Legislature(2005 - 2006)CAPITOL 106
04/12/2005 03:00 PM House HEALTH, EDUCATION & SOCIAL SERVICES
| Audio | Topic |
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| Start | |
| HB231 | |
| HB161 | |
| HB204 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 29 | TELECONFERENCED | |
| + | HB 231 | TELECONFERENCED | |
| *+ | HB 112 | TELECONFERENCED | |
| + | HB 161 | TELECONFERENCED | |
| *+ | HB 204 | TELECONFERENCED | |
HB 161-REEMPLOYMENT OF RETIREES CHAIR WILSON announced that the next order of business was HOUSE BILL NO. 161, "An Act relating to reemployment of and benefits for retired teachers and public employees and to teachers or employees who participated in retirement incentive programs and are subsequently reemployed as a commissioner; repealing secs. 5, 7, and 9, ch. 58, SLA 2001; providing for an effective date by amending the delayed effective date for secs. 3, 5, 9, and 12, ch. 57, SLA 2001, and repealing sec. 13, ch. 58, SLA 2001, which is the delayed effective date for secs. 5, 7, and 9, ch. 58, SLA 2001; and providing for an effective date." 3:40:41 PM JIM VANHORN, Staff to Representative Jim Elkins, introduced new information relevant to HB 161 on behalf of Representative Elkins, sponsor. He reviewed that the legislation would allow the rehiring of certain public employees' retirement system (PERS) and teachers' retirement system (TRS) members who retired with a normal retirement. These rehired employees can continue to receive normal retirement and benefits if they waive further participation in the retirement systems. During their period of reemployment, he said, no contributions to PERS and TRS are required from the employee or the employer. The proposed legislation would sunset July 1, 2009. MR. VANHORN directed attention to an Alaska Legislative Report entitled, "Results of the Retiree Return Program," produced by the Division of Retirement and Benefits and dated February 2005. The report shows that, as of November 30, 2004, there were a total of 211 retirees rehired under PERS and 124 retirees rehired under TRS, for a total of 335 employees, statewide. He said that equates to one-tenth of 1 percent of all PERS and TRS participants. He turned to a paragraph on page 4 of the report, which read as follows [original punctuation provided]: On September 14, 2004 the Division of Retirement and Benefits received an Attorney General Opinion regarding the employment status of returned retirees as of the sunset date of the legislation. The opinion states that once the reemployment amendments to the PERS and TRS statutes sunset on July 1, 2005, reemployed retirees can no longer receive retirement benefits while employed by a PERS or TRS employer. If they continue employment with a PERS or TRS employer, they must begin making contributions to the retirement systems and have their retirement benefits stopped. MR. VANHORN said the attorney general opinion came as a complete surprise to many. He stated, "The general opinion was that after the initial period, the legislature would review the program to see whether or not it was successful, and decide if it should be continued. Life decisions were made based on this opinion; now they slam shut in their faces." Mr. Vanhorn noted that the original legislation was a component of a workforce development initiative of the state, and a number of employers undertook to address workforce shortages that were already being experienced. MR. VANHORN directed attention to an article entitled, "State Worker Shortage Looms," from a February 2005 issue of state news [included in the committee packet]. The article shows that many states are currently facing the effects of an approaching retirement implosion that follows Baby Boomers into their golden years. Mr. Vanhorn paraphrased some highlights of the article, including: A 2002 study showed that 30 percent of many states' workforces would be retirement eligible by 2006; and compounding an approaching shortage of workers, a [Nelson A. Rockefeller Institute of Government] study confirms that nationally, 50 percent of government jobs are in occupations requiring specialized training, education, or job skills, compared to just 29 percent in the private sector. Mr. Vanhorn stated that it's obvious the workforce shortage will not go away, but will only intensify with time. MR. VANHORN said that during a hearing on the bill, the House Special Committee on Education adopted a committee substitute for HB 161 that clearly states that the legislature understands that the rehire of retirees is a valuable tool for school districts and public employers to manage workforce shortages. The committee substitute also finds that human resource managers must plan to meet their future workforce needs, without reliance on retired workers. MR. VANHORN directed attention to the pie charts on pages 13 and 24 of the previously noted report. He said the charts show that the majority of retirees that have been rehired were retired over 24 months before coming back to work, and the percentage of rehires has slowly decreased since 2002. Mr. mentioned the zero fiscal note in the committee packet. He concluded, "The current legislation has provided human resource managers an excellent tool to retain workers for hard-to-fill positions, and we urge ... passage of this extension." 