04/14/2021 09:00 AM Senate FINANCE

SENATE BILL NO. 55                                                                                                            
                                                                                                                                
     "An  Act  relating  to employer  contributions  to  the                                                                    
     Public  Employees'  Retirement  System of  Alaska;  and                                                                    
     providing for an effective date."                                                                                          
                                                                                                                                
9:09:14 AM                                                                                                                    
                                                                                                                                
Co-Chair Bishop discussed housekeeping.                                                                                         
                                                                                                                                
9:09:57 AM                                                                                                                    
                                                                                                                                
NEIL STEININGER, DIRECTOR, OFFICE  OF MANAGEMENT AND BUDGET,                                                                    
OFFICE OF  THE GOVERNOR,  explained that  the intent  of the                                                                    
bill  was to  change the  way  that the  state financed  the                                                                    
state  assistance  portion  of PERS  contributions  for  the                                                                    
State  of Alaska  as  an  employer. He  said  that the  bill                                                                    
impacted the state assistance payments  made in the language                                                                    
section   of   the    operating   budget   and   transferred                                                                    
approximately  $100  million  of  those  payments  into  the                                                                    
agency operations  budgets where  they could be  shared with                                                                    
other fund sources  that paid for state  agency payroll. The                                                                    
move would  result in a  net savings of  approximately $25.7                                                                    
million of UGF by utilizing  other fund sources to cover the                                                                    
cost. He  relayed that  under current  law the  payment into                                                                    
the PERS  system based on  payroll was capped at  22 percent                                                                    
of payroll;  the mechanism by  which the bill  would achieve                                                                    
savings  would be  to  remove  the cap  and  apply the  full                                                                    
actuarial rate  to state payroll.  He relayed that  the rate                                                                    
for the  following fiscal  year would  be 30.11  percent. He                                                                    
shared that the  difference in percentage would  be added to                                                                    
state payroll but compensated for  with the reduction of the                                                                    
state assistance portion in the budget.                                                                                         
                                                                                                                                
9:11:54 AM                                                                                                                    
                                                                                                                                
Co-Chair Stedman  asked for commentary on  potential impacts                                                                    
of the legislation at the local level.                                                                                          
                                                                                                                                
Mr. Steininger  stated that  the bill  was intended  only to                                                                    
impact  the State  of Alaska  as an  employer and  would not                                                                    
impact  municipalities  and the  like.  The  bill would  not                                                                    
impact  the  Teacher's  Retirement System  (TRS)  and  would                                                                    
continue to  make the full actuarial  contribution and would                                                                    
not impact retirement payments.                                                                                                 
                                                                                                                                
9:13:09 AM                                                                                                                    
                                                                                                                                
Senator   Olson   referenced    the   22   percent   payroll                                                                    
contribution that  had a  cap. He  wondered what  other fund                                                                    
sources would make up the 30.11 percent.                                                                                        
                                                                                                                                
Mr.  Steininger stated  that the  funds  would be  primarily                                                                    
federal receipts.                                                                                                               
                                                                                                                                
9:13:54 AM                                                                                                                    
                                                                                                                                
Senator  Olson  asked what  would  happen  if there  was  an                                                                    
interruption  in   federal  receipts  and  a   shortfall  in                                                                    
contributions.                                                                                                                  
                                                                                                                                
Mr.  Steininger replied  that OMB  had had  discussions with                                                                    
state agencies  about the possibility  of delayed  funds and                                                                    
said that any shortfall would be accommodated with UGF.                                                                         
                                                                                                                                
9:15:03 AM                                                                                                                    
                                                                                                                                
Senator  Wielechowski  asked  about the  proposed  effective                                                                    
date of  July 1, 2021.  He asked whether  the administration                                                                    
had considered  moving the date  to as early as  possible in                                                                    
order to  take advantage  of the infrastructure  or Covid-19                                                                    
funds from the federal government.                                                                                              
                                                                                                                                
Mr. Steininger explained that the  date was kept to simplify                                                                    
the accounting  work done  by the  state. He  furthered that                                                                    
changes  would have  to be  made  to profiles  that pay  the                                                                    
salaries  for state  employees and  making changes  mid-year                                                                    
would be more work than was necessary.                                                                                          
                                                                                                                                
Senator  Wielechowski recognized  there could  be more  work                                                                    
and  asked whether  there had  been a  cost-benefit analysis                                                                    
done to determine whether the change was truly beneficial.                                                                      
                                                                                                                                
Mr. Steininger  conveyed that most  of the money  that would                                                                    
come  to  the  state   through  a  potential  infrastructure                                                                    
package  would likely  be spent  in FY  22 and  beyond; very                                                                    
little of  the money would be  spent in FY 21.  He said that                                                                    
the  effective  date would  capture  the  funds because  the                                                                    
effective  date would  allow for  the charge  to be  for any                                                                    
                          st                                                                                                    
work  done  after  July  1.     Most  of the  work  done  of                                                                    
infrastructure projects would happen after that date.                                                                           
                                                                                                                                
9:17:17 AM                                                                                                                    
                                                                                                                                
SB  55  was   HEARD  and  HELD  in   committee  for  further                                                                    
consideration.                                                                                                                  
                                                                                                                                
Co-Chair Bishop set an amendment  deadline for Friday, April                                                                    
16, 2021 at 5PM. He discussed further housekeeping.