Legislature(2013 - 2014)BUTROVICH 205
04/02/2013 09:00 AM Senate STATE AFFAIRS
| Audio | Topic |
|---|---|
| Start | |
| HJR11 | |
| SB48 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HJR 11 | TELECONFERENCED | |
| = | SB 48 | ||
ALASKA STATE LEGISLATURE
SENATE STATE AFFAIRS STANDING COMMITTEE
April 2, 2013
9:06 a.m.
MEMBERS PRESENT
Senator Fred Dyson, Chair
Senator Cathy Giessel, Vice Chair
Senator John Coghill
Senator Bill Wielechowski
MEMBERS ABSENT
Senator Bert Stedman
COMMITTEE CALENDAR
CS FOR HOUSE JOINT RESOLUTION NO. 11(MLV)
Commemorating the 30th anniversary of President Ronald Reagan's
address to the nation concerning the Strategic Defense
Initiative, recognizing the strategic importance of Alaska in
the missile interceptor defense system, and urging the United
States to deploy the number of ground-based interceptors
originally intended at Fort Greely.
- MOVED CSHJR 11(MLV) OUT OF COMMITTEE
SENATE BILL NO. 48
"An Act requiring each municipality with a population that
decreased by more than 25 percent between 2000 and 2010 that
participates in the defined benefit plan of the Public
Employees' Retirement System of Alaska to contribute to the
system an amount calculated by applying a rate of 22 percent of
the total of all base salaries paid by the municipality to
employees of the municipality who are active members of the
system during a payroll period; reducing the rate of interest
payable by a municipality with a population that decreased by
more than 25 percent between 2000 and 2010 that is delinquent in
transmitting employee and employer contributions to the defined
benefit plan of the Public Employees' Retirement System of
Alaska; giving retrospective effect to the substantive
provisions of the Act; and providing for an effective date."
- HEARD & HELD
PREVIOUS COMMITTEE ACTION
BILL: HJR 11
SHORT TITLE: COMMEM. ANNIVERSARY OF REAGAN SDI SPEECH
SPONSOR(s): REPRESENTATIVE(s) SADDLER
03/13/13 (H) READ THE FIRST TIME - REFERRALS
03/13/13 (H) MLV
03/19/13 (H) MLV AT 1:00 PM CAPITOL 120
03/19/13 (H) Moved CSHJR 11(MLV) Out of Committee
03/19/13 (H) MINUTE(MLV)
03/20/13 (H) MLV RPT CS(MLV) 6DP
03/20/13 (H) DP: HUGHES, GRUENBERG, REINBOLD,
SADDLER, LEDOUX, FOSTER
03/22/13 (H) TRANSMITTED TO (S)
03/22/13 (H) VERSION: CSHJR 11(MLV)
03/25/13 (S) READ THE FIRST TIME - REFERRALS
03/25/13 (S) STA
04/02/13 (S) STA AT 9:00 AM BUTROVICH 205
BILL: SB 48
SHORT TITLE: PERS CONTRIBUTIONS BY MUNICIPALITIES
SPONSOR(s): SENATOR(s) OLSON
02/11/13 (S) READ THE FIRST TIME - REFERRALS
02/11/13 (S) STA, FIN
03/12/13 (S) STA AT 9:00 AM BUTROVICH 205
03/12/13 (S) Heard & Held
03/12/13 (S) MINUTE(STA)
04/02/13 (S) STA AT 9:00 AM BUTROVICH 205
WITNESS REGISTER
REPRESENTATIVE DAN SADDLER
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Sponsor of HJR 11.
DAVID SCOTT, Staff
Senator Donny Olson
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented SB 48 on behalf of the sponsor.
MIKE BARNHILL, Deputy Commissioner
Office of the Commissioner
Department of Administration
Juneau, Alaska
POSITION STATEMENT: Provided information related to SB 48.
GREG MOYER, City Manager
Galena, Alaska
POSITION STATEMENT: Testified on SB 48.
ACTION NARRATIVE
9:06:23 AM
CHAIR FRED DYSON called the Senate State Affairs Standing
Committee meeting to order at 9:06 a.m. Present at the call to
order were Senators Wielechowski, Coghill, Giessel and Chair
Dyson.
HJR 11-COMMEM. ANNIVERSARY OF REAGAN SDI SPEECH
CHAIR DYSON announced that the first order of business would be
HJR 11.
