Legislature(2023 - 2024)GRUENBERG 120
05/10/2024 03:00 PM House STATE AFFAIRS
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| Audio | Topic |
|---|---|
| Start | |
| HB302 | |
| HB293 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| += | HB 293 | TELECONFERENCED | |
| *+ | HB 302 | TELECONFERENCED | |
HB 302-EMPLOYEE RETIREMENT BENEFITS/SBS
[Contains discussion of SB 88.]
3:51:14 PM
CHAIR SHAW announced that the first order of business would be
HOUSE BILL NO. 302, "An Act relating to supplemental employee
benefits; relating to retirement benefits of peace officers and
firefighters hired after June 30, 2006; and providing for an
effective date."
3:51:23 PM
REPRESENTATIVE WRIGHT moved to adopt the proposed committee
substitute (CS) for HB 302, Version 33-LS0895\S, Klein, 5/9/24,
as a working document.
3:51:38 PM
CHAIR SHAW objected.
3:51:51 PM
BUDDY WHITT, Staff, Representative Laddie Shaw, Alaska State
Legislature, gave an overview of changes between the original
bill and the proposed CS for HB 302, Version S, [included in the
committee packet], which read as follows [original punctuation
provided]:
Adds Section 8
Adds a new section uncodified law that provides a 9.75
percent employer contribution to teachers under AS
14.25.350 (a) (defined contributions for teachers) for
FY 25, FY 26, and FY 27, bringing combined
contributions for teachers to 30 percent for those
years. These contributions will serve as teacher
recruitment and retention bonuses.
Section 9
Effective date of July 1, 2024.
3:52:47 PM
CHAIR SHAW removed his objection. There being no further
objection, Version S was before the committee.
3:53:16 PM
REPRESENTATIVE CARPENTER, as prime sponsor, presented HB 302,
Version S to the committee. He said the bill is meant to
address the disparities that exist in the current retirement
system in Alaska and introduced his staff, Kendra Broussard, to
give a PowerPoint presentation on the changes made in Version S.
3:54:27 PM
KENDRA BROUSSARD, Staff, Representative Ben Carpenter, Alaska
State Legislature, on behalf of Representative Carpenter, prime
sponsor, gave a PowerPoint presentation [hard copy included in
the committee packet] outlining changes made in HB 302, Version
S. She began on slide 1, which read as follows [original
punctuation provided]:
Overview
Aims to modernize retirement benefits for Peace
officer and firefighter employees in Alaska, aligning
them with national workforce trends and ensuring
equitable access to enhanced defined contribution
plans.
Addresses an imbalance by allowing Teachers to
opt into the SBS plan, ensuring more equitable
retirement benefits.
Gives a bonus Contribution for Teachers over a
three-year period.
MS. BROUSSARD moved to slide 2, which read as follows [original
punctuation provided]:
Regular PERS members meet best practice
standards, but Peace officer and firefighter employees
do not meet the best practice standard combined
Employer and employee contribution target of 30%.
Employer contributions for public safety would rise
from 5% of pay to 9.74% of pay under this Bill. Public
safety contributions, when paired with SBS-AP
contributions, would reach the 30% threshold.
Members of the Public Employee Retirement System
personnel are covered by the Defined Contribution Plan
and the Supplemental Benefit Plan under Alaska's
current pension design. Teachers are not included.
3:55:54 PM
REPRESENTATIVE STORY asked for clarification about the three-
year figure mentioned on slide 1.
MS. BROUSSARD explained that Version S would give a one-time,
per-year bonus contribution into a Teachers' Retirement System
(TRS) defined contribution system over a period of three years.
3:57:08 PM
REPRESENTATIVE CARPENTER, in response to a question from
Representative Carrick, confirmed that that only teachers would
receive the three-year bonus.
MS. BROUSSARD resumed the presentation on slide 3, which read as
follows [original punctuation provided]:
Alaska's teacherswhose union chose not to participate
in the Supplemental Benefits program when offered the
option many years ago and also do not participate in
Social Securityhave a combined 15% employer and
employee contribution, which is substantially below
the target contribution range."
"A proposed bill would make Alaska the gold standard
in defined contribution retirement plans for public
workers"
- Commentary from Reason Foundation-
MS. BROUSSARD continued to slide 4, which read as follows
[original punctuation provided]:
"Education in Alaska is a matter of significant
government concern.
1. Competition for quality teachers is a
nationwide issue and multiple jurisdictions have
adopted legislation to incentivize teacher
recruitment.
