02/16/2012 09:00 AM Senate STATE AFFAIRS
| Audio | Topic | 
|---|---|
| Start | |
| SB121 | |
| SB179 | |
| SB129 | |
| Overview: Alaska Non-profit Economy | |
| Adjourn | 
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 121 | TELECONFERENCED | |
| += | SB 179 | TELECONFERENCED | |
| += | SB 129 | TELECONFERENCED | |
| + | TELECONFERENCED | 
                    ALASKA STATE LEGISLATURE                                                                                  
            SENATE STATE AFFAIRS STANDING COMMITTEE                                                                           
                       February 16, 2012                                                                                        
                           9:04 a.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Senator Bill Wielechowski, Chair                                                                                                
Senator Kevin Meyer                                                                                                             
Senator Cathy Giessel                                                                                                           
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                              
Senator Albert Kookesh                                                                                                          
Senator Joe Paskvan, Vice Chair                                                                                                 
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
SENATE BILL NO. 121                                                                                                             
"An Act relating to the public employees' retirement system and                                                                 
the teachers' retirement system; and providing for an effective                                                                 
date."                                                                                                                          
                                                                                                                                
     - MOVED CSSB 121(STA) OUT OF COMMITTEE                                                                                     
                                                                                                                                
SENATE BILL NO. 179                                                                                                             
"An Act relating to missing vulnerable adult prompt response and                                                                
notification plans."                                                                                                            
                                                                                                                                
     - MOVED SB 179 OUT OF COMMITTEE                                                                                            
                                                                                                                                
SENATE BILL NO. 129                                                                                                             
"An  Act relating  to the  approval and  administration of  child                                                               
care services  by the Department of  Administration primarily for                                                               
the benefit  of state officers  and employees; and  providing for                                                               
an effective date."                                                                                                             
                                                                                                                                
     - HEARD & HELD                                                                                                             
                                                                                                                                
OVERVIEW: ALASKA NON-PROFIT ECONOMY                                                                                             
                                                                                                                                
     - HEARD                                                                                                                    
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
BILL: SB 121                                                                                                                  
SHORT TITLE: TEACHERS & PUB EMPLOYEE RETIREMENT PLANS                                                                           
SPONSOR(s): SENATOR(s) EGAN                                                                                                     
                                                                                                                                
04/07/11       (S)       READ THE FIRST TIME - REFERRALS                                                                        
04/07/11       (S)       STA, FIN                                                                                               
04/14/11       (S)       STA AT 9:00 AM BUTROVICH 205                                                                           
04/14/11       (S)       Heard & Held                                                                                           
04/14/11       (S)       MINUTE(STA)                                                                                            
09/15/11       (S)       STA AT 9:00 AM Anch LIO Rm 220                                                                         
09/15/11       (S)       Heard & Held                                                                                           
09/15/11       (S)       MINUTE(STA)                                                                                            
10/13/11       (S)       STA AT 12:00 AM Fairbanks                                                                              
10/13/11       (S)       Heard & Held                                                                                           
10/13/11       (S)       MINUTE(STA)                                                                                            
01/26/12       (S)       STA AT 9:00 AM BUTROVICH 205                                                                           
01/26/12       (S)       Heard & Held                                                                                           
01/26/12       (S)       MINUTE(STA)                                                                                            
02/09/12       (S)       STA AT 9:00 AM BUTROVICH 205                                                                           
02/09/12       (S)       Heard & Held                                                                                           
02/09/12       (S)       MINUTE(STA)                                                                                            
02/16/12       (S)       STA AT 9:00 AM BUTROVICH 205                                                                           
                                                                                                                                
BILL: SB 179                                                                                                                  
SHORT TITLE: MISSING VULNERABLE ADULT RESPONSE PLAN                                                                             
SPONSOR(s): SENATOR(s) DAVIS                                                                                                    
                                                                                                                                
01/27/12       (S)       READ THE FIRST TIME - REFERRALS                                                                        
01/27/12       (S)       STA, FIN                                                                                               
02/09/12       (S)       STA AT 9:00 AM BUTROVICH 205                                                                           
02/09/12       (S)       Heard & Held                                                                                           
02/09/12       (S)       MINUTE(STA)                                                                                            
02/16/12       (S)       STA AT 9:00 AM BUTROVICH 205                                                                           
                                                                                                                                
BILL: SB 129                                                                                                                  
SHORT TITLE: CHILD CARE CTRS: STATE EMPLOYEES & OTHERS                                                                          
SPONSOR(s): SENATOR(s) MCGUIRE                                                                                                  
                                                                                                                                
