Legislature(2005 - 2006)BELTZ 211

03/22/2005 03:30 PM STATE AFFAIRS


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+= SJR 8 CONST. AM: PERMANENT FUND P.O.M.V. TELECONFERENCED
Heard & Held
*+ SJR 14 REPEAL FEDERAL ESTATE TAX TELECONFERENCED
Moved SJR 14 Out of Committee
+ SB 24 REEMPLOYMENT OF RETIREES TELECONFERENCED
Heard & Held
*+ SB 143 STATE INFO SYSTEM PLAN: LEGISLATURE TELECONFERENCED
Heard & Held
+ HB 90 STATE TREASURY WARRANTS TELECONFERENCED
Moved HB 90 Out of Committee
+ HB 97 OATHS; NOTARIES PUBLIC; STATE SEAL TELECONFERENCED
Moved SCS CSHB 97(STA) Out of Committee
Bills Previously Heard/Scheduled
                    ALASKA STATE LEGISLATURE                                                                                  
            SENATE STATE AFFAIRS STANDING COMMITTEE                                                                           
                         March 22, 2005                                                                                         
                           3:40 p.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Senator Gene Therriault, Chair                                                                                                  
Senator Thomas Wagoner, Vice Chair                                                                                              
Senator Charlie Huggins                                                                                                         
Senator Bettye Davis                                                                                                            
Senator Kim Elton                                                                                                               
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
All members present                                                                                                             
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
SENATE JOINT RESOLUTION NO. 14                                                                                                  
Urging  the United  States  Congress  to amend  the  tax code  to                                                               
permanently  repeal the  federal  estate and  generation-skipping                                                               
transfer tax.                                                                                                                   
                                                                                                                                
     MOVED SJR 14 OUT OF COMMITTEE                                                                                              
                                                                                                                                
SENATE JOINT RESOLUTION NO. 8                                                                                                   
Proposing amendments to  the Constitution of the  State of Alaska                                                               
relating  to  and  limiting  appropriations  from  and  inflation                                                               
proofing the Alaska  permanent fund by establishing  a percent of                                                               
market value spending limit.                                                                                                    
                                                                                                                                
     HEARD AND HELD                                                                                                             
                                                                                                                                
HOUSE BILL NO. 90                                                                                                               
"An   Act  requiring   warrants  drawn   by  the   Department  of                                                               
Administration  against  the  state  treasury  to  be  negotiable                                                               
instruments."                                                                                                                   
                                                                                                                                
     MOVED HB 90 OUT OF COMMITTEE                                                                                               
                                                                                                                                
CS FOR HOUSE BILL NO. 97(FIN)                                                                                                   
"An Act  relating to the  authority to take  oaths, affirmations,                                                               
and   acknowledgments  in   the  state,   to  notarizations,   to                                                               
verifications,   to   acknowledgments,   to  fees   for   issuing                                                               
certificates with the seal of  the state affixed, and to notaries                                                               
public; and providing for an effective date."                                                                                   
                                                                                                                                
     MOVED SCS CSHB 97(STA) OUT OF COMMITTEE                                                                                    
                                                                                                                                
SENATE BILL NO. 143                                                                                                             
"An Act amending  the definition of the term  'state agencies' as                                                               
it   applies  under   Executive  Order   No.  113;   relating  to                                                               
information  systems  in  the  legislative   branch  and  to  the                                                               
Telecommunications  Information  Council;  and providing  for  an                                                               
effective date."                                                                                                                
                                                                                                                                
     HEARD AND HELD                                                                                                             
                                                                                                                                
SPONSOR SUBSTITUTE FOR SENATE BILL NO. 24                                                                                       
"An  Act relating  to reemployment  of and  benefits for  retired                                                               
teachers and  public employees and  to teachers or  employees who                                                               
participated   in   retirement   incentive   programs   and   are                                                               
subsequently reemployed as a commissioner;  repealing secs. 5, 7,                                                               
and  9, ch.  58, SLA  2001; providing  for an  effective date  by                                                               
amending the  delayed effective date for  secs. 3, 5, 9,  and 12,                                                               
ch. 57, SLA 2001, and repealing  sec. 13, ch. 58, SLA 2001, which                                                               
is the delayed effective date for secs.  5, 7, and 9, ch. 58, SLA                                                               
2001; and providing for an effective date."                                                                                     
                                                                                                                                
     HEARD AND HELD                                                                                                             
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
BILL: SJR 14                                                                                                                  
SHORT TITLE: REPEAL FEDERAL ESTATE TAX                                                                                          
SPONSOR(s): SENATOR(s) HUGGINS                                                                                                  
                                                                                                                                
03/08/05       (S)       READ THE FIRST TIME - REFERRALS                                                                        
03/08/05       (S)       STA, FIN                                                                                               
03/22/05       (S)       STA AT 3:30 PM BELTZ 211                                                                               
                                                                                                                                
BILL: SJR 8                                                                                                                   
SHORT TITLE: CONST. AM: PERMANENT FUND P.O.M.V.                                                                                 
SPONSOR(s): RULES BY REQUEST OF LEG BUDGET & AUDIT                                                                              
                                                                                                                                
02/14/05       (S)       READ THE FIRST TIME - REFERRALS                                                                        
02/14/05       (S)       STA, JUD, FIN                                                                                          
03/17/05       (S)       STA AT 3:30 PM BUTROVICH 205                                                                           
03/17/05       (S)       Scheduled But Not Heard                                                                                
03/22/05       (S)       STA AT 3:30 PM BELTZ 211                                                                               
                                                                                                                                
BILL: HB 90                                                                                                                   
SHORT TITLE: STATE TREASURY WARRANTS                                                                                            
SPONSOR(s): STATE AFFAIRS                                                                                                       
                                                                                                                                
01/21/05       (H)       READ THE FIRST TIME - REFERRALS                                                                        
01/21/05       (H)       L&C, STA                                                                                               
02/02/05       (H)       L&C AT 3:15 PM CAPITOL 17                                                                              
02/02/05       (H)       Moved Out of Committee                                                                                 
02/02/05       (H)       MINUTE(L&C)                                                                                            
02/04/05       (H)       L&C RPT 5DP                                                                                            
02/04/05       (H)       DP: LYNN, KOTT, LEDOUX, GUTTENBERG,                                                                    
                         ANDERSON                                                                                               
02/08/05       (H)       RULES TO CALENDAR PENDING REPORT                                                                       
02/08/05       (H)       STA AT 8:00 AM CAPITOL 106                                                                             
02/08/05       (H)       Moved Out of Committee                                                                                 
02/08/05       (H)       MINUTE(STA)                                                                                            
02/09/05       (H)       STA RPT 7DP                                                                                            
02/09/05       (H)       DP: GARDNER, LYNN, GATTO, GRUENBERG,                                                                   
                         RAMRAS, ELKINS, SEATON                                                                                 
02/09/05       (H)       TRANSMITTED TO (S)                                                                                     
02/09/05       (H)       VERSION: HB 90                                                                                         
02/10/05       (S)       READ THE FIRST TIME - REFERRALS                                                                        
02/10/05       (S)       L&C, STA                                                                                               
03/03/05       (S)       L&C AT 1:30 PM BELTZ 211                                                                               
03/03/05       (S)       Heard & Held                                                                                           
03/03/05       (S)       MINUTE(L&C)                                                                                            
03/10/05       (S)       L&C AT 1:30 PM BELTZ 211                                                                               
03/10/05       (S)       Moved  HB 90 Out of Committee                                                                          
03/10/05       (S)       MINUTE(L&C)                                                                                            
03/14/05       (S)       L&C RPT 3DP                                                                                            
03/14/05       (S)       DP: BUNDE, ELLIS, SEEKINS                                                                              
03/22/05       (S)       STA AT 3:30 PM BELTZ 211                                                                               
                                                                                                                                
BILL: HB 97                                                                                                                   
SHORT TITLE: OATHS; NOTARIES PUBLIC; STATE SEAL                                                                                 
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR                                                                                    
                                                                                                                                
01/21/05       (H)       READ THE FIRST TIME - REFERRALS                                                                        
01/21/05       (H)       STA, JUD, FIN                                                                                          
01/26/05       (H)       FN1: (GOV) - CORRECTED                                                                                 
02/03/05       (H)       STA AT 8:00 AM CAPITOL 106                                                                             
02/03/05       (H)       Moved CSHB 97(STA) Out of Committee                                                                    
02/03/05       (H)       MINUTE(STA)                                                                                            
02/07/05       (H)       STA RPT CS(STA)  6DP 1NR                                                                               
02/07/05       (H)       DP: LYNN, GATTO, ELKINS, GRUENBERG,                                                                    
                        RAMRAS, SEATON;                                                                                         
02/07/05       (H)       NR: GARDNER                                                                                            
02/16/05       (H)       JUD AT 1:00 PM CAPITOL 120                                                                             
02/16/05       (H)       Moved CSHB 97(JUD) Out of Committee                                                                    
02/16/05       (H)       MINUTE(JUD)                                                                                            
02/18/05       (H)       JUD RPT CS(JUD)  5DP                                                                                   
02/18/05       (H)       DP:   GRUENBERG,   DAHLSTROM,   COGHILL,                                                               
                         GARA, MCGUIRE                                                                                          
02/28/05       (H)       FIN AT 1:30 PM HOUSE FINANCE 519                                                                       
02/28/05       (H)       Heard & Held                                                                                           
02/28/05       (H)       MINUTE(FIN)                                                                                            
03/08/05       (H)       FIN AT 1:30 PM HOUSE FINANCE 519                                                                       
03/08/05       (H)       Moved CSHB 97(FIN) Out of Committee                                                                    
03/08/05       (H)       MINUTE(FIN)                                                                                            
03/09/05       (H)       FIN RPT CS(FIN) 2DP 7NR                                                                                
03/09/05       (H)       DP: FOSTER, MEYER;                                                                                     
03/09/05       (H)       NR: HAWKER, MOSES, HOLM, STOLTZE,                                                                      
                         JOULE, KELLY, WEYHRAUCH                                                                                
03/17/05       (H)       TRANSMITTED TO (S)                                                                                     
03/17/05       (H)       VERSION: CSHB 97(FIN)                                                                                  
03/18/05       (S)       READ THE FIRST TIME - REFERRALS                                                                        
03/18/05       (S)       STA, FIN                                                                                               
03/22/05       (S)       STA AT 3:30 PM BELTZ 211                                                                               
                                                                                                                                
BILL: SB 143                                                                                                                  
SHORT TITLE: STATE INFO SYSTEM PLAN: LEGISLATURE/UNIV                                                                           
SPONSOR(s): STATE AFFAIRS                                                                                                       
                                                                                                                                
03/16/05       (S)       READ THE FIRST TIME - REFERRALS                                                                        
03/16/05       (S)       STA                                                                                                    
03/22/05       (S)       STA AT 3:30 PM BELTZ 211                                                                               
                                                                                                                                
BILL: SB 24                                                                                                                   
SHORT TITLE: REEMPLOYMENT OF RETIREES                                                                                           
SPONSOR(s): SENATOR(s) STEVENS G                                                                                                
                                                                                                                                
