Legislature(2007 - 2008)HOUSE FINANCE 519
02/13/2007 01:30 PM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB107 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| *+ | HB 107 | TELECONFERENCED | |
HOUSE BILL 107
An Act making appropriations for qualified regional
seafood development associations, for investigation and
litigation relating to the public employees' retirement
system and the teachers' retirement system, and for a
special advisory election; and providing for an
effective date.
Co Chair Chenault noted that the Committee would hear
testimony, but would not entertain any amendments at this
meeting.
KAREN REHFELD, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET,
provided testimony on the legislation.
DEPARTMENT OF COMMUNITY & ECONOMIC DEVELOPMENT
Office of Economic Development
Regional Seafood Development Tax pass-through to the
Copper River/Prince William Sound Marketing
Association. The appropriation was inadvertently
omitted from the FY07 budget bills. The 1% tax
assessment generated $152,464 during calendar year
2005, which was to be appropriated to the association
as of July 1, 2006. $152.4 Pass Through
Ms. Rehfeld noted that the request is for pass-through funds
for the Copper River/Prince William Sound Marketing
Association, who was the first group to organize as a
regional seafood development association. The Department of
Revenue collected the tax but there was not an appropriation
to flow those collected taxes back to the development
association.
Representative Hawker pointed out that the request had been
an oversight. Ms. Rehfeld agreed and clarified that the
appropriation language is now included in the FY 08 budget.
Representative Thomas advised that the funds were monies
used for marketing last year and is now desperately needed
by that community.
3:06:07 PM
DEPARTMENT OF LAW
Civil Division, Labor & State Affairs
Funding for the investigation and proposed litigation
related to actuarial services received by the State of
Alaska. The investigation would be completed during
FY07, and the proposed litigation is contemplated to
begin before the end of the FY07. The amount of the
appropriation is the estimated costs to complete the
investigation and take the case from inception through
trial. $12.0 million Department of Law/PERS/TRS
Ms. Rehfeld noted that the request was in the amount of $12
million dollars to be used for the Department of Law's
proposed litigation against actuarial services provided to
the State. She observed the estimated amount of unfunded
liabilities for the retirement system. It is complicated
litigation; the anticipated time of the case is
approximately two years.
3:07:51 PM
Representative Gara asked for an overview of the litigation.
MICHAEL BARNHILL, ASSISTANT ATTORNEY GENERAL, LABOR & STATE
AFFAIRS SECTION, DEPARTMENT OF LAW, explained that there was
not the expertise within the State of Alaska, Department of
Law for actuarial malpractice suits. In 2006, the
Department received a request from Senator Hollis French
asking for a review of the matter. Money was received for
outside counsel. He noted that $400 thousand was
appropriated & the Paul Weis Law Firm out of New York was
hired, a firm that has taken such cases to a jury verdict.
The Firm advised the State Department of Law that there are
actually valid claims against Mercer. The Department of Law
is now seeking funds to pursue with that legal case. The
Department believes that these are extraordinary times and
it is not an ordinary case.
3:13:05 PM
Representative Gara wanted reassurance that the State is not
spending "bad money". He thought that the defense will be
that "even if they failed to tell the State to place the
money into the pension fund, there was no harm, because the
State kept those funds".
3:14:39 PM
Mr. Barnhill acknowledged the question, noting that he could
not comment in detail. He acknowledged that such arguments
previously had been raised. He acknowledged there are not a
lot of cases, however, there is some case law to support the
claim.
3:16:29 PM
Representative Gara advised that there are differences
between the two cases referenced by Mr. Barnhill, observing
that the previous case did not go retroactively after the
funds. In the State of Alaska's case, the funds remained or
were spent in other categories.
3:17:32 PM
Mr. Barnhill did not agree with the characterization of the
State's situation. There are 160 participating employers &
many school districts in the Teacher's Retirement System
(TRS). Representative Gara acknowledged that a portion
could not be accessed and wondered if there was sufficient
grounds to proceed. Mr. Barnhill advised that he was
"uncomfortable" discussing the defense for the State of
Alaska.
