Legislature(2025 - 2026)ADAMS 519
04/30/2025 01:30 PM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| HB78 | |
| HB91 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 57 | TELECONFERENCED | |
| + | HB 91 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | HB 78 | TELECONFERENCED | |
HOUSE BILL NO. 78
"An Act relating to the Public Employees' Retirement
System of Alaska and the teachers' retirement system;
providing certain employees an opportunity to choose
between the defined benefit and defined contribution
plans of the Public Employees' Retirement System of
Alaska and the teachers' retirement system; and
providing for an effective date."
1:38:42 PM
Co-Chair Foster noted that a new Committee Substitute (CS)
work draft was before the committee.
Co-Chair Schrage MOVED to ADOPT the proposed committee
substitute for HB 78, Work Draft 34-LS0493\N (Wayne,
4/28/25).
Co-Chair Foster OBJECTED for discussion.
Co-Chair Foster asked to hear from his staff and
Representative Kopp regarding the changes in the bill.
BRODIE ANDERSON, STAFF, REPRESENTATIVE NEAL FOSTER,
explained the CS. He explained that the CS contained one
change that was addressed in two locations in the bill. He
pointed to the Explanation of Changes in members' bill
packets. He read the following:
1. Section 23 (page 14, line 16) and Section 76 (page
42, line 27) both were subsection (g):
a. Adds new subsections that would reduce the Post
Retirement Pension Adjustments (PRPA) to 50 percent
for nonresidents ineligible for Permanent Fund
Dividend (PFD), as the qualifications read on the
effective date of the Act.
b. This change is an incentive for retirees to stay in
the state.
Mr. Brodie elaborated that the reason the change was in two
locations was due to a reference to Public Employees'
Retirement System (PERS) in Section 23 and Section 76
reflected the Teachers' Retirement System (TRS). The change
was made because it would align with the Gallagher
actuarial report presented the previous day. He added that
the 50 percent provision was in previous versions of the
bill, and the actuary had assumed it was in the current
version of the bill.
1:42:16 PM
Co-Chair Foster interjected that one of the main purposes
of the change was it would reduce the amount of necessary
funding.
REPRESENTATIVE CHUCK KOPP, replied that the change would
reduce the cost of the bill by $70 million from FY 2027
through FY 2039.
Co-Chair Foster WITHDREW the OBJECTION.
Representative Stapp OBJECTED. He thought there were
numerous changes in the CS. He pointed to places in the
bill he deduced had also changed.
1:43:58 PM
AT EASE
1:46:02 PM
RECONVENED
Mr. Anderson replied that the only changes that were made
in the version were outlined in the explanation of changes
and some renumeration. He offered to submit a redline
version to illustrate his answer.
Representative Stapp WITHDREW the OBJECTION.
Representative Bynum OBJECTED.
A roll call vote was taken on the motion.
IN FAVOR: Stapp, Galvin, Jimmie, Allard, Hannan, Josephson,
Schrage, Foster
OPPOSED: Tomaszewski, Bynum, Johnson
The MOTION PASSED (8/3).
1:48:49 PM
Representative Hannan asked if the fiscal notes had been
written to the original or the updated CS. Mr. Anderson
replied that they were written to the recent actuarial
report, and they should be reflective of the CS.
Representative Bynum cited the language regarding
qualifying for the PFD. He asked if the qualification for
the PFD was required by the state retirement system.
Representative Kopp answered that he had struggled with the
issue. He pointed out that 40 percent of state retirees
moved to warmer climates after retirement and whether they
should receive the inflation proofing PRPA as retirees who
remained in state. The bill that removed the penalty was
introduced but Mr. Kershner [David J Kershner, Principal,
Consulting Actuary, Gallagher] had inadvertently assumed
the penalty was included in the bill. The fiscal notes
accurately reflected the CS. He furthered that the PFD
eligibility standard was the standard that proved state
residency. The language tied the provision to a standard in
law. Representative Bynum offered that Alaska currently had
other qualifiers to be a resident without meeting the PFD
standard. He deduced that it did not take into
consideration travel, traveling for medical need, etc. He
observed that many residents in the state did not qualify
for the PFD. He found it disappointing that the bill would
discriminate against people who provided lifelong service
to the state and diminish their retirement because they
were not going to be able to qualify for the PFD. He would
likely try to fix the issue during the amendment process.