REPRESENTATIVE DAN SADDLER, sponsor of HJR 11, reviewed the
contents of the bill. He read from the following sponsor
statement:
HJR 11 commemorates the 30th Anniversary of President
Ronald Regan's "Strategic Defense Initiative"
addressed to the nation on March 23, 1983. President
Reagan believed that we should achieve "peace through
strength," and called for the nation to develop the
ability to intercept and destroy strategic nuclear
missiles before they could reach the United States.
Though his idea was initially mocked as a "Star Wars"
fantasy, Reagan's vision was eventually realized.
Americans developed what became better known, and
better respected, as the "Strategic Defense
Initiative."
HJR 11 commemorates the 30th anniversary of President
Reagan's speech to the nation calling for the creation
of the "Star Wars" defense system, and credits Reagan
for his vision. HJR 11 also honors the Alaskans who
play a critical role in this system: The Alaska
National Guard's 49th Missile Defense Battalion mans
the nation's primary installation of the Ground-Based,
Mid-course Defense System and interceptor missiles, at
Fort Greely, in Interior Alaska.
But while we have 26 missiles and silos at Fort
Greely, the plans had originally called for 40. In
2009 President Obama stopped short of finishing
deployment of the last 14 interceptors planned for
deployment. This incomplete system left the nation
vulnerable to the threat of increasingly sophisticated
and capable missiles: from Iran, from China, and from
North Korea. In recent weeks, the threat has gotten
even more real, North Korea has made clear and
credible threats to launch nuclear attacks on the
United States.
HJR 11, therefore, also calls on the current President
to deploy the full number of ground-based missiles
originally intended to be installed at Fort Greely.
But just as this resolution was being drafted,
Secretary of Defense Hagel announced his decision to
deploy an additional 14 interceptors to Fort Greely,
Alaska by 2017 - bringing the total to 44 (40 in
Alaska, 4 at Vandenberg AFB in California)
It's clear that President Reagan was right about Star
Wars; that our nation needed and someday would be very
glad to have, a defense against the threat of ICBMs.
REPRESENTATIVE SADDLER concluded that HBJ 11 recognizes
President Reagan's "Star Wars" vision, honors his commitment to
ensure our nation maintains peace through strength, expresses
appreciation of the brave Alaskans manning the defenses at the
frontiers of space, and validates Defense Secretary Hegel's
timely decision to complete the installation of the full
complement of missiles at Fort Greely.
CHAIR DYSON voiced appreciation for Representative Saddler's
efforts.
9:10:38 AM
SENATOR GIESSEL moved to report CSHJR 11(MLV) from committee
with individual recommendations and attached zero fiscal note.
There being no objection, it was so ordered.
9:11:10 AM
At ease
SB 48-PERS CONTRIBUTIONS BY MUNICIPALITIES
9:12:10 AM
CHAIR DYSON announced that the final order of business would be
SB 48.
DAVID SCOTT, Staff, Senator Donny Olson, sponsor of SB 48,
introduced the bill. He stated that version A was before the
committee.
CHAIR DYSON noted that the committee has heard the bill
previously. He recalled that some communities are in financial
trouble and have no way to fulfill their commitment to pay their
PERS/TRS retirement costs. In 2008, SB 125 was intended to keep
those communities from "gaming the system". The unintended
result of that legislation is that communities decreasing in
population are no longer able to pay their share and are
trapped, so Senator Olson came up with a solution - SB 48.
MR. SCOTT agreed with Chair Dyson. He added that SB 48 is a
solution to a problem, which if left unsolved, will result in
the state's seeing no money from these communities. He said the
bill is still in process and the other body has a similar bill
in the works. The sponsor wishes to help communities get out of
debt.
9:15:09 AM
CHAIR DYSON referred to a legal summary in members' packets.
SENATOR COGHILL requested an explanation of the House version of
the bill.
MR. SCOTT said the other body is going to provide for
communities that have lost 25 percent of their population by
using the floor created by HB 125 in 2008 and forgiving a
certain amount of debt. He noted there is ongoing communication
between the other body and sponsor, the state, and Senator
Olson's office.
CHAIR DYSON said he does not like the idea of continuing to deal
with this issue on an ad hoc basis. A better way might be to
deal with it by appropriation for a couple sessions. He said he
was inclined to pass the bill on to the Senate Finance
Committee. Nothing has been done since 2008, so there has to be
some pressure for a solution.
