Legislature(1999 - 2000)
03/15/1999 03:15 PM House L&C
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 17 - PERS CREDIT FOR NONCERTIFICATED EMPLOYEES
Number 0001
CHAIRMAN ROKEBERG announced the committee's next order of business
is HB 17, "An Act relating to the calculation of employee
contributions and credited service in the public employees'
retirement system for noncertificated employees of school
districts, regional educational attendance areas, the Alaska
Vocational Technical Center, and the state boarding schools; and
providing for an effective date." The chairman confirmed from
Representative Brice that the legislation had been heard the
previous legislative session as "HB 223" [HB 323]. He noted the
bill had been completely rewritten in the House Finance Standing
Committee.
Number 0087
REPRESENTATIVE BRICE indicated the changes had been made to address
AVTEC [Alaska Vocational Technical Center] but the bill had not
been completely rewritten. Representative Brice stated HB 17
addresses an inequity within the Alaska's school districts between
certificated and noncertificated employees. Certificated
employees, teachers and principals, receive a year's credit for a
nine-month contract year. This additional cost is split between
the school district and the employee. Noncertificated employees
such as janitors and secretaries receive a day-for-day credit in
their retirement system. This means they have to work 40 years to
receive a 30-year retirement if they are on a nine-month contract.
House Bill 17 would allow the employees the option of buying that
extra three months of credit, covering the entire cost themselves.
It is applicable to state boarding schools, school districts, REAAs
[Rural Education Attendance Areas] and "Alaska Voc-Tech Centers."
It is voluntary, the employee chooses to participate. In response
to questions from Representatives Halcro and Murkowski based on
NEA-Alaska's position paper in the bill packet, Representative
Brice noted that position paper also refers to other legislation.
[The sponsor statement for HB 17 reads:
Alaska has many noncertificated employees in its schools
who work nine, ten or eleven months out of the year along
with their certificated counterparts. The certificated
employees receive full year credit for the part of the
year they work while the noncertificated employee only
get credit for the actual time worked. Because of this,
a nine month employee has to work 40 years to receive a
30-year retirement.
This bill addresses the inequity in state law and PERS
system [Public Employees' Retirement System] by giving
noncertificated school employees who work a comparable
amount of days the option to use the same retirement
formula that certificated employees use. This bill will
allow those noncertificated school district employees to
receive the same amount of credit toward retirement as
those certificated employees who work the same amount of
time and receive a full year of credit toward retirement.
The cost of changing the PERS system, under this bill,
will be supported by the employees, rather than
increasing the burden to school districts. Employees
currently active in the system will have 180 days to opt
into the new program. New employees will have the option
to participate within 90 days of inception. That is
within beginning employment within the system.]
Number 0381
REPRESENTATIVE HARRIS referred to the comment in the fiscal note,
"The $72.4 [$72,400] is needed to hire contractors to update the
division's computer system to accommodate the proposed changes."
Representative Harris questioned what the obligation of the
education units described here would be to these employees for
their retirement. He asked if there would be added financial
responsibility for those institutions.
REPRESENTATIVE BRICE responded there is no added financial
responsibility in terms of the retirement system itself. He
indicated there might be a cost of a couple hundred to a thousand
dollars to provide the paperwork for an employee to elect in. He
stated there is no financial obligation to the school district; the
school employee shoulders the entire burden of the change to ensure
actuarial soundness of the system. In response to the chairman's
question about the whether the fiscal note was a disappointment
and/or surprise, Representative Brice indicated there is some
question with the Department of Administration about the costs of
developing the tracking and estimating computer programming. On
the other hand, he noted those are non-general fund dollars; the
employees would pay for the cost of those changes. Representative
Brice agreed with the chairman that that could be discussed in the
House Finance Standing Committee.
Number 0548
RICK HELMS, Southeast Political Alternate, Board of Directors,
Alaska Public Employees Association/Alaska Federation of Teachers
(APEA/AFT), came forward to testify in support of HB 17. He asked
for the committee's support, noting this legislation would benefit
the approximately 600 APEA/AFT members who work nine months out of
the year. These members are professionals just like the teachers
and administrators; they should not be penalized for choosing this
career. Referring to Representative Brice's comments, Mr. Helms
said it takes 37.5 years of work for 30 years of service. He
commented a companion Senate bill, SB 9, has already passed out of
the Senate Labor and Commerce Standing Committee, and he encouraged
this committee to do the same. Mr. Helms noted, as Representative
Brice had also mentioned, this legislation had passed the previous
session as HB 323, which died on the Senate floor due to late
action. Mr. Helms expressed the hope that with sooner action, HB
17 or SB 9 might be passed into law this year.
