MINUTES SENATE FINANCE COMMITTEE April 12, 1995 3:30 p.m. TAPES SFC-95, #32, Side 1 (000-575) SFC-95, #32, Side 2 (560-end) SFC-95, #34, Side 1 (000-200) CALL TO ORDER Senator Rick Halford, Co-chair, convened the meeting at approximately 3:30 p.m. PRESENT Co-chairs Halford and Frank along with Senators Phillips and Sharp were present. Senators Donley, Rieger and Zharoff came shortly after the meeting began. Also Attending: Senator Salo; Robert Stalnaker, Director, Retirement & Benefits; Art Snowden, Administrative Director, Alaska Court System; Willie Anderson, Representing the National Education Association; Claudia Douglas, National Education Association; Sheila Peterson, Department of Education; Ms. P. Babcock, Committee Aid to Senate H&SS Committee; Debra Garrish, and Parent/Juneau School District. Teleconference: Joe Josephson, Attorney at Law, Josephson & Bair, P.C.; Carl Rose, Executive Director, Alaska School Board Association. SUMMARY INFORMATION SENATE BILL NO. 151 "An Act placing the administrative director of the court system in the public employees' retirement system." Discussion was had by Art Snowden and Robert Stalnaker. SB 151 REPORTED OUT of committee with individual recommen- dations and 2 zero fiscal notes from Department of Admin- istration and Alaska Courts System. Co-chairs Halford and Frank recommended "do pass"; Senators Rieger, Phillips, and Sharp signed "no recommendation"; and Senators Zharoff and Donley signed "do not pass". SENATE BILL NO. 132 "An Act relating to judicial review of decisions of school boards relating to nonretention or dismissal of teachers." Testimony was given by Robert Stalnaker, Senator Salo, Ms. Babcock, Joe Josephson, Carl Rose, Willie Anderson, Claudia Douglas, Sheila Peterson and Ms.Garrish. After considerable discussion, it was determined the bill would be brought back for further consideration. SENATE BILL NO. 151 "An Act placing the administrative director of the court system in the public employees' retirement system." Art Snowden, Administrative Director for the Court System stated that the Supreme Court has asked that he testify in opposition to the legislation. He offered background, noting that the office of Administrative Director is a constitutional office within this state. In 1980 the Administrative Director was put under the judicial retirement system. It is the only retirement system with a 10-year vest. This legislation updates changes that have been made since statehood. At statehood, the chief justice served forever. The voters of the state changed that constitution some years later to say, the chief justice serves for three years at which time it goes to another elected member of the court and they may not succeed themselves. At this time, the court felt it needed continuity specifically in administration because the chief justice was changing. The position of administrative director, is a profession. There are 50 in the country. It requires special training. The ten year vest was put on this bill for the purpose of making sure that there was a longevity in the office. Co-chair Halford inquired as to the retirement system. Mr. Snowden informed the committee that an employee working their way up to administrative director would fall under PERS and remain there in the first 9 years of being the administrative director. On the 10th year, the state employee is then able to buy into the judicial retirement system, receive their PERS contribution back (which is a 3% contribution, and pay 7 to 7-1/2% for the JRS retirement). It is not a free system. The court and legislature wanted continuity. He informed the committee of the administrative director's responsibilities. He emphasized to the committee that the American Bar Association standards on court organizations say in part, the level of compensation and retirement benefits of the director of the administrative office of courts should be no less than a judge of the intermediate court of appeals. The administrative director for almost 40% of our states are under a judicial retirement system. The Supreme Court wants this in place to attract highly professional people who have been trained to do this function. Senator Sharp asked what the contribution is of the administrative director for the first 9 years? Mr. Snowden responded that the administrative director contributes 7 to 7-1/5% into the judicial retirement system. If the administrator elects to leave prior to 10 years, they revert to PERS. Under PERS, the administrator would be refunded from the judicial system and then pay into PERS the appropriate amount that it would have cost over those years. Or, there is the option to take the money and elect not to take retirement. Under five years, there is no retirement benefits. After 10 years there is still an option. Robert Stalnaker, Director, Retirement & Benefits stated that it is a zero cost bill to the system because whatever system is chosen, there are contributions to pay. He explained the process. A court administrator would start out in the judicial system, make the appropriate contributions and if their longevity is less than 10 years, they could refund out of the judicial system and buy into PERS. This option is available after 10 years as well. Senator Zharoff MOVED to adopt SB 151 with individual recommendations and two zero fiscal notes. No objection being heard, SB 151 was REPORTED OUT of committee