04/15/11       (S)       READ THE FIRST TIME - REFERRALS                                                                        
04/15/11       (S)       STA, FIN                                                                                               
02/09/12       (S)       STA AT 9:00 AM BUTROVICH 205                                                                           
02/09/12       (S)       Heard & Held                                                                                           
02/09/12       (S)       MINUTE(STA)                                                                                            
02/16/12       (S)       STA AT 9:00 AM BUTROVICH 205                                                                           
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
SENATOR DENNIS EGAN                                                                                                             
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT: Sponsor of SB 121.                                                                                        
                                                                                                                                
MIKE BARNHILL, Deputy Commissioner                                                                                              
Department of Administration (DOA)                                                                                              
Juneau, Alaska                                                                                                                  
POSITION STATEMENT: Testified in opposition to SB 121.                                                                        
                                                                                                                                
JESSE KIEHL, Staff                                                                                                              
Senator Dennis Egan                                                                                                             
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT: Provided information regarding SB 121 on                                                                  
behalf of the sponsor.                                                                                                          
                                                                                                                                
GENEVIEVE WOJTUSIK, Staff                                                                                                       
Senator Lesil McGuire                                                                                                           
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT: Offered to answer questions regarding SB 129                                                              
on behalf of the sponsor.                                                                                                       
                                                                                                                                
VERN JONES, Chief Procurement Officer                                                                                           
Division of General Services                                                                                                    
Department of Administration                                                                                                    
Juneau, Alaska                                                                                                                  
POSITION STATEMENT: Answered questions related to SB 129.                                                                     
                                                                                                                                
KATHIE WASSERMAN, Executive Director                                                                                            
Alaska Municipal League (AML) and                                                                                               
Board Member                                                                                                                    
Foraker Group                                                                                                                   
Juneau, Alaska                                                                                                                  
POSITION STATEMENT: Contributed to the discussion of the Alaska                                                               
Nonprofit Economy.                                                                                                              
                                                                                                                                
DENNIS MCMILLIAN, President & CEO                                                                                               
Foraker Group                                                                                                                   
Anchorage, Alaska                                                                                                               
POSITION STATEMENT: Presented an overview entitled Alaska Non-                                                                
Profit Economy.                                                                                                                 
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
9:04:22 AM                                                                                                                    
CHAIR BILL WIELECHOWSKI called the  Senate State Affairs Standing                                                             
Committee meeting  to order at 9:04  a.m. Present at the  call to                                                               
order were Senators Giessel, Meyer, and Chair Wilechowski.                                                                      
                                                                                                                                
        SB 121-TEACHERS & PUB EMPLOYEE RETIREMENT PLANS                                                                     
                                                                                                                                
9:05:11 AM                                                                                                                    
CHAIR WIELECHOWSKI announced that the  first order of business to                                                               
come before the committee was SB  121. It is the sixth hearing on                                                               
the  bill.  At  the  last   meeting  the  committee  adopted  two                                                               
amendments, the most significant of  which would help ensure that                                                               
the  health care  costs of  the new  defined benefits  tier never                                                               
exceed  those of  the existing  contributions program.  He opined                                                               
that the  committee has  finally achieved  the sponsor's  goal of                                                               
crafting  a  retirement  system  that will  save  the  state  and                                                               
municipalities money, while  providing teachers, police officers,                                                               
fire  fighters,  and  other   public  employees  with  retirement                                                               
benefits they can count on.                                                                                                     
                                                                                                                                
SENATOR  DENNIS EGAN  thanked the  committee for  its work  on SB
121. There  have been six hearings  of the bill in  three cities.                                                               
He commented that  public servants around the state  would like a                                                               
choice  to earn  a pension.  Experts talk  about the  benefits of                                                               
both defined contribution (DC) and  defined benefit (DB) systems.                                                               
He stressed  that the bill  had changed a  lot and now  saves the                                                               
state, at  the onset,  $49 million  in the  first five  years, is                                                               
cost  neutral long-term,  shares  the risk  between employer  and                                                               
employees, and adds nothing to  the unfunded liabilities from the                                                               
past.                                                                                                                           
                                                                                                                                
SENATOR EGAN related that SB 121  lets new hires who serve Alaska                                                               
and  Alaska's cities,  who teach  kids  and respond  in times  of                                                               
need, choose  between a portable  account to save  for retirement                                                               
or  a monthly  pension  check. Personal  accounts  are great  for                                                               
recruiting researchers,  military spouses, or  corporate retirees                                                               
to  state  and  local  government, and  pensions  are  great  for                                                               
keeping   those  who   spend  their   lives  teaching   children,                                                               
patrolling prisons, and managing fisheries.                                                                                     
                                                                                                                                
To make  the new  system cost neutral,  employees will  share the                                                               
risk  of health  cost rising  in the  future. It's  a risk  worth                                                               
taking and is fair to Alaskans.                                                                                                 
                                                                                                                                
