Legislature(2023 - 2024)BELTZ 105 (TSBldg)
03/29/2023 01:30 PM Senate LABOR & COMMERCE
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| Audio | Topic |
|---|---|
| Start | |
| SB83 | |
| SB93 | |
| SB88 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 83 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | SB 93 | TELECONFERENCED | |
| += | SB 88 | TELECONFERENCED | |
SB 88-RETIREMENT SYSTEMS; DEFINED BENEFIT OPT.
1:53:59 PM
CHAIR BJORKMAN reconvened the meeting and announced the
consideration of SENATE BILL NO. 88 "An Act relating to the
Public Employees' Retirement System of Alaska and the teachers'
retirement system; providing certain employees an opportunity to
choose between the defined benefit and defined contribution
plans of the Public Employees' Retirement System of Alaska and
the teachers' retirement system; and providing for an effective
date."
Chair Bjorkman noted that this is the sixth hearing of this
bill. He advised that testifiers may submit written testimony to
[email protected].
1:54:50 PM
CHAIR BJORKMAN opened public testimony on SB 88.
1:55:46 PM
TODD BURNINGHAM, representing self, Eagle River, Alaska,
testified in support of SB 88. He described his career in public
service, from the US Marine Corps to public education. He said
he was unaware that moving to Alaska mid-career would diminish
his previous foundation in building safety for retirement.
Alaska will not have a competitive offering to recruit teachers
without SB 88. The Anchorage School District currently has 17
special education teacher openings, 43 elementary teacher
openings, 40 secondary teacher openings, 142 paraprofessional
openings, and many openings for administrators. Understaffing
hurts students of all abilities and their ability to succeed
faces unneeded barriers.
1:58:05 PM
BARBARA TYNDALL, representing self, North Pole, Alaska,
testified in opposition to SB 88. She said that people are weary
of past government spending because right now the state of
Alaska owes $7.4 billion due to a previous, unfeasible, defined
benefit system. She said it doesn't make sense to drive the
state further into debt which is why she opposes SB 88.
2:00:18 PM
WILL CHERVENAK, representing self, Kenai, Alaska, testified in
support of SB 88. He said his concern stems from the fact that
Alaskan teachers are not eligible for Social Security benefits
and do not have a guaranteed pension under the current system.
This is the only state in the country where this is true. As a
school administrator he has seen the effect of the lack of a
defined benefit option for Alaska teachers. He said this
practice has resulted in ever shallower hiring pools as well as
amazing teachers leaving Alaska for a guaranteed pension. He has
had many conversations with colleagues about retirement in
Alaska and for his TRS Tier III cohorts, retirement is the
biggest driving factor in determining whether they will choose
to stay. He implored the committee to support SB 88.
2:02:34 PM
JENNA FABIAN, Principal, Nikiski North Star Elementary, Kenai
Peninsula Borough School District, Board Secretary, Alaska
Association of Elementary School Principals, Nikiski, Alaska,
testified in support of SB 88. She said Alaska currently is one
of the few states that educators no longer have a retirement
plan and do not pay into Social Security. Right now, there is a
roughly 38 percent principal turnover rate. Certified
professionals leave Alaska after a few years because there is no
incentive to stay. The Kenai Peninsula Borough School District
has seen a direct impact regarding difficulties recruiting and
retaining staff. The impact of inflation coupled with Alaska's
current retirement system for educators has caused drastic
changes to hiring pools. Five years ago, vacant positions would
have had 10-70 qualified applicants; now it is far less. The
outcome is even more concerning if this need is paired with flat
funding and the significant disruption to education over the
last several years. These factors have compromised the
instructional effectiveness of Alaska's certified teaching
professionals. She said she worries about teachers leaving the
state for more supportive retirement systems and whether there
will be qualified candidates for those vacancies.
2:05:22 PM
SAMANTHA WORTHAM, representing self, Manokotak, Alaska,
testified in support of SB 88. She said she is a science teacher
in a rural Native community off the road system. Her husband is
in the military so they have had to move a lot and she does not
qualify for Social Security. At 38 years old she has chosen to
live in Alaska, but has to face the reality that she has no real
chance of building a decent or workable retirement as long as
she works for the state. She is the kind of teacher Alaska
needs, but if she stays she'll be punished financially and will
have no income in later years. She said she wants the state to
make good on its promise to public servants.
2:07:43 PM
DAN POLTA, Superintendent, Denali Borough School District,
Healy, Alaska, testified in support of SB 88. He said he is a
TRS Tier II employee who believes the current PERS and TRS
programs must be redesigned. State municipal employees also
participate in the Supplemental Benefit System (SBS) which can
ameliorate some of the issues teachers face. Alaska teachers do
not participate in Social Security so PERS and TRS employees who
move between the state system and Social Security during their
working lives can be incredibly disadvantaged. At minimum,
teachers deserve the assurance of a secure retirement. He
implored open-minded discussion of SB 88 with the goal of
providing public servants with immediate guarantees for a
financially sound retirement and better working conditions.