with two fiscal notes from the Dept of Administration and Courts. Trial Courts fiscal notes has a cost of $25.4 in 2001. Co- chairs Halford and Frank recommended "do pass", while Senators Rieger, Phillips, and Sharp signed "no recommendation", and Senators Zharoff and Donley recommended "do not pass". The meeting adjourned at approximately 3:45 p.m. The meeting reconvened at approximately 5:05 p.m. PRESENT Co-chair Halford, along with Senators Phillips, Donley, and Sharp were present. Senators Zharoff and Rieger joined the meeting shortly after it began. Co-chair Frank was unable to attend. SENATE BILL NO. 132 "An Act relating to judicial review of decisions of school boards relating to nonretention or dismissal of teachers." Portia Babcock, Committee Aid to the Senate H&SS Committee, testified that SB 132 gives local school districts and school boards the flexibility necessary to make decisions that are in the best interest of the student in the academic program of each district. It also provides equity and fairness among public employees, levels the playing field among the different providers of education, and eliminates costly procedures. In general terms, SB 132 (JUD) will change tenure from 2 to 5 years for new teachers; allow for the lay off of tenure teachers without the loss of tenure rights in the event of a decrease in school attendance, loss of revenue, or to better meet the academic needs of the district; and deletes trial de novo requirements when the district has met standards acceptable to the court. This bill saves time and money and provides educators with the same production that is provided to other public employees. It requiring bargaining sessions be open to the public, and provides for an early retirement incentive program for teachers and school district employees. She explained that there was an amendment added by Judiciary that deleted the statutory requirement for duty free lunch. A change was offered by Senator Green which deals with the effective date on those sections applicable to first hired teachers by the school district on or after the effective date of the act. There was considerable discussion on trial de novo. Senator Salo stated that there is an extensive discovery process at a formal hearing, where both the attorneys are representing the district and the employee. After that hearing, the school board usually upholds the administrative firing. The recourse for the teacher is a de novo trial in superior court. De novo (meaning new trial) does not mean new information, but it is more than a judicial review. If this bill passed, there would be a court review of the records of the school board hearing, but there would not be a chance to provide witnesses and information directly to the superior court judge. New information is not presented, nor can the case be changed from the way it was at the hearing level. It is the same information. New facts cannot be introduced. Ms. Babcock confirmed that this process is different than other professions in that it is an appeal and review, by the superior court, of the facts presented at the hearing. Other professions or other employees do not have this review of the earlier hearing. Senator Sharp stated that trial de novo is basically an appeal from the administrative board which can take several years before it comes before the court. By that time, the witnesses are grown up, left the area and unavailable for testimony. All information presented at trial de novo has to be represented. There cannot be an expansion of the information, but in order for all information that was previously reviewed to be considered, it must be reviewed again. Trial de novo is expensive, and there are very few that have taken place. Senator Donley expressed his concerns with the higher cost of administrative proceedings. Robert Stalnaker, Director, Retirement & Benefits testified that while the administration believes that this bill is a valuable and useful tool for school districts, the administration opposes including the retirement and incentive in this bill. The administration has introduced a bill that would provide that valuable tool to all public employers, and believes that is the proper place for the RIP so that it can be implemented for all public employers, not just school districts. The RIP as proposed in this bill is similar to the programs of the past. It provides window periods for eligible members to retire, if the employer designates them. This is totally at the employers discretion on whether they want to participate. It is not a mandatory program. If an employer, feels they can benefit by the RIP and experience cost savings, they would then participate with an agreement through the commissioner of administration. The costs of the program including the administrative costs will be identified and paid for immediately. The cost for providing the incentives must be paid within the three year period in which they are to show a savings. This is not a provision that would require additional funding. If in fact they are experiencing a savings, they should pay for the cost of the RIP from the savings they are experiencing. Co-chair Halford asked if there are differences in the drafted CS and the bill introduced by the governor as it would apply to teachers? Mr. Stalnaker responded that there are no differences. The program is the same, though this bill restricts