CHAIR  WIELECHOWSKI noted  that he  had asked  the Department  of                                                               
Administration  to prepare  a  fiscal note,  which  had not  been                                                               
done.  He  estimated that  the  bill  would  save the  state  $49                                                               
million over the next five  year. Long-term savings would be even                                                               
greater. He  inquired if that  was Senator  Egan's understanding,                                                               
also.                                                                                                                           
                                                                                                                                
SENATOR EGAN said it was.                                                                                                       
                                                                                                                                
CHAIR WIELECHOWSKI  stated that  the goal of  the new  version of                                                               
the bill  is to be revenue  neutral or to save  money. He thanked                                                               
Senator Egan  for his  hard work.  He noted  that the  bill would                                                               
receive a rigorous review in Senate Finance.                                                                                    
                                                                                                                                
CHAIR WIELECHOWSKI asked for a motion  to move SB 121, version R,                                                               
as amended,  from committee  with individual  recommendations and                                                               
two attached fiscal notes: one for  $769,000 in FY 13 to help the                                                               
Department of Administration  get the new system  up and running,                                                               
and one  from the Department of  Revenue for $593,000 in  FY13 to                                                               
cover additional  retirement board  management fees. He  noted an                                                               
additional  fiscal note  from  the  Department of  Administration                                                               
would be forthcoming. The bill  has an additional referral to the                                                               
Senate Finance Committee.                                                                                                       
                                                                                                                                
9:09:14 AM                                                                                                                    
SENATOR  MEYER said  he would  make the  motion, but  first would                                                               
like to  ask a question  of the  Department of Revenue  (DOR). He                                                               
inquired about  the revenue neutrality  of the bill and  asked if                                                               
DOR agreed with the sponsor's statement.                                                                                        
                                                                                                                                
MIKE BARNHILL, Deputy  Commissioner, Department of Administration                                                               
(DOA),  testified in  opposition to  SB 121.  He stated  that the                                                               
department's goal is  to make the bill cost  neutral to employers                                                               
in terms  of normal cost.  He maintained that no  defined benefit                                                               
bill can  guarantee cost  neutrality for  past service  cost. For                                                               
that  reason, DOA  continues to  oppose SB  121. He  recalled the                                                               
history of the legislation, beginning  with how the first version                                                               
of the bill  contained $124 million in  unfunded liability. Next,                                                               
an incorrect  fiscal note  was drafted.  Then, health  care costs                                                               
increased. He  said in a defined  benefit plan the state  ends up                                                               
owning  the expense  because costs  increase more  than what  was                                                               
projected.  He  reiterated  the  many  problems  with  a  defined                                                               
benefit plan and argued against extending the bill for decades.                                                                 
                                                                                                                                
SENATOR MEYER thanked Mr. Barnhill for taking a position.                                                                       
                                                                                                                                
9:14:14 AM                                                                                                                    
CHAIR WIELECHOWSKI pointed out that  fiscal notes are done to try                                                               
to predict the cost of legislation.  He continued to say that DOR                                                               
fired an actuary who  had had a year to work  on the fiscal note.                                                               
The latest  fiscal note is  a best estimate based  on information                                                               
learned from  past actuarial mistakes, which  assumed that health                                                               
care costs  would increase by only  3 percent per year  when they                                                               
actually  increased  by  10  percent. He  pointed  out  that  the                                                               
current assumption is that health  care costs will increase by 10                                                               
percent for the  next 30 years. He disagreed  with that predicted                                                               
10 percent  increase because it would  mean that in 30  years the                                                               
state  would be  paying  $150,000 per  employee  for health  care                                                               
benefits.  He  called it  a  worst-case  scenario. Even  so,  the                                                               
assumptions  that DOR  experts arrived  at are  being used  in SB
121. The  sponsor has put  in a provision  that says the  cost of                                                               
the defined benefit program cannot  exceed 95 percent of the cost                                                               
of the current program. He  maintained that the system would save                                                               
the  state hundreds  of millions  of  dollars. He  noted that  he                                                               
requested a  new fiscal note  that has not been  forthcoming from                                                               
the administration.  He expressed  frustration at not  having the                                                               
new fiscal note.                                                                                                                
                                                                                                                                
9:17:06 AM                                                                                                                    
MR. BARNHILL disagreed with Chair Wielechowski's assumptions.                                                                   
                                                                                                                                
CHAIR   WIELECHOWSKI  maintained   that  they   were  not   "his"                                                               
assumptions, but rather DOR's assumptions.                                                                                      
                                                                                                                                
