Legislature(2015 - 2016)HOUSE FINANCE 519
04/06/2016 08:30 AM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| SB124 | |
| HB47 | |
| HB188 | |
| HCR4 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 47 | TELECONFERENCED | |
| += | SB 124 | TELECONFERENCED | |
| + | HB 241 | TELECONFERENCED | |
| + | HCR 4 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| + | HB 188 | TELECONFERENCED | |
HOUSE BILL NO. 47
"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
retirement 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 retirement 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."
9:16:41 AM
Co-Chair Neuman MOVED to ADOPT the proposed committee
substitute for HB 47 (FIN), Work Draft (29-LS0285\I). There
being NO OBJECTION, it was so ordered.
Co-Chair Thompson queried the changes in the committee
substitute.
BRODIE ANDERSON, STAFF, REPRESENTATIVE STEVE THOMPSON,
relayed the changes to the bill. He stated that there was a
title change to conform to the changes made within the
bill. He shared that the bill added a new Section 1, and
the sponsor will explain the new section. He relayed that
the CS deleted the old Section 3, which had a retroactive
clause. He stated that the CS added a new Section 4, and
the sponsor was prepared to explain that new section.
REPRESENTATIVE NEIL FOSTER, SPONSOR, indicated his staff
would be presenting the bill.
PAUL LABOLLE, STAFF, REPRESENTATIVE NEIL FOSTER, reviewed
the bill. He looked at Section 1, page 1, line 12, which
was the new subsection under 39.35.610 allowing the
administrator to determine the rate of assessed interest.
He stated that Section 2 was the old Section 1. He relayed
that Section 3 added a reference to the new subsection that
was created in Section 4. He shared that Section 4 allowed
for the administrator of Public Employees' Retirement
System (PERS) to assess an interest rate at a lower value
than otherwise dictated in the section, if the employer was
a municipality who had lost more than 25 percent of their
population between the 2000 and 2010 census.
Representative Munoz queried the issue of a community
regaining its population. Mr. Labolle responded that it
would have to be done through additional legislation.
9:20:36 AM
Co-Chair Neuman asked about the migration from rural
communities. Representative Foster responded that, overall,
there were some small migration numbers from rural to urban
areas. He remarked that Galena had a major migration out of
the area, because of the relocation of the military base.
Mr. Labolle agreed that the military base was relocated
from Galena. He stressed that the legislation was specified
to those communities who lost population from the 2000 to
2010 census. Therefore, future population loss would not be
affected by the confines of the legislation. He pointed out
that the census affected Galena, Pelican, Atka, St. George,
and Anderson. He explained that St. George and Anderson did
not have any PERS employees, so they were not affected by
the legislation. He deferred to the department to explain
why Pelican and Atka were not affected by the legislation.
Representative Guttenberg noted that the bill's language
was permissive, and not required. He wondered if that was
the intent of the legislation. Mr. Labolle replied in the
affirmative. He furthered that the intent of the bill was
to allow for negotiation. The original version of the bill
had a retroactive effective date, and changed the
delinquency rate in statute for affected communities. It
was determined that there should be negotiation between the
administrator of the program and the affected employer.
Representative Guttenberg wondered how the 2020 census
would affect Anderson and the legislation. Mr. Labolle
replied that the legislation was a "floor not a ceiling."
He explained that the current payments were 22 percent of
the current salaries or 22 percent of the 2008 floor,
whichever is greater. He explained that a growing community
with growing employees, the community would pay the greater
of the floor. Furthermore, Anderson would not need to pay
the 22 percent of current employee salaries.
9:25:28 AM
Representative Gara looked at page 2 of the bill, and noted
the two possible calculations for how much the municipality
should pay for the PERS employees: the greater of 22
percent of the number of current employees; or the number
of employees in 2008. He remarked that he did not
understand why the 2008 year was specified. He surmised
that if the number of current employees was larger than
what was in the new section, then the payment was 22
percent of the number of current employees. Mr. Labolle
responded in the affirmative. He explained that there was a
bill in 2008, which took the failing PERS systems, and
pooled them into one state system. He remarked that there
was a concern that employers could lay off employees, hire
contract employees, and therefore only pay the 22 percent
of the current employees. Thereby leaving the remaining
outstanding liability on the state. The floor was created
to prevent that possibility.
Representative Kawasaki asked for Mr. Labolle to explain
the retroactivity. Mr. Labolle thought Representative
Kawasaki was looking at a previous version of the bill.
Representative Kawasaki asked if there was not
retroactivity. Mr. Labolle confirmed that there was no
retroactivity in the bill.
Co-Chair Thompson OPENED public testimony.
9:28:35 AM
SHANDA HUNTINGTON, CITY OF GALENA, GALENA (via
teleconference), spoke in favor of the policy of imposing a
floor. She remarked that HB 47 did not change PERS policy.