2. Attracting and retaining top quality educators
to the state is absolutely vital to fulfilling
Alaska's obligation to provide a useful education to
our children. However, due to the uniqueness of
Alaska's geography and the remoteness of some of our
schools, we are experiencing a crisis in recruiting
and retaining the best teachers for our children."
Governor Dunleavy Sponsor Statement for HB 106
This Bill incentivizes retention and recruitment by
providing a 9.75 percent employer contribution to
teachers for FY 25, FY 26, and FY 27, bringing
combined contributions for teachers to 30 percent for
those years.
4:00:31 PM
REPRESENTATIVE CARPENTER clarified that the slide soon-to-be
displayed was the Reason Foundation's analysis of SB 88.
MS. BROUSSARD skipped to slide 7, which read as follows
[original punctuation provided]:
"SB 88 could cost Alaska an additional $9.6 billion
over the status quo. Actuarial analysis of Alaska PERS
and TRS that anticipates realistic economic conditions
and market stress over the next 30 years shows SB 88
likely exposes the state to significant additional
costs. Source: Pension Integrity Project 30-year
actuarial forecast of Alaska PERS and TRS. The
scenario applies recession returns in 2024-27 and
2039-42 and 6% returns in all other years. Values are
adjusted for inflation. Bottom Line: SB 88 would
likely cost Alaska more than $9 billion in the coming
decades. Since most public employees leave their
positions before being fully eligible for their
pension benefits, this could be very costly
legislation that only benefits a relatively small
group of workers"
"Senate Bill 88 would expose Alaska to significant
additional costs"
Backgrounder from Reason Foundation
MS. BROUSSARD continued to slide 8, which displayed a graph that
showed two different lines depicting different financial
outcomes if a pension-like retirement system were to be
reinstated in Alaska.
4:02:22 PM
REPRESENTATIVE STORY commented that she took great exception to
the slide referencing SB 88 and opined that it is misleading and
"greatly exaggerated."
4:03:50 PM
MS. BROUSSARD moved to slide 9, which displayed a graph that
showed teachers' annual benefits at retirement and how the
benefits would be affected depending on which pieces of
legislation were passed. She continued to slide 10, which
displayed a graph that showed police and fire benefits at
retirement and how the benefits would be affected depending on
which pieces of legislation were passed.
4:04:42 PM
REPRESENTATIVE CARPENTER, in response to Representative Story's
earlier remarks, referenced the previous slides that displayed
graphs and explained that the current defined benefits system
would be paid off as time moves on.
4:06:02 PM
ZACHARY CHRISTENSEN, Managing Director, Reason Foundation,
explained that the graphs displayed on previous slides were the
Reason Foundation's own estimates of the financial impacts of a
public retirement system and explained how the financial figures
were attained by the company. He gave a comparative analysis of
Alaska's supplemental benefits plan (SBS) and current retirement
systems and explained how they would look years in the future,
and further explained the perceived implications that such a
spending bill would have on Alaska in the coming years.
4:09:23 PM
REPRESENTATIVE STORY asked if recessions are imminent for each
state that has a public retirement system and further questioned
what the historical average rate of return on SBS has been for
the state.
MR. CHRISTENSEN responded that there are a growing number of
states that are applying a "stress test" to develop a fiscally
responsible public retirement system.
4:12:08 PM
RYAN FROST, Managing Director, Reason Foundation, relayed that
most states' average return rate for an SBS plan is about 6.8
percent and said that the rate of return for a public retirement
plan is generally reliant on the current market rate.
REPRESENTATIVE STORY asked which other states have participated
in actuarial with the Reason Foundation.
MR. FROST answered that the Reason Foundation has participated
in reforms in Colorado, Michigan, Arizona, Florida, North
Carolina, Mississippi, Texas, Montana, and New Mexico.
4:15:01 PM
REPRESENTATIVE CARPENTER asked how the debt of the proposed
legislation would show on the previously displayed financial
projections.
MR. FROST explained that the graph displays what is currently
being spent on retirement and said that HB 302, Version S, would
not add any debt to the State of Alaska.
REPRESENTATIVE CARPENTER asked if adding a defined benefits
system with an unspecified figure of debt is necessary in order
to provide a good retirement for public employees.
4:17:55 PM
MR. FROST shared his belief that currently, teachers in Alaska
are "forfeiting well over a million dollars" in benefits by not
being enrolled in the SBS plan with the State of Alaska and
further opined that HB 302, Version S, is "orders of magnitude"
more adequate in its proposed retirement benefits than the
retirement benefits proposed under SB 88.