2:10:18 PM
PENNY VADLA, Member, Kenai Peninsula School Board, Soldotna,
Alaska, testified in support of SB 88. She said her whole life
is centered around teaching, education, and children. Children
should be a number one priority. Alaska needs to provide
positive reimbursement for teachers, educators, and support
staff so that they remain in Alaska. One of the Kenai Peninsula
School Board's priorities is workforce development. Providing a
defined benefit plan will increase retention; currently, there
is little incentive for teachers to remain in Alaska long term.
In spite of excellent training programs, keeping teachers is
difficult because of a lack of a secure retirement program.
2:13:03 PM
CJ KOAN, representing self, Wasilla, Alaska, testified in
opposition to SB 88. She said Alaska owes $6.1 billion in
unfunded liability from a previous defined benefit plan and it's
a concern that this new defined benefit plan would also be
unsustainable. People will not stay in Alaska if taxes are high.
She expressed concern over the possibility of the PFD being
pilfered to pay for a defined benefit system. She said there
should be some sort of solution for the public system and she
recommends a defined contribution retirement system.
2:15:36 PM
CHAIR BJORKMAN clarified that testifiers are allowed to testify
once per bill per committee.
2:16:05 PM
BETH FREAD, representing self, Wasilla, Alaska, testified in
opposition to SB 88. She commented that the state transitioned
from a defined benefit plan because it was too expensive, but
now it suddenly isn't. She expressed disappointment over the
content of SB 88 and the lack of resourcefulness of Alaskans who
should reduce expenditures instead of leeching more money from
the government through taxes and taking from the PFD. The new
defined benefit plan proposed in SB 88 will be so expensive that
the government will need to borrow from the people. She said it
was just a Band-Aid for retention and implored the committee not
to repeat history. She reiterated opposition to SB 88 in its
current form.
2:17:26 PM
KIM HAYS, representing self, Anchorage, Alaska, testified in
support of SB 88. She said she works in the private sector and
has the good fortune of having a defined benefit retirement. She
said her parents, who worked in public service, are enjoying an
abundant retirement. Because her parents have pensions, they are
able to be highly involved grandparents resulting in freedom for
her and her husband to be more involved in their community. She
understands what it means to have retirement security. She would
like to have good public servants but they're leaving because of
a lack retirement security and competitive wages. SB 88 is the
first step to retaining and honoring public employees.
2:19:28 PM
BRIAN MASON, representing self, Eagle River, Alaska, testified
in support of SB 88. He said he is a teacher at Chugiak High
School with 17 years of experience in the district. During this
time the school has hired at least 12 younger, less experienced
people in the department and none have stayed beyond three to
five years. In most cases they left because they could not make
a future in Alaska. He said the department used to have eight to
a dozen applicants per position, now there may only be two.
During a teacher's conference, many fellow professionals
expressed interest in moving to Alaska but all of them lost
interest when they learned that there is no defined benefit plan
or access to Social Security. He reiterated support for SB 88.
2:21:55 PM
JACOB BERA, representing self, Chugiak, Alaska, testified in
support of SB 88. He expressed gratitude for Senator Giessel's
quality research in preparing SB 88. He said he spoke to a group
of Chugiak Elementary staff members and learned he was the only
TRS Tier II person in the room; the rest were all TRS Tier III.
They said the outcome of SB 88 would steer their decision about
whether to stay in Alaska or not. He noted that the defined
benefit is calculated on the average five years of consecutive
service and this might negatively impact parents who choose to
have a child and stay home. He told a story relating to this
notion. He suggested amending the language to omit the word
"consecutiveto avoid penalizing new parents who may need
intermittent years to care for their families.
2:24:38 PM
CHAIR BJORKMAN closed public testimony on SB 88.
2:24:59 PM
SENATOR CATHY GIESSEL, District E, Alaska State Legislature,
Juneau, Alaska, offered closing remarks as the sponsor of SB 88.
She emphasized that the previous defined benefit plan did not
fail due to its policy, but because an actuary made an error in
its projections and then lied to the state about the error. The
error and misrepresentation was not uncovered until a second
actuary was hired to audit the first one. The previous defined
benefit plan had been fully funded. The new defined benefit
system is modest but provides the ability for public employees
to have dignified retirements. The new plan shares the risk and
shares the cost between employees and employers with the goal of
maintaining 90 percent funding of the system.
