
  SENATOR LEMAN thanked  Commissioner Usera  and said that  he                 
  would like additional input from her in the future.                          
  Number 450                                                                   
  MARY LOU MEINERS,  American Association of  Retired Persons,                 
  supportED SB 6.                                                              
  SENATOR  LEMAN thanked everyone  for their participation and                 
  adjourned the meeting at 10:46 a.m.                                          

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