it to school districts only. He noted that the bill requires that an employer save money, to that extent the retirement systems do not get involved. There was a legislative audit done for the last RIP, and they found substantial savings in auditing employers and the state. At the request of the legislature from the last RIP, legislative audit found savings experienced by school districts. The largest savings come from teachers at the upper end of the pay structure being replaced by new teachers. Salary differences can be as high as 30%. He testified that it is not the administrations desire to question the employer regarding the savings. Senator Sharp asked if the past service liability or contribution rates have increased respectively because of a increase in tax liability? Mr. Stalnaker responded that when the first RIP was introduced, there was a conservative assumption made in coming up with the costs. Since that time, the actuary has been asked to track each year in order to monitor the assumption, with the idea that if a RIP is done in the future and there are miscalculations, it can be readjusted. In each actuarial evaluation, the actuary is required to respond to the question: "Has there been any adverse impact on the rate, or the unfunded liability attributable to the RIP", and the answer is consistently "no". If there is error, it is on the side of collecting more money than necessary. He stated that in 1986 in the PERS, the law was changed to provide for Tier II, a lower level of benefits for employees first hired after that date. Part of that was to prefund cost of living increases, opposed to the then ad hoc. In so doing, there was a large unfunded liability. The lower benefits and cost savings by the lower benefits have been paying that off very well. The most recent evaluation has the PERS at 94% funded. The TRS is at 89%, but they just had the change made in 1990. End Tape #32, Side 1 Begin Tape #32, Side 2 Mr. Stalnaker in responding to Senator Rieger, asked to clear the record. He stated that the funding method was recommended by the actuaries. It is a common practice when a dramatic change is made to a defined benefit plan which happened in 1990. With the recognition that as part of that change there is recognition of unfunded liability immediately, even though there is a payback over a long period of time. The actuaries recommended the level funding method because it is an accepted method. The system was not underfunded. The level funding method was recommended by the actuaries and the board adopted that. At that time the rate was 19% and 14% opposed to the 12% they recommended. Since that time last year, the rate was a calculated rate of 12.1%. Even though there had been a projected in the actuarial evaluation that the 12% would not be reached for another 4 or 5 years, that point was reached very early. It was out in the open, the actuaries put a lot of work into it, and the board adopted what they recommended. The wisdom in passing the legislation to prefund the cost of living increases was a sound funding practice. The ad hoc PRPA was recognized after it was granted and would have nothing but the effect of ratcheting the cost continually higher and higher with no prefunding, now we have a prefunded PRPA which is much more sound. Both systems are back into the 90% funded ratios and have recovered from those actions and are among the best funded systems in the country. Mr. Stalnaker said that past testimony from the university has been that there are advantages for short term hires, as there were with the legislature. The provision of the University of Alaska entering into a personal services contract with individuals for the purpose of teaching or research, can happen as long as there are no benefits. This holds true for the legislature as well. There was considerable discussion to gain understanding of this issue. Joe Josephson, Attorney at Law, testified by teleconference from Anchorage on SB 132. He stated that the logic of the present de novo hearing provision is that it gives the judge tools needed to decide factual issues properly. The judge could actually hear witnesses testify, and from their demeanor and behavior, the judge can get insights as to the truth. Reviewing administrative records do not provide an adequate substitute from that process. He suggested that the Asevedo case was not a good example regarding high trial costs. It was costly to the Anchorage School District because the school district asserted that a trial de novo can be held without any evidence being taken before the judge, simply by the judge's reading independently the administrative record. That issue was taken to the supreme court, as expected, won on that point. It was costly to the district. It was not the trial de novo that was costly, it was the consequence of the school district's taking of their mistaken view of the statute which required correction in the supreme court. He also mentioned that the Asevedo case stands for another proposition. That a school district cannot present evidence to the court that it failed to bring before the school board. In fact, the Asevedo case stands for just the opposite rule. In that case, a young women who had read about the case in the daily news, came forward to say that years before when she had been in junior high, the teacher had touched her inappropriately. She was allowed