Legislature(2013 - 2014)SENATE FINANCE 532
04/16/2014 01:30 PM Senate FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB379 | |
| SB220 | |
| HB308 | |
| HB361 | |
| HB160 | |
| HB116 | |
| SB48 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 278 | TELECONFERENCED | |
| + | HB 385 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| = | HB 379 | ||
| = | SB 220 | ||
| = | HB 308 | ||
| = | HB 361 | ||
| = | HB 160 | ||
| = | SB 48 | ||
| = | HB 116 | ||
SENATE BILL NO. 48
"An Act requiring each municipality with a population
that decreased by more than 25 percent between 2000
and 2010 that participates in the defined benefit plan
of the Public Employees' Retirement System of Alaska
to contribute to the system an amount calculated by
applying a rate of 22 percent of the total of all base
salaries paid by the municipality to employees of the
municipality who are active members of the system
during a payroll period; reducing the rate of interest
payable by a municipality with a population that
decreased by more than 25 percent between 2000 and
2010 that is delinquent in transmitting employee and
employer contributions to the defined benefit plan of
the Public Employees' Retirement System of Alaska;
giving retrospective effect to the substantive
provisions of the Act; and providing for an effective
date."
3:48:53 PM
DAVID SCOTT, STAFF, SENATOR DONNIE OLSON, SB 48 seeks to
provide relief to those communities that have faced
hardship due to the PERS "salary floor" established in SB
125 of the 25th Legislature. He stated that SB 125 changed
the PERS system from a 'multiple employer plan' to a 'cost
share plan'. That is, SB 125 transferred the individual
liability of the 160 PERS employers and consolidated that
liability so that all the employers share in that
liability. He announced that SB 125 also created what is
commonly referred to as the 2008 salary floor. That is,
every PERS employer will have a penalty imposed on them if
their salary base is below that of 2008. This was
instituted to ensure that the system could not be "gamed".
This is to keep municipalities from hiring people on a
contract basis and, therefore, allowing the base payments
into the system from shrinking. Many municipalities, due to
circumstances beyond their control, have found themselves
under the 2008 floor for a number of years. Most of these
are very small remote communities. Some of the affected
communities are simply trying to lower their budgets by
actively laying-off or not re-hiring due to attrition.
Some communities lost employees due to a base closure or a
regional clinic closure. To further make the point, there
is currently one community that owes $420,000 at 12 percent
interest. He stressed that SB 48 was introduced to help
communities in this situation. He stated that SB 48 will
address this issue in two ways: 1) Changes the "2008
floor" to 2012 for those communities that have lost 25
percent of their population between 2000 and 2010; and 2)
Provides relief to those communities that are delinquent in
transferring contribution if their population decreased by
more than 25 percent between 2000 and 2010. He remarked
that SB 48 does not intend to repeat the "2008 floor"
debate, but rather provide relief to those communities
affected by the arbitrary line that SB 125 created.
Vice-Chair Fairclough handed the gavel to Co-Chair Meyer.
3:56:11 PM
Senator Olson understood that the communities were facing a
financial burden that they would never overcome. He queried
the efforts of various communities who were attempting to
remedy this financial problem. Mr. Scott replied that there
were some communities that had lost 25 percent of their
populations from 2000 to 2010, like Pelican. He stated that
Pelican, Anderson, and Atka did not have any outstanding
delinquent contributions. He stressed that the only two
communities that had delinquent contributions were Galena
and St. George, who had also lost populations by more that
25 percent between the two censuses.
Co-Chair Meyer surmised that the bill asked the state to
cover those communities' share of the PERS contribution.
Mr. Scott replied that the legislation would forgive the
delinquent contribution penalty and cover the cost of the
contribution. He stressed that the bill to the PERS system
would continue to grow from 12 percent on $690,000, which
was up from the year prior at $420,000.
Co-Chair Meyer wondered if there was any hope that the
communities would be able to pay that amount. Mr. Scott
replied that Galena had taken a loan interest loan through
the bond bank to attempt to cover their community costs,
while recovering from a flood. He felt that Galena would
not be able to cover that cost, because the interest was
making the debt grow rapidly.
Senator Bishop stressed that Galena was under severe
financial stress from various entities. Senator Olson
agreed.
4:00:32 PM
MICHAEL BARNHILL, DEPUTY COMMISSIONER, DEPARTMENT OF
ADMINISTRATION, stated that the bill's fiscal note
reflected a retroactive effect. He stated that the
communities would see a benefit of a decreased rate of
interest that had an impact on the system, which was
detailed in the fiscal note.
Vice-Chair Fairclough pointed out that the fiscal note from
the Department of Administration (DOA) showed $180,000 in
FY 14; $176,000 in FY 15; $167,000 in FY 16; $157,000 in FY
17; $148,000 in FY 18; $139,000 in FY 19. She felt that it
appeared that the contribution by the state would decrease.
She looked at the estimated supplemental FY 13 costs of
$706,000. Mr. Barnhill replied that the supplemental cost
reflected the impact of the retroactivity of the bill. He
stressed that the costs were amounts that the state would
not collect under existing law, if the bill were passed
into law.
