Legislature(2003 - 2004)
04/15/2004 01:30 PM Senate L&C
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 91-RETIRED PEACE OFFICER'S MEDICAL BENEFITS
CHAIR CON BUNDE announced CSHB 91(FIN) to be up for
consideration and that it was accompanied by a power point
presentation.
REPRESENTATIVE TOM ANDERSON, sponsor, said that HB 91 is of
great importance to law officers whether they be correction,
firemen or policemen. It is a cost-avoidance bill. Current
policy requires that Tier 2 and Tier 3 peace officers defer
retirement an extra five years to qualify for their medical
benefit. He believed that deferment has a price tag and although
this bill has a fiscal note from the Division of Retirement and
Benefits, the Department of Corrections and the Department of
Public Safety haven't reported in at this juncture.
I think those fiscal notes would basically deplete the
elevated fiscal note from [the Division of] Retirement
and Benefits.... I hope you will consider that. Also,
when a peace officer defers retirement, I think it's
important to note that the operational cost increase
is greater than the actual benefit cost. So, I want
you to think of this, first of all, recognizing that
PERS is managed on the basis of equality among its
members and without this bill passing, there is no
fairness. You're aware of what it does; it gives 20-
year retirement for medical retirement and benefits to
peace officers.... There is a $23,105 savings in base
pay and leave during the first year after a 20-year
correction officer 3 takes normal retirement. So, we
see a savings.... These examples go on and on and
on.... This is important even though there is a fiscal
note, which again, I think can be reconciled down. We
have to defer to the judgment that we want to keep
these peace officers and the old adage I said in the
previous committee, hey, you look at the service...and
the risks and the stress that are involved...20-year
medical retirement doesn't seem that out of kilter
with respect to the career and that choice.
CHAIR BUNDE said he once heard that because the cost of
recruiting and training was so expensive, the state had to keep
these people longer. Now, because of other circumstances, we
want them to leave sooner.
REPRESENTATIVE ANDERSON responded that Mr. Fox's power point
presentation would show that a 20-year career span is as good as
it gets.
MR. MIKE FOX, PUBLIC SAFETY EMPLOYEES ASSOCIATION (PSEA), showed
the committee a power point presentation on HB 91 that
illustrated how HB 91 provides medical benefits for retired
peace officers after 20 years of accredited service instead of
after working five years beyond normal retirement. It removes
the disincentive for peace officers to take normal retirement.
It reestablishes parity with all other PERS members. Mercer's
current experience is that 21 out of 100 peace officers will
make it to retirement.
SENATOR HOLLIS FRENCH asked what Mercer's Human Resources is.
MR. FOX replied that they are the actuaries who are contracted
by the Division of Retirement and Benefits to perform analyses.
He continued that DPS hired 90 troopers in 2002 and 2003, 13
percent per year; Department of Corrections (DOC) hires about 70
[indisc.] per year, about 10 percent to maintain level staffing.
The remaining Tier 1 trooper class had an approximate 62 percent
separation rate. This means that 38 percent of the troopers left
are Tier 1.
MR. FOX explained that only Tier 2 and Tier 3 members would be
affected by this bill. Major medical is already provided to all
Tier 1 recipients. In 1986, Tier 2 was created, which provided
major medical at age 60. In 2001, the current situation was
created where after a 10-year vesting period, major medical is
provided at age 60 or at normal retirement unless you're a peace
officer and then you must work five more years.
The perspective from HB 91 simply removes the five-
year extra requirement for peace officers. That's all
it does. The justification for change - current law
withholds the benefit from peace officer members of
PERS unless an extra five years is worked; it
undermines the intent of peace officers' normal
retirement; it inhibits recruitment and retention and
it causes inequality among PERS members.
HB 91 is a cost-avoidance bill. Current policy intends
to defer retirement of Tier 2 and 3 peace officers.
Operational cost increases from a deferred retirement
are greater than the actual benefit costs. A cost
comparison example - the largest group affected is
correctional officers (CO). A correctional officer 2's
additional base pay and leave costs for one year of
deferred retirement is at least $18,252. DRB advises
that the average benefit cost is $9,670. The current
policy intends to defer retirements for five years.
The choice is to fund the benefit or fund the deferred
retirement cost increase.
COs by years of service - When Tier 2 and 3 COs defer
retirement, the 15 - 20 group will be added to the 20
- 25 group. This shift in the workforce profile will
significantly increase operational costs....
MR. FOX explained the chart for Chair Bunde and reminded the
committee that retirement is cut in half for those who divorce.
CHAIR BUNDE pointed out that he couldn't assume that all the
people in Tier 2 would continue to work after their 20-year
retirement. There would be some reduction.
MR. FOX agreed and added that people drop out all along the
curve. He continued:
Risk - If 20 years are not completed, there is no
benefit change and no new costs. If an officer makes
it to 20, the benefit cost is balanced by the payroll
reduction. There is no risk of a benefit cost without
a corresponding cost-avoidance.