to testify about that matter in court even though her claim was not even known of at that time of the administrative hearing. Finally, in other legislation dealing with teacher dismissal, there are provisions for arbitrating dismissal under Title 9, Chapter 43. The advantage of such an approach, assuming there is not going to be trial de novo in superior court would be, at least under arbitration, an assurance for the employee of one decision being made by a neutral person who is independent of the school board. Under Title 9, Chapter 43, it is noted, after an arbitrator reaches a decision, there is no right to have the arbitrator's award vacated in an ordinary case, unless there was proof of fraud or corruption. If the goal is to do away with a role for the court, the best way would be to have arbitration instead of the present administrative hearings. Arbitration has the virtue of being fair, since the parties pick the arbitrator; while the hearing officer today is appointed by the employer and paid by same. Senator Zharoff inquired as to Section 6 in the proposed legislation. His understanding is, it would take away the teacher's right to a trial de novo. Mr. Josephson confirmed that it is true. The idea would be an administrative hearing conducted by the board, and/or a hearing officer appointed by the board, at which time the teacher could go to the court and ask for judicial review. The problem is, judicial review decides whether there was a rational basis or substantial evidence to support the school board's decision. The judge would not be making an independent judgement, and the judge would not be exposed to any of the actual witnesses. From the teacher's prospective that means that the teacher never gets a level playing field on the issue of retaining his/her employment. He stated that if there is an idea that the school board makes a decision on the advice of a hearing officer, and then subject the teacher to a very limited review on the record before the hearing officer, there is not fairness. It would be better to leave the system as it is, it works very well. There are very few cases that do go before the superior court. If it is the legislature's wisdom to delete the trial de novo, then there has to be a substitute for the existing administrative process. Mr. Josephson recommends arbitration because at least there is a greater chance of fairness in that process without bias. He emphasized that the number of cases that go to administrative hearings is much larger than the smaller subset that goes to the court. In many cases, the outcome is favorable to the teacher, or the teacher decides not to pursue the matter in court. Senator Sharp asked how to speed up the process of review. Mr. Josephson suggested a few areas to investigate. The superior court now has "fast track" cases, which is a procedure which expedites cases. The legislature could direct the courts to conduct the de novo hearings within so many days. It is not usually a problem of the parties getting ready, because they have been through the procedure at the administrative stage. In the Asevedo Case, the delay was in the faulty reasoning of the school district adhering to the fact there was no need for a de novo hearing which required the parties go to the supreme court for an answer. The alternative of arbitration would be speedier than any other solution. The arbitrator makes an award one way or another and there is very little recourse except in extreme situations such as corruption. Mr. Josephson commented on the element of academic freedom. Teachers are very susceptible to criticism because they are on the front lines, dealing with our most precious resource (children), and dealing with ideas. This makes them susceptible to capriciousness that may not be true in other fields. As government employees, the employer must give due process in a way other employers do not have to do. Private employers may have contractual obligations, but they do not have the same constitutional obligations as the governmental employer. He noted the statute of trial de novo is not unique to Alaska. Carl Rose, Executive Director of the Association of Alaska School Board reviewed CSSB 132 (JUD), offered testimony. He noted the bill removes from the nonretention statutes an economical factor, and that is student decline. The board supports the removal from nonretention because there are only 4 reasons for nonretaining tenured teachers. The layoff statute would give more latitude in terms of enrollment decline designed to address a fiscal need. The board is facing another fiscal need, revenue decline. It is suggested that the bill remove from nonretention a financial issue, enrollment decline and create a layoff standard for economic reasons that would address enrollment decline as well as revenue decline. Those issues should be handled in a layoff because fairness can be provided: in protection of tenure rights; seniority rights; and a rehire clause. Another item to add to the layoff regulations would be, program needs of school districts. Currently, there are two areas of endorsement: elementary and secondary. The secondary endorsement has low standards for secondary schools, the board would like to see subject area endorsement. This would allow the board to go to the, layoff and rehire standards, and apply qualifications before resorting to seniority. Most large school