Legislature(2017 - 2018)HOUSE FINANCE 519
04/13/2017 01:30 PM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| HB127 | |
| HB47 | |
| HB151 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 127 | TELECONFERENCED | |
| += | HB 47 | TELECONFERENCED | |
| + | HB 155 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | HB 151 | TELECONFERENCED | |
HOUSE BILL NO. 47
"An Act requiring certain municipalities with a
population that decreased by more than 25 percent
between 2000 and 2010 that participate 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;
authorizing the administrator of the defined benefit
retirement plan of the Public Employees' Retirement
System of Alaska to reduce the rate of interest
payable by certain municipalities that are delinquent
in transmitting employee and employer contributions to
the retirement plan; and providing for an effective
date."
3:23:24 PM
PAUL LABOLLE, STAFF, REPRESENTATIVE NEAL FOSTER, discussed
the bill:
SB 125 changed the PERS system from a multiple employe
r plan to a cost share plan. It transferred the indivi
dual liability of the 160 PERS employers and consolida
ted it so that all the employers share in that liabili
ty.
SB 125 also created what is commonly referred to as th
e 2008 salary floor. This requires employer's
contribute 22% of annual salaries or 22% of FY08
salaries, whichever is
greater. The floor was instituted
to ensure that the system could not be "gamed" by disc
ouraging employers from replacing PERS
employees with contract hires to reduce their base con
tribution to the system.
Some municipalities have found themselves under the 20
08 floor through no fault of their own. A large
change in population results in a reduced tax base, wh
ich affects the services a city can provide. As that
financial reality drives a city to downsize, current l
aw exacerbates this problem by keeping their PERS cont
ribution at the 2008 level. This bill targets the comm
unities whose population has dropped by more
than 25% since the previous census.
HB 47 will address this issue in two ways:
1.Establish a new floor of FY 2012 for communities who
se population decreased by more than 25%
between 2000 and 2010.
2.Allows the PERS administrator to negotiate penalty i
nterest rates on delinquent payments.
HB 47 does not intend to repeat the "2008 floor" debat
e but to correct one of the unintended
consequences caused by the arbitrary line that debate
created.
3:25:51 PM
Representative Ortiz understood the intent of the bill. He
wondered how the department assessed things at present. He
wondered if there was a process in place to determine
whether municipalities were doing their part. He followed
up on his question.
Mr. LaBolle replied that the original bill a couple of
years ago - the bill before the committee the debt was not
absolved.
3:28:31 PM
AT EASE
3:28:36 PM
RECONVENED
Representative Pruitt MOVED to ADOPT Amendment 1, 30-
LS028\A.1 (Wayne, 4/8/17) (copy on file). [Note: due to
length of amendment it is not included here. See copy on
file].
Co-Chair Foster OBJECTED.
Representative Pruitt explained the amendment.
3:32:04 PM
Co-Chair Foster was open to hearing from Representative
Johnston.
REPRESENTATIVE JENNIFER JOHNSTON, stated the bill was a
great example about how the state may not be able to manage
the unfunded retirement liability. She stated that she had
previously been in the Alaska Municipal League and had
considered the issue of the unfunded liability. She
believed the larger entities needed to manage their
employees - not to penalize individuals for the way they
did business. She thought the committee should reassess the
fiscal note.
3:37:04 PM
Representative Johnston asked if the committee had
addressed the 2008 floor. It gave other abilities to manage
the unfunded liability. She thought it was time to address
the issue. She was looking to fiscally manage an elephant
in the room.
3:39:12 PM
Representative Pruitt thought the last component was very
important. He stressed that if the state was not enforcing
the issue it could come up in the future. He believed it
needed to be dealt with
Co-Chair Seaton asked the Department of Administration
(DOA) to address the committee.
Representative Johnston had been hesitant to say the last
statement, because of possible liability issues.
KEVIN WORLEY, CHIEF FINANCIAL OFFICER, DIVISION OF
RETIREMENT AND BENEFITS, DEPARTMENT OF ADMINISTRATION,
stated that the division looked at annual salaries, and had
recently completed the FY 16 evaluation in the previous
June. Those salaries were compared to the floor of 2008. He
stressed that statutes stated that there should be a bill
for the difference between the actual paid salaries and the
2008 floor.
3:42:34 PM
KATHY LEA, CHIEF PENSION OFFICER, DIVISION OF RETIREMENT
AND BENEFITS, DEPARTMENT OF ADMINISTRATION, shared that her
division continued to enforce termination and there were
three aspects to termination.
3:47:35 PM
Representative Thompson wondered whether the cost of a
termination study was approximately $15,000.
Ms. Lea replied that it depended on the number of
terminated employees.
Representative Wilson wondered whether a termination study
would be required after a division ceased to exist.
Ms. Lea answered in the negative, if the people were
assigned to another PERS position.