3:46:19 PM REPRESENTATIVE MCGUIRE stated, "I am embarrassed that I was in the legislature at the time that this bill passed. ... This bill was intended for very narrow circumstances: [For] small communities in Alaska where there was a teacher shortage, where kids were being left behind ... because there weren't adequate teachers there." Representative McGuire said there were also statements made about the need for public health workers in some communities where there was a shortage. She said, "I signed off on those very narrow circumstances, with the agreement and understanding that this program would sunset and that we would take a look at how it had been used ...." She said the time has come to review the program. Representative McGuire reported that there is a staggering amount of information regarding the abuse of the program by the current and preceding administrations. She offered an example of the abuse. She stated, "I don't even think we will begin to see the full effects of what's happened over the last five years for decades to come." REPRESENTATIVE MCGUIRE said she cannot, in good conscience, support the extension and she thinks the program should sunset. She said she has heard concern that the state may be sued for ending the program. Conversely, she stated that she has personally studied the waiver that the rehired employees signed and "there is no possible way that a state employee could have reasonably relied upon anything other than the waiver that they signed, which clearly stated that this sunset would occur in July." She said some people would argue that the personnel board has made "other statements," but she said many times statements are made that end up not being true. She offered an example. 3:51:30 PM REPRESENTATIVE SEATON said there has been a misunderstanding that those on the program would have to quit their jobs when the program sunsets. He stated for the record that those people can continue their employment; they would just be put back into the retirement system. MR. VANHORN confirmed that is true. He noted that TRS has stringent "sideboards," while PERS does not. He agreed that there probably have been abuses to the program; however, he pointed out that the [United Fishermen of Alaska] are strongly behind the bill, because, without it, 30 or more fish biologist will be lost. He offered further details. Mr. Vanhorn noted that [HB 161] is a companion bill to a Senate bill. 3:54:00 PM REPRESENTATIVE CISSNA said it has been reported that PERS and TRS are in trouble. She stated, "It seems sort of inconsistent to at one time be talking about how to fix that program ... at the same time that we're talking about ... continuing with something that would only make it harder for the program to exist, because it's the continual paying in to that program that gives it the strength that allows it to continue, I would assume." MR. VANHORN reminded Representative Cissna that the bill carries with it a zero fiscal note. He added, "The total cost ... is $106.53." In response to a follow-up comment from Representative Cissna, Mr. Vanhorn indicated that the fiscal note reflects the impact on the retirement systems. He offered further details. 3:55:50 PM REPRESENTATIVE SEATON, in response to a request from Chair Wilson, offered some background information on PERS and TRS as it relates to the proposed bill. He said if [the State of Alaska] was "collecting under the normal cost rate all of the money that would be necessary for a person's retirement," the amount of employees makes no difference. However, he explained, there is a $15 billion past service cost liability. He continued as follows: So, what has happened in the past use of this bill is that the employers are not paying in on ... the past service cost. ... The contribution rate is escalating at 5 percent a year, so, in just a few years, we're going to be paying, like, 44 percent for the teachers for the past service cost. ... I haven't looked at the new CS on this bill as to whether this bill is now going to make the employers use their entire wage base, including these "waivered" employees. ... If they make that contribution for the waivered employees - in other words if they would be paying into the system - then it wouldn't have the effect. If it is as it has been currently, there is a detrimental effect, because they're not paying in on the past service cost. MR. VANHORN referred to language in CSHB 161(EDU), which was on page 2, lines 12-14, and read as follows: (c) It is the intent of the legislature that employers that benefit from the provisions of the retiree reemployment provisions pay any increase in unfunded liability that results to the retirement systems. MR. VANHORN directed attention to page 11 of the previously mentioned report, which shows a less than 1 percent impact on the [retirement] system. He offered further details. REPRESENTATIVE SEATON moved to adopt [the committee substitute (CS) for 161(EDU), Version 24-LS0645\G, Craver, 4/5/05], as a work draft. There being no objection, Version G was before the committee. 