MR.   BARNHILL  debated   Chair   Wielechowski's  arguments.   He                                                               
maintained that  the actuaries  had only  a week  to work  on the                                                               
current version of  the bill. He described a  cascading series of                                                               
"passing  along the  buck"  if  the assumptions  turn  out to  be                                                               
incorrect. He  addressed the 10  percent cost  growth assumption,                                                               
saying it  is instead  9 percent. He  said the  Alaska Retirement                                                               
Management  (ARM) Board's  health  care  cost growth  assumptions                                                               
trend down over time. He  spoke of the actuarial mistakes related                                                               
to the DB plan and the  resulting solution to have more actuarial                                                               
oversight. He  maintained that a  week is  not enough time  for a                                                               
full actuarial review.                                                                                                          
                                                                                                                                
9:20:32 AM                                                                                                                    
CHAIR WIELECHOWSKI  countered that  DOR had over  a year  to have                                                               
the legislation fully vetted by actuaries.                                                                                      
                                                                                                                                
JESSE  KIEHL, staff,  Senator Dennis  Egan, provided  information                                                               
regarding SB 121 on behalf of  the sponsor. He clarified that the                                                               
new version  of the bill guarantees  that the new tier  would not                                                               
exceed the  normal cost of the  current DC system. He  noted that                                                               
when a  retiree under the  new DB  tier retires, the  amount they                                                               
pay for  their health insurance  is not fixed. The  percentage of                                                               
the  premium  is  fixed  once a  person  retires.  The  statutory                                                               
requirement  that   there  is  an   actuarial  analysis   of  the                                                               
retirement system,  long precedes  the 2005  enactment of  the DC                                                               
system. All of SB 141 safeguards  for a DB system remain in place                                                               
in SB  121. There  will be  a second actuary  to check  the first                                                               
actuary, an  ARM Board review,  and a requirement  that employers                                                               
not pay less than the normal  cost. It is the prefunding costs of                                                               
the DB system that won't exceed the cost of the DC system.                                                                      
                                                                                                                                
MR. KIEHL  took issue with  the statement that costs  are shifted                                                               
to future generations of retirees.  He emphasized that the health                                                               
care cost adjustment in the bill  is a pooling of risk and moving                                                               
that risk to  employees. He concluded that the  risk could become                                                               
burdensome for employees,  but it is a risk  that Alaska's public                                                               
servants are willing to take for a chance to choose a DB system.                                                                
                                                                                                                                
CHAIR WIELECHOWSKI asked  how the fiscal note  process has worked                                                               
and what assumptions were used.                                                                                                 
                                                                                                                                
MR. KIEHL reported that the  timeframes on the actuarial analyses                                                               
have  varied with  different versions  of the  bill. He  believed                                                               
that the administration would have a  fiscal note in time for the                                                               
bill to be heard in  the Senate Finance Committee. He appreciated                                                               
the administration's cooperation in  making the actuary available                                                               
to the sponsor.                                                                                                                 
                                                                                                                                
9:27:48 AM                                                                                                                    
SENATOR MEYER concluded  that allowing state employees  to have a                                                               
choice of  retirement systems is  the best policy for  the state.                                                               
However, he did  not know if the state could  afford it. He spoke                                                               
of military personnel who want  a defined contribution and others                                                               
who would  prefer a  defined benefit program.  He said  that most                                                               
states have a hybrid system.                                                                                                    
                                                                                                                                
SENATOR MEYER moved  to report SB 121, version  R, from committee                                                               
with  individual  recommendations  and  the  accompanying  fiscal                                                               
notes.                                                                                                                          
                                                                                                                                
CHAIR WIELECHOWSKI  added, SB  121, version  R, as  amended, with                                                               
two attached fiscal  notes and a forthcoming DOA  fiscal note. He                                                               
announced that  without objection,  CSSB 121(STA) moved  from the                                                               
Senate State Affairs Standing Committee.                                                                                        
                                                                                                                                
         SB 179-MISSING VULNERABLE ADULT RESPONSE PLAN                                                                      
                                                                                                                                
9:30:30 AM                                                                                                                    
CHAIR WIELECHOWSKI  announced the consideration of  SB 179, which                                                               
would  create  a   new  statewide  alert  system   to  help  find                                                               
vulnerable  missing   adults.  Last  week  the   committee  heard                                                               
testimony from  the Alaska State Troopers,  Alaska Association of                                                               
Retired  People, Alaska  Commission on  Aging, the  Department of                                                               
Military  and Veteran's  Affairs, Division  of Homeland  Security                                                               
and Emergency  Management, and several  Alzheimer's Associations,                                                               
among others.  No negative testimony  was received. The  bill has                                                               
three  zero  fiscal notes:  two  from  the Department  of  Public                                                               
Safety  and one  from the  Department of  Military and  Veteran's                                                               
Affairs.                                                                                                                        
                                                                                                                                
SENATOR BETTYE DAVIS, sponsor, thanked  the committee for hearing                                                               
the  bill in  a timely  manner. She  said SB  179 would  be quite                                                               
helpful to Alaskan citizens.                                                                                                    
                                                                                                                                