SENATOR GIESSEL requested an opinion from Mr. Barnhill.
9:18:35 AM
MIKE BARNHILL, Deputy Commissioner, Office of the Commissioner,
Department of Administration, provided information related to SB
48. He related that his office has been involved in a discussion
since last fall with the Alaska Municipal League and both
sponsors. He agreed that there is a problem and a variety of
solutions. He said SB 48 is a workable solution, as is
"advancing the floor to 2012." Another solution is to have an
appropriation through the Municipal Grants Program every year.
He said the administration leans toward the latter ad hoc
solution and not toward changing the statute, which would be
permanent and problematic if the population returns to the
community. There is also a fairness issue if the community has
the ability to pay some time in the future.
9:21:00 AM
CHAIR DYSON asked how much an appropriation would be if it were
made in this budget.
MR. BARNHILL replied that about 23 municipalities fall into the
delinquent category with the total amount of delinquency just
over $6 million and, of that, $4 million is penalties and
interest. The principal amount owed is between $1 million to $2
million.
CHAIR DYSON asked how to determine which communities deserve to
get bailed out by the state.
MR. BARNHILL suggested paying off the largest bills first. He
suggested it would be better to earmark it through the Municipal
Grants Program.
CHAIR DYSON asked if the administration could determine which
communities are absolutely without options.
MR. BARNHILL suggested the standards set forth in SB 48 could be
used. He used Galena as an example of a community that has
communicated its needs.
9:23:48 AM
CHAIR DYSON commented that the Institute of Social and Economic
Research (ISER) did a study on what makes a viable community, as
did the Denali Commission.
GREG MOYER, Galena City Manager, testified on SB 48. He
emphasized that Galena would face the same inability to pay
every year because its base salary is half of what was set by
law. He suggested that there be a permanent fix. He said his
goal is to build up the city and increase the population.
9:26:22 AM
CHAIR DYSON asked what harm delaying this legislation would do.
MR. BARNHILL explained that the amount owed continues to grow
and has persisted for several years. The interest rate of 12
percent is high. He said there is currently not much harm to the
retirement system. He voiced concern about the number of cities
in noncompliance. He shared the option of a statutory intercept,
an abrupt and disruptive option, which the department is
reluctant to do but may be necessary if non-compliance becomes
more widespread.
9:28:19 AM
SENATOR WIELECHOWSKI asked what the administration recommends.
MR. BARNHILL said the preference is to deal with it through
appropriation. The administration has no position on the bill.
SENATOR WIELECHOWSKI asked if the Governor is willing to put
money into future budgets for this.
MR. BARNHILL said the Municipal Grant Program is always in the
capital budget. He said he could not speak for the Governor.
9:29:40 AM
CHAIR DYSON addressed Mr. Moyer. He said he suspects that as the
penalties and interest grow, Galena's credit will be affected
and their credit rating is weakened.
MR. MOYER agreed it does have a detrimental effect on Galena. He
believed strongly in a legislative fix, due to the yearly
liability. He stressed that Galena needs help now.
MR. SCOTT said a single appropriation would still mean that
Galena's bill would continue.
9:32:37 AM
CHAIR DYSON concluded that the state is going to end up assuming
the communities' responsibilities due to the arbitrary floor. He
suggested the penalties and interest should be forgiven. He
asked if the sponsor thought of retroactively eliminating
penalties via statute.
MR. SCOTT said it was discussed, but not included in the bill.
9:34:03 AM
CHAIR DYSON suggested not penalizing the communities, yet having
an objective evaluation of who should be relieved of those
penalties.
SENATOR COGHILL suggested passing the bill on to Senate Finance.
He said the benefit of a statutory fix is that the legislature
has to deal with it. He noted with an annual appropriation,
municipal grant criteria must be considered. He questioned
whether moving the date is the best fix, because later it could
be amended and cause problems. He liked the idea of a budget
amendment which has to be debated each year. He suggested it
should be done at an appropriation level now. The bill sets up a
structure that might not work in the future.
CHAIR DYSON said there could be unintended consequences again.
SENATOR COGHILL thought HB 125 might have to be re-written due
to the economy in Alaska.