3:59:58 PM MIKE TIBBLES, Deputy Commissioner, Office of the Commissioner, Department of Administration, regarding the cost to the system, said one concern that has arisen is about bringing an individual back that would receive a benefit without paying into the system. He augmented Representative Seaton's previous explanation as follows: When we hire an individual, we are paying a blended rate: a normal cost rate and a past service rate. The normal cost rate is the amount of the retirement benefit that that individual received after putting in a number of years of service - either 30 years, or 25 years, or reaching retirement eligibility by age. But the benefit that they receive is based on the amount that they and the employer have been paying over their lifetime for their career. So, for example, if they worked 30 years, ... their pension benefit is based on the amount that's paid, so there's no additional cost to the system for that individual coming back, because that individual's not accruing any additional benefits. ... Since we have this unfunded liability, the cost isn't associated with an individual; however, it's associated with the system - it's $5 billion-worth. When we take out an individual from the system ..., their salary-base is used to allocate out a cost for past service rate. Then there becomes a higher rate among the other members. MR. TIBBLES, regarding the impact of the program, said an actuary calculated a separate threshold for PERS and TRS and reported that "at 100 participants of a 242 waiver, there is a $106,000 impact to the system." In PERS, there are 211 employees, so "the impact doesn't trigger until 500 employees." He explained, "So, we have a long way to go on the PERS system before they can actually put a dollar amount to the impact." He continued as follows: So, what the ... committee substitute that you have in front of you does, is it requires all employers - when they bring an individual back - to pay that past service rate at the point that they can put the dollar amount to it - when it no longer becomes negligible. ... The net effect is: When an employer brings somebody back on a 242 waiver, they're going to save the normal cost rate; it's going to be a savings to their system. The State of Alaska saved a million dollars. MR. TIBBLES said although it's certainly not the reason for the program, the State of Alaska has saved a million dollars because of it. He concluded, "Going forward under ... the committee substitute you have in front of you, we would be required to pay: TRS would be an increase of .01 percent, and at 500 participants on PERS would be .02 percent." MR. TIBBLES, in response to a question from Chair Wilson, noted that the language regarding a requirement for a contribution by employers for the past service cost is found "in Section 3 for TRS and Section 4 for PERS." He explained that the way the system is currently set up, the director of the Division of Retirement & Benefits monitors the number of participants and, at the point that he/she has been told by the actuary that there is an impact, then "costs will go out to all the employers." He said he would support a change to automatically charge the past service rate equal to every other employee; thereby, even when the cost is negligible, some amount could still be collected into the system. 4:07:16 PM CHAIR WILSON said she thinks the state has a responsibility to be "covering what we need to cover." 4:07:55 PM REPRESENTATIVE GARDNER directed attention to language on page 2 [of Version G, beginning on line 4], which read as follows: In extending the termination date of the reemployment provisions, it is the intent of the legislature to allow school districts and public employers to continue to use this management tool, while developing plans that address the knowledge, skills, and abilities that need to be transferred or developed to assure the work can be accomplished when the reemployment provisions terminate. REPRESENTATIVE GARDNER asked if that language was in the original "waiver legislation." MR. TIBBLES answered that he doesn't know. 4:09:13 PM REPRESENTATIVE GARDNER clarified that she wanted to know if the original plan was a temporary one, with the intent that the employers have a contingency plan for "the end of the waiver program." REPRESENTATIVE MCGUIRE stated her understanding of the original legislation was designed as a temporary crisis management tool, which is why there was a sunset clause. 4:11:03 PM MR. TIBBLES said the original sunset clause was added to the original House Bill 242 in the House Finance Committee after discussion regarding the impact to entry-level positions and how the people in those positions would be able to move up in career progression. He said that amendment was the basis of the decision of the Department of Law last year that said that the individuals currently enrolled in a 242 waiver will, as of July 1, [2005], stop receiving the pension benefits. 4:12:09 PM REPRESENTATIVE MCGUIRE opined that without the sunset clause, the bill would not have passed. She said there was concern at the time [House Bill 242] was on the floor regarding whether there may be other options, such as recruitment and retraining, rather than "giving people paychecks after they retire." REPRESENTATIVE SEATON said the purpose of the previously mentioned language in the bill was to analyze what the effect of the program was on upward mobility of people within the system, and he noted that letters had been received indicating that [the waiver program] has been a severe detriment to people attempting to have upward mobility. He asked, "Where is that addressed in the [previously mentioned] report? 4:14:14 PM MR. TIBBLES responded that there was language in House Bill 242 that required a report to the legislature; however, it only applied to the TRS system. The report provided to the committee complies with the requirement that was submitted in the original legislation. He stated that the administration has additional concerns regarding how the program has been implemented differently in each department. He stated, "I would like to walk through the administrative order that the governor signed on March 8, that implements the sideboards and talks about what we're going to require the departments to do ... and the workforce planning that needs to take place before they can bring an individual back on 242." 