districts with departments for english, math, etc., seniority is appropriate. Smaller schools the standard of secondary endorsement is too general. Three things could be done if there is a move to subject area endorsement: 1) improve the quality of instruction in the classroom; 2) improved workforce, because the issue of subject area endorsement will encourage people to use their credits and apply them toward additional endorsement; and 3) the issue of employment and security should be housed within the area of multi-endorsement areas. The employment status is secured. He spoke to the area of trial de novo. He stated it is a new trial. Under the law a tenured teacher can be nonretained. They have a right to the hearing. Under the hearing a record is established. Many times a teacher and school district will be represented by an attorney. There will be an unbiased third party as a hearing officer who will make the case. If the hearing is not favorable to the employee, under the current law, they have the right to request a new trial. The problem with the new trial is that everyone starts all over again and the record is recreated. A new trial does not examine the record that is established at the hearing level. It is a costly and duplicative process and the board asks that this process be extended to any school employee. He addressed mandatory open bargaining. Currently, there is an ability to do that with mutual agreement. The public wants this. In speaking to the early retirement incentives, he stated there is not an established position, though the membership does want it and feels it will be useful as long as there is the ability at the local level to make that determination. Overall, he stated this is an issue of fairness. Going back to the acquisition point, in Section 2, they support a 5 year tenure. He noted that the board also supports Section 7. There was testimony and discussion regarding the practice of Section 7. Senator Zharoff talked about the discussions between groups of people representing NEA, School Districts and others who play an instrumental role associated with the issues involved. Mr. Rose noted there has been compromise. He stated that they are looking for a way to manage the schools. There are a number of obligations and mandates that the school districts are obligated to meet. There is an inability to finance the state policy as directed. This is of a great concern to the membership. He related that the school districts should be held totally accountable for carrying out the mandates, and the municipalities and legislature should be accountable for funding the mandates. They want latitude in managing the schools. The layoff provision is not wanted. It is difficult to teach more children with less teachers. Mr. Rose stated that under Alaska 2000, the board created a proposal. The board went to NEA. The board asked for a longer extension for the probationary period to enable mentoring, professional development, and supervision to create a better pool of talent and a better experience for young teachers. The idea of incorporating subject area endorsement was also an attempt to fill positions by qualifications first. Alaska 2000 was not the appropriate forum. The needs are still there, but it was not possible to reach a compromise. Senator Salo questioned the compromise. She recognized the work done, but she stated that the work done fell apart because there was a requirement that supervision of new employees actually be done. The board backed off that compromise once there was a requirement regarding administrators. Mr. Rose responded that school districts have been under attack for years, in terms of having too much administration. Administration has been reduced to low levels. The issue of compliance and demand for administration with less dollars is a real problem. The issue is not one of providing more administration. The issue is one of preparing people for the classroom and creating the time to make the assessments. There was considerable discussion regarding the psychology of the 2 year versus 5 year tenure timeframe. Willie Anderson, National Education Association, stated the NEA's opposition to the bill. He stated that the extention of 2 to 5 years allows for a lag in administrative neglect. He went throughout the bill giving his testimony in opposition. Testimony is attached from Stephen Sorensen to Vernon Marshall, NEA Executive Vice President dated 4/11/95. Debra Garrish, a parent from the Juneau School District spoke to the Committee in favor of the 5 year tenure which allows flexibility. She expressed affirmation of early retirement. She stated that teachers need a lunch time. She noted the frustration of the parents and PTA members regarding the need for open public negotiations. She noted that parents had ideas and solutions, but that there was no place to go and solve the problems. Claudia Douglas, NEA-AK, testified that the bill is repulsive to teachers. NEA has a commitment to help, and parents have solutions. The layoff provision is a big area that needs representation. Sheila Peterson, Special Assistant to the Commissioner of Education, stated that the new State Board of Education did discuss the issues and they could not agree on the legislation. The message they wish to convey is that there is a need for full funding. ADJOURNMENT The meeting was adjourned at approximately 7:00 p.m.