Representative Hannan asked if the Cost of Living
Adjustment (COLA) was different than the PRPA adjustment.
Representative Kopp replied affirmatively. He reported that
the bill lacked a COLA that was tied to housing, energy,
and transportation costs. The prior Defined Benefit (DB)
tiers do have a 10 percent COLA, which was not present in
the bill because of the cost. He delineated that the post
retirement pension adjustment was simply inflation proofing
dollars. He reiterated that the provision saved the state
$70 million from FY 27 through FY 39 by allowing the 50
percent reduction if someone no longer met residency
requirements. He addressed Representative Bynum points
regarding the PFD residency standard and indicated that it
allowed for medical and other travel.
1:53:45 PM
Representative Hannan understood that nothing in the bill
diminished any earned benefit a DB member would be
receiving. Representative Kopp agreed with her statement.
He explained that a reduced PRPA would not diminish
anyone's base retirement benefit.
Co-Chair Josephson shared that his Mother was a state DB
retiree who moved out of the state later in life to New
Hampshire and suffered the loss of the 10 percent COLA. He
noted that the PRPA adjustment was in alignment with the
loss of COLA. He remarked that the PFD standard had a
similar standard. The PRPA reduction was not novel, it was
the same for COLA. Representative Kopp agreed with Co-Chair
Josephson's statements. He reminded the committee that the
COLA cost hundreds of millions, whereas the PRPA adjustment
cost a much smaller amount. However, they were the same
principle philosophically.
Co-Chair Foster noted the committee had to get to the House
floor session.
Co-Chair Foster set the amendment deadline for HB 78 for
Monday, May 5, 2025, at noon.
Representative Stapp objected and asked for a delay in the
deadline until Tuesday.
Co-Chair Foster set an amendment deadline for Tuesday May
6, 2025, at 5:00 p.m.
1:57:39 PM
RECESSED
4:28:44 PM
RECONVENED
Co-Chair Foster noted the committee previously adopted the
CS for the bill. He asked members if there were additional
questions.
Representative Stapp asked about the fiscal notes and
indicated there was a discrepancy between the prior fiscal
note and the new fiscal note. Co-Chair Foster asked him to
identify which fiscal note he referred to. Representative
Stapp pointed to the new fiscal impact note dated April 15,
2025, that showed $40.6 million in FY 2027 and none in FY
2026, versus the note it replaced had a $17.4 million
appropriation in FY 2026. He asked about the material
difference.
Representative Kopp answered that the prior fiscal note was
a House Finance Committee fiscal estimate prior to
receiving the valuation from Gallagher and was no longer
valid. He deferred to Mr. Anderson for further answer.
Mr. Anderson replied that the notes created by the House
Finance Committee were considered null and void after
receipt of the Gallagher analysis. He identified the two
new relevant fiscal notes. One fiscal impact note was for
the Department of Administration allocated to Retirement
and Benefits dated February 7, 2025, and reflected the
administrative cost of the new retirement program. He noted
that the other fiscal impact note for Various allocated to
All Branches lacking an OMB component number [dated April
15, 2025, written by DOA] was the other relevant fiscal
note.
4:35:05 PM
Representative Stapp asked why the new note did not include
an appropriation for FY 26. Mr. Anderson believed it was
because the program would be developed in FY 26, and the
program would begin in FY 27.
Representative Bynum remarked that the bill's effective
date was July 1, 2025, on page 52, line 17. He did not know
where the provision saying it would not be implemented
until FY 2027 was in the bill. Representative Kopp answered
that the effective date of the bill gave the administration
permission to set up the program. He detailed that election
into the plan was over an 180 day period. He suggested
asking the department to provide an explanation. He guessed
that it would take DOA some time to stand up the program in
the first year, which lowered initial costs. He referenced
the new Various fiscal note written to the actuarial
report. He cited the fiscal note and Gallagher analyses
stating that the plan started off fully funded in FY 26
until FY 27. The Gallagher analysis projected net total
increases to the PERS and TRS state contributions from FY
2027 to FY 2039.