REPRESENTATIVE CARPENTER asked how public employees' retirement
system [benefits] might be impacted by an employee's resignation
before retirement.
MR. FROST explained the nuances of the current and proposed
retirement plans and used a hypothetical example to explain his
answer.
4:20:32 PM
REPRESENTATIVE CARRICK asked if public safety officers and
firefighters are currently enrolled in Alaska's SBS program.
ALEXEI PAINTER, Director, Legislative Finance Division, answered
that depends whether or not a police officer or firefighter
might be enrolled in Alaska's SBS program.
REPRESENTATIVE CARRICK asked how the State of Alaska could make
SBS mandatory for public safety officers.
MR. PAINTER answered that there is a process for public safety
officers to engage in a vote to enroll in the SBS system and
explained that the cost of the benefit would fall on the
employer, not the State of Alaska.
4:23:08 PM
REPRESENTATIVE STORY asked for clarification on her
understanding of how an employer would contribute to an
employee's retirement benefits. She asked when Alaska would pay
off its current pension debt. She asked if the Legislative
Finance Division analyzed other states in a "stress test" and
further questioned why those tests are performed in the first
place.
MR PAINTER answered that the legislature has adopted an
amortization to pay off its current pension debt by 2039 and
explained that if the state cannot pay for that debt by 2039,
then the legislature may adopt a "layered amortization" on top
of the current amortization in order to pay the debt off more
gradually. He explained the different methods of a retirement
benefits "stress test" and emphasized that it is a common method
of assurance of the quality of a given retirement benefits
system.
4:28:52 PM
REPRESENTATIVE CARPENTER asked if the Legislative Finance
Division has had a chance to assess the cost of HB 302, Version
S.
MR. PAINTER answered that the division has prepared a cost
estimate and reviewed the sectional analysis of HB 302, Version
S, [copy included in committee packet], which read as follows
[original punctuation provided]:
Sections 1, 2
Amends the supplemental benefits system (SBS)
statute (AS 39.30.150) to allow participating
employees, not participating employers, to contribute
toward a participating employee's
supplemental benefits plan. This change shifts the
decision to join SBS from the employer to the
employee.
Section 3, 4
Amends the benefit options statute (AS 39.30.160)
to allow participating employees to contribute
toward a participating employee's special benefits
that include supplemental health benefits,
supplemental death benefits, supplemental disability
benefits, and supplemental dependent care
benefits.
Section 5
Adds a section to employee benefits (AS
39.30.170) (e) to allow any active member of the
teachers' retirement system (AS 14.25) or a peace
officer or firefighter by a political subdivision
of the state to elect to participate in SBS if not a
member of the federal social security system.
Section 6
Add the definition of "participating employee" to
the supplemental benefits statute (AS
39.30.180) to include a person who elects to
participate in SBS.
Section 7
Amends the public employees defined contributions
statute (AS 39.35.180 (a)) to raise the
annual employer contribution for peace officers and
firefighters from five percent to 9.74
percent, bringing combined contributions for peace
officers and firefighters to 30 percent.
Section 8
Adds a new section uncodified law that provides a
9.75 percent employer contribution to
teachers under AS 14.25.350 (a) (defined contributions
for teachers) for FY 25, FY 26, and FY
27, bringing combined contributions for teachers to 30
percent for those years. These
contributions will serve as teacher recruitment and
retention bonuses.
Section 9
Provides an effective date of July 1, 2024.
4:33:18 PM
REPRESENTATIVE STORY asked what the cost of SB 88 would be for
fiscal year 2025 (FY 25).
MR. PAINTER explained that SB 88 has zero cost in FY 25 because
the rates for FY 25 have already been adopted.
4:34:45 PM
REPRESENTATIVE CARPENTER moved back to slide 10, which displayed
a graph of police and fire benefits and how they would be
impacted by the passage of either HB 302, Version S, or SB 88.
He emphasized that the method of retirement benefits proposed HB
88 is to reinstate a pension-based retirement and explained how
that is different from the current defined contribution plan.
He said that HB 302, Version S, would require that retirement
benefits be paid for in the current budget and not allow for the
proposed retirement benefits to be paid for in future years.
4:37:38 PM
The committee took a brief at-ease at 4:37 p.m.
4:38:34 PM
CHAIR SHAW commented that the purpose of the proposed
legislation is to provide a benefit across the board to all
public employees and shared his belief that HB 302, Version S,
addresses many of the complexities associated with retirement
benefits.