01/11/05       (S)       PREFILE RELEASED 12/30/04                                                                              
01/11/05       (S)       READ THE FIRST TIME - REFERRALS                                                                        
01/11/05       (S)       HES, STA                                                                                               
01/26/05       (S)       SPONSOR SUBSTITUTE INTRODUCED-REFERRALS                                                                
01/26/05       (S)       HES, STA                                                                                               
03/07/05       (S)       HES AT 1:30 PM BUTROVICH 205                                                                           
03/07/05       (S)       Heard & Held                                                                                           
03/07/05       (S)       MINUTE(HES)                                                                                            
03/08/05       (S)       FIN REFERRAL ADDED AFTER STA                                                                           
03/14/05       (S)       HES AT 1:30 PM BUTROVICH 205                                                                           
03/14/05       (S)       Heard & Held                                                                                           
03/14/05       (S)       MINUTE(HES)                                                                                            
03/16/05       (S)       HES AT 1:30 PM BUTROVICH 205                                                                           
03/16/05       (S)       Moved  CSSSSB  24(HES) Out of Committee                                                                
03/16/05       (S)       MINUTE(HES)                                                                                            
03/18/05       (S)       HES RPT CS 1DP 3NR 1AM        NEW TITLE                                                                
03/18/05       (S)       NR: DYSON, WILKEN, OLSON                                                                               
03/18/05       (S)       DP: ELTON                                                                                              
03/18/05       (S)       AM: GREEN                                                                                              
03/22/05       (S)       STA AT 3:30 PM BELTZ 211                                                                               
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                              
Deborah Grundmann,                                                                                                              
Aide to Senator Huggins                                                                                                         
Alaska State Capitol                                                                                                            
Juneau, AK  99801                                                                                                               
POSITION STATEMENT:  Presented SJR 14 for the sponsor                                                                         
                                                                                                                                
Mike Williams                                                                                                                   
Department of Revenue                                                                                                           
PO Box 110400                                                                                                                   
Juneau, AK  99811-0400                                                                                                          
POSITION STATEMENT:  Answered questions about the fiscal impact                                                               
of SJR 8 on the state                                                                                                           
                                                                                                                                
Mike Burns,                                                                                                                     
Chief Executive Officer                                                                                                         
Alaska Permanent Fund Corporation                                                                                               
        th                                                                                                                      
801 W 10 St., Suite 302                                                                                                         
Juneau, AK 99802                                                                                                                
POSITION STATEMENT:  Answered questions about SJR 8                                                                           
                                                                                                                                
Laura Achee                                                                                                                     
Alaska Permanent Fund Corporation                                                                                               
        th                                                                                                                      
801 W 10 St., Suite 302                                                                                                         
Juneau, AK 99802                                                                                                                
POSITION STATEMENT:  Answered questions about SJR 8                                                                           
                                                                                                                              
Representative Max Gruenberg                                                                                                    
Alaska State Capitol                                                                                                            
Juneau, AK  99801-1182                                                                                                          
POSITION STATEMENT:  Presented HB 90                                                                                          
                                                                                                                                
Kim Garnero,                                                                                                                    
Director of Finance                                                                                                             
Department of Administration                                                                                                    
PO Box 110204                                                                                                                   
Juneau, AK  99811-0204                                                                                                          
POSITION STATEMENT:  Supported HB 90                                                                                          
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
CHAIR GENE  THERRIAULT called the  Senate State  Affairs Standing                                                             
Committee  meeting  to  order  at  3:40:25  PM.  Senators  Davis,                                                             
Huggins  and Chair  Therriault were  present. Senators  Elton and                                                               
Wagoner arrived during the course of the meeting.                                                                               
                                                                                                                                
                SJR 14-REPEAL FEDERAL ESTATE TAX                                                                            
                                                                                                                              
CHAIR GENE THERRIAULT  announced SJR 14 to be the  first order of                                                               
business.                                                                                                                       
                                                                                                                                
SENATOR ELTON joined the meeting.                                                                                               
                                                                                                                                
3:41:03 PM                                                                                                                    
                                                                                                                                
DEBORAH  GRUNDMANN,  Staff  to   Senator  Charlie  Huggins,  told                                                               
members  SJR  14  urges  Congress   to  amend  the  tax  code  to                                                               
permanently  repeal the  federal  estate and  generation-skipping                                                               
transfer  tax.  Individuals  accumulate assets  using  after  tax                                                               
income and then  the heirs pay additional tax on  those assets in                                                               
the form of inheritance tax.                                                                                                    
                                                                                                                                
In  2001   Congress  and   President  Bush   enacted  bi-partisan                                                               
legislation to  phase out  and eventually  repeal the  estate tax                                                               
until 2010.  In 2011 the tax  will be reinstated at  its old rate                                                               
of up to 55 percent with an exemption level of $1 million.                                                                      
                                                                                                                                
SJR  14  expresses support  for  the  legislation that  has  been                                                               
introduced in both  bodies of Congress to  permanently repeal the                                                               
estate tax.                                                                                                                     
                                                                                                                                
3:42:36 PM                                                                                                                    
                                                                                                                                
CHAIR  THERRIAULT  asked  Mr.  Williams if  the  state  would  be                                                               
impacted one way or the other.                                                                                                  
                                                                                                                                
MIKE  WILLIAMS, Alaska  Department of  Revenue, participated  via                                                               
teleconference.  He  read  the following  from  the  fiscal  note                                                               
analysis that he had prepared:                                                                                                  
                                                                                                                                
     This  resolution   requests  Congress   to  permanently                                                                    
     repeal  the  federal   estate  and  generation-skipping                                                                    
     transfer  tax. [The]  Alaska state  tax,  AS 43.31,  is                                                                    
     based upon  the state's death tax  credit allowed under                                                                    
     federal  law. In  2001, Congress  changed the  Internal                                                                    
     Revenue Code  to phase out  the state death  tax credit                                                                    
     by  December 31,  2004. Since  Alaska's estate  tax was                                                                    
     effectively reduced  to zero  by the change  in federal                                                                    
     law, permanent  repeal of the  federal estate  tax will                                                                    
     have no fiscal impact to general fund revenue.                                                                             
                                                                                                                                
CHAIR THERRIAULT  asked whether the Murkowski  Administration had                                                               
taken a position on SJR 14.                                                                                                     
                                                                                                                                
MR. WILLIAMS answered he was not aware of an official position.                                                                 
                                                                                                                                
SENATOR ELTON  said given that  state collections  are predicated                                                               
on federal law, why wouldn't a  general fund increment show in FY                                                               
2011 if the federal estate tax disappears in 2010.                                                                              
                                                                                                                                
MR. WILLIAMS clarified  that the estate tax would  spring back to                                                               
life  in calendar  year 2011.  Estate tax  for anyone  who passed                                                               
away in that year wouldn't be  due until 15 months after the date                                                               
of death so  any return to the  State of Alaska would  come in FY                                                               
2012 or later.                                                                                                                  
                                                                                                                                
SENATOR ELTON  asked how  much the state  collected prior  to the                                                               
change in federal law.                                                                                                          
                                                                                                                                
MR.  WILLIAMS estimated  the amount  to average  out at  about $2                                                               
million per year.                                                                                                               
                                                                                                                                
SENATOR ELTON  asked if a  general fund increment of  that amount                                                               
would show after 2012.                                                                                                          
                                                                                                                                
MR. WILLIAMS said that's correct.                                                                                               
                                                                                                                                
CHAIR THERRIAULT remarked  that would be dependent  on whether or                                                               
not Congress permanently repeals the estate tax.                                                                                
                                                                                                                                
He said  estate tax does have  a negative impact and  many people                                                               
devote  considerable  time and  effort  in  estate planning.  Its                                                               
repeal  reduces  the  need  for individuals  to  spend  money  on                                                               
attorneys  and accountants  to reduce  estate  size, which  could                                                               
provide an ongoing savings to constituents.                                                                                     
                                                                                                                                
SENATOR HUGGINS told members that  he believes Representative Don                                                               
Young would be in full support of SJR 14.                                                                                       
                                                                                                                                
3:48:30 PM                                                                                                                    
                                                                                                                                
CHAIR THERRIAULT set SJR 14 aside.                                                                                              
                                                                                                                                
            SJR 8-CONST. AM: PERMANENT FUND P.O.M.V.                                                                        
                                                                                                                                
CHAIR THERRIAULT announced  SJR 8 to be up  for consideration. He                                                               
explained that  the Alaska Permanent  Fund trustees asked  him to                                                               
bring  the  idea forward  for  discussion  in the  State  Affairs                                                               
Committee because it's the logical  place to hear proposals about                                                               
the management of the Permanent Fund.                                                                                           
                                                                                                                                
3:49:23 PM                                                                                                                    
                                                                                                                                
MIKE BURNS, Chief Executive Officer  of the Alaska Permanent Fund                                                               
Corporation  (APFC),  recapped  why   the  trustees  believe  the                                                               
Percent of Market  Value (POMV) method is the best  way to manage                                                               
the fund.  He emphasized that the  trustees do not view  the POMV                                                               
as  a fiscal  plan.  It wouldn't  allow  the Legislature  greater                                                               
access to the earnings and most  years it would reduce the amount                                                               
available for appropriation.                                                                                                    
                                                                                                                                
Implementation  of POMV  and  the use  of  earnings are  entirely                                                               
separate  issues. POMV  is  predictable  and understandable,  but                                                               
most  people are  confused by  the arcane  nature of  the current                                                               
distribution formula  of the permanent  fund. Most  fund trustees                                                               
manage  their funds  on a  real  return methodology  - the  total                                                               
return  of  the  fund  less  inflation.  Most  pension  fund  and                                                               
endowment fund managers  view their fiduciary duties  in the same                                                               
way.                                                                                                                            
                                                                                                                                
MR.  BURNS  said  the  trustees have  proposed  the  POMV  method                                                               
because the current  statutory realized-income based distribution                                                               
formula is  broken. When the fund  was created it was  prudent to                                                               
restrict  its investment  authority to  a bond  only strategy.  A                                                               
bond portfolio generates  income in two ways:  interest or coupon                                                               
income and capital gains from  bonds that are sold at appreciated                                                               
prices. This  formula made  perfect sense at  that time  for that                                                               
portfolio.  However,  because  the fund's  asset  allocation  now                                                               
incorporates  investments  that generate  significant  unrealized                                                               
gains  and realized  income, the  current payout  methodology and                                                               
protection of principal doesn't serve the  fund as well as it did                                                               
previously.                                                                                                                     
                                                                                                                                
Only  a POMV  payout limited  by the  sustainable yield  from the                                                               
fund can  provide the necessary  protection for the  future while                                                               
allowing  current   generations  an   equitable  share   of  fund                                                               
earnings. The only  way to ensure full protection of  the fund is                                                               
to place constitutional limitations.                                                                                            
                                                                                                                                
The POMV  proposal allows no more  than 5 percent of  the average                                                               
market value of  the fund averaged over the previous  5 years may                                                               
be  appropriated from  the fund.  This protects  a minimum  of 95                                                               
percent of the fund from being spent in any given year.                                                                         
                                                                                                                                