Co-Chair Meyer wondered if the money would ever be
collected. Mr. Barnhill responded that it was difficult to
speculate the future for communities like Galena, but one
could not rule out that perhaps Galena's fortune may turn
positive at some point.
Senator Olson stressed that Galena recently suffered a
flood, and some people could not even move back into their
homes. He pointed out that there was a significantly
decrease in the general population and school membership.
He reiterated that it was very improbably that Galena would
be able to afford to pay the debt.
Vice-Chair Fairclough wondered how the issue of fairness to
the state picking up the costs of one municipality on not
that of another municipality. She remarked that the
Municipal League had asked the legislature to eliminate the
termination studies for other cities. She felt that there
was a problem in determining what communities were
considered "winners" and "losers." She felt that there were
many communities across the state that were burdened by the
2008 salaries costs, in regards to contributions. Mr.
Barnhill responded that he was not diminishing the
substantial burdens that Galena and other communities were
facing. He stressed that the issue was statewide for
smaller communities' ability to sustain participation and
TRS on an ongoing basis.
4:05:55 PM
Vice-Chair Fairclough stressed that the issue of pension
liability was a burden for everyone, which was why the
governor had suggested a cash infusion. She stated that
there were municipalities that had discussed the
termination study. She felt empathy, but felt that solving
the issue for one community may be at a disadvantage for a
dozen other communities or the entire system. The state was
transitioning from meeting its obligations to withdrawing
reserves. She felt that the bill was an entire year's worth
of conversation to determine the best method. She felt that
it was reasonable to reduce the interest rate, when
communities were struggling. She wondered how the state
would react, if the city failed to make the payments. She
specifically wondered if those employees would not be
entitled for benefits. Mr. Barnhill replied that, to date,
the process was to send notices of delinquency on a
periodic basis. The statute provided DOA the authority to
intercept municipal revenue sharing, but had never
exercised that right. As the delinquency list continued to
grow, the state's reticence to exercise that intercept
needed to be examined.
Senator Olson wondered if the employees would not receive
their retirement benefits, if there were delinquent
payments. Mr. Barnhill responded that the employees were
still participants in the system, and were still entitled
to their benefits.
Senator Hoffman remarked that $420,000 for a community of
470 people, it would take approximately 12 or more years of
revenue sharing to pay that debt. He stated that the
community was probably utilizing the revenue sharing to
keep their offices open. He stated that most of the
communities of 100 to 500 people used their revenue sharing
to keep their municipal office in operation. He furthered
that, in 2010, there were 470 people in Galena, so a family
of required to pay in excess of $3500 dollars. He stressed
that Galena was greatly impacted, much more than other
small communities in the state.
4:11:27 PM
Co-Chair Meyer wondered if there were any PERS employees in
Galena. Mr. Barnhill replied that there were PERS employees
in Galena, and deferred to Mr. Scott for the exact number
of employees.
Mr. Scott stated that there were 17 PERS employees in
Galena.
Co-Chair Meyer queried the economic activity in Galena.
Senator Hoffman responded that the current economic
activity was focused on home repair.
Co-Chair Meyer stated that the military base in Galena had
closed, with no effort toward reopening.
Mr. Scott announced that Galena had 17 current PERS
employees, however the community's contribution to the
state was for 36 employees, which was the 2008 floor.
Vice-Chair Fairclough surmised that there would be 36 total
employees that would be retired from the PERS system. Mr.
Scott replied that the 36 employee contribution was
considered the 2008 floor.
Co-Chair Meyer stressed that it was an important issue, and
felt that it would not be resolved in the current session.
He hoped that Mr. Barnhill could assist in a solution
during the interim. Mr. Barnhill replied that he was
willing to explore solutions.
Vice-Chair Fairclough wondered if the 25 percent loss in
the census was an accurate measurement to assist all
Alaskan communities. Mr. Barnhill replied that there was a
census table that outlined population loss employer by
employer. He stated that the table would show how many
participating employers were added at the 25 percent level,
20 percent level, and so forth.
Mr. Scott stated that he would provide the graph to the
committee at a later date.
Vice-Chair Fairclough whether the 25 percent threshold was
better than the 20 percent threshold. Mr. Barnhill
responded that he was not prepared to respond to the
inquiry.
Vice-Chair Fairclough asked if there was a different
criteria that the Senate should study. Mr. Barnhill replied
that there should be an examination of a prospect for a
sustainable revenue base within the community that could
support continued participation in the system over the next
ten or twenty years.
Senator Hoffman noticed that Mr. Barnhill had stated that
there was an option of intercepting Galena's revenue
checks. He wondered if the department would withhold that
particular implementation of the law, until the legislature
was able to address the issue the following year. Mr.
Barnhill replied that the state needed to reexamine its
reticence in utilizing the revenue intercept. He stressed
that he would look some solutions that would avoid using
the revenue intercept.
SB 48 was HEARD and HELD in committee for further
consideration.