Legislature(1995 - 1996)

1995-03-20 House Journal

Full Journal pdf

1995-03-20                     House Journal                      Page 0813
HB 270                                                                       
HOUSE BILL NO. 270 by the House Rules Committee by request of                  
the Governor, entitled:                                                        
"An Act relating to retirement incentive programs for the public              
employees' retirement system and the teachers' retirement system;              
relating to separation incentives for certain state employees; and             
providing for an effective date."                                              

1995-03-20                     House Journal                      Page 0814
HB 270                                                                       
was read the first time and referred to the State Affairs, Labor &             
Commerce and Finance Committees.                                               
The following fiscal notes apply:                                              
Fiscal notes (2), Dept. of Administration, 3/20/95                             
Indeterminate fiscal note, Office of the Governor/All Depts., 3/20/95          
The Governor's transmittal letter, dated March 20, 1995, appears               
"Dear Speaker Phillips:                                                        
Under the authority of art. III, sec. 18, of the Alaska Constitution, I am     
transmitting a bill that establishes a temporary retirement incentive          
program for employees of the state, its subdivisions, and its school           
districts, and a temporary separation incentive program for employees          
of the state.                                                                  
Closing the state's fiscal gap will require major changes in state             
operations over the next several years.  We need to make state                 
government more efficient and eliminate nonessential services.  Our            
challenge is to accomplish these goals without forcing large layoffs of        
employees, which could ripple through the private sector and endanger          
the health of Alaska's economy.  Retirement and separation incentive           
plans have been successfully used by the private sector and                    
government to scale back payroll while eliminating or minimizing the           
need for layoffs.                                                              
Properly structured, these plans can be a cost-effective and humane            
method of downsizing.  This legislation will make these restructuring          
tools available to the State of Alaska, and will extend the retirement         
incentive program as an option for municipalities and school districts,        
which are also facing the need to restructure their operations and work        
My Administration will use the retirement and separation incentives in         
a strategic approach, different from prior programs.  The last state           
retirement incentive program applied to all departments regardless of          
their budget or personnel situation, and had little effect on downsizing       
or restructuring government.                                                   

1995-03-20                     House Journal                      Page 0815
HB 270                                                                       
Under our approach, the programs will be tailored to the fiscal and            
staffing requirements of each department.  This approach is similar to         
private sector and federal programs.  The incentives will be used in           
combination with attrition to permanently reduce the number of                 
positions on the state payroll.  Departments will be able to participate       
in the incentive programs only if the programs contribute to their             
budget and staffing requirements and are cost effective.                       
This bill differs from the previous retirement incentive program (RIP)         
laws, enacted in 1986 and 1989, in that employers are specifically             
authorized to extend an incentive plan to employees in certain                 
components (e.g., certain state divisions slated for major reductions),        
in certain job classifications, or certain geographic locations.  In           
addition, with regard to the state, not all state employees will be            
eligible to apply during a window period.  Instead the commissioner            
of administration is authorized to establish window periods (of 30 to          
60 days) for some departments and not others.  This will allow                 
targeting of departments where major reductions are contemplated, and          
will alleviate the "brain drain" problem that arose when previous              
incentive programs were implemented.                                           
The bill also requires that cost savings be shown for each employee            
allowed to participate, and that cost savings be calculated over a three-      
year period rather than a five-year period.  This change from previous         
RIP laws will guarantee that the retirement incentive program produces         
substantial savings to the state and its local governments and school          
There are some similarities between this bill and the prior RIP laws.          
As with those laws, this bill provides that eligible state, municipal, and     
school district employees in the Public Employees' Retirement System           
(PERS) and the Teachers' Retirement System (TRS) may obtain three              
years of retirement credit, to be applied toward reaching normal or            
early retirement age, reducing the actuarial reduction that early retirees     
must take, or increasing years of credited service.  An employee must          
pay the appropriate retirement system the employee's normal share for          
these three years of credit, and the employer must pay the system the          
difference between what the employee pays and the actuarial cost of            
allowing the employee to participate.  Applications for participation in       
the program will be allowed only during relatively short "window               
periods," and the employee must retire within several months after the         

1995-03-20                     House Journal                      Page 0816
HB 270                                                                       
end of a window period.  The bill imposes substantial penalties on an          
employee retiring under the RIP who accepts employment with another            
PERS or TRS employer or  with a Judicial Retirement System                     
employer, or who is reemployed as a member of the optional                     
university retirement system.                                                  
The bill also proposes, for the state only, another temporary incentive        
program, the separation incentive program, that has not been used              
previously by the state, but that has been used successfully by local          
governments and school districts in Alaska, by the federal government,         
and by the private sector.  Under this program, which may be offered           
in conjunction with the RIP or separately from that program, long-term         
state employees separating from state service may be paid a one-time           
separation incentive payment.  That payment would be $25,000 or six            
months' salary, whichever is less, unless a state department or the            
office of management and budget sets a lower payment.  As with the             
RIP, separation incentive payments could be made only if they would            
result in cost savings to the state over a three-year period; the program      
would not be open to all state employees, but could be limited to              
certain departments or job classes; there would be brief "window               
periods" for application; and there would be substantial penalties for         
reemployment by the state within three years.                                  
As this bill works its way through the legislative process,                    
representatives of my Administration will be available to answer any           
questions that members of your body might have.                                
I urge your prompt consideration and passage of this bill.                     
							Tony Knowles