4:14:54 PM LEO JOHN KERIN, at the request of the chair and in the interest of time, offered an abbreviated version of his written testimony, which he said he would send to the committee. He said he taught in a rural school district and strongly supports any measures taken to support excellence in education in rural Alaska, but is not convinced that "the rehire bill is the way to do that." He said he would send alternative suggestions to the committee by facsimile. Mr. Kerin stated his strong opposition to the extension of the rehire bill for PERS employees for the following reason: "While there ... may be a shortage of qualified teachers willing to work in rural Alaska, there is no shortage of qualified applicants willing to work in town with the state government bureaucracy, court system, university system, or municipal government." He continued as follows: If there was a problem finding qualified applicants, as was recently the case for [the Department of Transportation & Public Facilities (DOT&PF)] technical engineers, the Department of Administration would adjust their ... internal alignment of salaries for the job class to attract more applicants. If there is a real short-term shortage of experienced personnel for a specific job, ... there is and always has been a contracting procedure to gain the needed expertise. MR. KERIN said there has been significant abuse by the program. He indicated that the administration acknowledged that abuse when it brought forth a corrective administrative order; however, he said that order is like closing a barn door after the horses are out. He mentioned a "flood of recently retired and rehired employees, many of whom never bothered their desks during the 30-day waiting period." He asked, "If there is such a brain-drain for retiring baby boomers, why was the program only offered to a select few higher-level administrators instead of all retirement-age employees?" MR. KERIN said early retirement legislation has not been around for very long. He said now provisions have been made to let commissioners come back from early retirement, without having to make restitution to PERS as is required in the retirement incentive program bills. He said there has been much discussion regarding the potential for lawsuits from people who believe that the information given to them from the Division of Retirement & Benefits meant that they would be "grandfathered in for life." He said, "I would worry more about all the people who ... retired early asserting that they should be given the same opportunity as all the other double-dippers in the same job." MR. KERIN stated his belief that no realistic evaluation has been made regarding "the cost of PERS of inducing Tier I employees to retire on time, thereby affecting the retirement program's actuarials." He offered further details. He suggested that more testimony against [HB 161] is not heard from "the rank and file employees," because it's only their bosses who are being given "this platinum parachute." He added, "There's a real fear of retaliation." MR. KERIN said that though the bill is well intentioned, the sunset needs to take place. He asked that at the very least, the administration make the positions of those in PERS who have already been rehired be subject to reexamination "pursuant to the safeguards of the recent administrative order." He said, "If it can be shown that a true shortage exists for the job in question, the person should be allowed to retain their job while restitution is made to ... PERS ..., as would take place if the person had taken an early retirement. Any other course of action results in all members of PERS shouldering the cost of these people's 60 percent bonus." Mr. Kerin opined that the legislature also needs to be forthright about the transfer of general fund operating costs that have already been transferred to PERS/TRS as a result of existing rehire legislation. 4:21:56 PM ROBERT McHATTIE, testifying on behalf of himself, told the committee that he is a retired PERS member, formerly employed by DOT&PF. He thanked Representative McGuire for her previous comments, which he said mirror his own. He said House Bill 242 originally addressed hard-to-hire teaching positions, especially in the Bush. He posited that the rehiring of retired teachers has generally been more justified and carefully handled compared to the mostly supervisory and "important person" rehires done in PERS. He offered an example of the careful handling in TRS. MR. McHATTIE, regarding PERS, said he thinks it's self-interest that makes those who are going to be or have been rehired and those who represent agencies that do the rehiring support the proposed legislation. He said he personally knows lower-level staff members in several different agencies who are against these hiring practices but are afraid to give negative testimony for fear of reprisals from management or senior workers who have been rehired or intend to return. Mr. McHattie said obviously it is the lower-level staffers' paychecks that will be diminished when the legislature jacks up the PERS contributions, without collecting it from those who have been rehired. He clarified, "[Those formerly retired employees who are rehired] collect two fat paychecks while paying nothing into PERS, and the coworkers ... know that's going on." He concluded: It has been argued that individuals are so knowledgeable and experienced, that they or others on the staff cannot be replaced. While I am sure that long-term employees all consider themselves to be irreplaceable - I know I did while I was working - that argument just doesn't wash. Administrators have always had the responsibility of making sure that staff positions can be covered in case of illness, vacations, death, or somebody just quitting. Considering that vacations for long-term employees can extend most of a month, I assume that various organizations don't fall apart during that time. Every employee is replaceable by necessity, except in cases where poor management or favoritism, or something like that, exists. 