Number 0667
JOHN CYR, President, NEA-Alaska, came forward to testify in support
of HB 17. He noted NEA-Alaska, the National Education Association
of Alaska, represents about 11,000 employees. Three thousand of
these are classified employees: janitors, classroom aides, food
service workers. House Bill 17 would directly affect these
employees' lives. Mr. Cyr noted the committee has NEA-Alaska's
position statement. He said this has been a priority of NEA and
its members for a number of years. They believe they have finally
worked out a way to do this where the employees would bear the
total costs and he reiterated NEA-Alaska's support for the
legislation.
REPRESENTATIVE MURKOWSKI asked who would actually be covered under
this plan.
Number 0722
MR. CYR replied that it covers anyone who works in a school who is
not certified. Teachers, principles and administrators are
certified employees and are in TRS [Teachers' Retirement System].
CHAIRMAN ROKEBERG confirmed with Mr. Cyr that the classified
employees would be under the state program, PERS. The chairman
asked if they receive any SBS [Supplemental Benefits System] and
whether it varies by district.
MR. CYR replied some districts get SBS and some do not. For
example, the classified employees in "Mat-Su" [Matanuska-Susitna
Borough] are eligible. He believes that was a one-time opt-in
provision districts had.
CHAIRMAN ROKEBERG questioned if the employees have social security,
or if they are not allowed.
MR. CYR replied he thinks they do not have social security,
indicating he is not really familiar with PERS. Referring to the
previous questions about the NEA-Alaska position statement, Mr. Cyr
indicated he believes the inability of classified employees to
collect unemployment during layoff does have a bearing on HB 17
because custodians and secretarial staff used to be year-round
employees in Alaska. However now because of budget cuts, et
cetera, they are nine-month, and some even less. The employees are
laid off, cannot collect unemployment, and do not receive
retirement for that period. Mr. Cyr stated that to NEA-Alaska this
really is equity: if the classified employees are willing to pay
their own way, the state should allow them to do so.
CHAIRMAN ROKEBERG invited Guy Bell and Bill Church forward [Bill
Church, Retirement Supervisor, Division of Retirement and Benefits,
Department of Administration].
Number 0885
GUY BELL, Director, Division of Retirement and Benefits, Department
of Administration, came forward to testify on HB 17. Mr. Bell said
he has little to add to Representative Brice's testimony. He noted
a couple of small points: this will be prospective only; it would
apply from the date of passage forward. Those people in the system
today would be able to, within six months of the bill's effective
date, elect to pay a higher charge for the future service they
would accrue. New employees would have 90 days to make that
determination. In working on the bill last year with
Representative Brice, Mr. Bell indicated the concern was expressed
to the division that this be a fixed charge to the employee, so the
employee would know the charge from year to year. This concern was
brought to the division's actuaries in the development of the rate
calculation. The revised number given last week by the actuaries
is approximately 1.25 percent. Mr. Bell explained that if a person
wants this service they would be paying approximately 8 percent of
their salary as opposed to 6.75 percent, the current PERS
contribution. He confirmed to the chairman that it is an
irrevocable election; once the decision is made it cannot be
changed. In response to the chairman's further question about what
kinds of problems a revocable decision would add to the
administration, Mr. Bell said he thinks technically it would become
more difficult to administer because each year the employee would
have to be asked his or choice for that year; he thinks that why it
was drafted as irrevocable.
Number 1011
CHAIRMAN ROKEBERG said this is done all the time with benefits and
health insurance, noting elections and open periods.
MR. BELL stated, "Our thought was to try to keep this as benign as
possible and the way we thought about administering it is develop
a form in our division [and] send it out to the school districts.
When the people come in on the job at the beginning of the school
year, they would provide that form with some basic education, sign
the form and that's the time they make their decision. Certainly
it could be done otherwise, it would -- the bill would need to be
changed if that were the decision."
Number 1044
REPRESENTATIVE BRICE indicated that there have been other systems
where a move was made from a 30-year retirement plan to a 20-year
plan, specifically correctional officers. This vote [election] has
been patterned along that same irrevocable system to insure that
the administrative costs would stay very low. The intention is to
minimize the impact as much as possible.
CHAIRMAN ROKEBERG asked Mr. Bell if there are problems with Section
1 regarding the contribution surcharge. He mentioned the
stipulated amount.
MR. BELL indicated that, since it will be a fixed cost, the
alternative could be the deletion of the second sentence in Section
1 which discusses the way the calculation would be made and the
insertion "of 1.25 percent" on page 1, line 11, after "surcharge".
It does the same thing, it just says it more directly. In response
to the chairman's question about where the 1.25 percent comes from,
Mr. Bell noted it comes from the language in the second sentence.
It is the actuarial cost of that additional benefit the employees
would receive if they made the selection.
CHAIRMAN ROKEBERG asked if it could vary by contract.