4:39:08 PM
REPRESENTATIVE CARPENTER moved back to slide 9, which displayed
a graph of teachers' benefits and how they would be impacted by
the passage of either HB 302, Version S, or SB 88. He
emphasized that only local and state governments have the option
to opt out of Social Security and shared his belief that it is
unfair for private companies to fund a program that is not used.
4:41:29 PM
REPRESENTATIVE STORY opined that [HB 302, Version S] does not
address the current vacancy and turnover rate regarding public
employment and said that she would prefer to move SB 88 out of
committee because it incentivizes retention and eventual
retirement.
4:42:43 PM
REPRESENTATIVE WRIGHT moved to report CSHB 302, Version 33-
LS0895\S, Klein, 5/9/24, out of committee with individual
recommendations and the accompanying fiscal notes.
REPRESENTATIVE CARPENTER objected.
REPRESENTATIVE CARPENTER posited that employees are not working
for a single employer for as long as they used to and shared his
belief that forcing an employee to stay at a certain workplace,
as they would have to under a defined benefits plan, is negative
for all employment sectors. He said that HB 302, Version S,
would allow employees to retire early and "with dignity" when
necessary.
4:45:46 PM
REPRESENTATIVE ALLARD commented that she would "rather have a
happy employee" than one who is forced to stay at a workplace
they don't like just to maintain their requirement and signaled
her support for HB 302, Version S, over SB 88.
REPRESENTATIVE CARRICK said that she was "reluctantly in
opposition" to HB 302, Version S, because she knows that the
younger generation of workers isn't staying with one employer
for as long as they did in the past. She signaled her support
for certain parts of the proposed legislation and said that her
experience with the younger workforce is what is leading her to
oppose other parts of HB 302, Version S.
4:50:20 PM
REPRESENTATIVE STORY added that she wanted HB 302, Version S, to
move forward and said that a defined benefits system would be
very affordable for the state.
4:51:41 PM
REPRESENTATIVE CARPENTER maintained his objection.
4:51:45 PM
A roll call vote was taken. Representatives Allard, Story, C.
Johnson, Wright, Carpenter, and Shaw voted in favor of reporting
CSHB 302, Version 33-LS0895\S, Klein, 5/9/24, out of committee
with individual recommendations and the accompanying fiscal
notes. Representative Carrick voted against it. Therefore,
CSHB 302(STA) was reported out of the House State Affairs
Standing Committee by a vote of 6-1.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 293 Explanation of Change Version A to S.pdf |
HSTA 5/10/2024 3:00:00 PM |
HB 293 |
| CS HB 293 version S.pdf |
HSTA 5/10/2024 3:00:00 PM |
HB 293 |
| HB0302A.pdf |
HSTA 5/10/2024 3:00:00 PM |
HB 302 |
| HB 302 v. B 1.31.2024.pdf |
HSTA 5/10/2024 3:00:00 PM |
HB 302 |
| HB 302 v. B Sponsor Statement 1.31.2024.pdf |
HSTA 5/10/2024 3:00:00 PM |
HB 302 |
| HB 302 Sponsor Statement.pdf |
HSTA 5/10/2024 3:00:00 PM |
HB 302 |
| HB 302 v. B Sectional Analysis 1.31.2024.pdf |
HSTA 5/10/2024 3:00:00 PM |
HB 302 |
| CS For HB 302 v.S 5.09.2024.pdf |
HSTA 5/10/2024 3:00:00 PM |
HB 302 |
| CS to HB 302 v.S Sectional Analysis 5.09.2024.pdf |
HSTA 5/10/2024 3:00:00 PM |
HB 302 |
| HB 302 Explanation of Changes Version B to S.pdf |
HSTA 5/10/2024 3:00:00 PM |
HB 302 |
| HB 302 Sectional Analysis.pdf |
HSTA 5/10/2024 3:00:00 PM |
HB 302 |
| HB 302 Contribution Changes - Supporting Document.pdf |
HSTA 5/10/2024 3:00:00 PM |
HB 302 |
| CS to HB 302 Presentation.pdf |
HSTA 5/10/2024 3:00:00 PM |
HB 302 |
| HB 293 Fiscal Note DMV 1.26.2024.pdf |
HSTA 5/10/2024 3:00:00 PM |
HB 293 |
| HB 302 Fiscal Note DOA RNB.pdf |
HSTA 5/10/2024 3:00:00 PM |
HB 302 |
| HB 293 Fiscal Note DPS 1.26.2024.pdf |
HSTA 5/10/2024 3:00:00 PM |
HB 293 |