CHAIR  WIELECHOWSKI requested  a  motion to  move  the bill  from                                                               
committee.                                                                                                                      
                                                                                                                                
SENATOR  MEYER moved  to  report  SB 179  out  of committee  with                                                               
individual recommendations and the attached fiscal notes.                                                                       
                                                                                                                                
CHAIR  WIELECHOWSKI  announced  that without  objection,  SB  179                                                               
moved from the Senate State Affairs Standing Committee.                                                                         
                                                                                                                                
                                                                                                                                
At ease from 9:31 a.m. to 9:33 a.m.                                                                                             
                                                                                                                                
        SB 129-CHILD CARE CTRS: STATE EMPLOYEES & OTHERS                                                                    
                                                                                                                                
9:33:11 AM                                                                                                                    
CHAIR  WIELECHOWSKI announced  the  consideration of  SB 129.  It                                                               
would allow child care centers  to be located in office buildings                                                               
owned or leased by the State of Alaska.                                                                                         
                                                                                                                                
GENEVIEVE  WOJTUSIK, staff,  Senator  Lesil  McGuire, offered  to                                                               
answer questions regarding SB 129, on behalf of the sponsor.                                                                    
                                                                                                                                
VERN  JONES,  Chief  Procurement  Officer,  Division  of  General                                                               
Services,  Department   of  Administration,   answered  questions                                                               
related to SB 129.                                                                                                              
                                                                                                                                
SENATOR MEYER  said he supports  the bill. He inquired  about the                                                               
cost of the day care program  to the state. He suggested that the                                                               
property could be leased and revenue  brought in. He asked if the                                                               
legislation was fair to small business day care centers.                                                                        
                                                                                                                                
9:35:33 AM                                                                                                                    
MR. JONES  said he thought it  was not accurate to  say there was                                                               
no cost for  the state to implement child care  in its facilities                                                               
or in  leased facilities. It  is more accurate  to say it  is not                                                               
possible  to  choose a  number;  therefore,  the fiscal  note  is                                                               
indeterminate.  He said  there is  a requirement  in the  bill to                                                               
include new centers if a new  facility is built, that houses more                                                               
than 250  employees. He  estimated the cost  if day  care centers                                                               
were added  to the last  three buildings the state  acquired. For                                                               
the Atwood  Building, the cost would  have been a little  over $2                                                               
million. It  is assumed  rent would  be charged  to the  day care                                                               
provider, so there would be no operational loss of funds.                                                                       
                                                                                                                                
MR. JONES  addressed Senator Meyer's question  about "opportunity                                                               
costs".  The  state  typically  operates  a  state  facility  and                                                               
charges a  tenant operating costs  at less than market  rates. He                                                               
referred  to  the  Atwood  Building   as  an  example  where  the                                                               
operating costs  are about half  the market rate.  Also difficult                                                               
to factor  in is the  fact that an  agency could be  displaced by                                                               
the day care  center and would have to pay  the open market rate.                                                               
It is difficult to predict many costs.                                                                                          
                                                                                                                                
SENATOR MEYER noted that day care  centers can be justified as an                                                               
employee benefit.  He questioned  if providing  a day  care would                                                               
displace  agencies.  He  wondered  who would  pay  custodial  and                                                               
utility costs of future centers.                                                                                                
                                                                                                                                
MR.  JONES explained  that a  different agency  deals with  those                                                               
costs. He said the Division  of General Services would likely try                                                               
to recoup operating costs. He  addressed Senator Meyer's question                                                               
about competition with  the private sector. He did  not see undue                                                               
favoritism  to  a  day  care provider.  There  are  strict  rules                                                               
regarding charge-back  rates which  could be cheaper  than market                                                               
rates. The  division typically  does not keep  track of  how many                                                               
people inhabit  a facility. However,  the division  is undergoing                                                               
an efficiency study and has  learned that only two buildings have                                                               
over  250  people;  the  State Office  Building  and  the  Atwood                                                               
Building. Also,  four leased facilities  currently have  over 250                                                               
in them.                                                                                                                        
                                                                                                                                
9:43:44 AM                                                                                                                    
SENATOR GIESSEL asked for clarification  about the amount charged                                                               
for operating costs - "about half the fair market value."                                                                       
                                                                                                                                
MR. JONES replied  that state agencies are charged  about half of                                                               
market  value for  leases  because of  strict  federal rules  for                                                               
operating costs and depreciation. The  Atwood and SOB are charged                                                               
roughly half of what could be gotten on the open market.                                                                        
                                                                                                                                
SENATOR  GIESSEL pointed  out  that a  private  company would  be                                                               
leasing the space for a child  care center. She said she wondered                                                               
if they  would qualify for the  same lease price break  the state                                                               
receives.                                                                                                                       
                                                                                                                                