SENATOR GIESSEL gave a slideshow on SB 88. She began on slide 2,
"Alaska Retirement Management Board March 16-17, 2023 Board
Meeting Div. Of Retirement & Benefits Supplement to the Treasury
Reportand spoke to these points:
• Over last 7 months, withdrawals of TRS DC and PERS
DC are approximately $62 million dollars
• 90% of these withdrawals came after 5 years, or 100%
vesting
• On average $12.4 million/month is being withdrawn
from the DC systems
• Hundreds of millions of dollars are leaving the
system and potentially the state each year
2:28:44 PM
SENATOR GIESSEL advanced to slide 3, Alaska Retirement
Management Board (ARMB) Schedule of Non-Investment Changes by
Fund. She advised that the spreadsheet shows data from the
Alaska Retirement Management (ARM) Board meeting. It shows that
90 percent of the withdrawals came after five years of
employment. It begs the question of whether people waited to
leave until they could take all of their employer contributions.
SENATOR GIESSEL advanced to slide 4, Return to Social Security?
Legislative Research Report (Jan. 2011).
• PERS return to Social Security considered
• Alaska must alter its "Section 218" agreement with
the Social Security Administration
• All employees must be allowed to vote
• High complexity to replace Supplemental Benefit
System (SBS) with equivalent value Social Security
2:29:51 PM
SENATOR GIESSEL advance to slide 5, Return to Social Security?
In Summary.
• Even with actuarial assessment of equivalency it
would likely be left to courts to determine amounts
• The consistent message is extending Social Security
to current non-covered employees raises overall cost
of retirement plans substantially
2:30:10 PM
SENATOR GIESSEL advanced to slide 6, Supplemental Benefit
System (SBS), aka Alaska Supplemental Annuity Plan.
• Created by the State to replace Social Security
• Most School Districts and Municipalities did not
join SBS
• Therefore, large number of Public Employees are
without either SS or SBS
SENATOR GIESSEL advanced to slide 7, Supplemental Benefit
System (SBS) aka Alaska Supplemental Annuity Plan.
• Defined Contribution plan is governed by Section
401(a) of the Internal Revenue Code
• A portion of the employee wages (6.13%) and a
matching employer contribution are made pre-tax to
this Plan, instead of contributions to Social
Security
• Employees of the State of Alaska and 23
municipalities have elected to be in the plan
• Although the SBS is a supplemental plan, all
eligible employees are automatically enrolled in the
SBS plan on the date of their hiring
2:31:04 PM
SENATOR GIESSEL advanced to slide 8, Health Reimbursement
Arrangement (HRA).
• A HRA must be funded solely by an employer per IRS
(969)
• Not paid through voluntary salary reduction
agreement on the part of employee
• Employee pays no federal taxes or employment taxes
on money put in HRA by employer
• Used tax free for qualified medical expenses, not
included in employee's income
• Unused amounts can be carried forward for years
2:32:15 PM
SENATOR GIESSEL advanced to slide 9, Other Questions.
• Members in both PERS & TRS
• Combine PERS from one state with Alaska's
• Retire before 65 insurance coverage
• Combine past Pension & Health to level them
2:37:09 PM
SENATOR GIESSEL advanced to slide 9, Safeguards in Place.
• Protect against downside risk
• Triggers to increase contributions
• Suspend or decrease benefits if needed
• Conservative rate of return
2:38:04 PM
SENATOR GIESSEL advanced to slide 10, Cost Savings. She said
that the last 92 foster care workers left public service. It
will cost $5 million to hire and onboard replacement workers.
Attorney salaries were raised 20 percent in an attempt to retain
the workforce. She urged the need to stop the loss of these
critical employees.
• Retain employees
• Save recruitment costs lost revenue
• Save onboarding costs lost revenue
• Retain experience & knowledge
2:40:36 PM
SENATOR GIESSEL advanced to slide 12, "SB 88, Summary on Senate
Bill 88.
CHALLENGE CAUSE SOLUTION
Alaska's Alaska withdrew A retirement
Recruitment from DB retirement w/reasonable
And Retention system in 2005 costs and fair
Crisis benefits
SUMMARY
Alaska has a strong interest in ensuring quality
public servants fill the ranks of our public service
agencies
CHAIR BJORKMAN held SB 88 in committee.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB 88 Public Testimony-Received 03.18-27.23.pdf |
SL&C 3/29/2023 1:30:00 PM |
SB 88 |
| SB 88 Letters of Support-Received as of 3.21-28.23.pdf |
SL&C 3/29/2023 1:30:00 PM |
SB 88 |
| SB 83 Public Testimony-Received 03.06-03.27.pdf |
SL&C 3/29/2023 1:30:00 PM |
SB 83 |
| SB 93 Draft Proposed CS(L&C) Ver S.pdf |
SL&C 3/29/2023 1:30:00 PM |
SB 93 |
| SB 93 Public Testimony-Letter_UFA 03.27.23.pdf |
SL&C 3/29/2023 1:30:00 PM |
SB 93 |
| SB 88 Public Testimony-Received 03.23-28.23.pdf |
SL&C 3/29/2023 1:30:00 PM |
SB 88 |
| SB 88 Presentation to SL&C 03.29.23.pdf |
SL&C 3/29/2023 1:30:00 PM |
SB 88 |