3:19:44 PM
Mr. Barnhill reiterated that good arguments could be made to
support the State's claims.
3:20:07 PM
Representative Hawker pointed out that the funding source
was the pension trust assets for the Public Employees
Retirement System (PERS) and Teacher's Retirement System
(TRS). Mr. Barnhill stated that the $400 thousand dollars
came from the PERS & TRS Trust as will the requested
appropriation. He was confident that the fund source was
appropriate and that the Alaska Retirement and Management
(ARM) Board concurs.
Representative Hawker questioned if there is an argument
that the Trust itself did not cause its own injury, but was
caused by administrative decisions made outside the Trust.
Mr. Barnhill acknowledged that the Trust did not create the
injury.
3:22:41 PM
Representative Hawker questioned if the funding source could
be questioned. Mr. Barnhill reiterated that the fund source
was appropriate. Representative Hawker asked if $12 million
dollars would be sufficient to try the case. Mr. Barnhill
estimated the costs to litigate the case to run between $10
- $15 million dollars.
3:23:37 PM
Representative Gara asked if the ARM board approves the
expenditure from the Trust. Mr. Barnhill stated that they
have approved the request.
Representative Gara inquired if it was possible for the
funds to come out of the General Fund and if the State wins,
then place the proceeds into the pension fund. Mr. Barnhill
emphasized that this case was "not a lark". He said since
the Trust is the recipient, it is an appropriate funding
source. He added that he would be remiss to not pursue
recovery of the damages.
3:25:59 PM
Representative Gara stressed that the Administration is
pursuing the suit with someone else's money [State
employees]; it would be a stronger statement to back it with
its own General Fund money. He noted that a contingency fee
could be negotiated at a high rate.
He inquired if the case had been put out for a competitive
biding process. Mr. Barnhill advised he has had experience
with similar cases. Contingency fees have been negotiated
around 8 to 8.5 percent in other cases. He added that some
law firms operate on a contingency fee. He stated it would
be preferable to pay on an hourly fee basis. Contingency fee
agreements have been negotiated, but they were not found to
be as beneficial as the hourly fees. Fees could double or
triple over the hourly rate. The issue remains whether to
pay up front or in the end.
3:30:28 PM
Representative Thomas requested that further discussion be
held in executive session or individual meetings with the
attorney, Mr. Barnhill.
3:31:14 PM
Representative Gara pointed out that "contingency"
representation is one of the measures regarding whether a
law firm believes there is a good case; he asked if any
firms agreed to take the case on a contingency base. Mr.
Barnhill responded that at least one firm had offered.
3:32:10 PM
Ms. Rehfeld asked that the Legislature consider changing the
effective date for an appropriation made in Section 2, from
February 16, 2007 to November 1, 2006. That change would
allow the Administration to pay a couple bills that occurred
on the investigation portion of the supplemental. Co-Chair
Chenault said okay.
3:32:52 PM
OFFICE OF THE GOVERNOR
Elections
Funding for the costs associated with the April 3,
2007, special advisory election required by ch.1, FSSLA
2006, on the subject of employment benefits for same-
sex partners of public employees and retirees.
$1.2 million General Funds
Ms. Rehfeld reviewed Section 3, pertaining to a special
advisory election on April 3, 2007. She pointed out that
there was no fiscal note or appropriation accompanying the
legislation. At this point, the Division has incurred costs
for printing of ballots in preparation for the election.
Representative Gara asked about the high cost of the
election.
WHITNEY BREWSTER, DIRECTOR, DIVISION OF ELECTIONS, noted
that the Municipality of Anchorage (MOA) does conduct a
rd
special election also on April 3. No final agreement has
been made regarding workers that might be jointly shared.
She acknowledged that no other municipality holds an
election in April outside of Anchorage.
HB 107 was HELD in Committee for further consideration.
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