4:38:16 PM
Representative Bynum was trying to determine where in the
bill it specified the initial cost would be delayed. He
noted that an employee may opt into the program immediately
and there were costs associated with that. He deduced from
the answer given by Representative Kopp that participants
would need to wait until July 2026 to become members of the
plan. Representative Kopp clarified that there was no delay
in the implementation of the plan. He restated that the
Division of Retirement and Benefits, DOA, could better
explain the fiscal note. He reminded the committee that new
participants had six months to decide whether to join the
plan, which was halfway through FY 26 before the election
period ended.
Mr. Anderson clarified that he did not intend to use the
word delay" in his answer. He did not mean to cause
confusion.
4:40:20 PM
Co-Chair Foster asked if it was possible to hear from the
Division of Retirement and Benefits.
Representative Bynum asked which fiscal notes were no
longer valid. Representative Kopp repeated the answer from
earlier in the meeting.
Mr. Anderson interjected and noted the control codes for
the voided notes.
Representative Tomaszewski cited Section 23, page 14 of the
legislation and asked about the Alaska Retirement
Management Board (ARMB) ability to terminate a reduction
made under the subsection. He asked if it was individually
or for the entire plan. Representative Kopp replied that it
applied to all members of the plan. He added that if the
plan became less than 90 percent funded the ARMB could make
an adjustment. Representative Tomaszewski asked about the
eligibility requirements for a PFD. He ascertained that if
a person lived out of state, they may only receive half of
their COLA. Representative Kopp replied affirmatively.
Representative Tomaszewski asked if any other states did so
and if they had run it by Legislative Legal Services. He
asked if it was constitutional to penalize a person living
in another state. Representative Kopp answered that it was
constitutional. He elaborated that any retirement plan
could be structured in any way as long as members were
aware of the plan's specifics. However, once a person
joined a retirement plan the benefits could not be
diminished. He reiterated that if retirees chose to move
out of state, they would lose 50 percent of their inflation
adjustment [PRPA].
4:46:01 PM
Representative Hannan noted that under current DB plans
retirees lost their COLA if they were gone for more than 90
days; therefore, the Permanent Fund Dividend eligibility
option was looser than the proposed plan.
Representative Bynum reminded the committee that there was
a difference between a COLA from Tiers 1, 2, and 3 and PRPA
in HB 78. He pointed out for the record they were not
discussing a COLA but were deliberating about the PRPA.
Representative Kopp agreed with the statement. He
reiterated that a COLA was an entirely separate matter
reflecting the cost of living.
Representative Hannan interjected that she did not intend
to confuse or conflate the two. She wanted to provide an
example of the constitutionality of including a provision
based on residency and that it already did exist in the DB
system.
Co-Chair Foster thanked Representative Kopp and Mr.
Anderson.
Representative Kopp provided closing remarks. He referenced
the actuary's testimony from the previous day. He relayed
that the plan was structured so soundly it would take a
"remarkable event" to drop the plan liability under 90
percent. The actuary did not see the state incurring any
additional liabilities because of the plan's structure or
unseen event to spur the need to activate a PRPA. He
believed that the plan was remarkable and was structured to
keep the costs down. The heart of the bill recognized that
public workforce stability was key to the economic
viability of the state. The cost of the bill was about $600
million over the next 14 years, totaling about $50 million
per year. He shared that the burn rate of recruitment,
training, and retention losses costs were over $76 million
per year. He felt that the legislation was a net revenue
positive for the state. The bill would establish a way to
address a real structural problem. He used a fishing
analogy to describe that state's problem of vacancy rates
in education, public safety, and transportation
"compromising the vitality of the state." The structural
risk was that the public service agencies "were overtaxed
and underperforming and in many cases completely failing to
deliver many of the services that people depended on." He
mentioned the state's out migration creating a "toxic
narrative" about the state. He noted that the governor's
Recruitment and Retention Task Force reported that the
state experienced a $20 million burn rate just for the loss
of teachers alone. He believed that the plan was
imminently affordable and attractive enabling the state
to turn towards a more attractive and competitive place to
live.
4:52:32 PM
HB 78 was HEARD and HELD in committee for further
consideration.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB078 ver N Explaination of Changes.pdf |
HFIN 4/30/2025 1:30:00 PM |
HB 78 |
| HB 91 DOR Response to HFIN Question 05.01.2025.pdf |
HFIN 4/30/2025 1:30:00 PM |
HB 91 |
| HB 91 Public Testimony Rec'd by 05.08.25.pdf |
HFIN 4/30/2025 1:30:00 PM |
HB 91 |