MR. BURNS  concluded: "As I noted  earlier, POMV is not  a fiscal                                                               
plan and with  oil at $50 plus,  your interest in and  focus on a                                                               
fiscal plan may well be elsewhere.  But is this not the opportune                                                               
time to  modernize and increase  the transparency of the  fund so                                                               
it  can, not  only be  managed in  harmony with  its distribution                                                               
formula, but also be understood  by Alaskans when other decisions                                                               
must be made?"                                                                                                                  
                                                                                                                                
He urged committee members to  support the trustees' proposal for                                                               
reasons of modernization, clarity, and better protection.                                                                       
                                                                                                                                
3:54:25 PM                                                                                                                    
                                                                                                                                
SENATOR WAGONER arrived.                                                                                                        
                                                                                                                                
3:54:43 PM                                                                                                                    
                                                                                                                                
CHAIR THERRIAULT  asked if  the primary  motivation is  to ensure                                                               
that inflation proofing is guaranteed for the future.                                                                           
                                                                                                                                
MR. BURNS replied  inflation proofing is built in.  The belief is                                                               
that  over  time a  real  return  of  5  percent in  addition  to                                                               
inflation  proofing  is  attainable.  Over time  a  return  of  5                                                               
percent allows  a distribution to  the Legislature,  protects the                                                               
fund from inflation, and allows the fund to grow.                                                                               
                                                                                                                                
CHAIR  THERRIAULT asked  if the  inflation proofing  is deposited                                                               
with an  annual appropriation and  whether there is  concern that                                                               
during tight times the appropriation might not be made.                                                                         
                                                                                                                                
MR. BURNS  said the annual  appropriation for  inflation proofing                                                               
is in the province of the  Legislature so a question about what a                                                               
future Legislature might do is clearly a legitimate question.                                                                   
                                                                                                                                
CHAIR THERRIAULT  said if the goal  is for the fund  to be multi-                                                               
generational,  that  goal  couldn't  be achieved  if  the  fund's                                                               
purchasing power isn't protected.                                                                                               
                                                                                                                                
MR. BURNS agreed.                                                                                                               
                                                                                                                                
SENATOR  ELTON  said  he  had  two  questions.  Legislators  have                                                               
frequently  heard  that  over  time a  5  percent  withdrawal  is                                                               
workable.  He wondered  whether  using the  "over time  argument"                                                               
because of language on page 2,  line 2. He questioned whether use                                                               
of  the word  "annual"  precludes  the ability  of  looking at  a                                                               
multi-year strategy.                                                                                                            
                                                                                                                                
MR. BURNS  replied if line 2  were read in conjunction  with a 5-                                                               
year  average,  the  5-year  average  would  be  the  controlling                                                               
number. With  respect to whether  or not 5 percent  is attainable                                                               
over time he said:                                                                                                              
                                                                                                                                
     If  you take  our example  of  8 percent  and the  fund                                                                    
     grows each year,  it's 5 percent of  the maximum amount                                                                    
     only in one year. And you  go back the trailing 5 years                                                                    
     -  the actual  amount of  the  fund is  smaller. And  I                                                                    
     think if  you use  a straight 8  percent growth  on the                                                                    
     balance of the  fund, the payout actually  is less than                                                                    
     4.7. It's  5 percent  but it's 5  percent of  a smaller                                                                    
     year - 5  a little bit bigger - year  4 a little bigger                                                                    
     still. So it's only 5 percent  of the very last year in                                                                    
     the 5-year formula - if you think of a stair-step.                                                                         
                                                                                                                                
SENATOR ELTON said he assumed  POMV supplants the 5-year rule and                                                               
he questioned whether  Mr. Burns was saying that  the 5-year rule                                                               
would  still  control  when  the  Legislature  makes  the  annual                                                               
decision.                                                                                                                       
                                                                                                                                
MR. BURNS said  yes, the formula is based on  taking 5 percent of                                                               
the average of the last 5 years.                                                                                                
                                                                                                                                
CHAIR THERRIAULT  added the 5 percent  would turn out to  be less                                                               
than  5 percent  each  year because  it is  based  on the  5-year                                                               
average of a growing balance.                                                                                                   
                                                                                                                                
MR. BURNS said  that is correct and the  trustees' have estimated                                                               
the amount to be 4.65 percent each distribution year.                                                                           
                                                                                                                                
CHAIR THERRIAULT asked about the  average return over the life of                                                               
the permanent fund given recent down markets.                                                                                   
                                                                                                                                
MR. BURNS  said the  return has  been about  10 percent  over the                                                               
life of the fund. Last year, the return was 14.1 percent.                                                                       
                                                                                                                                
SENATOR ELTON  questioned whether the word  "predictable" on page                                                               
2 would  constrain the Legislature  from deciding  to appropriate                                                               
less than 5 percent.                                                                                                            
                                                                                                                                
MR. BURNS  responded it's what  the fund makes available  to this                                                               
process. Whether  the Legislature distributes that  amount or not                                                               
is a separate issue.                                                                                                            
                                                                                                                                
SENATOR   ELTON   said   the  annual   appropriation   would   be                                                               
predictable, but it  isn't if the percentage varies  from year to                                                               
year. He  again questioned whether  the word  "predictable" would                                                               
constrain the Legislature from appropriating a lower percentage.                                                                
                                                                                                                                
4:02:52 PM                                                                                                                    
                                                                                                                                
LAURA   ACHEE,  Communications   and  Research   Liaison,  Alaska                                                               
Permanent  Fund Corporation,  said the  Legislature would  not be                                                               
constrained to  take 5  percent. The  word "predictable"  goes to                                                               
two issues. First  is knowing that no more than  5 percent of the                                                               
market value for the previous  five years would be available. The                                                               
other side of  the issue is that as  the Legislature contemplates                                                               
use  of  earnings using  a  funding  source  that  has a  lot  of                                                               
volatility makes  it difficult for  the Legislature to  know that                                                               
in any given year they're going  to have 5 percent of the average                                                               
market value of the fund available to them.                                                                                     
                                                                                                                                
4:05:20 PM                                                                                                                    
                                                                                                                                
CHAIR THERRIAULT read from page 2, line 2:                                                                                      
                                                                                                                                
     ...and limited so the real value of the permanent fund is                                                                  
     preserved over time.                                                                                                       
                                                                                                                                
He asked if the trustees would  be tracking the value of the fund                                                               
and  the added  inflation-proofing amount.  If a  protracted down                                                               
market occurred and the 5 percent  allowed an erosion of the fund                                                               
going forward,  he questioned whether  that would put a  limit on                                                               
the 5 percent.                                                                                                                  
                                                                                                                                
MR. BURNS  said not as currently  proposed. In a down  market you                                                               
could actually take 5 percent of principal or reserved assets.                                                                  
                                                                                                                                
MS.  ACHEE said  keep  in mind  it would  take  several years  of                                                               
protracted  down  markets  before  dipping into  the  fund  would                                                               
occur. At  that point, the  same mechanism that stair  stepped up                                                               
would kick in  as well because the annual  appropriation would be                                                               
5 percent of values that were going down.                                                                                       
                                                                                                                                
Certainly it should  be within the Legislature's  purview to take                                                               
the full 5 percent or to  not withdraw any money. She pointed out                                                               
that a few  years ago - because of market  changes - the realized                                                               
earnings  account  was almost  dry  so  paying any  dividend  was                                                               
questionable.                                                                                                                   
                                                                                                                                
SENATOR ELTON  noted the current proposal  contains language such                                                               
as  "predictable" and  "real value"  that weren't  discussed last                                                               
year.                                                                                                                           
                                                                                                                                
4:08:04 PM                                                                                                                    
                                                                                                                                
MS.  ACHEE said  that's  correct. Both  resolutions  in the  last                                                               
Legislature  started out  reading  as  SJR 8  does  but one  body                                                               
removed that language in an early committee hearing.                                                                            
                                                                                                                                
SENATOR ELTON noted it would  be instructive for the committee to                                                               
find out why those words were removed.                                                                                          
                                                                                                                                
MR.  BURNS  responded  this  proposal   has  been  the  trustees'                                                               
starting point over a number of years.                                                                                          
                                                                                                                                
CHAIR THERRIAULT  asked about  the dollar  amount outside  of the                                                               
protected principal.                                                                                                            
                                                                                                                                
MR. BURNS estimated that about  11 percent isn't protected today,                                                               
but that  number jumps to  about 16  percent if one  goes through                                                               
the process of realizing the unrealized gains.                                                                                  
                                                                                                                                
CHAIR THERRIAULT  calculated that  there would  be a  starting $5                                                               
billion cushion above and beyond  the protected principal if POMV                                                               
is adopted.                                                                                                                     
                                                                                                                                
MR. BURNS  said yes but  it would  all be protected  principal if                                                               
the POMV method were adopted.                                                                                                   
                                                                                                                                
CHAIR  THERRIAULT offered  the opinion  that many  citizens don't                                                               
understand  that   under  the  Alaska  State   Constitution,  the                                                               
Legislature has access to about $5 billion.                                                                                     
                                                                                                                                
MS. ACHEE clarified, "Of that $5 billion  some of it is - at this                                                               
point - considered  principal. However it is  unrealized gains so                                                               
it's  merely   the  matter   of  realizing."   They're  partially                                                               
protected because until realized they are part of the principal.                                                                
                                                                                                                                
4:11:15 PM                                                                                                                    
                                                                                                                                
WAYNE STEVENS, President  and CEO of the Alaska  State Chamber of                                                               
Commerce,  stated  support  for   SJR  8.  The  chamber  business                                                               
advisory committee lists  the adoption of a state  fiscal plan as                                                               
a  priority and  one part  is to  statutorily establish  the POMV                                                               
management tool for the Alaska Permanent Fund.                                                                                  
                                                                                                                                
"Recognizing that SJR 8 speaks  to a constitutional percentage of                                                               
market value we  would support that. But as  an intermediate step                                                               
perhaps one would consider a  statutory percent of market value."                                                               
He suggested  that had  the POMV method  been adopted  last year,                                                               
Alaskans wouldn't have seen a  significant change in the dividend                                                               
checks.  The chamber  supports steadying  the budget  process now                                                               
and in the future and SJR 8 would help accomplish that.                                                                         
                                                                                                                                
CHAIR  THERRIAULT  noted  there  was  no  further  testimony  and                                                               
announced that he would set SJR 8 aside.                                                                                        
                                                                                                                                
                SJR 14-REPEAL FEDERAL ESTATE TAX                                                                            
                                                                                                                                
4:13:27 PM                                                                                                                    
                                                                                                                                
CHAIR THERRIAULT  returned to SJR  14 and recapped the  issue for                                                               
Senator Wagoner. He  noted there were no questions  and asked for                                                               
a motion.                                                                                                                       
                                                                                                                                
SENATOR  WAGONER  moved SJR  14  from  committee with  individual                                                               
recommendations and accompanying fiscal note.                                                                                   
                                                                                                                                
CHAIR  THERRIAULT announced  that without  objection, the  motion                                                               
carried.                                                                                                                        
                                                                                                                                