She provided some history. Galena declined its activity in
recent years, and city services plummeted. She pointed out
that there were 17 employees in 2012. The difference
between the two floors was significant. Galena's
contribution was significantly high. She provided some
statistical information regarding PERS contributions paid
by Galena. She added that HB 47 was not a loophole.
9:36:42 AM
KATHIE WASSERMAN, ALASKA MUNICIPAL LEAGUE, ANCHORAGE,
indicated that the League was in favor of HB 47. She
relayed the difficulty of conveying to the legislature the
challenges. She spoke to her previous experience as the
mayor of Pelican.
Co-Chair Thompson CLOSED public testimony.
Representative Gara asked about the penalties. Mr. Labolle
replied that previous versions of the bill had penalties
and retroactivity.
Representative Munoz asked if the past liabilities had been
paid. Mr. Labolle believed the amount was the amount
unpaid, but deferred to the administration for the actual
amount.
Representative Munoz asked for an explanation of
termination study. Mr. Labolle replied that the bill did
not address termination studies.
Representative Munoz noted that a testifier had addressed a
termination study.
Co-Chair Thompson agreed to provide that information, but
remarked that that it did not relate to the bill.
Representative Munoz disagreed, because a community must
initiate a termination study when an employee was
terminated because the employer could not afford the
employee. It would affect their finances, because they
needed to pay toward the costs. She wanted a fuller
understanding of the requirement of a termination study.
9:42:04 AM
KATHY LEA, CHIEF PENSION OFFICER, DIVISION OF RETIREMENT
AND BENEFITS, DEPARTMENT OF ADMINISTRATION, shared that
there were two types of termination costs in PERS. One was
with PERS since the inception in 1961, which was a common
feature in multi-employer plans. She stated that there were
some plans that required the study. She remarked that, if
an employer eliminates coverage for a group,
classification, or department, the employer must pay the
cost that arises from the action. The costs were based on a
change in the behavior of people who were close to
retirement. She stressed that the majority of people who
reach normal retirement age, did not retire at that point.
She pointed out that only 16 percent of people retire at
normal retirement age. She stated that most retire
approximately four years after the normal retirement date,
which was how the plan was funded. She remarked that
terminating a group changed that behavior. Therefore the
person who was not currently covered by PERS would draw the
retirement at the first eligible date. At that point, the
fund was not fully funded. The employer must then pay the
difference in the funding from the point at normal
retirement to the point the plan anticipated it would be
funded at 100. Terminating employees who were not vested
then become 100 percent vested in the PERS benefits. She
explained that in 2005, with the creation of the defined
contribution plans, termination costs were covered and
again in 2008 in SB 125. She explained that as part of a
change to a cost share system, there was a fear that
employers would remove groups, classifications, or
departments in order to lower their contribution amount and
leave the accrued liability for the other PERS employers to
pay. She stated that SB 125 created a second type of
termination cost, which required that the employer pay a
continuing contribution for the employees that were removed
from coverage based on the unfunded liability percentage.
The employee would continue to pay every payroll until the
unfunded liability was exhausted. She stated that a
termination study would not trigger, unless there was a
removal of a department, classification, or group when an
employee was looking to reduce the number of employees.
9:46:50 AM
Representative Munoz wondered if the smaller communities
that were discussed paid the termination costs. Ms. Lea
replied that Galena did not have a termination study.
Representative Wilson surmised that employees were still
paying for employees that were no longer employed. Ms. Lea
replied that, in Galena's case, they were paying the salary
score from 2008.
Representative Wilson felt that additional boroughs may
face a similar issue as Galena. Ms. Lea stated that any
time an employer removed an entire group, classification,
or department there would be a termination study.
Representative Wilson surmised that an employer would still
pay into PERS even without a termination study. She
stressed that the municipalities would still have a cost to
the employee, even though the employee would not be
employed. Ms. Lea agreed that the municipality would still
be subject to the 2008 salary floor.
Vice-Chair Saddler reviewed the fiscal notes.
Co-Chair Neuman MOVED to REPORT CSHB 47 (FIN) out of
committee with individual recommendations and the
accompanying fiscal note.
Co-Chair Neuman rescinded his action.
Co-Chair Thompson commented that the correct fiscal note
had not been read.
Vice-Chair Saddler reviewed the correct fiscal note.
Co-Chair Neuman MOVED to REPORT CSHB 47 (FIN) out of
committee with individual recommendations and the
accompanying fiscal note. There being NO OBJECTION, it was
so ordered.
CSHB 47 (FIN) was REPORTED out of committee with a "do
pass" recommendation and with one new fiscal impact note by
the Department of Administration.
9:52:20 AM
AT EASE
9:56:04 AM
RECONVENED