Representative Wilson wondered whether a termination study
was required when 15 employees were lost.
Ms. Lea answered in the affirmative.
Representative Wilson queried the cost of the study.
Ms. Lea answered it was difficult to answer because it was
based on individual employees.
Representative Wilson stressed that the state required the
study, to ensure that the employer was paying enough into
the retirement.
Ms. Lea stated that the study was done to examine the
individual employees retirement.
3:51:24 PM
Representative Wilson thought it was almost as big of a
deal than the original bill to the smaller communities. She
spoke to individuals being penalized by the state for
something that was not their fault.
Ms. Lea did not characterize it as penalizing.
Representative Wilson asked if many of the employers had
known they would be in the current position.
Ms. Lea answered that it had happened about 10 years
earlier. The basic consideration was how much the GF could
absorb. The amount needed to pay the unfunded liability
would not change, it was about who would pay.
Representative Ortiz asked if the net effect of changes
made in 2008 that it was much harder for smaller
communities to comply.
Mr. Worley asked Representative Ortiz to repeat the
question.
Representative Ortiz complied.
3:54:50 PM
Mr. Worley asked for clarification.
Representative Ortiz reiterated his question.
Ms. Lea answered that the number of employees with each
employer varied. There could be a smaller employer with
only one or two employees covered or a larger employer with
hundreds of employees covered. She did not believe it was
possible to make a sweeping statement that smaller
employers were more impacted.
Representative Ortiz spoke about triggering a study. He
surmised that if a person was eliminated from a category it
could trigger a study.
Ms. Lea replied in the affirmative.
Representative Ortiz stated that moving employees into a
different classification would not trigger a study.
Ms. Lea agreed.
3:58:35 PM
Co-Chair Foster referred to Representative Johnston's
statement that the bill was similar to a bill introduced in
2014. He believed the fiscal note had been indeterminate at
the time.
Representative Johnston spoke to the issue. She stressed
that termination studies were part of the process. She
remarked that the University of Alaska was below the 2008,
and they were paying for that cost.
4:03:10 PM
Co-Chair Seaton clarified the committee was currently
addressing Amendment 1.
Representative Guttenberg noted that it was possible to
determine liability focusing on certain groups. He wondered
how much of the amendment would challenge the negotiated
agreement rate of 22 percent.
Ms. Lea clarified her understanding of the question.
Representative Guttenberg affirmed.
Representative Guttenberg asked how the balance of burden
between larger and smaller communities.
Ms. Lea answered that it was specific to the employer. It
was difficult to make a generalization. She stressed that
it was very particular to the makeup of the employer and
how their covering.
Co-Chair Seaton asked for clarification. He referred to a
prior fiscal note.
Ms. Lea answered that the fiscal note was not current.
Co-Chair Foster stated that each time the bill did not get
passed it meant fiscal liabilities were adding up. He did
not support the amendment.
4:08:47 PM
Representative Pruitt provided wrap up on the amendment. He
stated the underlying bill may seem like a small bill, but
it was a big deal for communities. Likewise, so was the
amendment. He stated the issue could be addressed at
present or later on. He believed it was worth analyzing
whether they should move forward on the issue.
Co-Chair Foster MAINTAINED his OBJECTION.
A roll call vote was taken on the motion.
IN FAVOR: Ortiz, Pruitt, Thompson, Tilton, Wilson
OPPOSED: Kawasaki, Gara, Grenn, Guttenberg, Seaton, Foster
The MOTION FAILED (5/6).
4:12:07 PM
Representative Wilson was sorry the amendment failed. She
thought the bill picked winners and losers.
Co-Chair Seaton felt that increasing the budget was not
prudent.
Representative Wilson interjected it was not $75 million.
Co-Chair Seaton noted the previous fiscal note on a bill
had been that amount.
Representative Wilson stated much had changed.
Representative Pruitt did support moving the bill forward
He suspected that some of the communities would be coming
back with some of the challenges addressed in Amendment 1.
4:15:26 PM
Vice-Chair Gara explained the two fiscal notes.
Representative Wilson stated were not four communities
written into the bill. She asked if there was a way to
cover other communities under the bill in the future.
Mr. LaBolle asked for a repeat of the question.
Representative Wilson complied.
Mr. LaBolle replied in the negative.
Vice-Chair Gara MOVED to REPORT HB 47 out of committee with
individual recommendations and the accompanying fiscal
notes.
Representative Wilson OBJECTED.
A roll call vote was taken on the motion.
IN FAVOR: Thompson, Tilton, Gara, Grenn, Guttenberg, Ortiz,
Pruitt, Foster, Seaton
OPPOSED: Wilson
The MOTION PASSED (10/1).
There being NO further OBJECTION, HB 47 was REPORTED out of
committee with a "do pass" recommendation and with one new
fiscal impact note from the Department of Administration
and one zero note from the Department of Administration.