                 HB 90-STATE TREASURY WARRANTS                                                                              
                                                                                                                                
4:14:59 PM                                                                                                                    
                                                                                                                                
CHAIR THERRIAULT  announced the next  order of business to  be HB                                                               
90.  He  noted that  the  prime  sponsor is  Representative  Paul                                                               
Seaton,  but that  Representative Gruenberg  would introduce  the                                                               
bill.                                                                                                                           
                                                                                                                                
REPRESENTATIVE  MAX GRUENBERG  told  members similar  legislation                                                               
passed  the House  last  year,  but didn't  make  it through  the                                                               
Senate.  HB 90  simply codifies  the National  Bank of  Alaska v.                                                               
Univentures  1231  decision,  which   dealt  with  whether  state                                                               
warrants are negotiable instruments.                                                                                            
                                                                                                                                
The Legislature has never adopted the  use of checks to pay state                                                               
debts;  it  uses  warrants.  Until that  case  was  decided,  the                                                               
state's position was that it  didn't have to consider warrants as                                                               
negotiable  instruments in  the technical  sense. That  means the                                                               
state could stop payment on a  warrant even after a bank had made                                                               
payment on it.                                                                                                                  
                                                                                                                                
HB 90  specifically states that  warrants drawn by the  state are                                                               
negotiable instruments  under the  Uniform Commercial  Code. That                                                               
makes  it   clear  the  state   must  honor  the   checks  unless                                                               
requirements  and procedures  set out  in the  Uniform Commercial                                                               
Code are  followed. Certainly, the  state could dishonor  a check                                                               
if it notifies the bank before it is cashed.                                                                                    
                                                                                                                                
CHAIR THERRIAULT  asked what a negotiable  instrument allows that                                                               
wasn't allowed on a warrant.                                                                                                    
                                                                                                                                
REPRESENTATIVE  GRUENBERG  answered  a negotiable  instrument  is                                                               
defined in AS 45.03.104(a) as a  document drawn on a bank that is                                                               
to be served as evidence of a  debt to be paid. If properly drawn                                                               
and presented, it  must be honored unless proper  notice is given                                                               
to the bank in advance. That allows  the bank to rely on the bona                                                               
fides of that instrument.                                                                                                       
                                                                                                                                
Although the state pays a  lot of its debts electronically rather                                                               
that with checks,  those that it does pay would  be honored under                                                               
the Uniform Commercial Code.                                                                                                    
                                                                                                                                
4:20:07 PM                                                                                                                    
                                                                                                                                
KIM GARNERO,  Director of Finance, Department  of Administration,                                                               
affirmed that HB  90 simply codifies a 1992  Alaska Supreme Court                                                               
ruling.  Since  that decision,  the  state  has administered  its                                                               
warrants as  negotiable instruments so no  administrative changes                                                               
are necessary if this legislation passes.                                                                                       
                                                                                                                                
SENATOR  HUGGINS asked  why, if  the  court ruling  was in  1992,                                                               
there is a rush to do something about it now in 2005.                                                                           
                                                                                                                                
MS. GARNERO responded it's not a  bad idea to align the statutory                                                               
language with the Alaska Supreme Court ruling.                                                                                  
                                                                                                                                
CHAIR  THERRIAULT recapped  this  would align  statutes with  the                                                               
findings of the court.                                                                                                          
                                                                                                                                
MS. GARNERO said that is correct.                                                                                               
                                                                                                                                
4:22:02 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GRUENBERG   maintained  that   in  the   area  of                                                               
commercial law,  financial institutions  and lawyers look  to the                                                               
statutes rather than case law.                                                                                                  
                                                                                                                                
CHAIR  THERRIAULT  added HB  90  would  reduce confusion  because                                                               
someone could reference the statutes  and they would have to know                                                               
that the court overrode it.                                                                                                     
                                                                                                                                
REPRESENTATIVE GRUENBERG agreed.                                                                                                
                                                                                                                                
CHAIR  THERRIAULT  noted  there  was  no  further  testimony.  He                                                               
mentioned the zero fiscal note and asked for a motion.                                                                          
                                                                                                                                
SENATOR  WAGONER moved  HB 90  out of  committee with  individual                                                               
recommendations and attached fiscal note.                                                                                       
                                                                                                                                
CHAIR  THERRIAULT announced  that without  objection, the  motion                                                               
carried.                                                                                                                        
                                                                                                                                
4:23:52 PM                                                                                                                    
                                                                                                                                
        CSHB 97(FIN)-OATHS; NOTARIES PUBLIC; STATE SEAL                                                                     
                                                                                                                                
                                                                                                                              
CHAIR THERRIAULT announced  HB 97 to be up  for consideration. He                                                               
reminded members that  they heard the Senate version  at the same                                                               
time that  HB 97  was undergoing changes  in the  House Judiciary                                                               
Committee.  The decision  was to  wait for  the House  vehicle to                                                               
come forward.                                                                                                                   
                                                                                                                                
SCOTT  CLARK, Office  of the  Lieutenant Governor,  reported that                                                               
the  House  Judiciary  Committee   amended  the  bill  to  remove                                                               
obstacles   to  electronic   notarizations.  The   House  Finance                                                               
Committee  then amended  the bill  to take  into consideration  a                                                               
person  convicted of  a felony  that didn't  serve jail  time. It                                                               
also combined the two revocation  sections and clarified that any                                                               
decision to revoke a notary commission could be appealed.                                                                       
                                                                                                                                
4:25:31 PM                                                                                                                    
                                                                                                                                
CHAIR THERRIAULT remarked the  House Finance Committee questioned                                                               
why anyone convicted of a felony could act as a notary.                                                                         
                                                                                                                                
MR. CLARK replied the ten-year waiting period was a compromise.                                                                 
                                                                                                                                
CHAIR THERRIAULT asked if the  lieutenant governor would have the                                                               
power to  permanently ban a notary  who abused his or  her notary                                                               
power.                                                                                                                          
                                                                                                                                
MR.  CLARK answered  it's a  technical problem  with the  current                                                               
version  of the  bill. Currently  a person  loses the  ability to                                                               
apply for a  future commission any time a  commission is revoked.                                                               
The House Finance  Committee amended the bill to  add the 10-year                                                               
provision so if a commission is  revoked, the notary must wait 10                                                               
years to reapply.                                                                                                               
                                                                                                                                
A commission could also be  revoked for technical reasons such as                                                               
a notary  that moved out  of state.  In that instance  the person                                                               
shouldn't have to  wait 10 years to reapply if  they were to move                                                               
back to the state. The  lieutenant governor proposed an amendment                                                               
to further refine the concept of revocation.                                                                                    
                                                                                                                                
CHAIR THERRIAULT said  he would sponsor Amendment  1. It proposes                                                               
to differentiate  between notaries  whose commission  was revoked                                                               
because they moved  from the state and  notaries whose commission                                                               
was revoked as a result of  conviction for commission of a felony                                                               
offense.                                                                                                                        
                                                                                                                                
MR. CLARK  clarified the felony  offense is a  different section,                                                               
but  it's based  on the  same idea  that a  person with  a felony                                                               
conviction could  have his  or her commission  revoked and  he or                                                               
she couldn't reapply for 10 years.                                                                                              
                                                                                                                                
SENATOR HUGGINS asked Mr. Clark to restate the explanation.                                                                     
                                                                                                                                
MR. CLARK reiterated  a notary commission could  be revoked under                                                               
the  bill  for  several  reasons.   Revocation  would  occur  for                                                               
violation of  the terms  of the  notary statutes  or if  a notary                                                               
moved  out  of state.  If  the  revocation occurred  because  the                                                               
person moved  out of state,  he or she  wouldn't have to  wait 10                                                               
years to reapply after moving back to the state.                                                                                
                                                                                                                                
4:29:32 PM                                                                                                                    
                                                                                                                                
SENATOR HUGGINS restated the explanation.                                                                                       
                                                                                                                                
MR.  CLARK  said  the  amendment is  to  clarify  the  revocation                                                               
process and not inadvertently penalize people.                                                                                  
                                                                                                                                
CHAIR THERRIAULT asked  if revocation due to abuse  of the notary                                                               
power could preclude a person from reapplying for 10 years.                                                                     
                                                                                                                                
MR. CLARK said yes.                                                                                                             
                                                                                                                                
SENATOR HUGGINS said, "I thought they are precluded."                                                                           
                                                                                                                                
ANNETTE  KREITZER, Chief  of Staff  to Lieutenant  Governor Loren                                                               
Leman, clarified  that they are  precluded currently.  The intent                                                               
of Amendment 1  is to address those people who  have not complied                                                               
with the  law. She pointed out  that AS 44.50.068 (a)(2)  and (3)                                                               
lists the  reasons for revocation and  suspension. The Department                                                               
of Law crafted the language in  Amendment 1, which sorts out when                                                               
a  10-year  revocation  would occur  based  on  incompetence  and                                                               
malfeasance.  That type  of revocation  is separate  from someone                                                               
who simply  moved from the  state and  had his or  her commission                                                               
revoked. The latter could reapply  after moving back to the state                                                               
without waiting 10 years.                                                                                                       
                                                                                                                                
SENATOR  ELTON  recollected there  were  no  revocations when  he                                                               
worked in  the Lieutenant  Governor's Office.  If a  notary moved                                                               
out  of state  the commission  simply lapsed.  He questioned  how                                                               
often revocations occur.                                                                                                        
                                                                                                                                
MS. KREITZER  acknowledged that  the Lieutenant  Governor doesn't                                                               
currently have the power to  revoke any commission. Anyone with a                                                               
complaint must file under the Administrative Procedures Act.                                                                    
                                                                                                                                
Last year  notaries were included  in the  administrative hearing                                                               
officer  bill so  if this  legislation passes  a hearing  officer                                                               
would hear appeals.  Because some problems have  come up relating                                                               
to notaries,  her office has  looked at the specific  issues very                                                               
carefully as the bill was crafted.                                                                                              
                                                                                                                                
Complaints about notaries  would come in one of  two ways. First,                                                               
the  notary administrator  in  the  Lieutenant Governor's  Office                                                               
would have  direct dealings with  notaries and would be  aware of                                                               
compliance  or  lack thereof.  If  a  notary doesn't  comply  the                                                               
notary administrator would determine  whether a discipline letter                                                               
is required.  If compliance isn't forthcoming  a suspension might                                                               
occur. If  the notary  still doesn't  comply then  the Lieutenant                                                               
Governor would have no option  but to revoke. However, the notary                                                               
would  have  the option  of  the  administrative hearing  officer                                                               
appeal process.                                                                                                                 
                                                                                                                                
A second way that complaints would  be generated is when a member                                                               
of the  public becomes dissatisfied  and contacts  the Lieutenant                                                               
Governor's Office with a complaint.                                                                                             
                                                                                                                                
MR. CLARK said although serious  complaints have been lodged, the                                                               
current process  doesn't allow  the Lieutenant  Governor's Office                                                               
to follow up on those complaints.                                                                                               
                                                                                                                                
4:34:55 PM                                                                                                                    
                                                                                                                                
CHAIR  THERRIAULT  moved  Amendment  1  and  noted  that  without                                                               
objection it was adopted.                                                                                                       
                                                                                                                                