4:26:33 PM LARRY WIGET, Director, Government Relations, Anchorage School District, testified in support of the legislative intent of HB 161 to rehire retired employees when there is an actual shortage of applicants for the vacant position, and urged the legislature to extend the sunset date for the legislation with the caveat that similar restrictions currently placed on the rehire of TRS employees - AS 14.21.35 - be adopted for PERS employees, as well. He stated concern that the pre-selection and hiring of retirees to fill the job they have just vacated, without regard as to whether or not there is a qualified applicant pool from which to draw, eliminates the career ladder in state employment for other employees who are qualified and may apply and, unlike the rehire, would be contributing to the state retirement system. 4:28:09 PM BRUCE JOHNSON, Alaska Association of School Boards (AASB), said that association's membership resolved itself behind the extension of the rehire provision at its annual conference in November. He said, "We believe this is a valuable tool for school districts to have. I think it's been used sparingly, when necessary, and we still - even with this provision - have positions that are unfilled at the beginning of every school year, well into the semester, in some cases." He offered an example. He said a lot of money has been invested in teachers who have reached retirement eligibility age, but may still have a couple years left to teach, perhaps after going away for a while. They can come back, work for a couple of years, and "fill some vital needs." He said most districts would just as soon bring in a young teacher to employment and guarantee that he/she will be there for a long time, but the reality is that it's just not possible in some of the areas with an acute shortage of teachers. 4:30:38 PM CHRIS S. CHRISTENSEN, Deputy Administrative Director, Administrative Staff, Office of the Administrative Director, Alaska Court System, stated that the retiree return program has been very helpful to the court system, and he said that system is hopeful that the program will be extended by the legislature. Mr. Christianson reported that the court system has approximately 650 nonjudicial employees at 32 locations around the state. Currently, there are only about 10 people participating in the program. Though that doesn't sound like many, he said, those positions are critical to the operation of the court system. He stated that to a much greater extent than the executive branch, the court system has a number of unique, one-person job classes. One example, he said, is the state law librarian. He said it is crucial that these job positions remain filled by knowledgeable persons. He said it is difficult to recruit internally for such positions, because more than half of the court system's employees are clerical employees who cannot be promoted to these specific jobs. MR. CHRISTIANSON stated that for certain jobs in the court system there have been no qualified applicants and there have been times when supervisors [who have retired] have had to be rehired. He explained that the turnover rate in the lower-level positions is about 50 percent within the first five years of employment. In some rural locations, the turnover is twice as bad. He said this is primarily because of low pay. MR. CHRISTIANSON said that the court system has, for more than the last decade, been running a mandatory 30-day hiring freeze for all positions; the only person allowed to waive the freeze is the administrative director. He said this action is financially responsible; however, because of the practice, when jobs turn over there are vacancies that last for 30 days. He said the freeze is a double-edged sword: it requires that the supervisors be more experienced in order to keep the case load moving during times when there are job vacancies, but the turnover means that fewer people get the years of experience they need to become supervisors. He continued: "The retiree return program has enabled the court system to continue to function in an efficient manner because of our ability to hire back experienced and knowledgeable employees in the one-person job classes and in the rare supervisory positions where we simply cannot fill the job. Without it, we would be struggling to fill certain key positions." MR. CHRISTIANSON noted that the court system participated in the retirement incentive program (RIP) several years ago. He emphasized how damaging the RIP was; the court system lost the core of its long-term, experienced supervisors. Mr. Christianson stated, "To some extent, this program has helped us make up for that a little bit. And that's one of the reasons we are appreciative of this." CHAIR WILSON closed public testimony. 4:35:12 PM CHAIR WILSON said there are problems to be worked out, but there also is "an obvious need." She mentioned future work on the bill. 4:36:49 PM REPRESENTATIVE ANDERSON said he has heard concerns expressed from Alaska State Troopers and is glad the bill will be held so that they will have a chance to offer their comments. CHAIR WILSON announced that [HB 161 was heard and held].
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