MR. JONES  said the  state was  allowed to  charge rent  based on                                                               
federal guidelines,  but could also  charge the market rate  to a                                                               
non-state entity.  He said he  would have  to check on  that. The                                                               
fiscal note does not make any assumptions about the rate.                                                                       
                                                                                                                                
SENATOR GIESSEL spoke  of a private company  running a restaurant                                                               
in  the Atwood  Building.  She  asked what  rate  they are  being                                                               
charged.                                                                                                                        
                                                                                                                                
MR. JONES said  he thought they were being  charged an equivalent                                                               
rate, but he  would have to check on it.  Future day care centers                                                               
would not  be state-run  businesses; an RFP  would be  issued for                                                               
open market competition.                                                                                                        
                                                                                                                                
CHAIR WIELECHOWSKI said SB 129 would be held over.                                                                              
                                                                                                                                
              ^OVERVIEW: ALASKA NON-PROFIT ECONOMY                                                                          
                                                                                                                                
                                                                                                                                
9:47:36 AM                                                                                                                    
CHAIR WIELECHOWSKI  announced the  Foraker Group  presentation on                                                               
Alaska's nonprofit economy. Alaska  relies on nonprofit groups to                                                               
provide a wide  range of public services.  As economic conditions                                                               
in  Alaska  have tightened  and  the  legislature has  sought  to                                                               
constrain  state  spending,  many   of  these  organizations  are                                                               
struggling to meet public needs and accomplish their missions.                                                                  
                                                                                                                                
CHAIR  WIELECHOWSKI introduced  Dennis  McMillian, president  and                                                               
CEO of the Foraker Group. He  said that Mr. McMillian has devoted                                                               
his  professional  career   to  helping  nonprofit  organizations                                                               
better meet  the needs of  their communities. Mr.  McMillian came                                                               
to Alaska in 1992 to lead  the United Way of Anchorage, and since                                                               
then,   he   has   helped   build   the   state's   philanthropic                                                               
infrastructure  through  his work  with  United  Ways across  the                                                               
state,  and   through  his  support  in   developing  the  Alaska                                                               
Community  Foundation.  He  is a  strong  advocate  for  Alaska's                                                               
nonprofit sector. In 2001, Mr.  McMillian led the effort to start                                                               
the  Foraker Group  with the  mission of  building sustainability                                                               
and organizational capacity in Alaska's nonprofits.                                                                             
                                                                                                                                
At ease from 9:49:01 a.m. to 9:49:53 a.m.                                                                                       
                                                                                                                                
9:49:53 AM                                                                                                                    
KATHIE  WASSERMAN, Executive  Director,  Alaska Municipal  League                                                               
(AML),   Board  Member,   Foraker  Group,   contributed  to   the                                                               
discussion  of  Alaska  Nonprofit   Economy.  She  spoke  of  the                                                               
benefits  to  AML and  to  Alaska  from  the Foraker  Group.  The                                                               
Foraker  Group has  been instrumental  in  assisting AML's  board                                                               
operate more  effectively. Non-profits  that do  a good  job have                                                               
become much  stronger and  more effective due  to the  efforts of                                                               
the Foraker Group.                                                                                                              
                                                                                                                                
9:52:09 AM                                                                                                                    
DENNIS MCMILLIAN,  President & CEO,  Foraker Group,  presented an                                                               
overview entitled "Alaska Non-Profit  Economy." He predicted that                                                               
non-profit  requests would  escalate in  the future.  The Foraker                                                               
Group provides  training and research for  non-profits in Alaska.                                                               
They do research every three years to establish base-line data.                                                                 
                                                                                                                                
MR. MCMILLIAN reported  on the total number  of Alaska nonprofits                                                               
in 2010 in Alaska. He showed  a graph made by Institute of Social                                                               
and  Economic Research  (ISER) showing  the number  of registered                                                               
and  non-registered  nonprofits.   There  were  4,727  registered                                                               
nonprofits  and 2,300  other nonprofits.  He  commented on  which                                                               
groups do  not show up under  the 4,727 that are  registered. The                                                               
best  guess  is that  there  are  7,000 nonprofits  operating  in                                                               
Alaska currently.                                                                                                               
                                                                                                                                
MR. MCMILLIAN showed the expenditures  of nonprofits operating in                                                               
Alaska. It  is a $4.5  billion industry, three-quarters  of which                                                               
are 501(c)(3) charitable nonprofits.                                                                                            
                                                                                                                                
9:57:39 AM                                                                                                                    
MR.  MCMILLIAN  reported  on the  composition  of  Alaska  public                                                               
charities.  Nine   percent  of  the  organizations,   the  health                                                               
subsector, represents 61 percent of  employment and 60 percent of                                                               
expenditures.  He showed  how the  largest  ten public  charities                                                               
rank  by expenditures.  He noted  that  all ten  were related  to                                                               
health  care and  all but  three were  Native entities.  He added                                                               
that the  data was from  2007 and  not particularly good;  it was                                                               
ISER's best guess.                                                                                                              
                                                                                                                                