                      A M E N D M E N T 1                                                                                   
                                                                                                                                
                                                                                                                                
     Page 8, lines 17-19                                                                                                        
                                                                                                                                
     Delete "may not, within 10  years before the commission                                                                    
     takes effect,  have committed acts  for which  a notary                                                                    
     public commission  may be denied or  revoked under this                                                                    
     chapter; and"                                                                                                              
                                                                                                                                
     Insert "may not, within 10 years before the commission                                                                     
     takes effect,                                                                                                              
          (i)     have had the person's notary public commission                                                                
                  revoked under AS 44.50.068(a)(2) or (3) or                                                                    
                  under the notaries public laws of another                                                                     
                  state; or                                                                                                     
          (ii)    have been disciplined under AS 44.50.068 or                                                                   
                  under the notaries public laws of another state                                                               
                  if the disciplinary action prohibits the person                                                               
                  from holding  a notary  public commission  when                                                               
                  the person applies for a commission; and"                                                                     
                                                                                                                                
CHAIR THERRIAULT noted that electronic  signature user groups had                                                               
been contacted  as he  had requested.  He questioned  whether the                                                               
Alaska Bar Association  (ABA) had taken a position on  the use of                                                               
electronic signatures.                                                                                                          
                                                                                                                              
MR. CLARK  said he had  contacted the ABA,  but it didn't  send a                                                               
letter.  However, his  office had  received several  letters from                                                               
outside notary organizations and notary law organizations.                                                                      
                                                                                                                                
CHAIR  THERRIAULT  said  the  lobbyist  for  Wells  Fargo  didn't                                                               
express any concerns and he  hadn't sensed concern from any other                                                               
organizations that rely on notaries.                                                                                            
                                                                                                                                
He recapped HB 97 extends  the power to the Lieutenant Governor's                                                               
Office  to write  regulations and  use electronic  notarizations,                                                               
even though it has no immediate plans to do so.                                                                                 
                                                                                                                                
MS.  KREITZER said  that is  correct, but  she wanted  to clarify                                                               
that  the bill  deals with  electronic notarizations.  A separate                                                               
law deals with electronic signatures.                                                                                           
                                                                                                                                
"I have  confidence that whoever's  in the  Lieutenant Governor's                                                               
Office when  the technology catches up  to it will be  able to do                                                               
this in  a way that's  going to benefit the  business community,"                                                               
she said. With passage of HB  97 there wouldn't be need to return                                                               
to  the   Legislature  and  ask  for   amendment.  As  previously                                                               
discussed, one  of the  reasons this effort  has failed  in other                                                               
states  is  because  those  Legislatures  defined  an  electronic                                                               
notarization  too   narrowly.  HB   97  intends  to   remove  the                                                               
impediments.  The Lieutenant  Governor's Office  would write  the                                                               
regulations  and the  Administrative Regulation  Review Committee                                                               
would review the regulations that  are promulgated to ensure that                                                               
they are fair.                                                                                                                  
                                                                                                                                
CHAIR THERRIAULT asked if person-to-person  contact with a notary                                                               
would be required when an electronic signature is used.                                                                         
                                                                                                                                
MR.  CLARK said  that  is  required in  the  bill. The  technical                                                               
nature of the  notary's signature is left open in  this bill, but                                                               
the  signatory would  have to  be  present and  the notary  would                                                               
check  the  identification.  "Nothing would  change  along  those                                                               
lines," he assured.                                                                                                             
                                                                                                                                
CHAIR THERRIAULT drew  attention to the positive  fiscal note and                                                               
asked for a motion.                                                                                                             
                                                                                                                                
4:39:35 PM                                                                                                                    
                                                                                                                                
SENATOR  WAGONER moved  SCS CSHB  97(STA),  [amended \I  version]                                                               
from  committee  with  individual  recommendations  and  attached                                                               
fiscal note. There being no objection, it was so ordered.                                                                       
                                                                                                                                
           SB 143-STATE INFO SYSTEM PLAN: LEGISLATURE                                                                       
                                                                                                                                
4:40:08 PM                                                                                                                    
                                                                                                                                
CHAIR THERRIAULT announced SB 143  to be up for consideration. He                                                               
informed  members this  legislation springs  from the  discussion                                                               
the committee had with regard  to Executive Order 113 relating to                                                               
information  technology (IT)  functions. He  asked Ms.  Brakes to                                                               
introduce the bill.                                                                                                             
                                                                                                                                
4:40:30 PM                                                                                                                    
                                                                                                                                
HEATHER BRAKES, Staff to Senator Therriault and to the Senate                                                                   
State Affairs Committee, read the following into the record:                                                                    
                                                                                                                                
     Under  art. III,  sec. 23  of the  Alaska Constitution,                                                                    
     the Governor  may, by executive order,  make changes in                                                                    
     the  organization  of  the  executive  branch.  As  the                                                                    
     committee might remember, it  received an overview from                                                                    
     the Administration  on Executive  Order 113,  which, in                                                                    
     effect,  dissolves  the Telecommunications  Information                                                                    
     Council and  transferred the powers  and duties  of the                                                                    
     Council  to  the  commissioner  of  the  Department  of                                                                    
     Administration.    The   legislature  under  that  same                                                                    
     provision has 60 days to  consider the order. The order                                                                    
     subsequently took  effect March  14. The  definition of                                                                    
     'state  agency' as  currently defined  under the  order                                                                    
     includes the legislature and,  in doing so, effectively                                                                    
     places  the legislative  branch under  the jurisdiction                                                                    
     of   the   executive   branch    as   it   relates   to                                                                    
     telecommunications operations.                                                                                             
                                                                                                                                
     SB  143  removes  the   legislative  branch  from  that                                                                    
     definition  and sets  the  legislature  apart from  the                                                                    
     executive branch.                                                                                                          
                                                                                                                                
     Mr. Chairman,  Karla Schofield, the deputy  director of                                                                    
     the  Legislative Affairs  Agency  and Curtis  Clothier,                                                                    
     the  manager of  Data  Processing for  the agency,  are                                                                    
     both here  to speak to  the specific provisions  of the                                                                    
     bill  and the  proposed amendment  that members  should                                                                    
     have before them. Just one  further point, if you would                                                                    
     turn to  page 11  on the executive  order, line  20, it                                                                    
     appears the  word 'under' is  missing so that  the line                                                                    
     would  read 'transferred  under  this  order.' So  that                                                                    
     might  be   something  the  committee   might  consider                                                                    
     sending a  memo to  the legislative attorneys  to bring                                                                    
     to their attention.                                                                                                        
                                                                                                                                
4:43:34 PM                                                                                                                    
                                                                                                                                
CHAIR THERRIAULT asked Ms. Schofield to come forward.                                                                           
                                                                                                                                
KARLA  SCHOFIELD, Deputy  Director,  Legislative Affairs  Agency,                                                               
stated support  for SB 143. The  passage of SB 143  would reflect                                                               
how  the Legislature  actually operates  within the  state's data                                                               
processing community  and would allow the  legislative branch the                                                               
same autonomy as the judicial branch.                                                                                           
                                                                                                                                
The  Legislative  Affairs Agency  has  always  had a  cooperative                                                               
relationship with data processing  services within the Department                                                               
of Administration and  SB 143 would allow the  agency to continue                                                               
to work with, but not be under the department.                                                                                  
                                                                                                                                
The Legislative Affairs Agency has  its own data processing group                                                               
and  it makes  its  own  long and  short-range  goals, which  are                                                               
approved  by  the  Legislative Council  IT  subcommittee.  It  is                                                               
important for the  agency to have the flexibility  to develop its                                                               
own programs  because legislative  branch goals  sometimes differ                                                               
from those  that the executive  branch might have for  the entire                                                               
state.                                                                                                                          
                                                                                                                                
4:45:29 PM                                                                                                                    
                                                                                                                                
CHAIR THERRIAULT asked  Ms. Schofield if she had  comments on the                                                               
proposed amendment.                                                                                                             
                                                                                                                                
MS.   SCHOFIELD  replied   the  agency   supports  the   proposed                                                               
amendment. It  is similar  to the  public records  law procedures                                                               
that the agency follows and the Legislative Council oversees.                                                                   
                                                                                                                                
CHAIR THERRIAULT introduced Amendment 1, labeled F.1.                                                                           
                                                                                                                                
                                                      24-LS0746\F.1                                                             
                                                            Craver                                                              
                                                           3/22/05                                                              
                                                                                                                                
                                                                                                                                
                      A M E N D M E N T 1                                                                                   
                                                                                                                                
                                                                                                                                
OFFERED IN THE SENATE                                                                                                           
     TO:  SB 143                                                                                                                
                                                                                                                                
                                                                                                                                
Page 1, following line 4:                                                                                                       
     Insert a new bill section to read:                                                                                         
   "* Section 1.  AS 24.20 is  amended by adding a new section to                                                           
read:                                                                                                                           
          Sec. 24.20.055.  Information systems.  The executive                                                                
     director of  the Legislative Affairs Agency  shall establish                                                               
     information  systems guidelines  and  prepare a  short-range                                                               
     and long-range information systems  plan for the legislative                                                               
     branch.  The guidelines  and  plan must  be  adapted to  the                                                               
     special  needs of  the legislative  branch as  determined by                                                               
     the  Alaska  Legislative Council  and,  when  it is  in  the                                                               
     agency's    best     interest,    consistent     with    the                                                               
     telecommunications information  guidelines and  plan adopted                                                               
     by the  commissioner of administration under  AS 44.21.350 -                                                               
     44.21.390."                                                                                                                
                                                                                                                                
Page 1, line 5:                                                                                                                 
     Delete "Section 1"                                                                                                       
     Insert "Sec. 2"                                                                                                          
                                                                                                                                
Renumber the following bill sections accordingly.                                                                               
                                                                                                                                
SENATOR ELTON questioned why the  amendment directs the executive                                                               
director  of  the  agency  and not  the  Legislative  Council  to                                                               
establish the plan.                                                                                                             
                                                                                                                                
CHAIR  THERRIAULT acknowledged  it could  read, "The  Legislative                                                               
Council  shall establish..."  and the  executive director  of the                                                               
agency would probably fulfill that role.                                                                                        
                                                                                                                                
SENATOR ELTON said it would then  be the designee of the Council.                                                               
He suggested  that would take  care of  a situation in  which the                                                               
executive director's position were vacant.                                                                                      
                                                                                                                                
CHAIR THERRIAULT asked Mr. Clothier to come forward.                                                                            
                                                                                                                                
CURTIS  CLOTHIER, Data  Processing  Manager, Legislative  Affairs                                                               
Agency, stated support for SB  143. He said the existing language                                                               
is  dated  and  needs  to  be  cleaned  up  to  reflect  reality.                                                               
Legislative Affairs  is in a  separate branch of  government from                                                               
the executive branch  and as such the data  processing section in                                                               
the  agency  has  its  own  plans and  procedures  and  has  been                                                               
purchasing its  own equipment, supplies and  materials. They work                                                               
closely with  the executive branch  and serve jointly  on several                                                               
committees  and  work  groups.  With   passage  of  SB  143  that                                                               
relationship wouldn't change;  it would merely put  the agency on                                                               
the same footing as the judicial branch.                                                                                        
                                                                                                                                