CHAIR DYSON asked Mr. Barnhill about the cost of making an
appropriation.
MR. BARNHILL said between $1 million and $2 million of
principle.
SENATOR WIELECHOWSKI pointed out there is still over $4 million
owed accumulating at 12 percent interest.
MR. BARNHILL agreed. He suggested if an appropriation is going
to be made the entire amount should be paid.
SENATOR WIELECHOWSKI asked about lowering the 12 percent
interest rate.
MR. BARNHILL said interest rates are to compensate the state for
the time value of money, which is currently zero. Also, interest
rate can be punitive designed to illicit compliance. The statute
has a fixed rate of 8 percent, plus an additional 50 percent
rate. He suggested the committee keep in mind the two components
of interest rates as they proceed.
9:40:58 AM
CHAIR DYSON asked if there is $3 million to $4 million in
interest and penalties.
MR. BARNHILL said yes.
SENATOR COGHILL pointed out that the state would be paying
itself the interest under an appropriation. If the legislature
passes the bill, it requires part of the debt to be paid back at
a lower interest rate and that would draw the communities into
the payment method. He disliked that an appropriation would be
the state paying itself the interest.
SENATOR WIELECHOWSKI asked where the interest goes.
MR. BARNHILL said that "the state is paying itself" is a
misnomer because the money goes into a trust fund for the
benefit of the members of the retirement system.
CHAIR DYSON said that is an important distinction.
MR. BARNHILL emphasized that the interest going into the trust
fund does not make a meaningful difference toward repaying the
unfunded liability.
CHAIR DYSON inquired whether a municipality can file for
bankruptcy in Alaska.
9:43:43 AM
MR. BARNHILL did not know.
CHAIR DYSON commented on bankruptcy. He said it would be an
interesting discussion.
CHAIR DYSON suggested holding the bill until Thursday and
compiling a letter of intent to the administration regarding a
long-term solution.
SENATOR WIELECHOWSKI agreed. He said he thinks the
administration knows what's best. He did not like the Band-Aid
approach.
CHAIR DYSON asked if the Department of Law has someone who could
work on the issue.
9:46:03 AM
MR. BARNHILL said yes.
CHAIR DYSON requested information on the status of bankruptcy in
Alaska.
MR. SCOTT suggested contacting Scott Ruby from the Department of
Commerce, Community and Economic Development.
CHAIR DYSON he suggested a deadline of noon tomorrow.
SENATOR COGHILL asked for a "kick out provision" regarding the
population threshold.
MR. SCOTT said he thought the sponsor would agree with that.
[SB 48 was held in committee.]
9:48:15 AM
There being no further business to come before the committee,
Chair Dyson adjourned the Senate State Affairs Standing
Committee at 9:48 a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HJR 11 Sponsor Statement.pdf |
SSTA 4/2/2013 9:00:00 AM |
HJR 11 |
| HJR 11B.pdf |
SSTA 4/2/2013 9:00:00 AM |
HJR 11 |
| SB 48 - Sponsor Statement.pdf |
SSTA 4/2/2013 9:00:00 AM |
SB 48 |
| SB 48 Version A.pdf |
SSTA 4/2/2013 9:00:00 AM |
SB 48 |
| SB 48 Fiscal Note DOA-DRB-3-08-13.pdf |
SSTA 4/2/2013 9:00:00 AM |
SB 48 |
| SB 48 STA Questions To & Answers From DOA.pdf |
SSTA 4/2/2013 9:00:00 AM |
SB 48 |
| SB 48 E-mail on Municipal Bankruptcies in Alaska.pdf |
SSTA 4/2/2013 9:00:00 AM |
SB 48 |
| SB 48 Copy of Copy of PERS Employer census 2000-2010 (3).pdf |
SSTA 4/2/2013 9:00:00 AM |
SB 48 |
| SB 48 City of Pelican Statement.pdf |
SSTA 4/2/2013 9:00:00 AM |
SB 48 |
| SB 48 - Legislative Research Municipal Bankruptcies in Alaska.pdf |
SSTA 4/2/2013 9:00:00 AM |
SB 48 |
| SB 48 - Employers impacted by salary floor.pdf |
SSTA 4/2/2013 9:00:00 AM |
SB 48 |
| SB 48 - effected employers.pdf |
SSTA 4/2/2013 9:00:00 AM |
SB 48 |