Problems associated with peace officers working past
normal retirement - increased health problems,
increased risk of injury, higher compensation, lower
morale and burnout.
Disability rates were provided by Mercer Human Resources and
show that troopers and correctional officers average about 34
years of age when they are hired and they reach 20 years of
service at approximately age 54. Another graph showed the
increase in disability rates as peace officers age. He noted the
steep increase when retirement is deferred past age 54. The line
representing other employees who are not peace officers is
significantly lower than the peace officers and the gap widens
all the way to age 60.
The graph, using 2002 data for administrative versus officer
positions, illustrated the limited opportunity for peace
officers to move into administrative positions as they age. It
showed 709 corrections officers and 30 administrative jobs, 336
troopers and 33 administrative jobs. "It's impractical to think
a person can continue through their career until they get older
and then move into a desk job."
CHAIR BUNDE asked if he had data that showed typical behavior
for someone who now retires under the Tier 1 at age 54 or 55.
"They don't just play golf, do they?"
MR. FOX replied no, but he didn't have any data to show him. He,
himself, is one of those guys, however, and knows a whole lot of
others like himself. He explained that the PERS mission is not
to provide a living wage for life. It is, after 20 years, to get
45 percent of your average monthly income, at the most. He
elected to buy dental and vision insurance and the long-term
care insurance. He elected to buy a survivor benefit for his
wife. So, his actual monthly benefit is much lower than where it
started out. He did not know of any of his contemporaries who
didn't go on to other employment.
CHAIR BUNDE asked if it was likely that they had health benefits
in their other employment.
MR. FOX replied no. A lot of guys end up doing something that
they have more of an interest in and have the freedom to pursue
even if it pays less money or benefits.
PERS is managed on the basis of equality among
members. Normal retirement is after 20 years for peace
officers and after 30 years for all others. Peace
officers pay a higher contribution rate than all of
the members to maintain equality. Current policy
withholds benefits from peace officer members unless
they work five extra years. HB 91 corrects this
prejudice against peace officers.
The current policy is unfair. If a peace officer beats
the odds, makes it to 20, the current policy is to
defer their retirement. That is accomplished by
unfairly withholding their medical benefit until they
work five years beyond their normal retirement.
In conclusion, the current law undermines the intent
of normal retirement for peace officers and inhibits
the PERS mission to recruit and retain in public
service. HB 91 removes the disincentives to peace
officers to take normal retirement and reestablishes
parity among all PERS members and this bill is good
for peace officers and it's also good policy.
CHAIR BUNDE noted there were no questions and thanked him for
his presentation.
MR. CHUCK HANSEN, Correctional Officer, Leman Creek Correctional
Center, said he has an undergraduate degree in human development
and a master's degree in human services. He represents himself
and fellow correctional officers in Alaska. He is a Tier 1
employee and has been on the job 19 years and 9 months. His job
is part-time, seasonal, and he doesn't get any retirement
benefit for it. He noted the sick behaviors and violence that
make up the daily stresses in his job. The number of prisoners
who are HIV positive or have hepatitis A, B or C is far higher
than the public population, because inmates are often involved
in high-risk activities before they come into the system. This
also puts COs at higher risk than ordinary citizens, resulting
in a potential need for long-term care health benefits.
Correctional officers rarely make the present 20-year
retirement goal. I've watched over 250 floor staff
come and go without reaching that magic time...at
Lemon Creek, alone. I've lost track of about 25 more.
One day, a short time ago, I asked my superintendent,
Dan Carothers, 'In your 27-year career in corrections,
how many floor officers, which are non-management
staff, have you known to complete 20 years with the
Department of Corrections?' Four people. More
recently, a co-worker made it to 20. So, that is a
total of five making it to retirement that Mr.
Carothers knows of. The likelihood that COs will reach
the 20-year mark before retirement is bad enough,
pushing the mark to 25 years for full medical benefits
is next to impossible and demeaning to us when we are
all at risk of serious long-term illness because of
our jobs.
HB 91 will insure an appropriate retirement package
for those of us who make it that far. It is not cost-
effective to continually pay to train new people in
order to replace those who see the 25-year as
unattainable and so they quit early. And yet, that's
exactly what's happening now.
MS. MELANIE MILLHORN, Director, Division of Retirement and
Benefits, deferred her testimony on the fiscal note to let the
large number of citizens testify.
MR. DEAN BAUGH, Finance Director, City of Homer, said he also
represents the Alaska Government Finance Officers Association
(AGFOA). He didn't want to say that police officers don't
deserve this, but right now the PERS systems can't afford it.
If you would have asked me a year ago, I might have
said that is one thing, because my city was 100
percent funded, but if you look at me now, all of a
sudden, I'm $6 million in the hole.