4:49:43 PM                                                                                                                    
                                                                                                                                
CHAIR THERRIAULT  said Ms.  Brakes pointed  out that  the drafter                                                               
patterned this language after the  language used in the Executive                                                               
Order page 2, line 17.                                                                                                          
                                                                                                                                
MR.  CLOTHIER said  he understands  Senator Elton's  concern that                                                               
the executive director could be  gone for an extended period, but                                                               
the opposite  could be  true when  the Legislative  Council chair                                                               
isn't in town or the position is in flux.                                                                                       
                                                                                                                                
CHAIR THERRIAULT  announced that  without objection,  Amendment 1                                                               
was adopted.                                                                                                                    
                                                                                                                                
He noted that  the University of Alaska  requested exemption from                                                               
executive branch  oversight. The Alaska Railroad  Corporation and                                                               
judicial branch  are currently exempt  and the  University argues                                                               
that it is involved with levels  of technology that are above and                                                               
beyond that of the state agencies.                                                                                              
                                                                                                                                
The committee could leave the language  as is and take the matter                                                               
up on the  Senate floor or make that policy  call today. A member                                                               
of the  executive branch told  him that exempting  the University                                                               
is the  Legislature's call, but if  there was a move  to take out                                                               
other quasi-judicial groups  that could cause concern.   He asked                                                               
whether members had a feeling one way or another.                                                                               
                                                                                                                                
4:53:27 PM                                                                                                                    
                                                                                                                                
SENATOR  ELTON  said  there  is  a  beauty  to  centralizing  the                                                               
telecommunications system as much as  possible, but he would like                                                               
to hear  a response  from both the  University and  the executive                                                               
branch.  The larger  issue for  him  is why  the Alaska  Railroad                                                               
Corporation is exempted.                                                                                                        
                                                                                                                                
CHAIR  THERRIAULT held  SB 143  in committee  to await  testimony                                                               
from the University.                                                                                                            
                                                                                                                                
                                                                                                                              
                SB  24-REEMPLOYMENT OF RETIREES                                                                             
                                                                                                                              
                                                                                                                                
4:55:22 PM                                                                                                                    
                                                                                                                                
CHAIR   GENE  THERRIAULT   announced   SB  24   to   be  up   for                                                               
consideration.  He remarked  the committee  heard an  overview on                                                               
the  issue  but hadn't  heard  the  bill.  He asked  whether  the                                                               
sponsor  would   be  addressing  his  comments   to  the  sponsor                                                               
substitute.                                                                                                                     
                                                                                                                                
CHAIR GARY STEVENS,  Sponsor, said he would  address his comments                                                               
to the Senate HESS committee substitute. [CSSSSB 24(HES)]                                                                       
                                                                                                                                
The committee took an at-ease and reconvened at 5:00:29 PM.                                                                   
                                                                                                                                
SENATOR GARY  STEVENS explained  that SB  24 extends  the retiree                                                               
rehire program established in 2001.  That program allowed retired                                                               
state  workers  and  teachers to  rejoin  the  workforce  without                                                               
giving  up  retirement  payments.  He reminded  members  that  no                                                               
employee  of  an  early Retirement  Incentive  Program  (RIP)  is                                                               
allowed to return unless employed as a commissioner.                                                                            
                                                                                                                                
Employers who use  the program are required to  pay any resultant                                                               
increase to the  unfunded liability in the  retirement system. It                                                               
also requires the  PERS and TRS administrators to  give an annual                                                               
report  to  the  Legislature  on   the  effect  of  the  program.                                                               
Municipalities  or  public  organizations that  use  the  program                                                               
would be required  to adopt a policy and  resolution that permits                                                               
the employment  of retirees. In  addition, they must show  that a                                                               
true shortage of qualified applicants exists.                                                                                   
                                                                                                                                
TRS employees already have such  a program and Governor Murkowski                                                               
just  issued Administrative  Order  225, which  sets very  strict                                                               
sideboards for recruitment of state employees.                                                                                  
                                                                                                                                
Extending  the program  would help  public employers  attract and                                                               
retain  qualified workers  in  hard-to-fill  positions. It  would                                                               
give  employers  four  more  years   to  transition  the  current                                                               
workforce before the reemployment  provisions sunset. Finally, it                                                               
is cost neutral  in that it eliminates  any additional retirement                                                               
credit during re-employment.                                                                                                    
                                                                                                                                
5:03:46 PM                                                                                                                    
                                                                                                                                
SENATOR HUGGINS  said he can see  the merit in the  proposal, but                                                               
he is concerned  that this would allow older  employees to remain                                                               
in the  workforce and prevent  entrance to younger  employees. He                                                               
recalled  a  graph from  the  Department  of Administration  that                                                               
showed  seven teachers  aides were  rehired  and several  rehires                                                               
were in  urban areas. He  suggested the qualifications  for those                                                               
positions aren't that high and  many people would probably apply.                                                               
He said, "That's  my case in point  and concern of what  we do is                                                               
we choose, through  the good old boy network, we  just retain our                                                               
buddies."                                                                                                                       
                                                                                                                                
SENATOR STEVENS  said he became  interested in the issue  when he                                                               
realized  several  outstanding  teachers   in  his  district  had                                                               
retired and  decided they wanted  to return  to work a  few years                                                               
later but were precluded from  doing so. Those teachers were lost                                                               
to Oregon, which  is a terrible shame. It's not  his intention to                                                               
create a good  old boys club. Rather, this  extension would allow                                                               
retirees to  be rehired for  hard-to-fill positions.  It requires                                                               
employers  to  begin  thinking about  how  they  will  eventually                                                               
replace certain positions.                                                                                                      
                                                                                                                                
SENATOR WAGONER said he understands  the intent, but this program                                                               
is  one  of  the  most  abused programs  he  has  ever  seen.  He                                                               
suggested other  approaches could  be taken to  address shortages                                                               
in  the education  area. He  pointed to  SB 98,  which lists  the                                                               
villages that  have difficulty recruiting teachers  and suggested                                                               
limiting the bill's application to specific areas.                                                                              
                                                                                                                                
5:08:31 PM                                                                                                                    
                                                                                                                                
SENATOR  GARY  STEVENS  said  he   appreciated  the  concern  and                                                               
certainly  there have  been  abuses,  but this  is  an effort  to                                                               
tighten the  program. In addition, Administrative  Order 225 does                                                               
a fine job of setting up  sideboards for the rehiring process for                                                               
public  employees. He  repeated  TRS retirees  have already  been                                                               
addressed and a true shortage  of applicants must be demonstrated                                                               
before this could occur.                                                                                                        
                                                                                                                                
SENATOR  KIM ELTON  declared a  potential  conflict of  interest,                                                               
because he is a retired public employee.                                                                                        
                                                                                                                                
5:10:20 PM                                                                                                                    
                                                                                                                                
SENATOR ELTON said the sponsor  has noted that the employer would                                                               
pick up  any hit on  either of the retirement  accounts. However,                                                               
this bill  goes further in that  it has a retroactive  clause for                                                               
both TRS and PERS accounts.                                                                                                     
                                                                                                                                
He  agreed  with  Senator Wagoner  that  the  previous  extension                                                               
assumed good  behavior on the  part of all employers,  but abuses                                                               
probably did occur. This bill  makes the director of the Division                                                               
of Retirement  and Benefits the  responsible party and he  or she                                                               
would  have  to  certify  that   the  employer  proved  a  failed                                                               
recruitment  and  they would  have  to  demonstrate how  in-house                                                               
training would occur to bring skills  up to date to "bring in new                                                               
blood." He  credited the  Murkowski Administration  with stepping                                                               
forward to address abuses.                                                                                                      
                                                                                                                                
He  offered  two  instances  for   consideration.  First  is  the                                                               
community hospital,  which is  a PERS  employer that  has rehired                                                               
retired nurses. Recruiting nurses  has been difficult because the                                                               
field is competitive  and the hospital is  no longer competitive.                                                               
Without  this program,  service in  each of  the elements  in the                                                               
hospital would be impacted.                                                                                                     
                                                                                                                                
The  second instance  relates to  the potential  impact on  local                                                               
school districts with regard to  hiring long-term subs. According                                                               
to  statewide contract  provisions,  any sub  that  is hired  for                                                               
longer than  20 days automatically  becomes a TRS  member. Having                                                               
to pay the  employer TRS contribution creates  an additional cost                                                               
to the school district and  without this program school districts                                                               
couldn't rehire a retired teacher as a long-term sub.                                                                           
                                                                                                                                
A number  of different issues  come into play  regarding rehiring                                                               
retirees, and  the last two  situations speak  to the need  for a                                                               
rehire  program in  place that  is better  written and  precludes                                                               
abuse, he concluded.                                                                                                            
                                                                                                                              
5:15:16 PM                                                                                                                  
                                                                                                                                
SENATOR BETTYE DAVIS declared herself a retired public employee.                                                                
                                                                                                                                
SENATOR WAGONER  declared himself  a retired  TRS member  with no                                                               
thought of coming out of retirement.                                                                                            
                                                                                                                                
Acknowledging  recruitment and  pay scale  issues in  the nursing                                                               
field, he  suggested that this type  of program could be  used to                                                               
get  around increasing  pay scales.  He opined  that when  people                                                               
retire  the  ulterior motive  is  to  change lifestyle,  but  the                                                               
ulterior motive  of this  process has  become nothing  but money.                                                               
People  are  retiring  and returning  to  work  to  substantially                                                               
increase their annual income. For  instance the Alaska Department                                                               
of  Fish and  Game has  at least  37 rehired  employees that  are                                                               
affected. "It  became a  good old boys  system," he  asserted. He                                                               
urged members to be very  careful before re-enacting the program.                                                               
"Even  with  the   sideboards  that  are  there,   I'm  not  very                                                               
comfortable with it," he said.                                                                                                  
                                                                                                                                
5:17:57 PM                                                                                                                    
                                                                                                                                
SENATOR  GARY  STEVENS  declared  himself to  be  a  retired  TRS                                                               
member. Responding  to the  comment that  it's nothing  more than                                                               
money, he  said a  retiree could  go anywhere and  get a  job and                                                               
continue to work while collecting  retirement. "I don't know that                                                               
it should be seen as such  a negative thing that someone wants to                                                               
have retirement and  earn a salary," he said.  And remember, this                                                               
is only for a year at a time                                                                                                    
                                                                                                                                
Certainly everyone  recognizes the difficult situation  with PERS                                                               
and TRS and from the start  the intention was to ensure that PERS                                                               
and  TRS weren't  impacted.  "I think  we've  achieved that,"  he                                                               
concluded.                                                                                                                      
                                                                                                                                
5:19:13 PM                                                                                                                    
                                                                                                                                
CHAIR THERRIAULT declared he isn't old enough to retire.                                                                        
                                                                                                                                
Referencing demographic information from  the 2/10/05 overview on                                                               
the  impact  of the  retiree/rehire  program,  he noted  that  45                                                               
people  age 45  to  49  retired from  TRS  and were  subsequently                                                               
rehired. He  suggested that the general  public's discontent with                                                               
the program stems in part from  the fact that the system allows a                                                               
person to draw  retirement after working for 20 years  when he or                                                               
she  is clearly  not of  retirement age.  However, the  situation                                                               
isn't  outside the  norm in  his district  that has  two military                                                               
installations. It's  not at all  uncommon for  military personnel                                                               
retire after  20 years.  "Certainly if you've  spent 20  years in                                                               
the military moving  around and possibly in active  duty, I don't                                                               
begrudge people the right to do that," he said.                                                                                 
                                                                                                                                