He detailed the public charity  composition of revenues in Alaska                                                               
as  compared  to   those  in  the  entire   United  States.  U.S.                                                               
Government grants  make up 43  percent of revenues in  Alaska, as                                                               
compared   to  only   9   percent   nationally.  The   charitable                                                               
contributions/other category  in Alaska is  18 percent  versus 23                                                               
percent nationally.                                                                                                             
                                                                                                                                
He noted  a trend in Alaska  since 2003 - government  grants have                                                               
dropped from 53 percent of total  revenues to 43 percent.  Alaska                                                               
is disproportionally  supported by foundations  and corporations.                                                               
The  state is  overly dependent  on one  industry for  charitable                                                               
contributions.  The  Click,  Pick,  Give program  has  helped  to                                                               
increase individual giving.                                                                                                     
                                                                                                                                
10:02:39 AM                                                                                                                   
CHAIR WIELECHOWSKI noted tax breaks  in Alaska for companies that                                                               
contribute to  education. He asked  how that type of  donation is                                                               
counted.                                                                                                                        
                                                                                                                                
MR. MCMILLIAN said that was IRS data.                                                                                           
                                                                                                                                
CHAIR WIELECHOWSKI  wondered if  that type of  donation increased                                                               
the number for government spending.                                                                                             
                                                                                                                                
MR. MCMILLAN guessed that it did.                                                                                               
                                                                                                                                
MR.  MCMILLIAN turned  to  the  trends in  Alaska  that would  be                                                               
affecting charitable funding  in the future. A  funding crisis is                                                               
inevitable  due  to  the  drop   in  contributions  from  federal                                                               
earmarks  and  from  organizations   turning  to  the  state  for                                                               
funding. He emphasized that the  nonprofits have been warned that                                                               
this was coming.                                                                                                                
                                                                                                                                
He addressed the  "crash of the herd" crisis,  which he described                                                               
as an  over population issue  - one  nonprofit for 28  people. He                                                               
spoke  of baby  boomer population  trends leading  to not  enough                                                               
people to serve  on, and staff, non-profits in  order to maintain                                                               
7,000 nonprofits.                                                                                                               
                                                                                                                                
MR.  MCMILLIAN   discussed  new  nonprofit  structures   such  as                                                               
networked institutions  with new ways of  partnering and merging.                                                               
He noted the Foraker Group was here to serve Alaska.                                                                            
                                                                                                                                
10:09:36 AM                                                                                                                   
SENATOR  MEYER   agreed  that  in  tough   times,  companies  and                                                               
nonprofits  will tend  to merge.  He asked  how religious  groups                                                               
qualify as nonprofits.                                                                                                          
                                                                                                                                
MR. MCMILLIAN said they are all  nonprofits and are a part of the                                                               
7,000.                                                                                                                          
                                                                                                                                
SENATOR MEYER  said that was  good because they work  together to                                                               
provide food banks and soup kitchens.                                                                                           
                                                                                                                                
MR.  MCMILLIAN noted  that in  the nonprofit  sector, competition                                                               
does not work.                                                                                                                  
                                                                                                                                
SENATOR  MEYER suggested  that  when  nonprofits request  funding                                                               
from the state, they should also have other matching funds.                                                                     
                                                                                                                                
MR. MCMILLIAN talked about capital  campaigns. He opined that the                                                               
state  will  have  to  have  a  different  strategy  for  funding                                                               
nonprofits.  He predicted  that nonprofits  will need  67 percent                                                               
from one donor when they seek funding from the state.                                                                           
                                                                                                                                
10:14:03 AM                                                                                                                   
SENATOR MEYER  appreciated the  work Foraker  does. He  said that                                                               
nonprofits often require business-related assistance.                                                                           
                                                                                                                                
CHAIR  WIELECHOWSKI  asked  for specific  steps  the  legislature                                                               
could   take   to   strengthen  nonprofits   and   ensure   their                                                               
sustainability in Alaska.                                                                                                       
                                                                                                                                
MR. MCMILLAN  referred to a handout  called "Nonprofit Sustaining                                                               
Guidelines." He suggested four things  to look for in a nonprofit                                                               
to determine  how sustainable it  will be: having focus  or clear                                                               
understanding by  the nonprofit of  itself and its goals  - being                                                               
strategic and thinking ahead; having  the right people involved -                                                               
working  together in  partnership; being  fluent in  partnerships                                                               
and in collaborations; generating  unrestricted cash and making a                                                               
profit.                                                                                                                         
                                                                                                                                