MR. BELL explained that the actuary did it on a universal charge
basis, which means it may vary slightly from individual to
individual. However, in the aggregate, that is the cost arrived at
if a fixed rate which would apply to the entire group is being
sought. Doing it on an individual-by-individual basis would
produce something similar but it would also be much more costly
because characteristics and status - age, salary, et cetera - would
have to be examined for each individual.
Number 1190
REPRESENTATIVE BRICE indicated there has been some discussion on
whether a specific percentage should be included, or not included
"but ... have one number generated that every employee would have
to kick in if they wanted to opt to discuss." It comes down to the
possibility of a future change that might affect the actuarial
soundness of the system, whether an increase or decrease in
contribution. Representative Brice noted he wants to ensure that
a number is not set in statute and then left to the political whims
of the legislature: if that number were to increase and the
administration has no authority to increase that number. He
commented he is willing enter into this discussion, and added that
the fiscal note had not surprised him, it is the same or very close
to the previous session's.
CHAIRMAN ROKEBERG commented on the apparent size of the fiscal note
this year as compared to the previous year.
MR. BELL said the fiscal note is smaller this year.
Number 1289
REPRESENTATIVE MURKOWSKI asked if HB 17 is basically the same bill
that went through last year.
REPRESENTATIVE BRICE answered it is very substantially the same.
He thinks there was one change on page 1, line 10, and that the
first word, "and", should probably be "or" for complete clarity.
Representative Brice indicated "or" was used in the previous
legislation but legislative legal counsel feels it can be either
one. [HB 17, page 1, lines 9 and 10, "of a state boarding school,
of a school district or regional educational attendance area, and
of the Alaska Vocational Technical Center determined by reference
to".]
CHAIRMAN ROKEBERG stated that AVTEC was added.
REPRESENTATIVE BRICE explained that the addition of AVTEC was the
primary change from last year's House Labor and Commerce Standing
Committee version. He indicated the changes were made last year in
the House Finance Standing Committee.
CHAIRMAN ROKEBERG commented lightly he probably shouldn't take it
personally that the entire bill had been changed after leaving
House Labor and Commerce the previous session.
REPRESENTATIVE BRICE replied that the election of participation had
come from discussions with the Administration, and the addition of
AVTEC from other discussions. He indicated it was the continuation
of the committee process.
Number 1390
BARBARA HUFF TUCKNESS, Director, Governmental and Legislative
Affairs, General Teamsters Local 959 State of Alaska, came forward
to testify in support of HB 17. She referred to a letter of
support in the bill packet in lieu of giving more detailed
testimony. Ms. Huff Tuckness noted HB 17 would have an impact on
several hundred members within the Anchorage School District
including food service employees, bus drivers, and a few
maintenance workers. [The March 8, 1999, letter mentioned is to
the committee from Gerald L. Hood, Secretary-Treasurer, Teamsters
Local 959, and reads:
Teamsters Local 959 represents non-certified employees
most predominantly in the Anchorage School District.
Several hundred of those members actually work less than
twelve months of the year due to the nature of their
jobs. As we understand HB 17, it would allow those
members, by individual choice, the opportunity to receive
the same credited year as their certified counterparts
for purposes of retirement. Any increased cost under
this bill would be born by the employee, not the employer
(Anchorage School District).
We urge your support and passage of this bill to allow,
by employee choice, the opportunity to increase their
credited service time as is currently the option for the
certified employees.]
Number 1426
CHAIRMAN ROKEBERG indicated to Representative Brice that there had
been conversations about some special education personnel.
REPRESENTATIVE BRICE replied there had been some talk by SESA, the
Special Education Service Agency [stated as "Special Education
Support Agency"], at the end of the previous session. He noted
SESA is a function of state government [Department of Education],
not necessarily of a school district. Representative Brice said he
had been contacted after the end of the previous session but had
not heard from the organization in three months. He indicated he
would be happy to follow this up if the chairman wished.
Number 1493
CHAIRMAN ROKEBERG responded it was just something that had been
brought to his attention and that he did not have an opinion on.
Confirming there were no further witnesses, Chairman Rokeberg
announced the public testimony on HB 17 was closed. He commented
on the absence of a supporting letter from the Anchorage School
District (ASD) in the bill packet.
REPRESENTATIVE BRICE replied that Larry Wiget [Director, Government
Relations, Anchorage School District] had said there is no problem
with the bill during an informal discussion. Representative Brice
noted this discussion had been after the strike. However, he
indicated he does not know if the Anchorage School District has
taken a formal position on HB 17.
CHAIRMAN ROKEBERG indicated ASD was not in opposition to the
legislation.
Number 1606
REPRESENTATIVE HARRIS made a motion to move HB 17 out of committee
with individual recommendation and the attached fiscal note. There
being no objection, HB 17 moved out of the House Labor and Commerce
Standing Committee.
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