He  acknowledged  that  a  number  of  constituents  offered  the                                                               
opinion that,  at the very  least, the system  needed sideboards.                                                               
It's still  not clear whether  or not the  sideboards established                                                               
through Administrative Order 225 are adequate.                                                                                  
                                                                                                                                
SENATOR ELTON commented  the retired PERS employees  who were "20                                                               
and  out"  are  generally  in   public  safety.  For  those  PERS                                                               
employees  who  weren't  in  the   line  of  fire,  the  earliest                                                               
retirement  age was  age  50  and that  was  considered an  early                                                               
retirement.                                                                                                                     
                                                                                                                                
5:21:39 PM                                                                                                                    
                                                                                                                                
SENATOR WAGONER  indicated the savings  of $1,091,720  is correct                                                               
as far as it goes. However,  had the retirees not been allowed to                                                               
return  under contract  and  had other  people  taken those  jobs                                                               
contributions would have been made  to the PERS/TRS accounts. The                                                               
number  is  misleading,  he  argued,  because  rehires  create  a                                                               
negative  impact on  those accounts  and if  new people  had been                                                               
hired the impact would have been positive.                                                                                      
                                                                                                                                
SENATOR HUGGINS agreed with the  previous statement then reported                                                               
that reemployment after military retirement has sideboards.                                                                     
                                                                                                                                
He asked  that the administration  discuss the net effect  to the                                                               
people  currently working  under the  provision if  it's renewed.                                                               
Taking exception  to the  comment that a  retired teacher  is the                                                               
best  substitute teacher,  he said  that  if he  were making  the                                                               
decision he  would insist on  hiring a  new person rather  than a                                                               
retiree. That way  the new hire could gain experience.  This is a                                                               
contrast in styles he said. There isn't a right or wrong answer.                                                                
                                                                                                                                
CHAIR  THERRIAULT told  members he  was ready  to take  testimony                                                               
from the public.                                                                                                                
                                                                                                                                
SENATOR ELTON  referenced Senator Wagoner's comment  and said his                                                               
understanding is that bringing a  retired teacher into the system                                                               
is preserving  the status quo and  if a new person  is brought in                                                               
it would increase the unfunded liability.                                                                                       
                                                                                                                                
SENATOR WAGONER didn't  believe that to be the case  and said the                                                               
Division of Retirement and Benefits could weigh in.                                                                             
                                                                                                                                
CHAIR THERRIAULT  said he had  questions on the fiscal  note, but                                                               
would open teleconference testimony first.                                                                                      
                                                                                                                                
5:26:20 PM                                                                                                                    
                                                                                                                                
ROBERT McHATTIE,  retired PERS employee  from Fairbanks,  said he                                                               
is interested  in protecting the PERS  retirement program against                                                               
too  many  people occupying  state,  borough,  or municipal  jobs                                                               
while not paying into PERS  or TRS. The argument that experienced                                                               
employees can't be replaced doesn't  wash because employees go on                                                               
vacation,  become ill,  die and  are terminated  and the  various                                                               
organizations don't  fall apart  as a  result. Every  employee is                                                               
replaceable and  it's an administrator's  job to ensure  that the                                                               
rehiring  effort is  effective,  aggressive and  one  in which  a                                                               
competitive wage is offered.                                                                                                    
                                                                                                                                
His experience is that state  human resource personnel tend to be                                                               
passive  when replacing  high-level  employees  and he  suggested                                                               
following:                                                                                                                      
   · Consider the retirement check to be a payment for                                                                          
     retirement, not just a quasi pay increase.                                                                                 
   · Find a replacement since one will be necessary sooner or                                                                   
     later.                                                                                                                     
   · If a person must be rehired, hire that person as a                                                                         
     temporary and continue to look for a replacement. Allow one                                                                
     year for this process.                                                                                                     
   · Increase mentoring or training so that the workplace can                                                                   
     move on when a person retires.                                                                                             
                                                                                                                                
5:30:30 PM                                                                                                                    
                                                                                                                                
CHARLES SWANTON,  20-year employee with the  Alaska Department of                                                               
Fish  and  Game  (ADF&G),  testified via  teleconference.  He  is                                                               
currently under  the 30-year retirement program  and his comments                                                               
related strictly to ADF&G.                                                                                                      
                                                                                                                                
He opposed the  retiree rehire program in its current  form as it                                                               
is a benefit  to a select few and won't  benefit the department's                                                               
core employees, who  are unlikely to be  offered participation in                                                               
a similar program in the future.  It's ironic, he said, that most                                                               
department  employees who  currently participate  in the  program                                                               
are making more money than the department commissioner.                                                                         
                                                                                                                                
MR.  SWANTON said  the basis  for  the 2001  legislation was  ill                                                               
founded and  without appropriate instruction for  application. He                                                               
commended  the  sponsor  of  SB   24  for  the  addition  of  the                                                               
application criteria, however he continued  to oppose the bill on                                                               
a number of elements.                                                                                                           
                                                                                                                                
PERS  needs fiscal  input from  all current  active employees  to                                                               
remain semi-solvent.  If the program didn't  exist the department                                                               
would  be provided  an  opportunity  for a  new  era of  positive                                                               
change.  Specialized  knowledge  and  skills  is  acquired  while                                                               
working  up through  the ranks  and can  be replaced  albeit with                                                               
some bumps. "Keeping  the bumps from occurring are  worth what to                                                               
the state in terms of cost?"  He offered the opinion that several                                                               
program   participants   are   very   deserving   of   additional                                                               
compensation, but they  are the exception and not  the rule. This                                                               
program has  and will continue  to diminish  departmental morale.                                                               
"And at what cost," he asked.                                                                                                   
                                                                                                                                
5:32:58 PM                                                                                                                    
                                                                                                                                
SENATOR WAGONER  asked what the  program has done to  the overall                                                               
morale of  employees that  are trying  to work  up the  ladder to                                                               
administrative level.                                                                                                           
                                                                                                                                
MR. SWANTON said he could best describe it as a kick in the gut.                                                                
                                                                                                                                
5:33:48 PM                                                                                                                    
                                                                                                                                
TIM  VIAVANT,  Fairbanks  resident and  current  ADF&G  employee,                                                               
testified via  teleconference to  urge members  to oppose  SB 24.                                                               
The concept  goes against the  principle of how PERS  is supposed                                                               
to work. Language in the CS  requires the employer to make up the                                                               
shortfall in contributions, but  the employee's share wouldn't be                                                               
added to the PERS account.                                                                                                      
                                                                                                                                
The concept has  a negative affect on employee morale  and on the                                                               
recruitment  of new  employees.  In addition  it  has a  negative                                                               
affect on retaining employees who may  not yet be vested in PERS.                                                               
Certainly the argument  about a potential "brain  drain" has been                                                               
overblown. Finally,  the whole idea of  recruitment and retention                                                               
would be  less problematic if adequate  cost-of-living allowances                                                               
had been negotiated in contracts over the last 18 or 19 years.                                                                  
                                                                                                                                
5:36:59 PM                                                                                                                    
                                                                                                                                
JACK  KERIN, testified  from Fairbanks,  to  comment on  previous                                                               
testimony about  rehired retirees who were  incorrectly told they                                                               
would be  grandfathered in when the  original legislation sunset.                                                               
Concern  has  been expressed  about  possible  litigation if  the                                                               
employees aren't  grandfathered, but he questioned  whether there                                                               
shouldn't   be  greater   concern  about   litigation  from   all                                                               
retirement age employees over the  discriminatory process used to                                                               
determine who  is offered the  "platinum parachute  benefit." The                                                               
concept is poor and the program needs to sunset.                                                                                
                                                                                                                                
With regard to the argument that  the program is cost neutral, he                                                               
suggested  that the  actuaries  for Tier  I  employees who  don't                                                               
retire because they  can't afford to are  often overlooked. Those                                                               
employees  aren't offered  the opportunity  to  receive a  double                                                               
salary  and they're  supporting PERS  with  50 to  58 percent  of                                                               
their salary.                                                                                                                   
                                                                                                                                
5:39:56 PM                                                                                                                    
                                                                                                                                
TINA HABIB  testified from Craig  in opposition to the  bill. She                                                               
is  a retired  PERS employee  working for  the municipality.  She                                                               
agreed with  former comments about animosity  among employees and                                                               
how  the system  is abused.  She reminded  members that  PERS has                                                               
been in existence  since 1961 and for 40 years  the provision was                                                               
unnecessary.  Employers and  employees have  had 5  years to  get                                                               
prepared for the July 1 sunset.                                                                                                 
                                                                                                                                
With regard to  the argument that the sunset  would impact cities                                                               
she  pointed  out  that  Craig's  employer  obligation  is  20.33                                                               
percent so it's  already an impact. The more people  that are out                                                               
of PERS the greater the impact, she said.                                                                                       
                                                                                                                                
5:41:44 PM                                                                                                                    
                                                                                                                                
MIKE TIBBLES,  Deputy Commissioner, Department  of Administration                                                               
spoke  in support  of  SB  24. He  said  he  would highlight  two                                                               
important goals  that SB 24  would provide then discuss  two main                                                               
concerns that  were raised and  how the department has  worked to                                                               
resolve those concerns.                                                                                                         
                                                                                                                                
SB  24  would allow  the  approximately  335 employees  currently                                                               
working under the HB 242  waiver to continue receiving retirement                                                               
benefits beyond  the original sunset  date. That's  important for                                                               
several reasons.  First, it's unfortunate  but a number  of those                                                               
employees were told  they would be able to stay  on after July 1.                                                               
Also, if the  issue isn't addressed a number  of senior employees                                                               
might exit the  system to retain their  retirement benefits. This                                                               
would have  a great impact  on school  districts, municipalities,                                                               
and  the  state.  Finally,  SB  24  would  provide  an  effective                                                               
management  tool to  help employers  fill  positions they  aren't                                                               
otherwise  able to  fill, which  was the  intent of  the original                                                               
legislation.                                                                                                                    
                                                                                                                                
MR. TIBBLES  pointed out the  state is facing  severe recruitment                                                               
challenges; it  can't compete  with the  25 percent  federal COLA                                                               
and it doesn't pay market wages.  The system is based on internal                                                               
alignment so the state classification  and pay system isn't based                                                               
on market wages.  For example, it doesn't  allow salary increases                                                               
based on  inequities between the  State of Alaska  and Providence                                                               
Hospital.  To ensure  internal alignment,  the system  compares a                                                               
nurse working for  the state to like  duties and responsibilities                                                               
in  another state  position such  as  a social  worker. What  the                                                               
program can do is fill those positions on a short-term basis.                                                                   
                                                                                                                                