10:19:08 AM                                                                                                                   
There being  no further  business to  come before  the committee,                                                               
Chair Wielechowski  adjourned the  Senate State  Affairs Standing                                                               
Committee at 10:19 a.m.                                                                                                         
                                                                                                                                
| Document Name | Date/Time | Subjects | 
|---|---|---|
| SB 121 Pensionomics_factsheet_AK_2009.pdf | SSTA       4/14/2011 9:00:00 AM SSTA 2/16/2012 9:00:00 AM | SB 121 | 
| SB 121 Sponsor Statement.pdf | SSTA       4/14/2011 9:00:00 AM SSTA 2/16/2012 9:00:00 AM | SB 121 | 
| SB 121 NCPERS_ResearchSeries_TopTen.pdf | SSTA       4/14/2011 9:00:00 AM SSTA 2/16/2012 9:00:00 AM | SB 121 | 
| SB 121 PERStierI-IVchart.pdf | SSTA       4/14/2011 9:00:00 AM SSTA 2/16/2012 9:00:00 AM | SB 121 | 
| SB 121 TRStierI-IIIchart.pdf | SSTA       4/14/2011 9:00:00 AM SSTA 2/16/2012 9:00:00 AM | SB 121 | 
| SB 121 Actuarial Analysis - Fornia March 8 2011.pdf | SSTA       4/14/2011 9:00:00 AM SSTA 2/16/2012 9:00:00 AM | SB 121 | 
| SB121.pdf | SSTA       2/16/2012 9:00:00 AM | SB 121 | 
| SB 121 Explanation of Changes in Ver.R.docx | SSTA       2/16/2012 9:00:00 AM | SB 121 | 
| SB121-DOR-TRS-01-24-12.pdf | SSTA       2/16/2012 9:00:00 AM | SB 121 | 
| SB121Semmens.docx | SSTA       2/16/2012 9:00:00 AM | SB 121 | 
| SB121 Gary Miller Testimony.PDF | SSTA       2/16/2012 9:00:00 AM | SB 121 | 
| SB121 Letter of Support AARP.pdf | SSTA       2/16/2012 9:00:00 AM | SB 121 | 
| SB121 Testimony of Val Kenny.docx | SSTA       2/16/2012 9:00:00 AM | SB 121 | 
| SB 121 Jason Norris Letter of Opposition.pdf | SSTA       2/16/2012 9:00:00 AM | SB 121 | 
| SB121 Beltrami testimony.pdf | SSTA       2/16/2012 9:00:00 AM | SB 121 | 
| SB121 Letter of Support.pdf | SSTA       2/16/2012 9:00:00 AM | SB 121 | 
| SB 179 Background Information.pdf | SSTA       2/16/2012 9:00:00 AM | SB 179 | 
| SB 179 Original.pdf | SSTA       2/16/2012 9:00:00 AM | SB 179 | 
| SB 179 Sponsor Statement.pdf | SSTA       2/16/2012 9:00:00 AM | SB 179 | 
| SB 129.pdf | SSTA       2/16/2012 9:00:00 AM | SB 129 | 
| SB179-DPS-DET-02-07-12.pdf | SSTA       2/16/2012 9:00:00 AM | SB 179 | 
| SB179 Letter of Support.docx | SSTA       2/16/2012 9:00:00 AM | SB 179 | 
| SB179-DPS-R&I-02-08-12.pdf | SSTA       2/16/2012 9:00:00 AM | SB 179 | 
| Fiscal Note Calculations_SB121 #2.pdf | SSTA       2/16/2012 9:00:00 AM | SB 121 | 
| SB 121 Fiscal Note Calculations_30 yr.pdf | SSTA       2/16/2012 9:00:00 AM | SB 121 | 
| The Alaskan Non-Profit Economy Presentation .ppt | SSTA       2/16/2012 9:00:00 AM | |
| R Johnson SB 121 testimony.pdf | SSTA       2/16/2012 9:00:00 AM | SB 121 | 
| SB 121 Letters of Support.PDF | SSTA       2/16/2012 9:00:00 AM | SB 121 | 
| SB 129-Sponsor statement.pdf | SSTA       2/16/2012 9:00:00 AM | SB 129 | 
| SB 129 backup-Workplace support, child care, and turnover.PDF | SSTA       2/16/2012 9:00:00 AM | SB 129 | 
| SB129-DOA-RM-2-03-12.pdf | SSTA       2/16/2012 9:00:00 AM | SB 129 | 
| SB 129 JEDC study backup.PDF | SSTA       2/16/2012 9:00:00 AM | SB 129 | 
| SB 129 Thread letter of support.pdf | SSTA       2/16/2012 9:00:00 AM | SB 129 | 
| SB 129 AEYC letter of support.pdf | SSTA       2/16/2012 9:00:00 AM | SB 129 |