He disputed the fact put forward by Mercer's Human Resources
that 21 percent of the officers would retire at 20 years. He
thought closer to 80 - 100 percent of officers will retire at 20
years, if medical coverage is provided. So, the costs in the
fiscal note are incorrect. He also noted that it is state law
once Tier 2 and 3 are changed again to 20-year retirements with
full medical, it can't be changed again. At this point, PERS is
looking at creating a Tier 4 to keep the budget actuarially
sound.
CHAIR BUNDE asked if the committee changed the tier system today
so that it's not retroactive, would he support it.
MR. BAUGH responded that the issue would be argued all the more
because someone who had been there for 15 years has more
benefits than someone who has been there for one year.
CHAIR BUNDE said the fiscal note was attached to the state's
budget, not the municipalities' budgets.
MR. BAUGH responded that the state has said it would fund it for
the next year, but not forever.
MR. MAURICE HUGHES, Alaska State Trooper, Public Service
Employees Association, said it has approximately 350 members.
The difference between Tier 2 and Tier 3 is that when
Tier 2 was created, the members kept paying the same
percentage for 20-year retirement.
TAPE 04-33, SIDE B
3:55 p.m.
MR. HUGHES continued:
So, in relation to the statement where they would be
going back to paying for 30 years...our members
continue to pay that 7.5 percent....
I would just like to make some statements about our
core message and the message about HB 91 and that is
the policy that's in effect right now - it's
influencing police officers at Tier 2 or Tier 3 to
defer their retirement from a 20-year retirement to
25-year retirement. This is being done by the holding
[back] of a retirement benefit, which is the medical
benefit. The police officer who decides to defer that
retirement, it could be for a good reason. There could
be a good reason that officer wants to stay around,
but if a person is forced to stay to get a medical
benefit that he would otherwise have if he stayed in
some other occupation at his normal retirement, then
that's not right.
It's hard to accept, but when you say old and police
officer, the two don't go together. Police work is a
young man's game. When you get older, you get hurt
easier; it takes a longer time to mend when you do get
hurt. Mike pointed out that you have issues of sleep
deprivation and it's tougher to [do] shift work. The
burnout issue is a real issue, the older you get.
On the other end of the spectrum, with younger
officers coming along, when they get to that 7 - 8
years on the job, they have to make that determination
whether or not they want to stay that extra five years
to receive their medical benefit or to go ahead and
possibly change careers entirely or to go to another
system. The extra five years of working on holidays
and working on weekends and working when your family
is asleep is not a real conceivable goal for someone
to have to work that extra five years....
MR. PAUL COMOLLI, Juneau Police Officer, said he represented
himself and fellow police officers, not the city or the chief.
He related how his long-time friend, Kenai Police Officer John
Watson, was killed in the line of duty while responding to a
welfare check on a citizen, on Christmas Day 2003.
He was searching for a person who reportedly needed
help. He was doing his job on Christmas, trying to
keep you safe, just like we all do - on every shift,
every day and every night.... If John had survived two
more years on the job, he would have been eligible for
normal retirement. Far less than half of us make it to
20. John had only two more to go; he almost beat the
odds.
MR. COMOLLI said the current policy is ill-conceived, unfair and
blatantly prejudicial against peace officers. This bill does
nothing more than reestablish the parity among all PERS members.
I've got my benefits. It's not fair to me to leave my
young brothers and sisters behind me that are going to
step up and continue to do this job without what I
have. It's not too much to ask.
CHAIR BUNDE commented that he has a brother and two nephews who
are police officers and knows what he is talking about.
MR. LARRY SIMMONS, Certified Public Accountant (CPA), said he is
finance director for the City of Kenai, and that he had been
following this bill since last year and at that time the AGFOA
passed a resolution against it. When Tier 2 was created in 1986,
it didn't include medical benefits until members reached the age
of 60, a requirement that stayed in place for 15 years. In 2001,
benefits were changed for police and fire members to receive
medical benefits after 25 years. "Prior to that there were no
medical benefits, period, until age 60." At that time, the PERS
was 106 percent funded, but the following year the PERS system
was funded at 75 percent and the expense for the added medical
benefits are huge. He was very concerned about the fiscal note
for HB 91. It is based on actual experience that only 21 percent
of the eligible members would retire.
Do you think more people will retire when you give
them medical benefits at 20 years than will retire at
20 years if they don't have medical benefits? The
answer is totally obvious and, therefore, that fiscal
note is well understated. I think for the City of
Kenai, it is four times understated....
State funding for the increased benefits can go away when the
next legislature decides to make it go away.
MR. CHRIS BURNS, Mercer Human Resource Consulting, said he would
answer questions.
CHAIR BUNDE noted there were no questions and thanked all who
testified and said HB 91 would be held over. There being no
further business to come before the committee, he adjourned the
meeting at 4:07 p.m.
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