MR.  TIBBLES   referenced  the  cost  and   savings  aspects  and                                                               
explained that individuals  that come back on a  242 waiver don't                                                               
accrue  any  additional  retirement  benefits  and  the  employer                                                               
doesn't  contribute  the  normal  cost  rate  on  the  employee's                                                               
behalf.  However the  cost comes  into play  because the  pool of                                                               
employees  that  are  otherwise   contributing  to  pay  off  the                                                               
unfunded liability  becomes smaller. The actuaries  indicate that                                                               
there is  currently an  impact for  the TRS system  at a  rate of                                                               
$106,000 per  year. The impact  can be quantified by  .02 percent                                                               
of the base salary.                                                                                                             
                                                                                                                                
The  savings   of  bringing  someone   back  who  is   no  longer                                                               
contributing the normal  cost rate is 12.75 percent  for the PERS                                                               
system. So  even though there's a  cost to the system,  there's a                                                               
larger savings for  that employer. SB 24  requires that employers                                                               
pay into  the system at the  point that a cost  is triggered. The                                                               
computation involves  taking the  wage base  of the  employee and                                                               
calculating  it into  the past  service  rate. That  contribution                                                               
would still represent a savings to the employer.                                                                                
                                                                                                                                
As was previously  stated, "There's been a $1  million savings to                                                               
the State  of Alaska since  this program's been in  place because                                                               
the state is  not contributing for those individuals  to a normal                                                               
cost rate - not in the past service rate."                                                                                      
                                                                                                                                
MR. TIBBLES addressed  the concern about making  sure the program                                                               
is used  as intended, which  is only when there  are demonstrated                                                               
recruitment  difficulties. Referencing  Administrative Order  225                                                               
he said the requirements are:                                                                                                   
   · That agency is going to have to competitively recruit the                                                                  
     position.                                                                                                                  
   · If somebody would like to retire then come back they could                                                                 
     take the risk that that position is going to be                                                                            
     competitively recruited for a minimum of 15 days.                                                                          
                                                                                                                                
SENATOR WAGONER  suggested that  the person  that retires  from a                                                               
position should  be excluded from  the pool of  future applicants                                                               
until  after the  position is  competitively  advertised and  the                                                               
pool is generated.                                                                                                              
                                                                                                                                
MR. TIBBLES said under AO 225  the individual could apply but the                                                               
recruitment  must be  statewide and  once the  applicant pool  is                                                               
gathered a  recruitment challenge  would have to  be demonstrated                                                               
to the  Division of Personnel  indicating why no  other candidate                                                               
has the knowledge,  skill, and ability to perform  the job. Also,                                                               
if  the recruitment  brings more  than five  qualified applicants                                                               
then the  retiree wouldn't  be eligible. "It's  in effect  and it                                                               
has been working," he said.                                                                                                     
                                                                                                                                
Because  the process  of  bringing people  back  is a  short-term                                                               
solution,  the  Division  of  Personnel   in  the  Department  of                                                               
Administration   will  be   very   proactive   in  working   with                                                               
departments that  want to  bring people  back from  retirement to                                                               
make sure they are building workforce plans.                                                                                    
                                                                                                                                
5:53:38 PM                                                                                                                    
                                                                                                                                
CHAIR THERRIAULT  asked Mr.  Tibbles touch  on the  highlights so                                                               
that public testimony  could be closed. Ms.  Steinberger from the                                                               
Attorney General's  Office was on  line to talk to  the committee                                                               
under   an   executive   session   about   the   possible   legal                                                               
ramifications of grandfathering or not grandfathering.                                                                          
                                                                                                                                
5:54:35 PM                                                                                                                    
                                                                                                                                
MR. TIBBLES advised that Administrative Order 225 requires the                                                                  
following before an agency could bring someone back from                                                                        
retirement to fill a position:                                                                                                  
        · The position  must be  recruited through  a competitive                                                               
          process                                                                                                               
        · The competitive  process must post  the position  for a                                                               
          minimum of 15 days                                                                                                    
        · The hiring  authority must consider all  applicants not                                                               
          just a selected pool                                                                                                  
        · All  individuals   brought  back  under  242   must  be                                                               
          separated from state service for a minimum of 30 days                                                                 
        · Before  a  position is  offered  to  an applicant,  the                                                               
          administrative   order    would   require    that   the                                                               
          recruitment  process result  in  an  applicant pool  of                                                               
          fewer   than  5   qualified,  eligible   and  available                                                               
          applicants                                                                                                            
        · The  hiring authority  must  demonstrate  why no  other                                                               
          individual  has the  knowledge, skills  and ability  to                                                               
          perform those duties                                                                                                  
        · The approval for  hire must be secured  in writing from                                                               
          the director of personnel                                                                                             
        · Within  60  days  after  receipt  of  the  director  of                                                               
          personnel's  approval  for  a  waiver,  the  department                                                               
          seeking   the  waiver   must   identify  the   critical                                                               
          components of the position                                                                                            
        · The department  must identify the knowledge  skills and                                                               
          abilities that  need to be  developed in  the workplace                                                               
          to assure  that the work  can be accomplished  when the                                                               
          rehired retiree separates from service again                                                                          
        · A  development plan  that  accomplishes  a transfer  of                                                               
          knowledge is required                                                                                                 
        · Applicable statutes and personnel rules will apply                                                                    
        · State agencies  are encouraged  to develop  a strategic                                                               
          view of  human resource needs including  development of                                                               
          a workforce  plan with the  assistance of  the division                                                               
          of personnel                                                                                                          
                                                                                                                                
5:57:51 PM                                                                                                                    
                                                                                                                                
SENATOR  HUGGINS  commented,   "There's  something  fundamentally                                                               
wrong that  a person says, 'I'm  going to retire.' and  they turn                                                               
the switch off and they come back  to work in 30 days in the same                                                               
job."                                                                                                                           
                                                                                                                                
MR.  CHRIS CHRISTENSEN,  Deputy  Administrative Director,  Alaska                                                               
Court System,  informed members that  the court system  has found                                                               
the retiree  rehire program to be  very helpful and it  hopes the                                                               
program will be extended. The  court system has approximately 650                                                               
non-judicial employees  of which 10 participate  in this program.                                                               
Given  the  nature  of  those   positions,  those  employees  are                                                               
significant to court system operations.                                                                                         
                                                                                                                                
The program  has helped  address two  problems. First,  the court                                                               
system has a large number  of one-person job classifications such                                                               
as the state law librarian.  When the primary responsibility of a                                                               
position is  unique, continuity of  service is  problematic. When                                                               
such a position  becomes vacant, no one on staff  can pick up the                                                               
work.                                                                                                                           
                                                                                                                                
He stressed  the importance for  these one-person job  classes to                                                               
remain   filled  with   knowledgeable  and   experienced  people.                                                               
Internal  recruitment is  difficult because  the positions  often                                                               
require  an  advanced  degree  and   in  the  court  system  most                                                               
employees are range 15 or less clerical workers.                                                                                
                                                                                                                                
Another  problem is  that  the court  system  frequently has  few                                                               
qualified   applicants   for   its   supervisory   positions   so                                                               
supervisors  are  often  retained. The  fundamental  problem  and                                                               
reason for this  is high turnover. More than 50  percent of court                                                               
system employees are  paid at ranges 6,  8 or 10 so  an annual 50                                                               
percent turnover is typical. Forty  percent of the court system's                                                               
employees are  located in Anchorage  so it is competing  with the                                                               
Municipality of  Anchorage (MOA).  Although the  salary structure                                                               
is  similar,  MOA pays  more  employee  benefits. In  some  rural                                                               
locations the  court system has experienced  100 percent turnover                                                               
in one  year. Certainly public  service doesn't have the  draw it                                                               
did years  ago and the  court system would be  struggling without                                                               
the retiree rehire program.                                                                                                     
                                                                                                                                
The  RIP  program  became extremely  problematic  for  the  court                                                               
system and  the retire rehire  program partially  compensates for                                                               
those problems.                                                                                                                 
                                                                                                                                
CHAIR THERRIAULT asked  if he had requested  that the Legislature                                                               
not participate in the RIP program.                                                                                             
                                                                                                                                
MR. CHRISTENSEN didn't recall.                                                                                                  
                                                                                                                                
6:03:12 PM                                                                                                                    
                                                                                                                                
MS.   BARBARA  HUFF-TUCKNESS,   Director   of  Governmental   and                                                               
Legislative Affairs  for Teamsters Local 959,  stated support for                                                               
SB  24.   She  represents  employees   with  the  MOA   who  have                                                               
participated in this  program and for whatever  reason MOA hasn't                                                               
suffered from the program.                                                                                                      
                                                                                                                                
When  this   program  first  went   into  effect,   language  was                                                               
negotiated   in  the   collective   bargaining  agreements   that                                                               
addressed the retiree  rehire issue. Of the  18 waivers requested                                                               
by the  MOA, 12 retirees were  rehired in a system  that has over                                                               
2,025 employees.                                                                                                                
                                                                                                                                
MOA  has  a  tremendous  number of  retired  military  that  have                                                               
returned to classified,  non-classified and politically appointed                                                               
positions. This  isn't viewed  as a  negative because  they bring                                                               
valuable resources and knowledge to the workplace.                                                                              
                                                                                                                                
The program  has been used  very successfully in  the engineering                                                               
and public health sectors because  it's been difficult to keep up                                                               
with  cost  of  living  increases, health  benefit  changes,  and                                                               
competition with the private sector.                                                                                            
                                                                                                                                
Individuals that  are currently enrolled  in the program  and are                                                               
within   MOA  were   under  the   belief  that   they  would   be                                                               
grandfathered  in. In  fact many  structured work  and retirement                                                               
plans based  on that fact. "For  the record I would  request that                                                               
the least that  could be done here would be  grandfather in those                                                               
particular individuals  that are  currently participating  in the                                                               
program," she said.                                                                                                             
                                                                                                                                
The Municipality  of Anchorage has  saved over $.25  million with                                                               
the 12 individuals  that have been participating  in the program.                                                               
She urged  the committee to seriously  look at the pros  and cons                                                               
of the program and move the bill from committee.                                                                                
                                                                                                                                
6:07:26 PM                                                                                                                    
                                                                                                                                
SENATOR  WAGONER   announced  that   U.S.  Senator   Ted  Stevens                                                               
mentioned  that  this  might  be   the  last  year  that  federal                                                               
employees living in  Alaska receive the cost  of living allowance                                                               
differential.                                                                                                                   
                                                                                                                                
CHAIR THERRIAULT noted there was no further testimony.                                                                          
                                                                                                                                
He  asked for  a motion  that the  committee move  into executive                                                               
session to take  testimony from the Department of  Law on whether                                                               
the grandfathering question raises a legal issue.                                                                               
                                                                                                                                
SENATOR WAGONER moved that the  Senate State Affairs Committee go                                                               
into  executive session  under AS  44.62.310 to  consider matters                                                               
the immediate  knowledge of which  could clearly have  an adverse                                                               
affect upon the  finances of the State of Alaska.  There being no                                                               
objection, the committee went into executive session.                                                                           
                                                                                                                                
SB 24 was held in committee.                                                                                                    
                                                                                                                                
CHAIR  THERRIAULT  reconvened  the meeting  after  the  executive                                                               
session and adjourned at 6:51:52 PM.                                                                                          

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